Document:

Exhibit 10.1

    
      
        

      
 AGREEMENT
      OF LEASE

    
      (Southcenter
        South Industrial Park)

      

      THIS
        AGREEMENT OF LEASE IS MADE as of September __,
        2005,
        between THE
        TRUSTEES UNDER THE WILL AND OF THE ESTATE OF JAMES CAMPBELL,
        DECEASED,
        acting
        in their fiduciary and not their individual capacities ("Landlord"),
        and
ZONES,
        INC.,
        a
        Washington corporation ("Tenant").

      

      Landlord
        hereby leases to Tenant and Tenant hereby leases from Landlord, the Premises,
        for the Term, commencing on the Commencement Date, subject to the terms,
        covenants, conditions and provisions of this Lease.

      

      1.            
        DEFINITIONS.
        Whenever used in this Lease, the following terms shall have the meanings
        indicated below:

      

      1.1  Additional
        Rent.
        The
        Common Area Rent, Tax Rent, and all other amounts, except Fixed Rent, payable
        by
        Tenant under this Lease.

      

      1.2  Brokers.
        Wilma
        Warshak of Colliers International represented the Landlord ("Landlord's
        Broker"),
        and
        Michael A. Hemphill of The Andover Company, Inc. represented Tenant
        ("Tenant's
        Broker").

      

      1.3  Building.
        The
        improvements known as Southcenter South Industrial Park, Glacier Building
        (the
        "Building")
        located at 6540 Glacier Street, in Tukwila, Washington, and with an agreed
        area
        of 82,172 square feet as shown on Exhibit
        A,
        plus
        the Building Parcel. 

      

      1.4  Building
        Parcel.
        The
        land described on Exhibit
        B
        attached
        and any other parcels of land at any time designated by Landlord to be added
        thereto (but only so long as such designation remains unrevoked) which are,
        or
        are to be, used for or in conjunction with the Building, including, but not
        limited to, parking areas, landscaping and all improvements to any such
        parcels.

      

      1.5  Commencement
        Date.
        October
        15, 2005 or the date determined as provided in Section 2.2.

      

      1.6  Common
        Areas.
        As
        defined in Section 4.1.

      

      1.7  Fixed
        Rent.
        The
        Fixed Rent will be as set forth below and will be payable in monthly
        installments (see Section 3).

      

      
        	
                MONTHS

              	
                MONTHLY
                  INSTALLMENT

              
	
                1-3

              	
                $12,300
                  per month

              
	
                4-7

              	
                $0.00
                  per month

              
	
                8-36

              	
                $12,300
                  per month

              
	
                37-64

              	
                $13,776
                  per month

              

      

      

      1.8  Floor
        Loading Limit.
        An
        average load on the slab of 250 pounds per square foot.

      

      1.9  Governmental
        Authority.
        The
        United States, the State of Washington, and any political subdivision thereof
        or
        any local public or quasi-public authority, agency, department, commission,
        board, bureau or instrumentality of any of them including, with respect to
        matters pertaining to insurance, rating bureaus or insurance carriers to
        the
        extent they have power to impose conditions on the issuance of policies or
        the
        coverage thereof.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      1.10  Governmental
        Requirements.
        Any
        law, ordinance, code, order, rule or regulation of any Governmental
        Authority.

      

      1.11  Landlord.
        The
        party named as Landlord herein until a sale, transfer or lease, and thereafter
        the Person or Persons, collectively, who shall, for the time being, be liable
        for the obligations of Landlord under the provisions of Section 6.3 of this
        Lease.

      

      1.12  Necessary
        Approvals.
        Any
        permit, license, certificate or approval or other evidence of compliance
        with
        any Governmental Requirements necessary to the lawful occupancy of the Premises
        and the issuance of the insurance required to be carried hereunder for the
        Permitted Uses.

      

      1.13  Notice
        Address.

      

      
        	
                Landlord:

              	
                The
                  Estate of James Campbell

              
	 	
                Attn:
                  President, Real Estate 

              
	 	
                Investment
                  Management

              
	 	
                425
                  California Street, Suite 1000

              
	 	
                San
                  Francisco, California 94104

              
	 	 
	
                With
                  copy to Managing Agent:

              	
                Mr.
                  John Wanamaker

              
	 	
                GVA
                  Kidder Mathews

              
	 	
                12886
                  Interurban Ave S.

              
	 	
                Tukwila,
                  WA 98168

              
	 	 
	
                Tenant:

              	
                Zones,
                  Inc. 

              
	 	
                1102
                  15th Street SW, Suite 102 

              
	 	
                Auburn,
                  WA 98001-6509

              
	 	
                Attn:
                  Ronald McFadden, CFO

              

      

      

      1.14  Office
        Park.
        Southcenter South Industrial Park as legally described in the Protective
        Covenants.

      

      1.15  Permitted
        Uses.
        Office
        and warehouse but specifically excluding public warehousing, truck terminals,
        custom houses and container terminals.

      

      1.16  Person.
        A
        natural person, firm, partnership, association, corporation or limited liability
        company, as the case may be.

      

      1.17  Premises.
        Suite
        160 in the Building with an agreed area of approximately 26,943 square feet
        as
        shown on Exhibit
        A.

      

      1.18  Prepaid
        Rent.
        $15,260.00, payable upon the full execution of this Lease, to be applied
        to the
        Fixed Rent and Additional Rent payable for the first full month of the Lease
        Term that such sums are due payable by Tenant pursuant to this
        Lease.

      

      1.19  Protective
        Covenants.
        Declaration of Protective Covenants recorded in the official records of King
        County, Washington under Recording No. 7704210775, as now or hereafter
        amended.

      

      1.20  Rent.
        The
        Fixed Rent and the Additional Rent.

      

      1.21  Security
        Deposit.
        Not
        applicable.

      

      1.22  Tenant's
        Pro Rata Share.
        32.79%.

      

      1.23  Term.
        Sixty-four (64) full calendar months unless earlier terminated pursuant to
        this
        Lease.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                Exhibit
                  A

              	
                -

              	
                Floor
                  Plan of Premises

              

      

      
        	
                Exhibit
                  B

              	
                -

              	
                Legal
                  Description of Building Parcel

              

      

      
        	
                Exhibit
                  C

              	
                -

              	
                Tenant
                  Improvements

              

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      2.            
        CONSTRUCTION--COMMENCEMENT
        DATE.

      

      2.1  Landlord's
        Work.

      

      2.1.1  Landlord
        shall perform certain work in preparing the Premises for occupancy by Tenant
        all
        as set forth in Exhibit C and in this section ("Tenant
        Improvements").

      

      2.1.2  If
        Tenant
        desires improvements beyond the Tenant Improvements set forth in Exhibit
        C, and
        Landlord
        and
        Tenant agree as to further additional work, Tenant shall, within five (5)
        days
        after written demand, pay to Landlord as Additional Rent, the agreed upon
        cost
        and expense to Landlord of supplying and installing such additional work,
        materials and installations (including sales tax and design fees), plus ten
        percent (10% of such cost and expense for Landlord's overhead, less a credit
        equal to the cost to Landlord of materials specified in Exhibit C (if any)
        for
        which substitutes were installed at Tenant's request.

      

      2.1.3  Landlord
        shall perform the Tenant Improvements, provided, however, that Landlord shall
        have the right on an on-going basis to make any changes required by any
        Governmental Authority. Landlord shall perform work only once, it being
        understood that Landlord's obligation to perform the work with respect to
        Tenant
        Improvements is a single, non-recurring obligation.

      

      2.1.4  Tenant
        will be permitted entry into the Premises on September 19, 2005 for the purpose
        of installing data and telephone cabling and wires, installation of warehouse
        racking, installation of office work stations and any other needed preparation
        of the Premises for occupancy by Tenant or for any other purpose permitted
        by
        Landlord; provided, however, that such early entry will be at Tenant's sole
        risk
        and subject to all the terms and provisions of this Lease as though the
        Commencement Date had occurred, except for the payment of Fixed Rent and
        Additional Rent, which will commence on the Commencement Date. Tenant will
        not
        interfere with or delay Landlord's performance of the Tenant Improvements.
        All
        rights of Tenant under this Section 2.1.4 will be subject to the requirements
        of
        all applicable building codes and zoning requirements. Tenant may use its
        own
        contractors for the installation of warehouse racking and office data and
        telephone cabling.

      

      
        
          2.2          
            Commencement
            Date.

        

      

      

      2.2.1  The
        Commencement Date listed in Section 1 of this Lease represents an estimate
        of
        the actual Commencement Date. The actual Commencement Date shall be the first
        to
        occur of the following events: (i) three (3) days after Landlord notifies
        Tenant
        the Premises are available for Tenant's occupancy in the condition required
        pursuant to Section 2.1 of this Lease, or (ii) the date on which Tenant takes
        possession of the Premises for purposes other than completing tenant
        improvements. If the Commencement Date is later than the estimated Commencement
        Date specified in Section 1 above, this Lease shall not be void or voidable.
        If
        the Commencement Date is a day other than the first day of the calendar month,
        unless otherwise agreed in writing by Landlord and Tenant, the Term shall
        not
        commence until the first day of the first calendar month staring after the
        Commencement Date, however all of the other terms and conditions of this
        Lease
        (including those regarding the payment of rent) shall be applicable on the
        Commencement Date. 

      

      2.2.2  Tenant
        waives any damages which may result from any delay in the substantial completion
        of the work described in Section 2.1 or delivery of possession of the Premises.
        If Tenant takes possession of the Premises prior to the Commencement Date
        for
        the purpose of doing business in the Premises, Tenant's obligation to pay
        Rent
        hereunder and to observe and perform all other conditions and agreements
        hereunder with respect to the Premises shall commence on such earlier date
        of
        taking possession of the Premises. Notwithstanding the foregoing, Tenant
        shall
        not take possession of the Premises prior to the Commencement Date for such
        purposes without Landlord's written permission.

      

      2.2.3  In
        the
        event that substantial completion of the Tenant Improvements is delayed by
        reason of delays caused or occasioned by Tenant, this Lease shall commence
        on
        the date that this Lease would have commenced had not the completion of Tenant
        Improvements been so delayed by the Tenant, as reasonably determined by
        Landlord.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      2.2.4  The
        taking of possession of the Premises by Tenant shall be deemed an acceptance
        of
        the Premises and substantial completion by Landlord of the Tenant
        Improvements.

      

      2.2.5  Promptly
        after the Commencement Date, Landlord shall complete and send to Tenant the
        Verification Letter attached to this Lease as Exhibit
        D.
        Tenant
        shall execute and return the Verification Letter to Landlord within fifteen
        (15)
        days of receipt.

      

      2.3  Ownership
        of Improvements.
        All
        installations, alterations, additions, improvements, fixtures and other property
        which are now or at any time hereafter attached to, or located upon the
        Premises, made or installed by either party, including all pipes, ducts,
        conduits, wiring, paneling, decorations, partitions, railings, mezzanine
        floors,
        galleries and the like, shall be and remain the property of Landlord and
        shall
        remain upon and be surrendered with the Premises as a part thereof at the
        expiration or sooner termination of the Term in accordance with Exhibit
        C
        attached
        to this Lease. None of the foregoing shall be deemed to include any of Tenant's
        furniture, trade fixtures and personal property which are removable without
        damage to the Premises. To the extent Tenant is required to remove any
        improvements made by Tenant to the Premises upon the expiration or sooner
        termination of the Term, Landlord will notify Tenant of such removal requirement
        at the time Landlord approves the installation of any such
        improvements.

      

      2.4  
Option
        to Extend Term.

      

      2.4.1  Landlord
        grants to Tenant one (1) Option (the "Option")
        to
        extend the Term for an additional term of five (5) years (the "Extension"),
        on
        the same terms, conditions, and covenants set forth in the Lease, except
        as
        provided below. The Option shall be exercised only by written notice delivered
        to Landlord at least one hundred eighty (180) days prior to the expiration
        of
        the Term. If Tenant fails to deliver to Landlord written notice of the exercise
        of an Option within the prescribed time period, such Option shall lapse,
        and
        there shall be no further right of Tenant to extend the Term. The Option
        shall
        be exercisable by Tenant only upon the express conditions precedent that,
        at all
        times prior to the commencement of such Extension, (a) Tenant has not been
        and
        shall not be in default under any of the provisions of the Lease, and (b)
        the
        Lease shall be in full force and effect. The foregoing Option is personal
        to
        Tenant and may not be exercised by any assignee or subtenant of
        Tenant.

      

      2.4.2  The
        Fixed
        Rent shall be increased on the first day of the Extension to the "Fair
        Rental Value of the Premises"
        (as
        defined below), determined in the following manner:

      

      (a)  Landlord
        and Tenant shall endeavor in good faith upon Tenant's exercise of the Option
        to
        agree upon the Fair Rental Value of the Premises. If Landlord and Tenant
        have
        not been able to agree on the Fair Rental Value of the Premises within thirty
        (30) days after Tenant's exercise of the Option, the Fixed Rent for the
        Extension shall be determined as follows: within forty five (45) days following
        the exercise of the Option, Landlord and Tenant shall endeavor in good faith
        to
        agree upon a single appraiser. If Landlord and Tenant are unable to agree
        upon a
        single appraiser within the 45 day period, each shall then, by written notice
        to
        the other, within ten days after the 45 day period, appoint one appraiser.
        Within ten (10) days after the two appraisers are appointed, the two appointed
        appraisers shall appoint a third appraiser. If either Landlord or Tenant
        fails
        to appoint its respective appraiser within the prescribed time period, the
        single appraiser appointed shall determine the Fair Rental Value of the
        Premises. If the two appointed appraisers fail to agree on the third appraiser,
        the third appraiser shall be appointed by the then-president of the Seattle,
        Washington Chapter of the Appraisal Institute. Each party shall bear the
        cost of
        the appraiser appointed by it, and the parties shall share equally the cost
        of
        the third appraiser.

      

      (b)  The
        term
        "Fair
        Rental Value of the Premises"
        shall
        mean the rent that a ready and willing tenant would pay, at the time of the
        commencement of the Extension, as monthly Fixed Rent to a ready and willing
        lessor of property comparable to the Premises, if such property were exposed
        for
        lease on the open market for a reasonable period of time, and taking into
        account all of the purposes for which such property may be used, and not
        just
        the use proposed to be made of the property by Tenant. Currently, 6,000 square
        feet of the Premises is built out as office space. If, at the time of the
        Extension, Tenant is using only 4,000 square feet of the office space within
        the
        Premises as office space, then the Fair Rental Value of the Premises will
        be
        calculated based on the use of 2,000 square feet of the office space within
        the
        Premises as warehouse space. If, however, Tenant is using more than 4,000
        square
        feet of office space as office space, the Fair Rental Value of the Premises
        will
        be calculated using office rental rates for the full 6,000 square feet. The
        Fair
        Rental Value of the Premises shall be the average of the two of the three
        appraisals which are closest in amount, and the third appraisal shall be
        disregarded. In no event shall the Fixed Rent be reduced by reason of such
        computation. If the Fair Rental Value of the Premises is not determined prior
        to
        the commencement of the Extension, then Tenant shall continue to pay to Landlord
        the Fixed Rent applicable to the Premises immediately prior to the Extension,
        until the Fair Rental Value of the Premises is determined, and when it is
        determined, Tenant shall pay to Landlord within ten (10) days after receipt
        of
        written notice the difference between the Fixed Rent actually paid by Tenant
        to
        Landlord and the new Fixed Rent determined under this Section 2.4.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      3.            
        RENT.

      

      3.1        
        Payment.
        All
        Rent shall be paid in lawful money of the United States which shall be legal
        tender in payment of all debts and dues, public and private, at the time
        of
        payment, at the address of Landlord set forth in this Lease or at such other
        place as Landlord in writing may designate, without any set-off or deduction
        whatsoever and without any prior demand therefor.

      

      3.2         
        Fixed
        Rent.
        Tenant
        shall pay the annual Fixed Rent in equal monthly installments in advance
        on the
        first day of each calendar month included in the Term. 

      

      3.3         
        Tax
        Rent.

      

      3.3.1       
        Definitions.
        In
        addition to the Fixed Rent, Tenant shall pay to Landlord, Tenant's Pro Rata
        share of Real Property Taxes ("Tax
        Rent"),
        utilizing the following definitions:

      

      (a)  "Real
        Property Taxes"
        shall
        mean real and personal property taxes, LID's, assessments, and other
        governmental impositions and charges of every kind and nature, now or hereafter
        imposed, including surcharges with respect thereto, which may during the
        Term of
        this Lease be levied, assessed, imposed, or otherwise become due and payable
        with respect to the Building, including Tenant Improvements, and including
        the
        Building Parcel and all improvements, fixtures, and equipment thereon, or
        the
        use, occupancy or possession thereof; taxes on Property of Tenant (as described
        in subsection 3.3.4) which have not been paid by Tenant directly to the taxing
        authority; costs and expenses, including costs of appraisers, attorneys and
        consultants incurred in negotiating, reviewing or appealing any taxes; and
        any
        taxes levied or assessed in addition to, in lieu of, or as a substitute for,
        in
        whole or part, taxes now levied or assessed or any other tax upon owning,
        leasing or rents receivable by Landlord from the Building, but not including
        any
        federal or state income tax imposed on Landlord. Real Property Taxes will
        not
        include business and occupation taxes paid by Landlord unless such taxes
        are
        substituted for or otherwise replace real property taxes to be paid by Landlord
        with respect to the Building, the Tenant Improvements or the Building
        Parcel.

      

      (b)  "Tenant's
        Share of Real Property Taxes"
        shall
        mean the amount of Real Property Taxes payable during any calendar year by
        Landlord multiplied by Tenant's Pro Rata Share.

      

      3.3.2  Additional
        Rent for Estimated Tenant's Share of Real Property Taxes.
        Each
        year Landlord shall furnish Tenant with a written statement setting forth
        the
        estimate of Tenant's Share of Real Property Taxes for such calendar year.
        One-twelfth (1/12) of such amount shall be Additional Rent payable by Tenant
        with installments of Fixed Rent. Until Landlord provides Tenant with the
        written
        statement provided for above in this paragraph, Tenant shall continue to
        pay
        Tenant's Share of Real Property Taxes in the monthly amount specified in
        the
        last such written statement given to Tenant by Landlord. If during a calendar
        year Landlord obtains information regarding Real Property Taxes which alters
        Landlord's prior estimates of Tenant's Share thereof, by written notice to
        Tenant, Landlord may adjust the amount due from Tenant under this Section
        3.3.2
        during the balance of that calendar year to reflect such new information.
        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.3.3  Actual
        Real Property Taxes.
        After
        the close of each calendar year or portion thereof, Landlord shall deliver
        to
        Tenant a written statement setting forth the Tenant's Share of Real Property
        Taxes during the preceding calendar year. If Tenant's Share of Real Property
        Taxes for any calendar year exceeds the estimated Tenant's Share of Real
        Property Taxes determined as provided in the preceding subsection 3.3.2,
        Tenant
        shall pay the amount of such excess to Landlord as added Additional Rent
        within
        thirty (30) days after receipt of such statement by Tenant. If such statement
        shows such amount to be less than the amount paid by Tenant to Landlord pursuant
        to the preceding subsection 3.3.2, then the amount of such overpayment shall
        be
        credited by Landlord to the next due Rent payable by Tenant; however, upon
        the
        expiration or sooner termination of the Term, if Tenant has otherwise complied
        with all other terms and conditions of this Lease, Landlord shall refund
        any
        unpaid excess to Tenant.

      

      3.3.4  Personal
        Property Taxes.
        Tenant
        shall pay, prior to delinquency, all Personal Property Taxes payable with
        respect to all Property of Tenant located on the Premises or the Building
        and
        promptly upon request of Landlord shall provide written proof of such payment.
        As used herein, "Property
        of Tenant"
        shall
        include all improvements, fixtures and equipment which are paid for or owned
        by
        Tenant. "Personal
        Property Taxes"
        shall
        include all property taxes assessed against the Property of Tenant, whether
        assessed as real or personal property.

      

      3.3.5  Real
        Property Tax Proceedings.
        In the
        event Landlord shall obtain a tax refund as a result of Real Property Taxes
        reduction proceedings or other proceedings of similar nature, then Tenant
        shall,
        provided Tenant is not then in default, and after the final conclusion of
        all
        appeals or other remedies, be entitled to the net refund of Real Property
        Taxes
        obtained based upon Real Property Taxes paid by Tenant which is the subject
        of
        the refund. As used herein, the term "net
        refund"
        means
        the refund plus interest, if any, thereon, paid by the Governmental Authority
        less appraisal, engineering, expert testimony, attorney, printing and filing
        fees and all other costs and expenses of the proceeding. Tenant shall not
        have
        the right to institute or participate in any such proceedings without the
        consent of Landlord, it being understood that the commencement, conduct,
        and
        settlement thereof shall be determined by Landlord. To the extent Tenant
        is
        entitled to any net refund, Landlord shall pay Tenant such net refund within
        ninety (90) days after Landlord's receipt of such net refund.

      

      3.4          
        Common
        Area Rent.

      

      3.4.1  Definitions.
        In
        addition to the Fixed Rent, Tenant shall pay to Landlord as Additional Rent,
        Tenant's Pro Rata Share of Common Area Operating Costs ("Common
        Area Rent"),
        using
        the following definitions:

      

      (a)  "Common
        Area Operating Costs"
        shall
        mean (1) the pro rata portion, allocated on the basis of the ratio which
        the
        area of the Building Parcel bears to the then area of the Office Park, of
        the
        expenses of the operation, maintenance and repair of the Common Areas of
        the
        Office Park in accordance with the Protective Covenants, (2) insurance premiums
        for insurance carried by Landlord on the Building or the Building Parcel,
        (3)
        the cost of landscape maintenance on the Building Parcel and periodic painting
        and repair of the exterior of the surface of the Building, (4)
        repair and maintenance of the roof of the Building (including the roof membrane
        and exterior of the Building), and (5)
        all
        expenses paid or incurred by Landlord for maintaining, operating and repairing
        the Common Areas (as defined in (b) through (e) of Section 4.1), the Building
        and the Building Parcel and the equipment and personal property used in
        conjunction therewith, including, without limitation, the costs of compliance
        with Governmental Requirements, the costs of refuse collection, water, sewer,
        electricity, and other utilities services, supplies and cleaning services,
        services of independent contractors, compensation (including employment taxes
        and fringe benefits) of all persons who perform duties in connection with
        the
        operation, maintenance and repair of the Common Areas and its equipment,
        the
        maintenance and repair of parking areas, curbs, landscaping, lighting and
        outdoor facilities, licenses, permits and inspection fees, taxes, liability
        insurance for the Office Park including the Building, property management
        fees,
        legal and accounting expenses and any other expense or charge whether or
        not
        hereinabove described which in accordance with generally accepted accounting
        and/or property management practices would be considered an expense of
        maintaining, operating or repairing the Common Areas, the Building or the
        Building Parcel, excluding:

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      (1)  Costs
        of
        any special services rendered to individual tenants (including Tenant) for
        which
        a special charge is made; and

      

      (2)  Real
        Property Taxes (as defined in Section 3.3 of this Lease).

      

      (3)  Repairs
        required to be made by Landlord at
        Landlord's expense
        pursuant
        to Section 6.1.

      

      (b)          
        "Actual
        Costs"
        shall
        mean the actual expenses paid or incurred by Landlord for Common Area Operating
        Costs during any calendar year of the term hereof.

      

      (c)           "Actual
        Costs Allocable to the Premises"
        shall
        mean Actual Costs multiplied by Tenant's Pro Rata Share.

      

      (d)          
        "Estimated
        Costs Allocable to the Premises"
        shall
        mean Landlord's estimate of Actual Costs Allocable to the Premises to be
        given
        by Landlord to Tenant pursuant to subsection 3.4.2 below.

      

      (e)           
        If
        during
        any year, the Building is less than fully occupied, then, for purposes of
        calculating Tenant's Pro Rata Share of Common Area Operating Costs for that
        year, the amount of expenses that fluctuate with Building occupancy shall
        be
        imputed to be the amount which, in Landlord's reasonable estimation, they
        would
        have been had the Building been fully occupied for that entire
        year.

      

      3.4.2  Additional
        Rent for Estimated Costs.
        Each
        year Landlord shall furnish Tenant a written statement of the Estimated Costs
        Allocable to the Premises for such calendar year: One-twelfth (1/12) of such
        amount shall be Additional Rent payable by Tenant with installments of Fixed
        Rent. Until Landlord provides Tenant with the written statement provided
        for
        above in this paragraph, Tenant shall continue to pay the amount of the
        Estimated Costs Allocable to the Premises specified in the last such written
        statement given to Tenant by Landlord. If during a calendar year Landlord
        obtains information regarding Common Area Operating Costs which alters
        Landlord's prior estimate of the Estimated Costs Allocable to the Premises,
        by
        written notice to Tenant, Landlord may adjust the amount due from Tenant
        under
        this Section 3.4.2 during the balance of that calendar year to reflect such
        new
        information. Estimated Costs Allocable to the Premises will not include business
        and occupation taxes unless such taxes are substituted for or replace real
        property taxes to be paid by Landlord.

      

      3.4.3  Actual
        Costs.
        After
        the close of each calendar year or portion thereof, Land-lord shall deliver
        to
        Tenant a written statement setting forth the Actual Costs Allocable to the
        Premises during the preceding calendar year. If such costs for any calendar
        year
        exceed Estimated Costs Allocable to the Premises paid by Tenant to Landlord
        pursuant to the preceding subsection 3.4.2, Tenant shall pay the amount of
        such
        excess to Landlord as Additional Rent within thirty (30) days after receipt
        of
        such statement by Tenant. If such statement shows such costs to be less than
        the
        amount paid by Tenant to Landlord pursuant to the preceding subsection 3.4.2,
        then the amount of such overpayment by Tenant shall be credited by Landlord
        to
        the next succeeding installment of Rent payable by Tenant; however, upon
        the
        expiration or sooner termination of the Term, if Tenant has otherwise complied
        with all of the terms and conditions of this Lease, Landlord shall refund
        the
        excess to Tenant within ninety (90) days.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      3.5  End
        of
        Term.
        If this
        Lease shall terminate on a day other than the last day of a calendar year,
        the
        amount of any adjustment between Estimated and Actual Costs Allocable to
        the
        Premises and Tenant's Share of Real Property Taxes with respect to the calendar
        year in which such termination occurs shall be prorated on the basis which
        the
        number of days from commencement of such calendar year to and including such
        termination date bears to 365; and any amount payable by Landlord to Tenant
        or
        Tenant to Landlord with respect to such adjustment shall be payable within
        thirty (30) days after delivery by Landlord to Tenant of the statement of
        such
        adjustment with respect to such Lease Year.

      

      3.6  Additional
        Rent.
        Unless
        another time shall be herein expressly provided, Additional Rent shall be
        due
        and payable on demand or together with the next succeeding installment of
        Fixed
        Rent, whichever shall first occur; and Landlord shall have the same remedies
        for
        failure to pay the Additional Rent as for a non-payment of Fixed
        Rent.

      

      3.7  Rent
        for a Partial Month.
        For any
        portion of a calendar month included at the beginning or end of the Term,
        Tenant
        shall pay 1/30th of each monthly installment of Rent for each day of such
        portion, payable in advance at the beginning of such portion.

      

      3.8  Interest;
        Late Charges.
        If
        Tenant fails to pay Rent within five (5) days of the due date, a late charge
        equal to the greater of $50.00, or five percent (5%) of the unpaid amount,
        shall
        be assessed and be immediately due and payable by Tenant. In addition, from
        and
        after ten (10) days after the due date of any payment of Rent, interest shall
        accrue thereon at the rate of the lesser of 1-1/2% per month or the maximum
        rate
        permitted by law.

      

      3.9  Sales
        Tax.
        Tenant
        shall pay any sales, use, occupancy, value added (if the value added is not
        in
        lieu of Real Property Taxes as described in Section 3.3) or similar tax now
        or
        hereafter levied or imposed in connection with the Rent payable by Tenant,
        but
        not including any federal, state or local income tax or business and occupation
        tax imposed upon Landlord.

      

      4.   COMMON
        AREAS.

      

      4.1  Common
        Areas.
        Landlord hereby grants to Tenant a nonexclusive license in common with Landlord
        and with others to use for the purposes permitted under this Lease: (a) the
        common areas of the Office Park as defined in the Protective Covenants for
        ingress and egress to the Premises, (b) the hallways, lobby, if any, and
        such
        public conveniences of the Building as may from time to time be designated
        by
        Landlord, (c) the parking lot and parking area serving the Building, (d)
        private
        streets and roads serving the Premises, and (e) any other areas or improvements
        in or around the Building or Building Parcel, including all exterior lighting,
        now or hereafter to be used in common by or for the common benefit of Landlord
        and the tenants of the Building or other buildings. The items set forth in
        (a)
        through (e) above are collectively referred to as "Common
        Areas".
        Notwithstanding any of the provisions herein contained, Landlord shall retain
        a
        nonexclusive right to the use of the Common Areas and all other parts of
        the
        Office Park. No schedule, exhibit, sketch, plan, drawing, rendering, brochure,
        flyer, or the like shall be deemed to create a warranty, representation or
        agreement on the part of Landlord that the Office Park or the Building will
        be
        or will continue to be exactly as indicated thereon, and Landlord reserves
        the
        right to (i) increase, reduce or change the number, type, size, location,
        elevation, nature and use of any of the Common Areas in the Office Park,
        and
        (ii) make changes, additions, alterations, or improvements in or to the Common
        Areas or the Office Park (including additional buildings), and (iii) dedicate
        all or any part of the Common Areas or the Office Park to any Governmental
        Authority having jurisdiction. Subject to occasional temporary closures
        necessary for any work within the Common Areas, Landlord shall not make changes
        to the Common Areas which materially and adversely affect Tenant's ability
        to
        conduct business within the Premises. Tenant shall have no rights with respect
        to the land or improvements below the exterior floor slab level or above
        the
        interior surface of the ceiling of the Premises or air rights or any easements,
        in, on, about, below or above the Premises.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      4.2        
        Parking.
        Tenant
        and its visitors, agents and employees shall be permitted to park in the
        parking
        lot serving the Building and located on the Building Parcel, and Tenant
        understands that parking spaces shall not be reserved but on a first-in basis.
        Tenant and Tenant's visitors, agents and employees shall park their passenger
        vehicles, trucks or delivery vehicles only in the paved parking area serving
        the
        Building and located on the Building Parcel and not in any other parts of
        the
        Office Park, including any unpaved areas, railroad rights of way or easements
        or
        any fire lanes or corridors. In addition, Tenant shall not, at any time,
        park or
        permit the parking of any vehicles or visitor parking in any part of the
        parking
        areas which are restricted or designated as driveways, loading area, access
        areas, crosswalks, entrance areas, exit areas or in any other manner which
        would
        in any way restrict and/or hamper the flow of traffic. In utilizing parking
        areas and spaces, all Persons shall park at their own risk and it is
        specifically understood and agreed that the Landlord shall not be liable
        in any
        way for any injury to person or property or loss by theft or damage or otherwise
        of said vehicle(s) or the contents thereof or from any other cause whatsoever.
        Vehicles may be moved in order to permit Landlord to examine the parking
        areas
        and spaces and to make such repairs, replacements and improvements as Landlord
        may deem necessary and reasonably desirable in accordance with and subject
        to
        the terms, conditions and covenants of this Lease.

      

      4.2.1  Tenant
        agrees to enforce all parking requirements or rules and regulations imposed
        by
        any Governmental Authority or Landlord. Landlord reserves the right to tow
        away
        any vehicle in violation of such requirements, rules or
        regulations.

      

      4.2.2  Use
        of
        the Common Areas and all parts of the Office Park shall be subject to such
        rules
        and regulations including the right to allocate the number of spaces available
        to each tenant or occupant of the Building as Landlord may from time to time
        adopt on a uniform or nondiscriminatory basis, including the establishment
        of
        validation systems, barriers or gates, permits and stickers for parking and
        other systems as Landlord may, from time to time, adopt. In the event of
        an
        allocation of parking spaces, Tenant shall be allocated Tenant's Pro Rata
        Share
        of the parking spaces serving the Building.

      

      5.            
        UTILITIES
        SERVICE.

      

      5.1  Utilities.
        Tenant
        shall be solely responsible and shall pay separately for all charges for
        fuel,
        heat, water, sewer service, refuse collection, gas, electricity, telephone
        and
        for all other utilities used or consumed in the Premises. It is understood
        that
        Landlord shall not be required to provide any services or utilities to Tenant,
        and Tenant shall make any necessary arrangements to have all of such services
        or
        utilities billed directly to and paid directly by Tenant.

      

      5.2  Directory.
        If
        Landlord constructs a Building directory, Tenant shall be allotted Tenant's
        Pro
        Rata Share of the available space on such directory.

      

      6.            
        LANDLORD'S
        ADDITIONAL COVENANTS.

      

      6.1  Repairs
        by Landlord.
        Landlord
        shall repair, maintain and replace the roof structure, floor structure, exterior
        walls and foundations of the Building,
        and the
        plumbing, electrical and other utility systems serving but which are located
        outside of the Premises (excluding, however, repairs to windows, doors, saddles
        and plate glass), and the load-bearing walls and load-bearing columns, if
        any,
        within the Premises, provided that Landlord shall not be obligated hereby
        to do
        any work required to be done because of any damage caused by any act, omission
        or negligence of Tenant and its invitees, licensees, their respective officers,
        agents and employees or their customers. Routine
        maintenance or repair costs incurred in connection with the maintenance and
        repairs described in the preceding sentence shall be considered Common Area
        Operating Costs but replacements or repairs of a capital nature (as determined
        in accordance with generally accepted accounting principles) shall be at
        Landlord's cost and expense and shall not be a Common Area Operating Cost.
        Landlord
        shall not be required to commence any such repair until after notice from
        Tenant
        that the same is necessary, which notice, except in the case of an emergency,
        shall be in writing and shall allow Landlord ten (10) days in which to commence
        such repair. When necessary by reason of accident or other cause occurring
        in
        the Building or in the Premises or in order to make any repairs or alterations
        or improvements in or relating to the Building or the Premises, Landlord
        reserves the right to interrupt the supply of electricity, water and gas
        or any
        other utility and also to suspend the operation of the heating and air
        conditioning system, where there shall be one installed in the Building,
        until
        said repairs, alterations or improvements shall have been completed. There
        shall
        be no abatement in Rent because of any such interruption or suspension, however,
        Landlord shall pursue such work with reasonable continuity, diligence and
        dispatch and in such a manner as to cause a minimum of interference with
        Tenant's use of the Premises. Landlord shall maintain the landscaping on
        the
        Building Parcel and periodically paint and repair the exterior surfaces of
        the
        Building and the cost thereof shall be a Common Area Operating Cost as set
        forth
        in Section 3.4; provided, however, if Landlord paints the entire Building
        during
        the Term of this Lease, such costs will be amortized and will not be a one-time
        charge. In addition, Landlord, at Landlord's discretion, may clean and maintain
        parking areas and entryways if the Tenant fails to keep such areas clean
        and in
        good condition, and the cost thereof shall be a Common Area Operating Cost
        as
        set forth in Section 3.4.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      6.2         
        Quiet
        Enjoyment.
        Landlord covenants that Tenant, on paying the Rent and performing Tenant's
        obligations in this Lease, shall peacefully and quietly have, hold and enjoy
        the
        Premises throughout the Term without hindrance, ejection or molestation by
        any
        Person lawfully claiming under Landlord, subject to the other terms and
        provisions of this Lease, the Protective Covenants and to all mortgages and
        underlying leases of record to which this Lease is or may become subject
        and
        subordinate.

      

      6.3         
        Landlord's
        Liability.

      

      6.3.1  In
        the
        event of a sale or transfer of all or any portion of the Building or Building
        Parcel or an undivided interest therein, or in the event of the making of
        a
        lease of all or substantially all of the Building or Building Parcel (an
        "Overlease"),
        or in
        the event of a sale or transfer of the Landlord's fee or leasehold estate
        in any
        such Overlease, the grantor or transferor, as the case may be, shall thereafter
        be entirely relieved of all terms, covenants and obligations thereafter to
        be
        performed by Landlord under this Lease to the extent of the interest or portion
        so sold or transferred, provided that (a) any amount then due and payable
        to
        Tenant or for which Landlord or the then grantor or transferor would otherwise
        then be liable to pay to Tenant (it being understood that the owner of an
        undivided interest in the fee or any such Overlease shall be liable only
        for his
        or its proportionate share of such amount) shall be paid to Tenant, (b) the
        interest of the grantor or transferor, as Landlord, in any funds then in
        the
        hands of Landlord or the then grantor or transferor, in which Tenant has
        an
        interest, shall be transferred to the then grantee or transferee, and (c)
        notice
        of such sale, transfer or Overlease, shall be delivered to Tenant. Upon the
        termination of any such Overlease, the lessor thereunder shall become and
        remain
        liable as Landlord hereunder only so long as there shall not be made another
        such Overlease.

      

      6.3.2  Tenant
        agrees that it shall look solely to the estate and property of Landlord in
        the
        land and buildings comprising the Building and Building Parcel (subject to
        prior
        rights, if any, of holders of superior interests) for the collection of any
        judgment (or other judicial process) requiring the payment of money by Landlord
        in the event of any default or breach by Landlord with respect to any of
        the
        terms, covenants and conditions of this Lease to be observed or performed
        by
        Landlord; and no other assets of Landlord or any Person having any interest
        in
        Landlord shall be subject to levy, execution or other procedures for the
        satisfaction of Tenant's remedies.

      

      6.3.3  So
        long
        as the Trustees Under the Will and of the Estate of James Campbell, Deceased,
        constitute Landlord, subject to Section 6.3.2 above, any liability which
        may
        arise as a consequence of the execution of this Lease by or on behalf of
        the
        Landlord shall be a liability of the assets of the Estate of James Campbell
        and
        not the personal liability of any trustee, corporate officer of a corporate
        trustee or employee of the Estate of James Campbell.

      

      7.           
        TENANT'S
        ADDITIONAL COVENANTS.

      

      7.1   Affirmative
        Covenants.
        Tenant
        covenants, at its expense, at all times during the Term:

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      7.1.1  To
        use
        the Premises only for the Permitted Use and for no other purpose and in no
        event
        shall Tenant permit the use of the Premises in violation of any Governmental
        Requirements, in violation of any covenants and restrictions affecting the
        Building and Building Parcel, including those set forth in the Protective
        Covenants, or for any unlawful, or noxious or offensive purpose or in such
        a
        manner as to constitute a nuisance.

      

      7.1.2  To
        (a)
        store all trash and refuse in appropriate sealed and covered containers either
        within the Building or in a concealed location designated by Landlord and
        shall
        attend to the regular disposal and removal thereof, (b) receive all deliveries,
        load and unload goods, merchandise, supplies, fixtures, equipment, furniture
        and
        rubbish only through proper service doors, and loading docks serving the
        Building, but in no event through the main front entrance thereof, and (c)
        not
        change the exterior colors or architectural treatment of the Premises or
        make
        any alterations or changes to the exterior of the Building, or the grading,
        planting or landscaping of the exterior of the Premises without Landlord's
        prior
        written approval. In addition, there shall be no outside storage of any kind
        permitted without Landlord's written consent.

      

      7.1.3  Except
        for repairs required to be made by Landlord, Tenant shall take good care
        of the
        Premises and, at Tenant's sole cost and expense, shall make all improvements,
        repairs and replacements of the interior and exterior nonstructural portions
        of
        the Premises, foreseen or unforeseen as and when needed to preserve the Premises
        in good working order and condition.
        Without
        affecting or limiting Tenant's obligations set forth in this preceding sentence,
        Tenant, at Tenant's sole cost and expense, shall provide (a) maintenance
        and
        repair of the electrical, heating, plumbing and air conditioning systems
        in the
        Premises; (b) generally keep and maintain the Premises, both interior and
        exterior, in good repair and condition; and (c) repair and maintain all exterior
        and interior doors, windows, partitions, lighting, glass, floor surfaces
        and
        entry ways. Tenant specifically acknowledges that the floor loading limit
        within
        the Premises is as set forth in Section 1, and Tenant agrees not to load
        the
        floor in excess of such limit. Before installing any heavy equipment or fixtures
        in the Premises, Tenant shall submit the plans and specifications therefor
        to
        Landlord for approval. Tenant shall at all times during the term of this
        Lease,
        keep and maintain in full force and effect maintenance and repair contracts
        for
        the benefit of Landlord and Tenant, providing for the service, maintenance,
        and
        repair of the heating, ventilating and air conditioning systems of the Premises.
        

      

      7.1.4  To
        make
        all repairs, alterations, additions or replacements to the Premises, including
        appurtenances, equipment, interior and exterior facilities and fixtures related
        thereto, including any protective bollards located on the Building Parcel,
        arising out of Tenant's use or occupancy of the Premises or necessary to
        satisfy
        any Governmental Requirement; to keep the Premises equipped with all safety
        appliances so required because of such use or occupancy; and otherwise to
        comply
        with the orders and regulations of any Governmental Authority. Tenant
        acknowledges that Landlord may be required or may desire to subdivide or
        plat
        the Building Parcel and grant easements thereon, and Tenant agrees to consent
        to
        or join in such documents to the extent reasonably required by
        Landlord.

      

      7.1.5  To
        pay
        promptly when due the entire cost of any work to the Premises, including
        equipment, facilities and fixtures therein, undertaken by Tenant, so that
        the
        Premises and the Building shall, at all times, be free of liens for labor
        and
        materials; to procure all Necessary Approvals before undertaking such work;
        to
        do all such work in a good and workmanlike manner acceptable to Landlord,
        employing materials of good quality; to perform such work in such manner
        as to
        insure proper maintenance of good and harmonious labor relationships; and
        to
        comply with any Governmental Requirements relating thereto.

      

      7.1.6  To
        indemnify and save Landlord harmless of and from all loss, cost, liability,
        damage and expense, including, but not limited to, attorneys' fees, penalties
        and fines, incurred in connection with or arising from (a) any default by
        Tenant
        in the observance or performance of any of the terms, covenants or conditions
        of
        this Lease on Tenant's part to be observed or performed, or (b) the use or
        occupancy or manner of use or occupancy of the Premises, the Building, the
        Building Parcel or the Office Park by Tenant or any Person claiming through
        or
        under Tenant, or (c) acts, omissions or negligence of Tenant or any Person
        claiming through or under Tenant, or the contractors, agents, servants,
        employees, visitors or licensees of Tenant or any Person claiming through
        or
        under Tenant, in or about the Premises, the Building, the Building Parcel
        or the
        Office Park, either prior to or during the Term or any holdover period or
        renewal period thereafter, or (d) any claims by any Persons, by reason of
        injury
        to Persons or damage to property occasioned by any use, occupancy, act, omission
        or negligence referred to herein. Notwithstanding the foregoing or any other
        provision of this Lease, in the event of the concurrent negligence of Tenant,
        its agents, employees, sublessees, invitees, licensees or contractors, and
        that
        of Landlord, its agents, employees or contractors, which concurrent negligence
        results in injury or damage to persons or property and relates to the
        construction, alteration, repair, addition to, subtraction from, improvement
        to
        or maintenance of the Premises or the Building, Tenant's obligation to indemnify
        Landlord as set forth in this Lease shall be limited to the extent of Tenant's
        negligence and that of Tenant's agents, employees, sublessees, invitees,
        licensees or contractors, including Tenant's proportional share of costs
        of
        attorneys' fees and expenses incurred in connection with any action, claim
        or
        proceeding brought with respect to any injury or damage. The foregoing indemnity
        with respect to acts or omissions during the term of this Lease shall survive
        termination or expiration of this Lease. As between Landlord and Tenant,
        the
        foregoing indemnity is specifically and expressly intended to constitute
        a
        waiver of Tenant's immunity under Washington's Industrial Insurance Act,
        RCW
        Title 51, to the extent necessary to provide Landlord with a full and complete
        indemnity from claims made by Tenant and its employees, to the extent of
        their
        negligence.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      7.1.7  To
        pay on
        demand any increase in premiums that may be charged on insurance carried
        by
        Landlord resulting from Tenant's use or occupancy of the Premises.

      

      7.1.8  Landlord
        and Landlord's agents and employees shall not be liable for, and Tenant waives
        all claims for, loss or damage to Tenant's business or damage to person or
        property sustained by Tenant resulting from any accident or occurrence (unless
        caused by or resulting from the negligence of Landlord, its agents, servants
        or
        employees other than accidents or occurrences against which the Tenant is
        insured or required to be insured) or in or upon the Premises or the Building
        or
        the Office Park, including, but not limited to, claims for damage resulting
        from: (a) any equipment or appurtenances becoming out of repair; (b) injury
        done
        or occasioned by wind; (c) any defect in or failure of plumbing, heating
        or air
        conditioning or ventilation equipment, electric wiring or installation thereof,
        gas, water, steam or other pipes, stairs, porches, railings or walks; (d)
        broken
        glass; (e) the backing up of any pipe or downspout; (f) the bursting, leaking
        or
        running of any tank, tub, washstand, water closet, waste pipe, drain or any
        other pipe or tank in, upon or about the Building or the Premises; (g) the
        escape of steam or hot water; (h) water, snow or ice being upon or coming
        through the roof, skylight, trapdoor, stairs, doorways, show windows, walks
        or
        any other place upon or near the Building or the Premises or otherwise; and
        (i)
        any act, omission or negligence of other tenants, licensees or of any other
        persons or occupants of the Building or Office Park.

      

      7.1.9  To
        permit
        Landlord and its agents to have access in and about the Premises including,
        without limitation, the right to enter the Premises on twenty-four (24) hours
        prior notice (except in the case of emergency) to examine the Premises or
        for
        the purpose of performing any obligation of Landlord under this Lease or
        exercising any right or remedy reserved to Landlord in this Lease; to erect,
        install, use and maintain in concealed locations pipes, ducts and conduits
        in
        and through the Premises; to exhibit the Premises to others; to make such
        decorations, repairs, alterations, improvements or additions, or to perform
        such
        maintenance, as Landlord may deem necessary or desirable. Landlord shall
        have
        the right, from time to time, to change the name, number or designation by
        which
        the Building is commonly known. All parts (except surfaces facing the interior
        of the Premises) of all walls, windows and doors bounding the Premises
        (including exterior Building walls, core corridor walls, doors and entrances)
        and the use thereof, as well as access thereto through the Premises for the
        purposes of operation, maintenance, alteration and repair, are hereby reserved
        to Landlord.

      

      7.1.10  To
        pay on
        demand Landlord's expenses, including reasonable attorneys' fees, at trial
        and
        on appeal, or in arbitration or mediation, incurred in successfully enforcing
        any obligation of the Tenant under this Lease or incurred in any action or
        proceeding arising out of or pursuant to this Lease.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      7.1.11  To
        cause
        to be discharged of record by payment and to indemnify, defend and hold harmless
        Landlord from and against all liability and expense arising from any mechanic's
        lien at any time filed against the Premises or the Building Parcel for any
        work,
        labor, services or materials claimed to have been performed at, or furnished
        to
        the Premises, for or on behalf of Tenant, or anyone holding the Premises
        through
        or under Tenant. Nothing in this Lease contained shall be construed as a
        consent
        on the part of Landlord to subject Landlord's estate in the Premises, the
        Building or Build-ing Parcel to any lien or liability under applicable
        law.

      

      7.1.12  Upon
        the
        expiration or other termination of the Term, to quit and surrender the Premises
        to Landlord, broom clean, in good order and condition, ordinary wear and
        tear
        and casualty not caused by Tenant, its agents, servants, employees, visitors,
        or
        licensees excepted, and at Tenant's expense to remove all property of Tenant
        and, at Landlord's option, any alteration, addition and improvement made
        by
        Tenant and to repair all damages to the Premises caused by such removal and
        restore the Premises to the condition in which they were prior to the
        installation of the articles so removed. Any improvements or installations
        which
        are required to be but are not so removed shall be deemed to have been abandoned
        by Tenant and may be retained or disposed of by Landlord, as Landlord shall
        desire, but Tenant shall be responsible for the cost of restoration of the
        Premises and removal and disposal. To the extent Tenant is required to remove
        any improvements made by Tenant to the Premises upon the expiration or sooner
        termination of the Term, Landlord will notify Tenant of such removal requirement
        at the time Landlord approves the installation of any such
        improvements.

      

      7.1.13  To
        conform to all rules and regulations which Landlord may make for the management
        and use of the Premises, requiring such conformance by Tenant and Tenant's
        employees, agents, contractors, visitors, servants, or licensees. Such rules
        and
        regulations shall be uniform and shall not discriminate against
        Tenant.

      

      7.1.14  To
        comply
        with any existing or hereafter-enacted environmental laws, regulations,
        administrative acts or rulings, including but not limited to any laws governing
        the use, disposal or release of any Hazardous Substance (as defined below),
        affecting Tenant's operation at the Premises ("Environmental
        Laws").
        Tenant shall, at its expense, make all submissions to, provide all information
        to, and comply with all requirements of the appropriate Governmental Authority
        under the Environmental Laws. In addition, if a Governmental Authority
        determines that a cleanup plan be prepared and that a cleanup be undertaken
        or
        any other action taken because of any spills or discharges of Hazardous
        Substances at the Premises which occur during the Term, Tenant shall at its
        expense prepare and submit the approved plans. Tenant shall not cause or
        permit
        any Hazardous Substance to be generated, processed, stored, transported,
        handled
        or disposed of on, under, in or through the Premises without first obtaining
        Landlord's written consent which may be withheld in Landlord's absolute
        discretion. As used herein, the term "Hazardous
        Substance"
        means
        any hazardous, toxic or dangerous substances, waste or material, including
        any
        biological waste, which is or becomes regulated under any federal, state
        or
        local statute, ordinance, rule, regulation or other law now or hereafter
        in
        effect pertaining to environmental protection, contamination or cleanup,
        including without limitation any substance, waste or material which now or
        hereafter is designated as a "Hazardous Substance" under the Comprehensive
        Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601,
et
        seq.),
        or
        under the Model Toxics Control Act (Revised Code of Washington § 70.105D);
        without limiting the foregoing, Hazardous Substances shall include, but not
        be
        limited to, any substance which after being released into the environment
        and
        upon exposure, ingestion, inhalation, or assimilation, either directly from
        the
        environment or indirectly by ingestion through food chains, will or may
        reasonably be anticipated to cause death, disease, behavior abnormalities,
        cancer and/or genetic abnormalities. Tenant's
        obligations under this subsection 7.1.14 shall arise if there is any closing,
        terminating or transferring of operations of an industrial establishment
        at the
        Premises pursuant to the Cleanup Laws.
        At no
        expense to Landlord, Tenant shall promptly provide all information requested
        by
        Landlord for preparation of affidavits required by Landlord to determine
        the
        applicability of the Environmental Laws to the Premises, and shall sign the
        affidavits promptly when requested to do so by Landlord. Tenant shall indemnify,
        defend, and hold harmless Landlord from all fines, suits, procedures, claims,
        actions costs or liabilities of any kind arising out of or in any way connected
        with any spills or discharges of Hazardous Substances or wastes by Tenant
        at the
        Premises that occur during the Term, including without limitation, a decrease
        in
        the value of the Premises, damages due to loss or restriction of rentable
        or
        usable space, or any damages due to adverse impacts or marketing of space,
        any
        and all sums paid for settlement of claims, attorneys' fees, consultant and
        expert fees, or any costs arising out of Tenant's failure to provide all
        information, make all submissions and take all steps required by a Governmental
        Authority under the Environmental Laws or any other environmental laws or
        regulations. Tenant's obligations and liabilities under this paragraph shall
        survive termination or sooner expiration of this Lease. Tenant's failure
        to
        abide by the terms of this subsection 7.1.14 shall be restrainable by
        injunction.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      7.1.15  Tenant
        shall, prior to handling, processing, transporting, storing or disposing
        of any
        Hazardous Substance within the Premises (including, without limitation, any
        foam
        or any other material described in Material Safety Data Sheets to be used
        within
        the Premises) deliver to Landlord a plan describing such Hazardous Substances
        and Tenant's procedures for handling, processing, transporting, storing and
        disposing of each such Hazardous Substance ("Tenant's
        Plan").
        Tenant's Plan shall also describe how Tenant will assure compliance with
        all
        Environmental Laws with respect to such Hazardous Substances. Tenant's Plan
        must
        be prepared by a person or environmental consulting firm with experience
        and
        sufficient expertise in Environmental Laws related to the Hazardous Substances
        described in Tenant's Plan. Tenant shall not handle, process, transport,
        store
        or dispose of any Hazardous Substance within the Premises until Landlord
        and
        Landlord's insurer have approved Tenant's Plan. Tenant shall make such
        reasonable revisions to Tenant's Plan as are required by Landlord or Landlord's
        insurer. Any permitted assignee or sublessee under this Lease will be required
        to deliver to Landlord for Landlord's approval a similar plan before any
        such
        assignee or sublessee may handle, process, transport, store or dispose of
        any
        Hazardous Substance within the Premise.

      

      7.2  
Negative
        Covenants.
        Tenant
        covenants at all times during the Term and such further time as Tenant occupies
        the Premises or any part thereof:

      

      7.2.1  Not
        to
        make or perform, or permit the making or performance of, any alterations,
        subdivisions, installations, decorations, improvements, additions or other
        physical changes in or about the Premises including those which are necessary
        to
        satisfy any Governmental Requirements (referred to collectively as "alterations")
        without Landlord's prior written consent. Landlord agrees not unreasonably
        to
        withhold its consent to any interior nonstructural alterations which do not
        adversely affect the Building's utility and mechanical systems proposed to
        be
        made by Tenant to adapt the Premises for Tenant's business purposes. Alterations
        shall be made only by contractors or mechanics approved by Landlord. All
        business machines and mechanical equipment shall be placed and maintained
        by
        Tenant in settings sufficient, in Landlord's judgment, to absorb and prevent
        vibration, noise and annoyance to other tenants or occupants of the Office
        Park.
        Tenant shall submit to Landlord detailed plans and specifications for each
        proposed alteration and shall not commence any such alteration without first
        obtaining Landlord's approval of such plans and specifications; all reports,
        and
        all permits, approvals and certificates required by all Governmental Authorities
        shall be timely obtained by Tenant and submitted to Landlord; all materials
        and
        equipment to be incorporated in the Premises as a result of all alterations
        shall be new and first quality; no such materials or equipment shall be subject
        to any lien, encumbrance, chattel mortgage or title retention or security
        agreement. In the event cost of an alteration exceeds the amount of three
        (3)
        monthly installments of Fixed Rent, Landlord shall have the right to require
        that Tenant obtain performance and payment bonds from such surety companies
        and
        in such forms as Landlord shall require in amounts at least equal to the
        cost of
        the proposed work.

      

      7.2.2  Not
        to
        assign, sell, mortgage, pledge, or in any manner, voluntarily or involuntarily,
        transfer or permit the transfer of this Lease or any interest therein, or
        sublet
        the Premises or parts thereof or grant any license or concession, without
        Landlord's prior written consent, which may be withheld in Landlord's sole
        discretion, except as otherwise provided in Section 11.4. A transfer or change
        in the owners of Tenant's stock or a change in the composition of any
        noncorporate Tenant shall, unless such stock is publicly traded, be deemed
        an
        assignment. Consent by Landlord to an assignment, subletting, concession
        or
        license shall not be construed to relieve Tenant from obtaining the express
        consent of Landlord to any further assignment, subletting, concession or
        license, nor shall the collection of Rent by Landlord from any assignee,
        subtenant or other occupant be deemed a waiver of this covenant or the
        acceptance of the assignee, subtenant or occupant as Tenant or a release
        of
        Tenant from the covenants in this Lease on Tenant's part to be performed.
        Tenant
        and any assignee or subtenant shall be jointly and severally liable for the
        obligations under this Lease.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      7.2.3  NOT
        TO
        AFFIX ANY SIGN TO THE EXTERIOR OF THE PREMISES OR ITS WINDOWS (OR WITHIN
        THE
        PREMISES IF SUCH SIGN CAN BE SEEN OUTSIDE THE PREMISES), OR TO ANY PART OF
        THE
        COMMON AREA OR THE BUILDING; PROVIDED, HOWEVER, THAT TENANT MAY PLACE ITS
        CORPORATE NAME AND LOGO ON THE EXTERIOR OF THE BUILDING SO LONG AS (A) THE
        SIGN
        HAS BEEN APPROVED BY LANDLORD,
        AND (B)
        THE SIGNAGE MEETS ALL LOCAL CODES AND REGULATIONS.

      

      7.2.4  Not
        to
        obstruct or encumber or use the Common Areas for any purpose other than ingress
        and egress to and from the Premises. Tenant shall not bring or keep or permit
        to
        be brought or kept, any inflammable, combustible or explosive fluid, material,
        chemical or substance in or about the Premises. Tenant shall not commit or
        allow
        to be committed any waste upon the Premises, or any public or private nuisance
        or other act or thing which disturbs the quiet enjoyment of any other tenant
        in
        the Building or the Office Park. If any of Tenant's machines or equipment
        should
        disturb the quiet enjoyment of any other tenant in the Building, then Tenant
        shall provide adequate insulation, or take such other action as may be necessary
        to eliminate the disturbance.

      

      8.            DESTRUCTION:
        CONDEMNATION; INSURANCE.

      

      8.1  
Damage
        or Destruction.

      

      8.1.1  Damage
        and Repair.
        In case
        of damage to the Premises or the Building by fire or other casualty, Tenant
        shall give immediate notice to Landlord. If the Building is damaged by fire
        or
        any other cause to such extent that the cost of restoration, as reasonably
        estimated by Landlord, will equal or exceed 30% of the replacement value
        of the
        Building (exclusive of foundations) just prior to the occurrence of the damage,
        or if insurance proceeds sufficient for restoration are for any reason
        unavailable, then Landlord may no later than the sixtieth (60th) day following
        the damage, give Tenant a notice of Landlord's election to terminate this
        Lease.
        In the event of such an election, this Lease shall be deemed to terminate
        on the
        third (3rd) day after the giving of said notice, Tenant shall surrender
        possession of the Premises within a reasonable time thereafter, and the Rent
        shall be apportioned as of the date of said surrender and any Rent paid for
        any
        period beyond said date shall be repaid to Tenant. If the cost of restoration
        as
        estimated by Landlord shall amount to less than 30% of such replacement value
        of
        the Building and insurance proceeds sufficient for restoration are available,
        or
        if despite the cost Landlord does not elect to terminate this Lease, Landlord
        shall restore the Building and the Premises (to the extent of improvements
        to
        the Premises originally provided by Landlord hereunder) with reasonable
        promptness, subject to delays beyond Landlord's control and delays in the
        making
        of insurance adjustments by Landlord, and Tenant shall have no right to
        terminate this Lease except as herein provided. To the extent that the Premises
        are rendered untenantable, the Rent shall proportionately abate, except in
        the
        event such damage resulted from or was contributed to, directly, or indirectly,
        by the act, fault or neglect of Tenant, Tenant's contractors, agents, employees,
        invitees or licensees, in which event Rent shall abate only to the extent
        Landlord receives proceeds from Landlord's rental income insurance policy
        to
        compensate Landlord for loss of rent.

      

      If
        the
        Premises are not restored as described above by that date which is nine (9)
        months from the date of the casualty, then, unless Tenant has been relocated
        as
        set forth below, Tenant will have the right to terminate this Lease by giving
        Landlord written notice of such termination no later than ten (10) days after
        the expiration of the nine month period. If Tenant fails to give such notice
        within the ten day period, this Lease will continue in full force and effect.
        If
        the Premises cannot be restored as described above within the nine month
        period
        described above, Landlord may, at its sole option and expense, elect to relocate
        Tenant prior to the expiration of the nine month period to a reasonable
        comparable space in the vicinity of the Building mutually agreed to between
        Landlord and Tenant. If Landlord elects to so relocate Tenant, Landlord will
        provide Tenant written notice describing the relocation space for Tenant’s
        approval. Tenant will not unreasonably withhold its approval. Tenant will
        respond to Landlord’s notice by providing either its approval of the space or
        its disapproval, with Tenant’s reasons for such disapproval, within ten (10)
        days after Landlord’s notice. If Tenant fails to respond within the ten day
        period, Tenant will be deemed to have approved the relocation space. If Landlord
        relocates Tenant in accordance with this paragraph, then Tenant will not
        have
        the right to terminate the Lease under this Section 8.1.1, and this Lease
        will
        continue in full force and effect.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      8.1.2  Business
        Interruption.
        No
        damages, compensations or claim shall be payable by Landlord for inconvenience,
        loss of business or annoyance arising from any repair or restoration of any
        portion of the Premises or of the Building. Landlord shall use reasonable
        efforts to effect such repairs promptly.

      

      8.1.3  Tenant
        Improvements.
        Tenant
        acknowledges Landlord will not carry insurance of any kind on any improvements
        paid for by Tenant or on Tenant's furniture or furnishings or on any fixtures,
        equipment, personal property, inventory, improvements or appurtenances of
        Tenant
        under this Lease and Landlord shall not be obligated to repair any damage
        thereto or replace the same.

      

      8.2  
Eminent
        Domain.

      

      8.2.1  Entire
        Taking.
        If all
        of the Premises or such portions of the Building as may be required for the
        reasonable use of the Premises, are taken by eminent domain, this Lease shall
        automatically terminate as of the date title vests in the condemning authority
        and all Rents, Additional Rents and other payments shall be paid to that
        date.

      

      8.2.2  Constructive
        Taking of Entire Premises.
        In the
        event of a taking of a material part but less than all of the Building, where
        Landlord shall reasonably determine that the remaining portions of the Premises
        cannot be economically and effectively used by it (whether on account of
        physical, economic, aesthetic or other reasons), Landlord shall forward a
        written notice to Tenant of such determination not more than sixty (60) days
        after the date of taking. The term of this Lease shall expire upon such date
        as
        Landlord shall specify in such notice but not earlier than sixty (60) days
        after
        the date of such notice.

      

      8.2.3  Partial
        Taking.
        In case
        of taking of a part of the Premises, or a portion of the Building not required
        for the reasonable use of the Premises, then this Lease shall continue in
        full
        force and effect and the Rent shall be equitably reduced based on the proportion
        by which the floor area of the Premises is reduced, such Rent reduction to
        be
        effective as of the date title to such portion vests in the condemning
        authority.

      

      8.2.4  Termination
        by Landlord.
        In the
        event that title to a part of the Building other than the Premises shall
        be so
        condemned or taken and if, in the opinion of the Landlord, the Building should
        be restored in such a way as to alter the Premises materially, the Landlord
        may
        terminate this Lease and the term and estate hereby granted by notifying
        the
        Tenant of such termination within sixty (60) days following the date of vesting
        of title, and this Lease and the term and estate hereby granted shall expire
        on
        the date specified in the notice of termination, not less than sixty (60)
        days
        after the giving of such notice, as fully and completely as if such date
        were
        the date hereinbefore set for the expiration of the term of this Lease, and
        the
        Rent hereunder shall be apportioned as of such date.

      

      8.2.5  Awards
        and Damages.
        Landlord reserves all rights to damages to the Premises for any partial,
        constructive, or entire taking by eminent domain, and Tenant hereby assigns
        to
        Landlord any right Tenant may have to such damages or award, and Tenant shall
        make no claim against Landlord or the condemning authority for damages for
        termination of the leasehold interest or the value of such leasehold interest
        or
        interference with Tenant's business. Tenant shall have the right, however,
        to
        claim and recover from the condemning authority compensation for any loss
        to
        which Tenant may be put for Tenant's moving expenses, business interruption
        or
        taking of Tenant's personal property (not including Tenant's leasehold interest)
        provided that such damages may be claimed only if they are awarded separately
        in
        the eminent domain proceedings and not out of or as part of the damages
        recoverable by Landlord.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      9.   INSURANCE.
        

      

      9.1  
Tenant's
        Insurance.
        Tenant
        hereby agrees to maintain in full force and effect at all times during the
        Term
        and at Tenant's cost and expense, the policies of insurance described in
        this
        Section 9.1.

      

      9.1.1  A
        policy
        or policies of hazard insurance insuring all Tenant's personal property,
        improvements and fixtures, existing in the Premises on the Commencement Date
        or
        at any time thereafter, against all of the risks covered by a standard "special
        causes of loss" endorsement. Such insurance shall be in an amount equal to
        the
        lesser of the replacement cost or full insurable value of such personal
        property, improvements and fixtures. The amount of any deductibles must be
        reasonably acceptable to Landlord.

      

      9.1.2  A
        policy
        or policies of "commercial general liability", or a combination of "commercial
        general liability" and "umbrella or excess liability" insurance naming Landlord
        (and any mortgagee of Landlord and any lessor under an Overlease) as an
        additional insured thereunder, with combined single limits of not less than
        $3,000,000 and with deductibles reasonably acceptable to Landlord. The liability
        insurance required hereunder shall cover all of Tenant's operations and
        contingent liability of Tenant for all operations performed at the Premises
        on
        Tenant's behalf by Tenant's contractors or subcontractors and shall specifically
        include products/completed operations liability, contractual liability, fire
        damage liability, and medical payments and shall provide that Tenant's employees
        are covered by such insurance. The liability coverage required hereunder
        shall
        state that Tenant's insurance applies separately to each named insured against
        whom a claim is made or suit is brought, except with respect to the limits
        of
        the insurer's liability. 

      

      9.1.3  A
        policy
        or policies of "worker's compensation" insurance with minimum limits as required
        by the Washington Labor and Industrial Relations Statutes, and the rules
        and
        regulations promulgated thereunder, and policy or policies of "employer's
        liability".

      

      9.1.4  A
        policy
        or policies of "business interruption insurance" covering those risks referred
        to in Section 9.1.1 in an amount not less than the Base Rent and Additional
        Rent
        for a period of not less than twelve (12) months commencing with the date
        of the
        loss.

      

      9.1.5  Each
        policy of insurance required under this Section 9.1 shall (a) provide that
        the
        liability of the insurer thereunder shall not be affected by, and that the
        insurer shall not claim any right of setoff, counterclaim, apportionment,
        proration or contribution by reason of any other insurance obtained by or
        for
        Landlord, Tenant, or any person claiming by, through or under any of them;
        (b)
        provide that such policy may not be canceled, whether or not requested by
        Tenant, except upon the insurer giving at least thirty (30) days prior written
        notice thereof to Landlord, Tenant and every mortgagee of any interest in
        the
        Premises (as such mortgagees are identified by Landlord to Tenant); (c) be
        written by an insurance company with a current AM Best Company rating of
        A-XII
        or better; and (d) be written as primary policies, not contributing with
        and not
        in excess of any coverage that Landlord may carry. If any insurance required
        of
        Tenant under this Lease becomes exhausted as a result of claim payments or
        is
        canceled or non-renewed or becomes null and void for any reason, Landlord
        reserves the right but shall not be obligated to replace or reinstate such
        insurance for the protection of Landlord's interest and Tenant shall reimburse
        Landlord within twenty (20) days of demand for any and all expenses incurred
        as
        a result of such reinstatement or replacement of Tenant's insurance. Landlord
        makes no representation that the limits of liability specified to be carried
        by
        Tenant under the terms of this Lease are adequate to protect Tenant against
        Tenant's undertakings under this Section 9.1, and if Tenant believes any
        such
        insurance coverage called for under this Lease is insufficient, Tenant shall
        provide, at its own expense, such additional insurance as Tenant deems adequate.
        On or prior to the Commencement Date, and thereafter within twenty (20) days
        following a request from Landlord, Tenant shall deposit with Landlord current
        certificates of insurance issued by the insurance carriers or the insurance
        brokers certifying that all insurance required of Tenant under this Section
        9.1
        is in effect. If requested by Landlord in writing, Tenant also shall deposit
        current copies of all required insurance policies and endorsements. Landlord
        shall have the right to periodically require Tenant to increase the liability
        limits, change the coverages and the scope of the risks covered by the insurance
        policies required of Tenant hereunder to such higher levels, such other
        coverages or such broader scope of risks as Landlord may from time to time
        reasonably specify; provided, however, that such changes will not impose
        insurance obligations on Tenant greater than the obligations generally being
        required of similarly situated tenants of similar properties in the vicinity
        of
        the Building at the time such changes are required.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      9.2  Landlord's
        Insurance.
        Landlord shall maintain, with insurance companies qualified to do business
        in
        the State of Washington, such property, rental insurance, commercial general
        liability insurance and other insurance coverages as Landlord deems prudent
        and
        in such amounts and with such deductibles as Landlord deems appropriate.
        If
        Landlord shall so elect, Landlord may self insure in whole or part any of
        the
        foregoing coverages. The premiums for said policy or policies, or, if a policy
        is part of a blanket policy, the amount of the premium (including any amount
        for
        the waiver of subrogation set forth below) allocable to the Building, or,
        if
        Landlord shall self insure in whole or part, premiums which would be
        attributable to the self-insured portion, shall be a Common Area Operating
        Cost
        as set forth in Section 3.4. The proceeds of said insurance shall be adjusted
        by
        and payable solely to Landlord or its lenders.

      

      9.3  Waiver
        of Subrogation.
        Landlord and Tenant hereby waive any and every claim which arises or may
        arise
        in its favor and against the other party during the Term or any extension
        or
        renewals thereof, for any and all losses resulting from the peril of fire
        to any
        of its property located within or upon, or constituting part of the Premises,
        which loss or damage is covered by valid and collectible insurance policies,
        to
        the extent that such loss or damage is recoverable under such policies. Said
        mutual waiver shall be an addition to, and not in limitation or derogation
        of,
        any other waiver or release contained in this Lease with respect to any loss
        or
        damage to property of the parties hereto. Insomuch as said waivers will preclude
        the assignment of any aforesaid claim by way of subrogation (or otherwise)
        to an
        insurance company (or any other person) each party agrees, if not previously
        arranged with its insurance company, immediately to give to each insurance
        company which has issued to it policies of property insurance covering the
        peril
        of fire, written notice of the terms of said mutual waivers, and to have
        such
        insurance policies properly endorsed, if necessary to prevent the invalidation
        of said insurance coverage by reason of said waivers.

      

      10.  
DEFAULTS
        AND REMEDIES.

      

      10.1        Default.
        The
        occurrence at any time prior to or during the Term of any one or more of
        the
        following events (the "Events
        of Default")
        shall
        constitute a default under this Lease:

      

      10.1.1  If
        Tenant
        shall default in the payment when due of any installment of Rent;
        or

      

      10.1.2  If
        Tenant
        shall default in the observance or performance of any term, covenant or
        condition of this Lease on Tenant's part to be observed or performed (other
        than
        covenants for the payment of Rent; or

      

      With
        respect to a default under subsection 10.1.1 above, Tenant shall ten (10)
        days
        after written notice of the Event of Default to remedy or cure its default.
        With
        respect to an Event of Default under subsection 10.1.2 above, Tenant shall
        have
        twenty (20) days after a written notice from Landlord to remedy or cure the
        default; however, if the default cannot reasonably be cured within such twenty
        (20) day period, and Tenant commences the cure within the twenty (20) day
        period, and thereafter diligently prosecutes the cure to completion in good
        faith, said twenty (20) day period shall be extended for such period of time
        as
        is reasonably necessary for Tenant to cure the default, but in no event more
        than an additional sixty (60) days. The foregoing notice and cure period
        shall
        be inclusive of and not in addition to the notices and cure periods provided
        for
        in RCW 59.12, as now or hereafter amended, or any legislation in lieu or
        substitution thereof.

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      10.2  Remedies.
        If an
        Event of Default occurs and Tenant fails to cure the default within the
        applicable cure period, if any, Landlord shall have the following rights
        and
        remedies, at its option, which shall be cumulative and not exclusive, and
        which
        shall be in addition to and not in lieu of any other rights or remedies
        available to Landlord at law or in equity, or elsewhere in this Lease: (i)
        to
        declare the Lease Term ended and reenter the Premises and take possession
        thereof and remove all persons therefrom, and Tenant shall have no further
        claim
        thereon or hereunder; (ii) to cure such default on Tenant's behalf and at
        Tenant's cost and expense and charge Tenant as Additional Rent for all costs
        and
        expenses incurred by Landlord in effecting the cure; (iii) without declaring
        this Lease terminated, to reenter the Premises and occupy the whole or any
        part
        thereof for and on account of Tenant and collect any unpaid rentals and other
        charges, which have become payable, or which may thereafter become payable;
        (iv)
        even though it may have reentered the Premises, to thereafter elect to terminate
        this Lease and all of the rights of Tenant in or to the Premises. 

      

                     10.2.1  Reentry.
        If
        Landlord reenters the Premises under option (iii) of Section 10.2, Landlord
        shall not be deemed to have terminated this Lease or the liability of Tenant
        to
        pay any Rent thereafter accruing as it becomes due, or to have terminated
        Tenant's liability for damages under any of the provisions hereof, by any
        such
        reentry or by any action, in unlawful detainer or otherwise, to obtain
        possession of the Premises, unless Landlord shall have notified Tenant in
        writing that it has so elected to terminate this Lease, and Tenant shall
        be
        liable for and reimburse Landlord upon demand for all costs and expenses
        of
        every kind and nature incurred in retaking possession of the Premises and
        all
        other losses suffered by Landlord as a consequence of Tenant's default. In
        the
        event of any entry or taking possession of the Premises, Landlord shall have
        the
        right, but not the obligation, to remove therefrom all or any part of the
        personal property located therein and may place the same in storage at a
        public
        warehouse at the expense and risk of Tenant.

      

      10.2.2  Termination.
        If
        Landlord elects to terminate this Lease pursuant to the provisions of options
        (i) or (iv) of Section 10.2, Landlord may recover from Tenant as damages,
        the
        following: (i) the worth at the time of award of any unpaid Rent which had
        been
        earned at the time of such termination; plus (ii) the worth at the time of
        award
        of the amount by which the unpaid Rent which would have been earned after
        termination until the time of award exceeds the amount of the Rent loss Tenant
        proves could have been reasonably avoided; plus (iii) the worth at the time
        of
        award of the amount by which the unpaid Rent for the balance of the term
        after
        the time of award exceeds the amount of the Rent loss that Tenant proves
        could
        be reasonably avoided; plus (iv) any other amount necessary to compensate
        Landlord for all the detriment proximately caused by Tenant's failure to
        perform
        its obligations under this Lease or which in the ordinary course of things
        would
        be likely to result therefrom, including but not limited to, any costs or
        expenses incurred by Landlord in retaking possession of the Premises, including
        reasonable attorneys' fees therefor; maintaining or preserving the Premises
        after such default; preparing the Premises for reletting to a new tenant,
        including repairs or alterations to the Premises for such reletting; leasing
        commissions; and any other costs necessary or appropriate to relet the Premises;
        and (v) such other amounts in addition to or in lieu of the foregoing as
        may be
        permitted from time to time by the laws of the State of Washington. As used
        in
        items (i) and (ii) of this Section 10.2.2, the "worth at the time of award"
        shall be computed by allowing interest at the interest rate specified in
        Section
        3.8 of this Lease. As used in item (iii) above, the "worth at the time of
        award"
        shall be computed by using the then applicable discount rate quoted by the
        Federal Reserve Bank of San Francisco or its successor. 

      

      10.2.3  Re-letting
        the Premises.
        At the
        option of Landlord: (i) the Rent shall become due thereupon and be paid up
        to
        the time of such re-entry, dispossess and/or termination; (ii) Landlord may
        relet the Premises or any part or parts thereof, either in the name of Landlord
        or otherwise, for a term which may at Landlord's option be less than or exceed
        the period which would otherwise have constituted the balance of the Term,
        and
        may grant reasonable concessions of free rent; and (iii) Tenant or the legal
        representative of Tenant shall also pay Landlord, as damages for the failure
        of
        Tenant to observe and perform said Tenant's covenants herein contained, for
        each
        month of the period which would otherwise have constituted the balance of
        the
        Term, any deficiency between (x) the sum of (a) one monthly installment of
        Fixed
        Rent, (b) the Tax Rent that would have been payable for the month in question
        but for such reentry or termination, and (c) the current monthly minimum
        Common
        Area Rent, and (y) the net amount, if any, of the rents collected on account
        of
        the lease or leases of the Premises for each month of the period which would
        otherwise have constituted the balance of the Term. The reasonable refusal
        or
        failure of Landlord to relet the Premises or any part of parts thereof shall
        not
        release or affect Tenant's liability for damages provided Landlord shall
        have
        made the same effort and on the same terms to relet the Premises as with
        respect
        to other vacant space in the Office Park, however, Landlord shall not be
        required to prefer the reletting of the Premises over any other space in
        the
        Office Park. In computing such damages there shall be added to the said
        deficiency such reasonable expenses as Landlord' may incur in connection
        with
        reletting, such as court costs, attorneys fees and disbursements, brokerage
        and
        for the expenses of putting and keeping the Premises in good order or for
        preparing the same for reletting as hereinafter provided. Any such damages
        shall
        be paid in monthly installments by Tenant on the rent day specified in this
        Lease and any suit brought to collect the amount of the deficiency for any
        month
        shall not prejudice in any way the rights of Landlord to collect the deficiency
        for any subsequent or prior month by a similar proceeding. Landlord, at
        Landlord's option, may make such alterations, repairs, replacements and/or
        decorations in the Premises as Landlord in Landlord's sole judgment considers
        advisable and necessary for the purpose of reletting the Premises for the
        purpose of reletting the Premises to another user of warehouse space; and
        the
        making of such alterations and/or decorations shall not operate or be construed
        to release Tenant from liability hereunder as aforesaid. Except as expressly
        provided herein, Landlord shall in no event be liable in any way whatsoever
        for
        failure to relet the Premises, or in the event that the Premises are relet,
        for
        failure to collect the rent thereof under such reletting.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      10.2.4  Appointment
        of Receiver.
        If an
        Event of Default has occurred, Landlord shall have the right to have a receiver
        appointed to collect rent. Neither the filing of a petition for appointment
        of a
        receiver nor the appointment itself shall constitute an election by Landlord
        to
        terminate this Lease.

      

      10.2.5  Waiver
        of Redemption Rights.
        Tenant,
        for itself, and on behalf of any and all persons claiming through or under
        it,
        including creditors of all kinds, does hereby waive and surrender all right
        and
        privilege which they or any of them might have under or by reason of any
        present
        or future law, to redeem the Premises or to have a continuance of this Lease
        for
        the term hereof, as it may have been extended, after having been dispossessed
        or
        ejected therefrom by process of law or under the terms of this Lease or after
        the termination of this Lease as herein provided.

      

      10.3        
        Trial
        by Jury; Counterclaim.
        Landlord and Tenant shall and they hereby do waive trial by jury in any action,
        proceeding or counterclaim brought by either of the parties hereto against
        the
        other on any matters not relating to personal injury or property damage but
        otherwise arising out of or in anyway connected with this Lease, the
        relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises,
        and any emergency statutory or any other statutory remedy.

      

      10.4         Holdover
        by Tenant.
        In the
        event Tenant remains in possession of any portion of the Premises after the
        expiration of the Term as to such portion and without the execution of a
        new
        lease, Tenant, at the option of Landlord, shall be deemed to be occupying
        such
        portion of the Premises as a tenant from month to month, at a monthly rental
        equal to the sum of (a) one hundred fifty percent (150%) of the monthly
        installment of Fixed Rent payable during the last month of the Term, (b)
        the
        monthly installment of Tax Rent payable for the last month of the Term, and
        (c)
        the Common Area Rent payable for such month, subject to all the other
        conditions, provisions and obligations of this Lease insofar as the same
        are
        applicable to a month-to-month tenancy. Tenant shall not and hereby waives
        the
        right to interpose any counterclaim or counterclaims in a summary proceeding
        or
        other action by Landlord based on holdover.

      

      10.5         
        Landlord's
        Right To Cure Defaults.
        Landlord may cure, after notice of default is served, any default by Tenant
        under this Lease; and whenever Landlord so elects, all costs and expenses
        incurred by Landlord in curing a default, including, without limitation,
        reasonable attorneys' fees, together with interest on the amount of costs
        and
        expenses so incurred at the rate provided in Section 3.8 hereof, shall be
        paid
        by Tenant to Landlord on demand, and shall be recoverable as Additional
        Rent.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      10.6  Waiver
        of Default.
        No
        consent or waiver, express or implied, by Landlord or Tenant to or of any
        breach
        of any covenant, condition or duty of the other shall be construed as a consent
        or waiver to or of any other breach of the same or any other covenant, condition
        or duty of Tenant, unless in writing signed by the party against whom waiver
        is
        sought.

      

      11.  
ASSIGNMENT
        AND SUBLETTING.
        After
        completion of the Tenant Improvements, the payment of any amounts for Tenant
        Improvements, and the taking of the Premises for occupancy, and so long as
        no
        Event of Default has occurred and is continuing, Tenant may, in writing,
        request
        Landlord's consent to an assignment of this Lease or a subletting of all
        (but
        not less than all) of the Premises. Such request shall include the name of
        the
        proposed assignee or subtenant, a copy of the proposed agreements and
        instruments relating to the transaction, certi-fied financial statements
        of the
        proposed assignee or subtenant and its officers, directors and stockholders,
        and
        such information as to the financial responsibility, business and standing
        of
        the proposed assignee or subtenant as Landlord may reasonably require.

      

      11.1  Right
        to Cancel.
        Upon
        the receipt by Landlord of a request from Tenant to sublet or assign, and
        the
        information from Tenant described above, Landlord shall have the right, to
        be
        exercised in writing within thirty (30) days after such receipt, to cancel
        and
        terminate this Lease as of the date set forth in Landlord's notice of exercise
        of such option, which effective date of termination in Landlord's notice
        shall
        be not less than sixty (60) nor more than one hundred twenty (120) days
        following the service of such notice. If Landlord shall exercise such
        cancellation right, Tenant shall surrender possession of the Premises, on
        the
        date set forth in such notice in accordance with the provisions of this Lease
        relating to surrender of the Premises at the expiration of the Term. In no
        event
        shall the Premises be subdivided or partially sublet.

      

      11.2  Consent
        Required.
        If
        Landlord shall not exercise its right to cancel this Lease as provided in
        Section 11.1, Landlord's consent to such request shall not be unreasonably
        withheld provided such consent to sublease or assignment is effected by a
        legal
        document in form and substance satisfactory to Landlord and Section 11.3
        below
        shall apply with respect to a possible adjustment of Rent. In no event shall
        any
        assignment or subletting to which Landlord may have consented release or
        relieve
        Tenant from its obligations fully to perform all of the terms, covenants
        and
        conditions of the Lease on its part to be performed. In determining whether
        to
        consent to a proposed assignment or subletting, Landlord may consider any
        commercially reasonable basis for approving or disapproving the proposed
        assignment or subletting, including without limitation any of the following:
        (i)
        the business experience or reputation of the proposed assignee or sublessee,
        (ii) whether the clientele, personnel, or traffic which will be generated
        by the
        business of the proposed assignee or sublessee is consistent in Landlord's
        opinion with the businesses of other tenants in the Building and the Office
        Park; (iii) notwithstanding that Tenant or others may remain liable under
        this
        Lease, whether the proposed assignee or sublessee has a net worth and financial
        strength and a credit record satisfactory to Landlord; (iv) whether the use
        of
        the Premises by the proposed assignee or sublessee will be substantially
        the
        same as the use of the Premises by Tenant, and whether such use is consistent
        with the businesses of other tenants then occupying the Office Park, and
        whether
        such use will violate or create a potential violation of any laws or a breach
        or
        violation of any other lease or agreement by which Landlord is bound; (v)
        whether the proposed use of the Premises by the proposed assignee or sublessee
        will increase the likelihood of damage or destruction to the Premises or
        the
        Building, be likely to cause an increase in insurance premiums for insurance
        policies applicable to the Building, require new tenant improvements
        incompatible with the then existing Building systems and components, and
        otherwise have or cause a material adverse impact on the Premises, the Building,
        the Office Park or Landlord's interests therein; (vi) whether the proposed
        assignee or sublessee is an existing tenant or occupant of the Building or
        the
        Office Park or a person or entity with whom Landlord is then dealing, or
        with
        whom Landlord has had dealings during the previous six (6) months with respect
        to leasing of space in the Office Park; and (vii) whether any ground lessor
        or
        mortgagee whose consent to such transfer as required has so consented to
        the
        proposed transaction.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      11.3  Adjustment
        to Rent.
        If
        under the assignment or sublease consented to by Landlord the rent, additional
        rent, other charges, and/or consideration, money or thing of value payable
        thereunder or payable in connection with the transaction exceed the Rent
        provided in this Lease, Tenant or, at Landlord's option, the sublessee or
        assignee shall pay said excess rent or other consideration to Landlord as
        Additional Rent hereunder as and when the same becomes due under said assignment
        or sublease.

      

      11.4  Permitted
        Transfers.
        Notwithstanding the prohibition set forth in Section 7.2.2, if Tenant is
        a
        corporation, Tenant shall have the right, without the consent of Landlord,
        to
        assign its interest in this Lease to a parent, subsidiary or affiliate of
        Tenant
        or any corporation which is a successor to Tenant either by merger or
        consolidation, or in connection with the transfer of all of the business
        and
        assets of the Tenant or a public offering of Tenant's stock provided that
        the
        successor shall have a tangible net worth, determined in accordance with
        generally accepted accounting principles, at least equal to the tangible
        net
        worth of Tenant as of the date of this Lease. However, no such assignment
        shall
        be valid unless, within ten (10) days prior to the effective date thereof
        Tenant
        shall deliver to Landlord (1) a duplicate original instrument of assignment
        in
        form and substance satisfactory to Landlord, duly executed by Tenant, (2)
        an
        instrument in form and substance satisfactory to Landlord, duly executed
        by the
        assignee, in which such assignee shall assume observance and performance
        of and
        to be personally bound by, all terms, covenants and conditions of this Lease
        on
        Tenant's part to be observed and performed, and (3) evidence of compliance
        with
        the conditions of this paragraph.

      

      12.  
MISCELLANEOUS
        PROVISIONS.

      

      12.1  Notices.
        Any
        notice or demand from Landlord to Tenant or from Tenant to Landlord shall
        be in
        writing and shall be deemed duly served if mailed by Registered or certified
        mail, return receipt requested, addressed, if to Tenant, at the Building
        or to
        such other address as may be specified in Section 1 of this Lease, or to
        such other address as Tenant shall have last designated by notice in writing
        to
        Landlord, and if to Landlord, at the address of Landlord set forth herein
        or
        such other address as Landlord shall have last designated by notice in writing
        to Tenant, with copy to Managing Agent. Notice shall be deemed served when
        personally delivered or three (3) days after mailed if mailed.

      

      12.2  Brokerage.
        Tenant
        and Landlord warrant that they have had no dealings with any broker or agent
        in
        connection with this Lease other than the Brokers, if any, named herein and
        each
        covenants to pay, hold harmless and indemnify the other from and against
        any and
        all cost, expense or liability for any compensation, commissions and charges
        claimed by any other broker or agent with respect to this Lease or the
        negotiation thereof with whom they had dealings. Landlord
        acknowledges that Tenant has entered into an agreement with Tenant's Brokers
        for
        representation in connection with this Lease. Tenant acknowledges that Landlord
        has entered into an agreement with Landlord's Brokers for representation
        in
        connection with this Lease. In accordance with the terms of Landlord's listing
        agreement with Landlord's Brokers, Landlord shall pay any commissions due
        and
        payable to Landlord's Brokers or Tenant's Brokers in connection with this
        Lease.

      

      12.3  Estoppel
        Certificates; Subordination Agreements.
        

      

      12.3.1  Each
        of
        the parties agrees that it will, at any time and from time to time, within
        ten
        (10) business days following written notice by the other party hereto specifying
        that it is given pursuant to this section, execute, acknowledge and deliver
        to
        the party who gave such notice a statement in writing certifying that this
        Lease
        is unmodified and in full force and effect (or if there have been modifications,
        that the same is in full force and effect as modified and stating the
        modifications), and the dates to which the Rent and any other payments due
        hereunder from Tenant have been paid in advance, if any, and stating whether
        or
        not to the best of knowledge of the signer of such certificate the other
        party
        is in default in performance of any covenant, agreement or condition contained
        in this Lease, and, if so, specifying each such default of which the signer
        may
        have knowledge.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      12.3.2  This
        Lease is and all of Tenant's rights hereunder are subject and subordinate
        to any
        Overlease, mortgages or deeds of trust that now exist or may hereafter be
        placed
        upon the Building, the Building Parcel or any part thereof and to any and
        all
        advances to be made thereunder, and to the interest thereon, and to all
        renewals, replacements, amendments, modifications, consolidations and extensions
        of any of the foregoing. Tenant agrees to execute within ten (10) business
        days
        following a written request from Landlord to Tenant, such docu-ments with
        holders of such Overleases, mortgages or deeds of trust confirming the foregoing
        subordination as may be requested by Landlord. Any lessor, mortgagee or
        beneficiary under any such Overlease, mortgage or deed of trust may elect
        that
        this Lease shall have priority over its Overlease, mortgage or deed of trust
        and
        upon notification of such election by such mortgagee or beneficiary to Tenant,
        this Lease shall be deemed to have priority over said Overlease, mortgage
        or
        deed of trust whether this Lease is dated prior to or subsequent to the date
        of
        said Overlease, mortgage or deed of trust. Tenant agrees to execute any
        subordination or nondisturbance agreement with the holder of any Overlease,
        mortgage or deed of trust on the Building Parcel or the Building confirming
        the
        matters set forth in this Section 12.3.2 and such other provisions as are
        customary in connection with such subordination agreements.

      

      12.4  Applicable
        Law and Construction.
        The
        laws of the State of Washington shall govern the validity, performance and
        enforcement of this Lease. The invalidity or unenforceability of any provision
        of this Lease shall not affect or impair any other provision. The submission
        of
        this document to Tenant for examination does not constitute an offer to lease,
        or a reservation of or option to lease, and becomes effective only upon
        execution and delivery thereof by Landlord and Tenant. All negotiations,
        considerations, representations and understandings between the parties are
        incorporated in this Lease. Landlord or Landlord's agents have made no
        representations or promises with respect to the Building, the Office Park
        or the
        Premises, except as herein expressly set forth. The headings of the several
        articles and sections contained herein are for convenience only and do not
        define, limit or construe the contents of such articles or sections. Whenever
        herein the singular number is used, the same shall include the plural, and
        the
        neuter gender shall include the masculine and feminine genders.

      

      12.5  Relationship
        of the Parties.
        Nothing
        contained herein shall be deemed or construed by the parties hereto, or by
        any
        third party, as creating the relationship of principal and agent or partnership
        or joint venture between the parties hereto, it being understood and agreed
        that
        no provisions herein, nor any acts of the parties hereto, shall be deemed
        to
        create any relationship between the parties hereto other than the relationship
        of landlord and tenant.

      

      12.6  Construction
        on Adjacent Premises or Buildings.
        If any
        excavation or other building construction shall be about to be made or shall
        be
        made on any premises adjoining or above or below the Premises or on any other
        portion of the Building, Tenant shall permit Landlord or the adjoining owner,
        and their respective agents, employees, licensees and contractors, to enter
        the
        Premises and to shore the foundations and/or walls thereof, and to erect
        scaffolding and/or protective barricades around and about the Premises (but
        not
        so as to preclude entry thereto) and to do any act or thing necessary for
        the
        safety or preservation of the Premises. Tenant's obligations under this Lease
        shall not be affected by any such construction or excavation work, shoring-up,
        scaffolding or barricading. Landlord shall not be liable in any such case
        for
        any inconvenience, disturbance, loss of business or any other annoyance arising
        from any such construction, excavation, shoring-up, scaffolding or barricades,
        but Landlord shall use its best efforts so that such work will cause as little
        inconvenience, annoyance and disturbance to Tenant as possible consistent
        with
        accepted construction practice in the vicinity and so that such work shall
        be
        expeditiously completed and will not materially and adversely affect the
        operation of Tenant's business within the Premises.

      

      12.7  Recording.
        Tenant
        agrees not to record this Lease.

      

      12.8  Binding
        Effect of Lease.
        The
        covenants, agreements and obligations herein contained, except as herein
        otherwise specifically provided shall extend to, bind and inure to the benefit
        of the parties hereto and their respective personal representatives, heirs,
        successors and permitted assigns. Each covenant, agreement, obligation or
        other
        provision herein contained shall be deemed and construed as a separate and
        independent covenant of the party bound by, undertaking or making the same,
        not
        dependent on any other provision of this Lease unless otherwise expressly
        provided.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      12.9  Effect
        of Unavoidable Delays.
        The
        provisions of this section shall be applicable if there shall occur, during
        the
        Term, or prior to the commencement thereof, any (a) strike(s), lockout(s)
        or labor dispute(s); (b) inability to obtain labor or materials, or reasonable
        substitutes therefor; or (c) acts of God, governmental restrictions, regulations
        or controls, enemy or hostile governmental action, civil commotion, fire
        or
        other casualty, or (d) other conditions similar or dissimilar to those
        enumerated in this item beyond the reasonable control of the party obligated
        to
        perform. If Landlord or Tenant shall, as the result of any of the
        above-described events, fail punctually to perform any obligation on its
        part to
        be performed under this Lease, then such failure shall be excused and not
        be a
        breach of this Lease by the party in question, but only to the extent occasioned
        by such event. If any right or option of either party to take any action
        under
        or with respect to this Lease is conditioned upon the same being exercised
        within any prescribed period of time or at or before a named date, then such
        prescribed period of time and such named date shall be deemed to be extended
        or
        delayed, as the case may be, for a period equal to the period of delay
        occasioned by any above-described event. Notwithstanding anything herein
        contained however, the provisions of this section shall not be applicable
        to
        Tenant's obligations to timely pay Rent or its obligations to pay any other
        sums, moneys, costs, charges or expenses required to be paid by Tenant hereunder
        and time shall be of the essence with respect to timely payment
        thereof.

      

      12.10  No
        Oral Changes.
        Neither
        this Lease nor any provision hereof may be changed, waived, discharged or
        terminated orally, but only by an instrument in writing signed by the party
        against whom enforcement of the change, waiver, discharge or termination
        is
        sought.

      

      12.11  Executed
        Counterparts of Lease.
        This
        Lease may be executed in any number of counterparts and each of such
        counterparts shall for all purposes be deemed to be an original, and all
        such
        counterparts shall together constitute but one and the same Lease.

      

      12.12  Invalid
        Provisions.
        If any
        provision of this Lease is held unlawful or invalid, then this Lease shall
        continue in full force and effect but such unlawful or invalid provision
        shall
        be deemed omitted. If any portion of Rent shall at any time be held to be
        higher
        than the amount which the Landlord may lawfully reserve then the amount thereof
        shall be reduced to the highest lawful amount.

      

      12.13  Entire
        Agreement.
        This
        Lease is the final and complete expression of Landlord and Tenant relating
        in
        any manner to the leasing, use and occupancy of the Premises, to Tenant's
        use of
        the Building and other matters set forth in this Lease. No prior agreement
        or
        understanding pertaining to the same shall be valid or of any force or
        effect.

      

      12.14  Attorneys'
        Fees.
        If a
        lawsuit or other legal proceeding is brought to enforce or interpret the
        terms
        of this Lease, the substantially prevailing party therein will be entitled
        to
        recover from the other party, the substantially prevailing party's reasonable
        attorneys' fees, witness fees and other court costs incurred in connection
        with
        such proceeding.

      

      12.15  Transportation
        Management Program; Recycling.
        Tenant
        shall cooperate with Landlord in meeting the objectives and complying with
        the
        terms and conditions of any transportation management plan now or hereafter
        instituted by any Governmental Authority and applicable to the Building or
        the
        Office Park. In addition, Tenant will cooperate with and participate in any
        and
        all recycling programs now or hereafter in place with respect to the Building
        or
        the Office Park, whether or not governmentally mandated, if substantially
        all of
        the tenants of the Building or the Office Park, as applicable, are requested
        to
        participate.

      

      13.  
RIGHT
        TO TERMINATE EARLY.
        So
        long
        as Tenant is not then in default under this Lease beyond any applicable notice
        or cure period, Tenant may terminate this Lease effective as of the end of
        the
        fortieth (40th) full calendar month of the Lease Term by giving Landlord
        at
        least two hundred seventy (270) days advance written notice. If Tenant elects
        to
        terminate this Lease pursuant this Section 13, Tenant shall pay to Landlord,
        at
        the time Tenant delivers such notice, the unamortized balance of "Landlord's
        Costs" (defined below). The term "Landlord's
        Costs"
        means
        the sum of (1) the real estate fees and commissions paid by Landlord in
        connection with this Lease, and (2) Fixed Rent in the amount of $48,000,
        representing the free rent granted to Tenant during the fourth through the
        seventh months of the Lease Term.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      DATED
        as
        of the day and year first above written.

      

      LANDLORD:

      

      THE
        TRUSTEES UNDER THE WILL AND

      OF
        THE ESTATE OF JAMES CAMPBELL, 

      DECEASED,
        acting
        in their fiduciary and not in 

      their
        individual capacities

      

      
        	
                By

              	
                  /S/
                  DORINE J HOLSEY
                  STREETER 

              	 
	
                 

              	
                Dorine
                  J. Holsey Streeter,

              	 
	
                 

              	
                Executive
                  Vice President,

              	 
	
                 

              	
                Real
                  Estate Investment Management

              	 
	 	 	 
	
                By

              	
                  /S/
                  CLYDE A
                  SKEEN

              	 
	
                 

              	
                Clyde
                  A. Skeen, Vice President,

              	 
	
                 

              	
                Regional
                  Manager

              	 
	
                 

              	
                Real
                  Estate Investment Management

              	 

      

      

      APPROVED
        AS TO FORM FOR LANDLORD:

      

      ALSTON,
        COURTNAGE & BASSETTI LLP

      

      

      
        	
                By

              	
                  /S/
                  THOMAS a
                  BARKEWITZ

              	 
	 	
                Thomas
                  A. Barkewitz

              	 
	 	 	 	 
	
                TENANT:

              	 	 
	 	 	 	 
	
                ZONES,
                  INC.,
                  a
                  Washington corporation

              	 
	 	 	 	 
	 	 	 	 
	
                By

              	
                  /S/
                  RONALD P
                  MCFADDEN

              	 
	 	 	 	 
	 	
                Its

              	
                President
                  

              	
                 

              
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
                By

              	
                  /S/
                  RONALD P
                  MCFADDEN

              	 
	 	 	 	 
	 	
                Its

              	
                SVP,
                  CFO 

              	
                 

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      CALIFORNIA
        ALL-PURPOSE ACKNOWLEDGEMENT

      
        
          

        

      

      

      State
        of
        California

       

      County
        of
        San Francisco )
        ss.

      On
        this
        21st day of September, 2005, before me, Jennifer Cobb, Notary Public, personally
        appeared Dorine
        J. Holsey Streeter,
        and
Clyde
        A. Skeen,
        

      

      Personally
        known to me. 

      

      WITNESS
        my hand and official seal.

      

      

      
        	 	
                /S/
                  JENNIFER COBB

              	 
	 	
                Signature
                  of Notary Public

              	 
	 	 	 
	 	
                Jennifer
                  Cobb

              	 
	 	
                Commision
                  # 1556736

              	 
	 	
                NOTARY
                  PUBLIC - California

              	 
	 	
                San
                  Francisco County

              	 
	 	
                My
                  commission expires March
                  4, 2009.

              	 

      

       

       

      

      

      
        	
                STATE
                  OF WA 

              	
                )

              	 
	 	
                )
                  ss.

              	 
	
                COUNTY
                  OF King 

              	
                )

              	 

      

      

      

      On
        this
        16th day of September, 2005, before me, a Notary Public in and for the State
        of
        Washington, duly commissioned and sworn, personally appeared Firoz Lalji
        and
        Ronald McFadden, to me known to be the CEO and CFO, respectively, of
Zones,
        Inc.,
        the
        corporation named in and which executed the foregoing instrument; and they
        acknowledged to me that they signed the same as the free and voluntary act
        and
        deed of said corporation for the uses and purposes therein
        mentioned.

      

      I
        certify
        that I know or have satisfactory evidence that the persons appearing before
        me
        and making this acknowledgment are the persons whose true signatures appear
        on
        this document.

      

      WITNESS
        my hand and official seal the day and year in this certificate above
        written.

      
 

      
        	 	
                /S/
                  RITA A GEBENINI

              	 
	 	
                Signature

              	 
	 	 	 
	 	
                Rita
                  A Gebenini

              	
                 

              
	 	
                Print
                  Name

              	 
	 	
                NOTARY
                  PUBLIC in and for the State of

              	 
	 	
                WA,
                  residing at 22411
                  127th
                  Ave SE, Kent WA.

              	 
	 	
                My
                  commission expires June
                  29, 2008.EXECUTION VERSION

                           FIRST SECURITY GROUP, INC.

                            (A TENNESSEE CORPORATION)

                        4,500,000 SHARES OF COMMON STOCK

                           (PAR VALUE $0.01 PER SHARE)

                               PURCHASE AGREEMENT
                               ------------------

                                                                  August 9, 2005

KEEFE, BRUYETTE & WOODS, INC.
  as Representative of the several Underwriters
787 Seventh Avenue
4th Floor
New York, New York 10019

Ladies  and  Gentlemen:

     First  Security  Group,  Inc.,  a  Tennessee  corporation  (the  "Company")
                                                                       -------
confirms its agreement with Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette") and
                                                            --------------
each  of  the  other  Underwriters named in Schedule A hereto (collectively, the
"Underwriters,"  which  term  shall  also include any underwriter substituted as
-------------
hereinafter provided in Section 10 hereof), for whom Keefe Bruyette is acting as
representative (in such capacity, the "Representative"), with respect to (i) the
                                       --------------
sale  by  the  Company  and  the  purchase by the Underwriters of the respective
numbers  of  shares  of  Common Stock, $0.01 par value per share, of the Company
("Common Stock") set forth in Schedules A and B hereto and (ii) the grant by the
  ------------
Company  to  the  Underwriters,  acting severally and not jointly, of the option
described  in  Section  2(b)  hereof  to  purchase  all  or  any part of 675,000
additional  shares  of  Common  Stock  to  cover  over-allotments,  if any.  The
aforesaid  4,500,000  shares  of  Common  Stock (the "Initial Securities") to be
                                                      ------------------
purchased  by  the  Underwriters  and  all  or any part of the 675,000 shares of
Common Stock subject to the option described in Section 2(b) hereof (the "Option
                                                                          ------
Securities")  are  hereinafter  called,  collectively,  the  "Securities."
----------                                                    ----------

     The  Company  understands  that  the  Underwriters propose to make a public
offering  of  the Securities as soon as the Representative deems advisable after
this  Agreement  has  been  executed  and  delivered.

     The  Company  has  filed  with  the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 333-125722) covering the
 ----------
registration  of  the  Securities  under  the Securities Act of 1933, as amended
(together  with  the  rules  and  regulations  promulgated thereunder, the "1933
                                                                            ----
Act"),  including  the  related preliminary prospectus or prospectuses. Promptly
---
after  execution  and  delivery  of this Agreement, the Company will prepare and
file  a  prospectus  in  accordance  with  the  provisions  of  Rule  430A

<PAGE>
("Rule  430A")  under the 1933 Act and paragraph (b) of Rule 424 ("Rule 424(b)")
 -----------                                                       -----------
under  the  1933  Act.  The  information  included  in  such prospectus that was
omitted  from  such  registration  statement at the time it became effective but
that  is  deemed to be part of such registration statement at the time it became
effective  pursuant  to  paragraph (b) of Rule 430A is referred to as "Rule 430A
                                                                       ---------
Information."  Each  prospectus  used  before such registration statement became
-----------
effective,  and  any  prospectus that omitted the Rule 430A Information that was
used  after  such  effectiveness and prior to the execution and delivery of this
Agreement,  is  herein  called  a  "preliminary  prospectus."  Such registration
                                    -----------------------
statement, including the exhibits thereto and, schedules thereto, if any, at the
time  it  became  effective  and  including the Rule 430A Information, is herein
called  the "Registration Statement."  Any registration statement filed pursuant
             ----------------------
to  Rule  462(b)  under  the  1933 Act is herein referred to as the "Rule 462(b)
                                                                     -----------
Registration Statement," and after such filing the term "Registration Statement"
----------------------                                   ----------------------
shall  include  the Rule 462(b) Registration Statement.  The final prospectus in
the  form  contained  in  the Registration Statement when declared effective (or
deemed  by Rule 430A to be part thereof) is herein called the "Prospectus."  For
                                                               ----------
purposes  of  this  Agreement, all references to the Registration Statement, any
preliminary  prospectus, the Prospectus or any amendment or supplement to any of
the  foregoing  shall  be  deemed  to include the copy filed with the Commission
pursuant  to  its  Electronic  Data  Gathering,  Analysis  and  Retrieval system
("EDGAR").
  -----

     All  references  in  this  Agreement  to  financial  statements, schedules,
exhibits  and  other  information which is "contained," "included," "described,"
"referred  to"  or  "stated"  in  the  Registration  Statement,  any preliminary
prospectus  or  the  Prospectus  (or  other  references of like import) shall be
deemed  to  mean  and  include  the financial statements, schedules, exhibits or
other  information incorporated by reference (as they may be amended or modified
by  other information included or incorporated by reference) in the Registration
Statement,  any  preliminary  prospectus  or the Prospectus, as the case may be.

     SECTION  1.     Representations  and  Warranties.
                     --------------------------------

     (a)     Representations  and  Warranties  by  the  Company.  The  Company
represents  and  warrants  to  each Underwriter as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if  any)  referred to in Section 2(b) hereof, and agrees with each Underwriter,
as  follows:

          (i)  Compliance  with Registration Requirements. The Company meets the
               ------------------------------------------
     requirements  for  use  of Form S-1 under the 1933 Act, as set forth in the
     general  instructions  thereto,  with respect to the Registration Statement
     and  any Rule 462(b) Registration Statement. The Registration Statement and
     any  Rule  462(b)  Registration  Statement  filed as of the date hereof has
     become  effective  under  the  1933  Act  and  no stop order suspending the
     effectiveness of the Registration Statement or any Rule 462(b) Registration
     Statement  has  been  issued under the 1933 Act and no proceedings for that
     purpose  have  been  instituted  or  are,  to the knowledge of the Company,
     pending  or  contemplated by the Commission, and any request on the part of
     the  Commission  for  additional  information  has  been  complied  with.

<PAGE>
          At  the  respective  times the Registration Statement, any Rule 462(b)
     Registration  Statement  and  any  post-effective amendments thereto became
     effective  (or  becomes  effective if not yet effective) and at the Closing
     Time  (and,  if  any  Option  Securities  are  purchased,  at  the  Date of
     Delivery),  the  Registration  Statement,  the  Rule  462(b)  Registration
     Statement  and  any  amendments  and  supplements thereto complied and will
     comply  in  all material respects with the requirements of the 1933 Act and
     did not and will not contain an untrue statement of a material fact or omit
     to state a material fact required to be stated therein or necessary to make
     the  statements  therein  not  misleading.  Neither  the  Prospectus,  any
     preliminary  prospectus,  nor any amendments or supplements thereto, at the
     time  such  preliminary  prospectus,  Prospectus  or  any such amendment or
     supplement  was  issued  and  at  the  Closing  Time  (and,  if  any Option
     Securities  are  purchased,  at  the  Date  of  Delivery), included or will
     include  an  untrue statement of a material fact or omitted or will omit to
     state a material fact necessary in order to make the statements therein, in
     the  light of the circumstances under which they were made, not misleading.
     The  representations  and  warranties in this subsection shall not apply to
     statements  in  or  omissions  from  the  Registration  Statement,  any
     post-effective  amendment  thereto,  any  preliminary  prospectus,  the
     Prospectus,  or any amendments or supplements thereto made in reliance upon
     and  in  conformity with information furnished to the Company in writing by
     any  Underwriter  through  Keefe  Bruyette  expressly  for  use  in  the
     Registration  Statement,  preliminary  prospectus,  or  Prospectus.

          Each  preliminary  prospectus  and the prospectus filed as part of the
     Registration  Statement  as  originally  filed  or as part of any amendment
     thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
     filed  in  all  material  respects  with  the 1933 Act and each preliminary
     prospectus  and  the  Prospectus  delivered  to the Underwriters for use in
     connection  with  this  offering  was  identical  to  the  electronically
     transmitted  copies  thereof  filed  with the Commission pursuant to EDGAR,
     except  to  the  extent  permitted  by  Regulation  S-T under the 1933 Act.

          (ii)  Independent  Registered  Public Accounting Firm. Joseph Decosimo
                -----------------------------------------------
     and  Company,  PLLC  ("Decosimo"),  the  accounting firm that certified the
                            --------
     financial  statements  and  supporting schedules of the Company included in
     the  Registration Statement, any preliminary prospectus, and the Prospectus
     is an independent registered public accounting firm as required by the 1933
     Act.  With  respect  to  the  Company,  Decosimo is not in violation of the
     auditor  independence  requirements  of  the  Sarbanes-Oxley  Act  of  2002
     ("Sarbanes-Oxley  Act")  and  the  related  rules  and  regulations  of the
       -------------------
     Commission.

          (iii)  Financial  Statements. The financial statements included in the
                 ---------------------
     Registration  Statement,  any  preliminary  prospectus, and the Prospectus,
     together with the related schedules and notes, present fairly the financial
     position  of  the  Company  and  the Subsidiaries (as defined below) at the
     dates  indicated  and the statement of operations, stockholders' equity and
     cash  flows  of the Company and the Subsidiaries for the periods specified.
     Such  financial  statements and any supporting schedules have been prepared
     in  conformity  with  generally  accepted  accounting  principles  ("GAAP")
                                                                          ----
     applied  on  a  consistent basis throughout the periods involved, except as
     may  be  expressly  stated in the related notes thereto, and except, in the
     case  of  the  interim  unaudited financial statements, for normal year-end
     adjustments  and  for  the  absence  of  footnotes  disclosure.  The

<PAGE>
     selected  financial  data and the summary financial information included in
     any  preliminary  prospectus  and/or  the  Prospectus  present  fairly  the
     information shown therein and have been compiled on a basis consistent with
     that  of  the  audited  financial  statements  included in the Registration
     Statement  (with  respect to the audited periods) and on a basis consistent
     with  that  of  the most recent interim financial statements filed with the
     Commission  (with  respect  to  unaudited periods). The pro forma financial
     statements  and  the  related  notes  thereto  included in the Registration
     Statement, any preliminary prospectus, and/or the Prospectus present fairly
     the  information  shown  therein, have been prepared in accordance with the
     Commission's  rules  and  guidelines  with  respect  to pro forma financial
     statements  and have been properly compiled on the basis described therein,
     and  the assumptions used in the preparation thereof are reasonable and the
     adjustments used therein are appropriate to give effect to the transactions
     and  circumstances  referred  to  therein. All disclosures contained in the
     Registration  Statement,  any  preliminary  prospectus,  or  the Prospectus
     regarding  "non-GAAP  financial  measures"  (as such term is defined by the
     rules  and  regulations  of the Commission) comply with Regulation G of the
     Securities  Exchange  Act  of 1934, as amended (together with the rules and
     regulations  promulgated  thereunder,  the  "1934  Act")  and  Item  10  of
                                                  ---------
     Regulation  S-K  under  the  1933  Act,  to  the  extent  applicable.

          (iv)  No  Material  Adverse  Change  in Business. Since the respective
                ------------------------------------------
     dates  as  of  which information is given in the Registration Statement and
     the Prospectus, except as otherwise stated therein or contemplated thereby,
     (A)  there  has been no material adverse change in the condition, financial
     or otherwise, or in the earnings, business affairs or business prospects of
     the  Company  and the Subsidiaries considered as one enterprise, whether or
     not  arising  in  the  ordinary  course  of  business  (a "Material Adverse
                                                                ----------------
     Effect"),  (B)  there have been no transactions entered into by the Company
     ------
     or  the  Subsidiaries, other than those in the ordinary course of business,
     which  are  material  with  respect  to  the  Company  and the Subsidiaries
     considered  as  one  enterprise,  and  (C)  there  has  been no dividend or
     distribution of any kind declared, paid or made by the Company on any class
     of  its  capital  stock.

          (v)  Good  Standing  of  the Company. The Company is a registered bank
               -------------------------------
     holding  company  under  the  Bank  Holding Company Act of 1956, as amended
     ("BHCA"),  has been duly organized and is validly existing as a corporation
       ----
     in  good  standing  under  the  laws  of the State of Tennessee and has the
     corporate  power and authority to own, lease and operate its properties and
     to conduct its business as described in each preliminary prospectus and the
     Prospectus  and  to  enter  into  and  perform  its  obligations under this
     Agreement;  and  the  Company is duly qualified as a foreign corporation to
     transact  business  and  is  in good standing in each other jurisdiction in
     which such qualification is required, whether by reason of the ownership or
     leasing of property or the conduct of business, except where the failure so
     to qualify or to be in good standing would not result in a Material Adverse
     Effect.

          (vi)  Good  Standing  of  Subsidiaries.  FSGBank, National Association
                --------------------------------
     ("FSGBank")  has  been  duly  organized  and  is validly existing as a bank
       -------
     national  association  and  each other direct or indirect subsidiary of the
     Company (together with FSGBank, the "Subsidiaries") has been duly organized
                                          ------------
     and,  except  for  Premier  National  Services,  Inc.  ("PNS"),  is validly
                                                              ---
     existing  as  a  corporation,  and  each  Subsidiary  other

<PAGE>
     than  PNS  is  in  good  standing under the laws of the jurisdiction of its
     organization,  has  corporate power and authority to own, lease and operate
     its  properties and to conduct its business as described in any preliminary
     prospectus  and/or  the  Prospectus  and  is  duly  qualified  as a foreign
     corporation  to  transact  business  and  is  in  good  standing  in  each
     jurisdiction  in which such qualification is required, whether by reason of
     the  ownership  or  leasing  of property or the conduct of business, except
     where  the failure so to qualify or to be in good standing would not result
     in  a  Material  Adverse  Effect. All of the issued and outstanding capital
     stock  of  each  Subsidiary has been duly authorized and validly issued, is
     fully  paid  and  non-assessable, except as otherwise provided in 12 U.S.C.
     Section  55  with respect to FSGBank, and is owned by the Company directly,
     free  and  clear  of  any  security  interest,  mortgage,  pledge,  lien,
     encumbrance,  claim  or  equity;  none of the outstanding shares of capital
     stock  of  any  Subsidiary  was  issued  in  violation of the preemptive or
     similar rights of any securityholder of such Subsidiary. The Company has no
     direct  or  indirect subsidiaries other than those set forth on Schedule E.
     PNS  owns  no  assets  and  has  no  operations.

          (vii) Bank Subsidiaries. Except as disclosed in the Prospectus and any
                -----------------
     preliminary  prospectus,  the  Company and FSGBank conduct their respective
     businesses  in compliance in all material respects with all federal, state,
     local and foreign statutes, laws, rules, regulations, decisions, directives
     and  orders  applicable  to  them  (including,  without  limitation,  all
     regulations  and  orders  of, or agreements with, the Board of Governors of
     the  Federal  Reserve  System,  the  Federal  Deposit Insurance Corporation
     ("FDIC"),  the  Office  of  the  Comptroller of the Currency, the Tennessee
       ----
     Department  of  Financial Institutions, as applicable, and the Equal Credit
     Opportunity  Act, the Fair Housing Act, the Community Reinvestment Act, the
     Home  Mortgage  Disclosure  Act,  all other applicable fair lending laws or
     other  laws  relating  to discrimination and the Bank Secrecy Act and Title
     III  of  the  USA  Patriot  Act).  Since March 1, 2005, the Company has not
     received  any communication from any governmental entity asserting that the
     Company  or  FSGBank  is  not  in  compliance  with any statute, law, rule,
     regulation,  decision,  directive  or  order,  and, to the knowledge of the
     Company,  there  is no continuing investigation, proceeding, or outstanding
     executory  obligation  of  the  Company  relating to any such communication
     received  prior  to  March  1, 2005. To the knowledge of the Company, since
     March  1,  2005,  FSGBank  has  not  received  any  communication  from any
     governmental  entity  asserting  that FSGBank is not in compliance with any
     statute,  law,  rule,  regulation, decision, direction or order and, to the
     knowledge of the Company, there is no continuing investigation, proceeding,
     or  outstanding  executory  obligation  of  FSGBank  relating  to  any such
     communication  received  prior  to  March  1,  2005.

<PAGE>
          (viii)  Capitalization. The authorized, issued and outstanding capital
                  --------------
     stock  of the Company is as set forth in the Prospectus and any preliminary
     prospectus  in  the  column  entitled  "Actual"  under  the  caption
     "Capitalization" (except for subsequent issuances, if any, pursuant to this
     Agreement,  pursuant  to reservations, agreements or employee benefit plans
     referred to in the Prospectus and any preliminary prospectus or pursuant to
     the  exercise  of  convertible  securities  or  options  referred to in the
     Prospectus  and  any  preliminary  prospectus).  The  shares  of issued and
     outstanding  capital stock, including the Securities to be purchased by the
     Underwriters,  have  been  duly authorized and validly issued and are fully
     paid  and  non-assessable; none of the outstanding shares of capital stock,
     including the Securities to be purchased by the Underwriters, was issued in
     violation  of  the preemptive or other similar rights of any securityholder
     of  the  Company.

          (ix)  Authorization  of  Agreement.  This  Agreement  has  been  duly
                ----------------------------
     authorized,  executed  and delivered by the Company and, when duly executed
     by the Underwriters, will constitute the valid and binding agreement of the
     Company  enforceable  against  the  Company  in  accordance with its terms,
     except  as  may  be  limited  or  otherwise  affected  by  (A)  bankruptcy,
     insolvency,  reorganization,  moratorium,  fraudulent  conveyance  or other
     similar  statutes,  rules,  regulations  or  other  laws  affecting  the
     enforcement  of  creditors'  rights  and  remedies  generally,  and (B) the
     unavailability of, or limitation on the availability of, a particular right
     or  remedy  (whether  in  a  proceeding  in equity or at law) because of an
     equitable  principle,  public  policy  or  a  requirement  as to commercial
     reasonableness,  conscionability  or  good  faith.

          (x)  Authorization and Description of Securities. The Securities to be
               -------------------------------------------
     purchased  by  the  Underwriters from the Company have been duly authorized
     for  issuance  and sale to the Underwriters pursuant to this Agreement and,
     when issued and delivered by the Company pursuant to this Agreement against
     payment  of  the consideration set forth herein, will be validly issued and
     fully  paid and non-assessable; the Common Stock conforms to all statements
     relating  thereto contained in any preliminary prospectus or the Prospectus
     and  such  description  conforms to the rights set forth in the instruments
     defining  the same; no holder of the Securities will be subject to personal
     liability  by  reason  of  being  such  a  holder;  and the issuance of the
     Securities  is not subject to the preemptive or other similar rights of any
     securityholder  of  the  Company.

          (xi)  Absence  of  Defaults and Conflicts. Neither the Company nor any
                -----------------------------------
     Subsidiary  is  in violation of its charter or by-laws or in default in the
     performance  or  observance  of  any  obligation,  agreement,  covenant  or
     condition  contained  in  any contract, indenture, mortgage, deed of trust,
     loan  or  credit agreement, note, lease or other agreement or instrument to
     which  the  Company or any of its Subsidiaries is a party or by which it or
     any  of them may be bound, or to which any of the property or assets of the
     Company  or  any  Subsidiary  is  subject  (collectively,  "Agreements  and
                                                                 ---------------
     Instruments")  except  in  each  case  for  such  defaults  that would not,
     -----------
     individually  or in the aggregate, result in a Material Adverse Effect; and
     the  execution,  delivery  and  performance  of  this  Agreement  and  the
     consummation  of  the  transactions  contemplated  herein  and  in  the
     Registration  Statement  (including the issuance and sale of the Securities
     and the use of the proceeds from the sale of the Securities as described in
     any  preliminary  prospectus  or  the  Prospectus under the caption "Use of
                                                                          ------
     Proceeds")  and  compliance  by  the Company with its obligations hereunder
     --------
     have  been  duly  authorized  by  all  necessary  corporate

<PAGE>
     action  and  do  not  and  will  not, whether with or without the giving of
     notice or passage of time or both, conflict with or constitute a breach of,
     or  default  or  Repayment Event (as defined below) under, or result in the
     creation or imposition of any lien, charge or encumbrance upon any property
     or  assets of the Company or any Subsidiary pursuant to, the Agreements and
     Instruments  (except  for  such  conflicts,  breaches or defaults or liens,
     charges  or  encumbrances  that  would  not  result  in  a Material Adverse
     Effect),  nor will such action result in any violation of the provisions of
     the  charter  or by-laws of the Company or any Subsidiary or any applicable
     law,  statute,  rule,  regulation,  judgment,  order, writ or decree of any
     government,  government  instrumentality  or  court,  domestic  or foreign,
     having  jurisdiction  over  the  Company  or any Subsidiary or any of their
     assets, properties or operations. As used herein, a "Repayment Event" means
                                                          ---------------
     any  event  or  condition  which gives the holder of any note, debenture or
     other  evidence  of  indebtedness  (or  any  person acting on such holder's
     behalf) the right to require the repurchase, redemption or repayment of all
     or  a  portion  of  such  indebtedness  by  the  Company or any Subsidiary.

          (xii) Absence of Labor Dispute. No labor dispute with the employees of
                ------------------------
     the  Company  or any Subsidiary exists or, to the knowledge of the Company,
     is imminent, and the Company is not aware of any existing or imminent labor
     disturbance  by  the  employees of any of its or its Subsidiary's principal
     suppliers,  manufacturers, customers or contractors, which, in either case,
     may  reasonably  be  expected  to  result  in  a  Material  Adverse Effect.

          (xiii)  Absence  of Proceedings. There is no action, suit, proceeding,
                   ----------------------
     inquiry  or  investigation  before  or brought by any court or governmental
     agency  or  body, domestic or foreign, now pending, or, to the knowledge of
     the  Company,  threatened,  against  or,  to  the knowledge of the Company,
     affecting  the Company or any Subsidiary, which is required to be disclosed
     in  the  Registration Statement (other than as disclosed therein), or which
     might  reasonably  be  expected  to result in a Material Adverse Effect, or
     which  might  reasonably be expected to materially and adversely affect the
     properties  or  assets  thereof  or  the  consummation  of the transactions
     contemplated  in  this  Agreement  or the performance by the Company of its
     obligations  hereunder;  the aggregate of all pending legal or governmental
     proceedings  to  which the Company or any Subsidiary is a party or of which
     any  of  their  respective  property or assets is the subject which are not
     described  in  the  Registration  Statement,  including  ordinary  routine
     litigation  incidental to the business, could not reasonably be expected to
     result  in  a  Material  Adverse  Effect.

          (xiv)  Accuracy of Exhibits. There are no contracts or documents which
                 --------------------
     are required by the 1933 Act to be described in the Registration Statement,
     any preliminary prospectus, the Prospectus or the documents incorporated by
     reference therein or to be filed as exhibits thereto which have not been so
     described  and  filed  as  required.

<PAGE>
          (xv)  Possession  of  Intellectual  Property.  The  Company  and  the
                --------------------------------------
     Subsidiaries  own  or possess, or can acquire on reasonable terms, adequate
     patents,  patent  rights,  licenses,  inventions,  copyrights,  know-how
     (including  trade  secrets  and  other  unpatented  and/or  unpatentable
     proprietary  or  confidential  information,  systems  or  procedures),
     trademarks,  service  marks,  trade  names  or  other intellectual property
     (collectively,  "Intellectual Property") necessary to carry on the business
                      ---------------------
     now  operated  by  them,  and  neither  the  Company nor any Subsidiary has
     received  any  notice  or  is  otherwise  aware  of  any infringement of or
     conflict  with  asserted  rights of others with respect to any Intellectual
     Property  or  of  any  facts  or  circumstances  which  would  render  any
     Intellectual  Property invalid or inadequate to protect the interest of the
     Company  or  any Subsidiary therein, and which infringement or conflict (if
     the  subject  of any unfavorable decision, ruling or finding) or invalidity
     or  inadequacy,  singly  or  in  the  aggregate, would result in a Material
     Adverse  Effect.

          (xvi)  Absence  of  Further  Requirements.  No  filing  with,  or
                 ----------------------------------
     authorization,  approval,  consent,  license,  order,  registration,
     qualification  or  decree of, any court or governmental authority or agency
     is  necessary  or  required  for  the  performance  by  the  Company of its
     obligations hereunder, in connection with the offering, issuance or sale of
     the  Securities  hereunder  or  the  consummation  of  the  transactions
     contemplated  by  this Agreement, except such as have been already obtained
     or as may be required by the NASD or under the 1933 Act or state securities
     laws  and  any  other  foreign  jurisdiction in which the Securities may be
     offered  or sold and except for such filings, authorizations, and approvals
     as  may  be  necessary  for the application of proceeds as described in the
     Prospectus  to  complete  the  acquisition  of  Jackson  Bank  &  Trust.

          (xvii)  Possession  of  Licenses  and  Permits.  Except  for  the
                  --------------------------------------
     administrative  dissolution of PNS, the Company and each Subsidiary possess
     such  permits,  licenses,  approvals,  consents  and  other  authorizations
     (collectively,  "Governmental Licenses") issued by the appropriate federal,
                      ---------------------
     state, local, banking or foreign regulatory agencies or bodies necessary to
     conduct  the business now operated by them; the Company and each Subsidiary
     are  in  compliance  with the terms and conditions of all such Governmental
     Licenses, except where the failure so to comply would not, singly or in the
     aggregate, have a Material Adverse Effect; all of the Governmental Licenses
     are  valid and in full force and effect, except when the invalidity of such
     Governmental Licenses or the failure of such Governmental Licenses to be in
     full force and effect would not have a Material Adverse Effect; and neither
     the  Company  nor  any  Subsidiary  has  received any notice of proceedings
     relating  to  the  revocation  or  modification  of  any  such Governmental
     Licenses  which,  singly  or  in  the  aggregate,  if  the  subject  of  an
     unfavorable decision, ruling or finding, would result in a Material Adverse
     Effect.

<PAGE>
          (xviii)  Title  to Property. The Company and each Subsidiary have good
                   ------------------
     and  marketable title to all real property owned by the Company and/or such
     Subsidiaries  and good title to all other properties owned by them, in each
     case,  free and clear of all mortgages, pledges, liens, security interests,
     claims,  restrictions  or  encumbrances  of any kind except such as (a) are
     described  in  any preliminary prospectus and the Prospectus or (b) do not,
     singly  or  in  the aggregate, materially affect the value of such property
     and  do  not  interfere  with  the use made and proposed to be made of such
     property  by  the  Company  or  such  Subsidiary; and all of the leases and
     subleases  material  to  the  business of the Company and the Subsidiaries,
     considered as one enterprise, and under which the Company or any Subsidiary
     holds properties described in any preliminary prospectus or the Prospectus,
     are  in  full  force and effect, and neither the Company nor any Subsidiary
     has  any notice of any material claim of any sort that has been asserted by
     anyone  adverse to the rights of the Company or any Subsidiary under any of
     the  leases  or  subleases mentioned above, or affecting or questioning the
     rights  of  the  Company or the Subsidiaries to the continued possession of
     the  leased  or  subleased  premises  under  any  such  lease  or sublease.

          (xix)  Investment  Company  Act.  The  Company  is  not,  and upon the
                 ------------------------
     issuance  and  sale  of  the  Securities  as  herein  contemplated  and the
     application  of  the net proceeds therefrom as described in any preliminary
     prospectus  and  the  Prospectus will not be, an "investment company" or an
     entity "controlled" by an "investment company" as such terms are defined in
     the  Investment  Company  Act  of  1940,  as  amended  (the  "1940  Act").
                                                                   ---------

          (xx)  Environmental  Laws.  Except  as  described  in the Registration
                -------------------
     Statement  and except as would not, singly or in the aggregate, result in a
     Material  Adverse  Effect, (A) neither the Company nor any Subsidiary is in
     violation  of  any  federal,  state,  local  or foreign statute, law, rule,
     regulation,  ordinance,  code, policy or rule of common law or any judicial
     or  administrative  interpretation  thereof,  including  any  judicial  or
     administrative order, consent, decree or judgment, relating to pollution or
     protection of human health, the environment (including, without limitation,
     ambient air, surface water, groundwater, land surface or subsurface strata)
     or  wildlife,  including, without limitation, laws and regulations relating
     to  the  release  or  threatened  release  of  chemicals,  pollutants,
     contaminants,  wastes, toxic substances, hazardous substances, petroleum or
     petroleum  products  (collectively,  "Hazardous  Materials")  or  to  the
                                           --------------------
     manufacture,  processing,  distribution, use, treatment, storage, disposal,
     transport  or handling of Hazardous Materials (collectively, "Environmental
                                                                   -------------
     Laws"),  (B)  the  Company  and  the  Subsidiaries  have  all  permits,
     ----
     authorizations  and  approvals  required under any applicable Environmental
     Laws  and  are each in compliance with their requirements, (C) there are no
     previously  instituted  or,  to  the  Company's  knowledge,  any pending or
     threatened, administrative, regulatory or judicial actions, suits, demands,
     demand  letters,  claims,  liens,  notices  of  noncompliance or violation,
     investigation  or proceedings relating to any Environmental Law against the
     Company  or any Subsidiary and (D) to the Company's knowledge, there are no
     events or circumstances that might reasonably be expected to form the basis
     of  an  order for clean-up or remediation, or an action, suit or proceeding
     by  any  private party or governmental body or agency, against or affecting
     the  Company  or  any  Subsidiary  relating  to  Hazardous Materials or any
     Environmental  Laws.

<PAGE>
          (xxi)  Taxes.  The Company and the Subsidiaries (other than PNS, which
                 -----
     has  been  administratively  dissolved  for  failure to file certain annual
     reports  and  pay  associated  fees)  have  (a)  timely  filed all material
     foreign,  United  States  federal, state and local tax returns, information
     returns,  and  similar  reports  that are required to be filed (taking into
     account  valid  extensions),  and  all  tax  returns  are true, correct and
     complete,  (b)  paid  in  full  all taxes required to be paid by it and any
     other  assessment,  fine  or penalty levied against it, except for any such
     tax,  assessment, fine or penalty that is currently being contested in good
     faith  or  as  would not have, individually or in the aggregate, a Material
     Adverse  Effect, and (c) established on the applicable financial statements
     reserves  that  are  adequate  for the payment of all taxes not yet due and
     payable.

          (xxii) Regulatory Agreements. Except for the Company's commitment with
                 ---------------------
     the  FRB not to incur any additional indebtedness without FRB's consent and
     for commitments of the Company and the Bank with respect to the divestiture
     of  certain  real  estate  investments  if  the JB&T Agreement is effected,
     neither the Company nor any of the Subsidiaries is a party to or subject to
     any  order,  decree,  agreement,  memorandum  or  understanding  or similar
     agreement  with,  or  a  commitment  letter,  supervisory letter or similar
     submission  to,  any  governmental  entity  charged with the supervision or
     regulation  of  depository  institutions  or  engaged  in  the insurance of
     deposits  (including  the  FDIC)  or  the  supervision or regulation of the
     Company  or  the  Subsidiaries,  except  as  would  not,  singly  or in the
     aggregate, result in a Material Adverse Effect, and neither the Company nor
     any  Subsidiary  has been advised by any such governmental entity that such
     governmental  entity  is  contemplating  issuing  or  requesting  (or  is
     considering  the  appropriateness of issuing or requesting) any such order,
     decree,  agreement,  memorandum  or  understanding,  commitment  letter,
     supervisory letter or similar submission, except as would not, singly or in
     the  aggregate,  result  in  a  Material  Adverse  Effect.

          (xxiii)  Statistical  and  Market  Data.  The  statistical  and market
                   ------------------------------
     related  data  contained  in  any  preliminary  prospectus, the Prospectus,
     and/or  the  Registration  Statement  are  based on or derived from sources
     which  the  Company  reasonably  believes  are  reliable  and  accurate.

          (xxiv)  Relationship.  No  relationship,  direct  or  indirect, exists
                  ------------
     between  or  among  the Company or any Subsidiary, on the one hand, and the
     directors, officers, shareholders, customers or suppliers of the Company or
     any  Subsidiary,  on  the  other,  that  is  required by the 1933 Act to be
     described in the Registration Statement, any preliminary prospectus, and/or
     the  Prospectus  and  that  is  not  so  described.

          (xxv)  Unlawful  Payments. Neither the Company nor any Subsidiary nor,
                 ------------------
     to  the knowledge of the Company, any director, officer, agent, employee or
     other  person  associated  with  or  acting on behalf of the Company or any
     Subsidiary  has (A) used any corporate funds for any unlawful contribution,
     gift,  entertainment  or  other  unlawful  expense  relating  to  political
     activity;  (B)  made any direct or indirect unlawful payment to any foreign
     or  domestic  government  official  or  employee  from corporate funds; (C)
     violated  or  is  in  violation  of  any  provision  of the Foreign Corrupt
     Practices  Act  of  1977;  or (D) made any bribe, rebate, payoff, influence
     payment,  kickback  or  other  unlawful  payment.

<PAGE>
          (xxvi)  Deposit Insurance. The deposit accounts of FSGBank are insured
                  -----------------
     by  the  FDIC  to  the  legal  maximum,  FSGBank  has paid all premiums and
     assessments  required  by  the  FDIC  and the regulations thereunder and no
     proceeding  for  the termination or revocation of such insurance is pending
     or  threatened.  FSGBank  is  a member in good standing of the Federal Home
     Loan  Bank  of  Cincinnati.

          (xxvii) No Registration Rights. No person has the right to require the
                  ----------------------
     Company  or  any  Subsidiary  to register any securities for sale under the
     1933  Act  by  reason  of the filing of the Registration Statement with the
     Commission  or  the  issuance  and sale of the Securities to be sold by the
     Company  hereunder.

          (xxviii)  No Stabilization or Manipulation. The Company has not taken,
                    --------------------------------
     directly  or indirectly, any action designed to or that could reasonably be
     expected  to  cause  or  result in any stabilization or manipulation of the
     price  of  the  Securities.

          (xxix)  No  Unauthorized  Use  of  Prospectus.  The  Company  has  not
                  -------------------------------------
     distributed  and,  prior  to the later to occur of (i) the Closing Time and
     (ii)  completion of the distribution of the Securities, will not distribute
     any prospectus (as such term is defined in the 1933 Act) in connection with
     the  offering  and  sale  of  the  Securities  other  than the Registration
     Statement,  any  preliminary prospectus, the Prospectus or other materials,
     if  any,  permitted  by  the  1933  Act and approved by the Representative.

          (xxx) Forward-Looking Statements. No forward-looking statement (within
                --------------------------
     the meaning of Section 27A of the 1933 Act and Section 21E of the 1934 Act)
     contained in the Registration Statement, any preliminary prospectus, or the
     Prospectus  has  been  made or reaffirmed without a reasonable basis or has
     been  disclosed  other  than  in  good  faith.

          (xxxi)  Sarbanes-Oxley  Act.  The  Company  is  in compliance with the
                  -------------------
     applicable  provisions of the Sarbanes-Oxley Act, the rules and regulations
     of  the Commission thereunder, and the corporate governance and other rules
     and  requirements  of  Nasdaq.

          (xxxii)  Lock-up  Agreements. Each of the Company's executive officers
                   -------------------
     and  directors,  in  each case as listed on Schedule D hereto, has executed
     and  delivered  lock-up  agreements as contemplated by Section 5(i) hereof.

<PAGE>
          (xxxiii)  Internal  Control  Over Financial Reporting. The Company and
                    -------------------------------------------
     its  Subsidiaries  maintain  a  system  of  internal control over financial
     reporting  (as  such term is defined in Rules 13a-15(f) and 15d-15(f) under
     the  1934  Act)  sufficient  to  provide  reasonable  assurances  that  (A)
     transactions  are  executed  in  accordance  with  management's  general or
     specific  authorizations,  (B)  transactions  are  recorded as necessary to
     permit  preparation  of financial statements in conformity with GAAP and to
     maintain  accountability for assets, (C) access to assets is permitted only
     in  accordance  with management's general or specific authorization and (D)
     the  recorded  accounting  for  assets  is compared with existing assets at
     reasonable  intervals  and  appropriate action is taken with respect to any
     differences.  The  Company's  independent registered public accounting firm
     and the Audit Committee of the Board of Directors have been advised of: (A)
     any  significant  deficiencies  and  material  weaknesses  in the design or
     operation  of  internal  control  over  financial  reporting  which  could
     adversely  affect  the Company's ability to record, process, summarize, and
     report  financial  data;  and  (B) any fraud, whether or not material, that
     involves  management  or other employees who have a significant role in the
     Company's  internal  control  over  financial  reporting.

          (xxxiv)  Fees. Other than as contemplated by this Agreement, except as
                   ----
     disclosed  in  any  preliminary prospectus and the Prospectus or except for
     any  bonus  payments to employees in connection with the offering, there is
     no  broker,  finder  or  other  party  that is entitled to receive from the
     Company  or  any Subsidiary any brokerage or finder's fee or any other fee,
     commission  or payment as a result of the transactions contemplated by this
     Agreement.

          (xxxv)  ERISA.  The  Company  and  the  Subsidiaries  or  their "ERISA
                 -----
     Affiliates"  (as  defined below) are in compliance in all material respects
     with  all presently applicable provisions of the Employee Retirement Income
     Security  Act  of 1974, as amended, including the regulations and published
     interpretations  thereunder ("ERISA"); no "reportable event" (as defined in
                                   -----
     ERISA) has occurred with respect to any "employee benefit plan" (as defined
     in  ERISA) for which the Company, any Subsidiary, or ERISA Affiliates would
     have  any  liability;  none of the Company, any Subsidiary, nor their ERISA
     Affiliates have incurred or expect to incur liability under (i) Title IV of
     ERISA  with  respect  to  termination of, or withdrawal from, any "employee
     benefit  plan"  or  (ii)  Sections  412,  4971, 4975 or 4980B of the United
     States  Internal  Revenue Code of 1986, as amended, and the regulations and
     published  interpretations  thereunder  (collectively the "Code"); and each
                                                                ----
     "employee  benefit  plan"  for  which the Company, any Subsidiary or any of
     their  ERISA  Affiliates  would  have  any liability that is intended to be
     qualified  under Section 401(a) of the Code is so qualified in all material
     respects  and  nothing as occurred, whether by action or by failure to act,
     which  would cause the loss of such qualification. "ERISA Affiliate" means,
                                                         ---------------
     with  respect  to the Company or any Subsidiary, any member of any group of
     organizations  described in Sections 414(b), (c), (m) or (o) of the Code or
     Section  400(b)  of  ERISA  of  which  the  Company or such Subsidiary is a
     member.

          (xxxvi)  JB&T  Acquisition.  The  Agreement and Plan of Share Exchange
                   -----------------
     dated  May  12, 2005, by and among the Company, FSGBank, and Jackson Bank &
     Trust  (the  "JB&T  Agreement")  is in full force and effect as of the date
                   ---------------
     hereof,  and  to  the  knowledge  of  the  Company,  no  events,  facts  or
     circumstances  exist  that,  either  with  the

<PAGE>
     passage  of  time  or  the giving of notice, constitute a default under the
     JB&T  Agreement  or  are reasonably likely to give either or both parties a
     right  to  terminate  the  JB&T  Agreement.

          (xxxvii)  SEC Documents. The Company is subject to and is reporting in
                    -------------
     accordance  with  the  requirements  of  Section 13 or Section 15(d) of the
     Exchange  Act.

     (b)     Officer's  Certificates.  Any  certificate signed by any officer of
the  Company or any Subsidiary delivered to the Representative or to counsel for
the Underwriters shall be deemed a representation and warranty by the Company to
each  Underwriter  as  to  the  matters  covered  thereby.

     SECTION  2.     Sale  and  Delivery  to  Underwriters;  Closing.
                     -----------------------------------------------

     (a)     Initial  Securities.  On  the  basis  of  the  representations  and
warranties  herein  contained and subject to the terms and conditions herein set
forth,  the  Company  agrees  to  sell  to  each  Underwriter, severally and not
jointly,  and  each  Underwriter,  severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule C, that number of
Initial  Securities  set  forth  in  Schedule  A  opposite  the  name  of  such
Underwriter,  plus  any  additional  number  of  Initial  Securities  which such
Underwriter  may  become  obligated  to  purchase  pursuant to the provisions of
Section  10  hereof,  subject,  in  each  case,  to  such  adjustments among the
Underwriters  as  the  Representative  in  its  sole  discretion  shall  make to
eliminate  any  sales  or  purchases  of  fractional  securities.

     (b)     Option  Securities.  In  addition,  on  the  basis  of  the
representations  and  warranties  herein  contained and subject to the terms and
conditions  herein  set  forth,  the  Company  hereby  grants  an  option to the
Underwriters,  severally  and  not  jointly,  to  purchase up to an aggregate of
675,000  additional  shares  of Common Stock, as set forth in Schedule B, at the
price  per  share set forth in Schedule C, less an amount per share equal to any
dividends  or  distributions  declared by the Company and payable on the Initial
Securities  but not payable on the Option Securities.  The option hereby granted
will  expire  30  days after the date hereof and may be exercised in whole or in
part  from  time  to time only for the purpose of covering over-allotments which
may  be  made  in  connection  with the offering and distribution of the Initial
Securities  upon  notice  by the Representative to the Company setting forth the
number  of  Option  Securities  as  to  which  the several Underwriters are then
exercising  the  option  and  the time and date of payment and delivery for such
Option  Securities.  Any  such  time and date of delivery (a "Date of Delivery")
                                                              ----------------
shall  be  determined  by  the Representative, but shall not be later than seven
full  business days after the exercise of said option, nor in any event prior to
the  Closing Time, as hereinafter defined.  If the option is exercised as to all
or  any  portion  of  the  Option  Securities,  each of the Underwriters, acting
severally  and not jointly, will purchase that proportion of the total number of
Option  Securities  then  being purchased which the number of Initial Securities
set forth in Schedule A opposite the name of such Underwriter bears to the total
number  of  Initial  Securities, subject in each case to such adjustments as the
Representative  in its discretion shall make to eliminate any sales or purchases
of  fractional  shares.

<PAGE>
     (c)     Payment.  Payment  of  the  purchase  price  for,  and  delivery of
certificates  for, the Initial Securities shall be made at the offices of Alston
&  Bird,  LLP,  1201  West  Peachtree Street, Atlanta, Georgia 30309, or at such
other  place  as  shall be agreed upon by the Representative and the Company, at
10:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30
P.M. (Eastern time) on any given day) business day after the date hereof (unless
postponed  in  accordance with the provisions of Section 10), or such other time
not  later than ten business days after such date as shall be agreed upon by the
Representative and the Company (such time and date of payment and delivery being
herein  called  "Closing  Time").
                 -------------

     In  addition,  in  the  event  that any or all of the Option Securities are
purchased  by  the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above-mentioned
offices,  or  at  such other place as shall be agreed upon by the Representative
and  the  Company,  on each Date of Delivery as specified in the notice from the
Representative  to  the  Company.

     Payment  shall  be  made  to  the  Company  by wire transfer of immediately
available  funds to a bank account designated by the Company against delivery to
the  Representative  for  the  respective  accounts  of  the  Underwriters  of
certificates  for the Securities to be purchased by them.  It is understood that
each  Underwriter  has authorized the Representative, for its account, to accept
delivery  of,  receipt  for,  and  make  payment  of the purchase price for, the
Initial  Securities  and  the  Option Securities, if any, which it has agreed to
purchase.  Keefe  Bruyette,  individually  and  not  as  representative  of  the
Underwriters,  may  (but shall not be obligated to) make payment of the purchase
price  for  the  Initial  Securities  or  the  Option  Securities, if any, to be
purchased  by  any Underwriter whose funds have not been received by the Closing
Time  or  the  relevant  Date  of Delivery, as the case may be, but such payment
shall  not  relieve  such  Underwriter  from  its  obligations  hereunder.

     (d)     Denominations; Registration.  The Securities to be purchased by the
Underwriter  hereunder, in definitive form, and in such authorized denominations
and  registered  in  such  names  as  Keefe  Bruyette  may request upon at least
forty-eight  hours'  prior  notice  to  the  Company shall be delivered by or on
behalf  of  the  Company  to  Keefe  Bruyette,  through  the  facilities  of the
Depository  Trust  Company ("DTC"), for the account of the Underwriters, against
                             ---
payment  by  or  on  behalf of the Underwriters of the purchase therefor by wire
transfer  of Federal (same day) funds to the account specified by the Company to
Keefe  Bruyette.  The  Company  will  cause  the  certificates  representing the
Securities  to be made available for checking and packaging at least twenty-four
hours prior to the Closing Time with respect thereto at the office of DTC or its
designated  custodian  (the  "Designated  Office").  The  time  and date of such
                              ------------------
delivery  and  payment  shall  be, with respect to the Initial Securities, 10:00
a.m.,  New York time, on the date specified by Keefe Bruyette or such other time
and  date as Keefe Bruyette and the Company may agree upon in writing, and, with
respect  to  the  Option  Securities,  10:00  a.m.,  New  York time, on the date
specified by Keefe Bruyette in the written notice given by Keefe Bruyette of the
Underwriter's  election  to  purchase such Option Securities, or such other time
and  date  as  Keefe  Bruyette  and  the  Company  may  agree  upon  in writing.

<PAGE>
     SECTION  3.     Covenants  of the Company.  The Company covenants with each
                     -------------------------
Underwriter  as  follows:

     (a)     Compliance  with  Securities  Regulations  and Commission Requests.
The  Company, subject to Section 3(b), will comply with the requirements of Rule
430A  or  Rule  434, as applicable, and will notify the Representative promptly,
and  confirm the notice in writing, (i) when any post-effective amendment to the
Registration  Statement  shall  become  effective,  or  any  supplement  to  the
Prospectus  or any amended Prospectus shall have been filed, (ii) of the receipt
of  any comments from the Commission, (iii) of any request by the Commission for
any  amendment  to  the Registration Statement or any amendment or supplement to
the  Prospectus  or  for additional information, and (iv) of the issuance by the
Commission  of  any  stop order suspending the effectiveness of the Registration
Statement,  of  any order preventing or suspending the use of the Prospectus, or
of the suspension of the qualification of the Securities for offering or sale in
any jurisdiction, or of the initiation or threatening of any proceedings for any
of  such  purposes.  The  Company  will  promptly  effect  the filings necessary
pursuant  to  Rule  424(b)  and  will  take  such steps as it deems necessary to
ascertain  promptly  whether the form of prospectus transmitted for filing under
Rule  424(b) was received for filing by the Commission and, in the event that it
was  not,  it  will  promptly  file  such  prospectus.  The  Company  will  use
commercially  reasonable  efforts to prevent the issuance of any stop order and,
if  any  stop  order  is  issued,  to obtain the lifting thereof at the earliest
possible  moment.

     (b)     Filing  of  Amendments.  The  Company  will give the Representative
notice  of  its  intention  to file or prepare any amendment to the Registration
Statement  (including any filing under Rule 462(b)) or any amendment, supplement
or  revision  to either the prospectus included in the Registration Statement at
the  time it became effective or to the Prospectus, whether pursuant to the 1933
Act,  the  1934 Act or otherwise, will furnish the Representative with copies of
any  such documents a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file or use any such document to which the
Representative  or  counsel for the Underwriters shall have reasonably objected.

     (c)     Delivery  of Registration Statements.  The Company has furnished or
will  deliver  to  the  Representative and counsel for the Underwriters, without
charge,  signed  copies of the Registration Statement as originally filed and of
each  amendment  thereto  (including exhibits filed therewith or incorporated by
reference  therein  and  documents  incorporated or deemed to be incorporated by
reference  therein)  and  signed  copies  of  all  consents  and certificates of
experts,  and  will  also  deliver  to  the  Representative,  without  charge, a
conformed  copy  of  the  Registration Statement as originally filed and of each
amendment  thereto  (without exhibits) for each of the Underwriters.  The copies
of  the  Registration  Statement  and  each  amendment  thereto furnished to the
Underwriters  will be identical to the electronically transmitted copies thereof
filed  with  the Commission pursuant to EDGAR, except to the extent permitted by
Regulation  S-T  under  the  1933  Act.

     (d)     Delivery  of  Prospectuses.  The  Company  has  delivered  to  each
Underwriter,  without  charge,  as many copies of each preliminary prospectus as
such  Underwriter  reasonably  requested, and the Company hereby consents to the
use  of  such  copies  for purposes permitted by the 1933 Act.  The Company will
furnish  to  each  Underwriter,  without  charge,  during  the  period  when the
Prospectus  is required to be delivered under the 1933 Act or the 1934 Act, such
number  of  copies  of  the  Prospectus  (as  amended  or  supplemented) as such
Underwriter  may  reasonably

<PAGE>
request.  The  Prospectus and any amendments or supplements thereto furnished to
the  Underwriters  will  be  identical  to the electronically transmitted copies
thereof  filed  with  the  Commission  pursuant  to  EDGAR, except to the extent
permitted  by  Regulation  S-T  under  the  1933  Act.

     (e)     Continued Compliance with Securities Laws.  The Company will comply
with  the  1933  Act  and  the  1934  Act  so as to permit the completion of the
distribution  of  the  Securities  as  contemplated in this Agreement and in the
Prospectus.  If  at any time when a prospectus is required by the 1933 Act to be
delivered  in  connection  with  sales of the Securities as contemplated by this
Agreement,  any  event shall occur or condition shall exist as a result of which
it  is  necessary,  in the reasonable opinion of counsel for the Underwriters or
for  the Company, to amend the Registration Statement or amend or supplement the
Prospectus  in  order that the Prospectus will not include any untrue statements
of  a  material fact or omit to state a material fact necessary in order to make
the statements therein not misleading in the light of the circumstances existing
at  the time it is delivered to a purchaser, or if it shall be necessary, in the
reasonable  opinion  of such counsel, at any such time to amend the Registration
Statement  or  amend  or  supplement  the Prospectus in order to comply with the
requirements  of  the  1933  Act  in  connection with sales of the Securities as
contemplated  by this Agreement, the Company will promptly prepare and file with
the  Commission, subject to Section 3(b), such amendment or supplement as may be
necessary  to  correct  such  statement  or omission or to make the Registration
Statement  or the Prospectus comply with such requirements, and the Company will
furnish  to  the  Underwriters  such  number  of  copies  of  such  amendment or
supplement  as  the  Underwriters  may  reasonably  request.

     (f)     Blue  Sky  Qualifications.  The  Company  will use its commercially
reasonable  efforts,  in  cooperation  with  the  Underwriters,  to  qualify the
Securities  for  offering  and sale under the applicable securities laws of such
states  and  other jurisdictions (domestic or foreign) as the Representative may
reasonably  have  designated  in  writing and to maintain such qualifications in
effect  for  a  period of not less than one year from the later of the effective
date  of  the Registration Statement and any Rule 462(b) Registration Statement;
provided,  however,  that  the Company shall not be obligated to execute or file
any general consent to service of process or to qualify or register as a foreign
corporation  or as a dealer in securities in any jurisdiction in which it is not
so  qualified, required to file such a consent, or to subject itself to taxation
in respect of doing business in any jurisdiction in which it is not otherwise so
subject.  In  each  U.S.  jurisdiction  in  which  the  Securities  have been so
qualified,  the Company will file such statements and reports as may be required
by  the laws of such jurisdiction to continue such qualification in effect for a
period  of  not  less  than one year from the effective date of the Registration
Statement  and  any  Rule  462(b)  Registration  Statement.

     (g)     Rule  158.  The  Company  will timely file such reports pursuant to
the  1934  Act  as  are  necessary  in  order to make generally available to its
securityholders  as  soon  as practicable an earnings statement for the purposes
of,  and  to provide the benefits contemplated by, the last paragraph of Section
11(a)  of  the  1933  Act.

     (h)     Use of Proceeds.  The Company will use the net proceeds received by
it  from  the  sale  of the Securities in the manner specified in the Prospectus
under  "Use  of  Proceeds."

<PAGE>
     (i)     Listing.  The  Company will use its commercially reasonable efforts
to  effect  and  maintain the quotation of the Securities on the Nasdaq National
Market  and  will file with the Nasdaq National Market all documents and notices
required  by  the  Nasdaq National Market of companies that have securities that
are  traded in the over-the-counter market and quotations for which are reported
by  the  Nasdaq  National  Market.

     (j)     Restriction  on  Sale  of  Securities.  During a period of 180 days
from the date of the Prospectus (the "Restricted Period"), the Company will not,
                                      -----------------
without the prior written consent of Keefe Bruyette, directly or indirectly, (i)
offer,  pledge, sell, contract to sell, sell any option or contract to purchase,
purchase  any  option or contract to sell, grant any option, right or warrant to
purchase  or  otherwise  transfer or dispose of any share of Common Stock or any
securities  convertible  into or exercisable or exchangeable for Common Stock or
file  any  registration  statement under the 1933 Act with respect to any of the
foregoing  or  (ii)  enter  into  any  swap, hedge or any other agreement or any
transaction  that  transfers,  in  whole or in part, directly or indirectly, the
economic  consequence  of  ownership of the Common Stock, whether any such swap,
hedge  or  transaction described in clause (i) or (ii) above is to be settled by
delivery  of  Common  Stock or such other securities, in cash or otherwise.  The
foregoing  sentence  shall not apply to (A) the Securities to be sold hereunder,
(B)  any  shares  of  Common Stock issued by the Company upon the exercise of an
option  or  warrant  outstanding  on  the  date  hereof  and  referred to in the
Prospectus  and  any  preliminary  prospectus, (C) any shares of Common Stock or
other  securities  issued,  options to purchase Common Stock or other securities
granted  pursuant  to existing director or employee benefit plans of the Company
referred  to in the Prospectus and any preliminary prospectus, (D) any shares of
Common  Stock  or any securities convertible into or exercisable or exchangeable
for  Common Stock offered, pledged or contracted to be sold as consideration for
the  acquisition  by  the Company or any Subsidiary of the business or assets of
any  entity  not  controlled by any executive officer, director, or affiliate of
the  Company,  or  (E)  any  transfer,  sale or other disposition with the prior
written  consent  of  Keefe Bruyette.  Keefe Bruyette agrees not to provide such
consent  without  providing notice to each Underwriter to permit compliance with
applicable  provisions  of NASD Conduct Rule 2177(f) restricting publication and
distribution  of research and public appearances by research analysts before and
after  the  expiration,  waiver or termination of a lock-up agreement and agrees
only to provide consent in circumstances that will permit such compliance by the
Underwriters. Notwithstanding the foregoing, in the event that either (i) during
the  period  that  begins  on  the  date that is 15 calendar days plus three (3)
business  days before the last day of the Restricted Period and ends on the last
day of the Restricted Period, the Company issues an earnings release or material
news  or  a  material event relating to the Company occurs, or (ii) prior to the
expiration  of the Restricted Period, the Company announces that it will release
earnings  results  during  the  16-day  period  beginning on the last day of the
Restricted  Period,  the  restrictions  set  forth herein will continue to apply
until  the  expiration  of  the  date  that  is  15 calendar days plus three (3)
business  days  after  the  date  on which the earnings release is issued or the
material  news  or  event  related  to  the  Company  occurs.

     (k)     Reporting  Requirements.  The  Company,  during the period when the
Prospectus  is required to be delivered under the 1933 Act or the 1934 Act, will
file all documents required to be filed with the Commission pursuant to the 1934
Act within the time periods required by the 1934 Act (including as allowed to be
extended  pursuant  to  Form  12b-25  or  otherwise  under  the  1934  Act).

<PAGE>
     (l)     Compliance  with  the  Sarbanes-Oxley  Act.  During the time when a
Prospectus  is required to be delivered under the 1933 Act, the Company shall at
all  times  comply,  in all material respects, with all applicable provisions of
the  Sarbanes-Oxley Act, including the related rules and regulations promulgated
thereunder  by  the Commission and The Nasdaq Stock Market, Inc., in effect from
time  to  time.

     (m)     Compliance  with  the  Cuba  Act.  In  accordance with that certain
Florida  Act relating to the disclosure of doing business with Cuba, codified as
Section 517.075 of the Florida statutes and the rules and regulations thereunder
(the  "Cuba  Act")  and without limitation to the provisions of Sections 6 and 7
       ---------
hereof,  the Company agrees to indemnify and hold harmless each Underwriter from
and  against  any  and all loss, liability, claim, damage and expense whatsoever
(including  fees  and disbursements of counsel), as incurred, arising out of any
violation  by  the  Company  of  the  Cuba  Act.

     SECTION  4.     Payment  of  Expenses.
                     ---------------------

     (a)     Expenses.  The  Company  will  pay or cause to be paid all expenses
incident to the performance of their obligations under this Agreement, including
(i)  the  preparation,  printing  and  filing  of  the  Registration  Statement
(including  financial  statements  and exhibits) as originally filed and of each
amendment  thereto,  (ii)  the printing and delivery to the Underwriters of this
Agreement,  any  Agreement among Underwriters and such other documents as may be
required  in  connection with the offering, purchase, sale, issuance or delivery
of  the  Securities,  (iii)  the  preparation,  issuance  and  delivery  of  the
certificates  for  the  Securities  to  the Underwriters, including any stock or
other  transfer  taxes  and  any  stamp  or  other duties payable upon the sale,
issuance  or  delivery  of the Securities to the Underwriters, (iv) the fees and
disbursements  of the Company's counsel, accountants and other advisors, (v) the
qualification  of  the  Securities  under securities laws in accordance with the
provisions  of  Section  3(f)  hereof,  including  actual  filing  fees  and the
reasonable  fees and disbursements of counsel for the Underwriters in connection
therewith  and in connection with the preparation of the Blue Sky Survey and any
supplement  thereto (not to exceed $2,500 in the aggregate without the Company's
written  consent),  (vi)  if  requested  by the Representative, the printing and
delivery  to  the  Underwriters of copies of each preliminary prospectus, and of
the Prospectus and any amendments or supplements thereto, (vii) the preparation,
printing  and  delivery to the Underwriters of copies of the Blue Sky Survey and
any  supplement  thereto,  (viii) the fees and expenses of any transfer agent or
registrar  for  the  Securities and (ix) the actual filing fees incident to, and
the  reasonable  fees  and  disbursements of counsel to the Underwriters (not to
exceed  $7,500  in  the  aggregate  without  the  Company's  written consent) in
connection  with,  the review by the National Association of Securities Dealers,
Inc.  (the "NASD") of the terms of the sale of the Securities and (x) the actual
            ----
fees and expenses incurred in connection with the inclusion of the Securities in
the Nasdaq National Market.  Except as provided in this Section 4, Section 6 and
Section  7  hereof,  the Underwriters shall pay their own expenses including the
fees  and  disbursements  of  their  counsel.

     (b)     Termination  of  Agreement.  If this Agreement is terminated by the
Representative  in  accordance with the provisions of Section 5, Section 9(a) or
Section 11 hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket  expenses,  including  the  reasonable  fees  and disbursements of
counsel  for  the  Underwriters, incurred by the Underwriters in connection with
the  proposed  purchase  and  the  offering  and  sale  of  the  Securities  as
contemplated  in  this  Agreement.

<PAGE>
     SECTION 5.     Conditions of Underwriters' Obligations.  The obligations of
                    ---------------------------------------
the  several  Underwriters  hereunder  are  subject  to  the  accuracy  of  the
representations  and  warranties of the Company contained in Section 1 hereof or
in  certificates  of any officer of the Company or any Subsidiary of the Company
delivered  pursuant  to the provisions hereof, to the performance by the Company
of  its  covenants and other obligations hereunder, and to the following further
conditions:

     (a)     Effectiveness  of  Registration  Statement.  The  Registration
Statement,  including  any  Rule  462(b)  Registration  Statement,  has  become
effective  and at Closing Time no stop order suspending the effectiveness of the
Registration  Statement shall have been issued under the 1933 Act or proceedings
therefor  initiated  or,  to  the  knowledge  of  the Company, threatened by the
Commission,  and  any  request  on  the  part  of  the Commission for additional
information  (to  be included in the Registration Statement or Prospectus) shall
have  been  complied  with  to  the  reasonable  satisfaction  of counsel to the
Underwriters.  A prospectus containing the Rule 430A Information shall have been
filed  with  the  Commission in accordance with Rule 424(b) (or a post-effective
amendment  providing  such  information  shall  have  been  filed  and  declared
effective  in  accordance  with  the  requirements  of  Rule  430A).

     (b)     Opinion  of  Counsel  for  Company.  At  Closing  Time,  the
Representative  shall  have  received the favorable opinion, dated as of Closing
Time,  of  Powell  Goldstein  LLP, counsel for the Company, in the form and with
respect  to  the  matters  set  forth  on  Exhibit  A,  together  with signed or
reproduced  copies  of  such  letter  for  each of the other Underwriters to the
effect  set  forth  in  Exhibit  A  hereto.

     (c)     Opinion  of  Counsel  for  Underwriters.  At  Closing  Time,  the
Representative  shall  have  received the favorable opinion, dated as of Closing
Time,  of  Alston  &  Bird,  LLP,  counsel  for  the  Underwriters.

     (d)     Officers' Certificate.  At Closing Time, there shall not have been,
since  the  date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or  otherwise, or in the earnings, business affairs or business prospects of the
Company  and  the  Subsidiaries  considered  as  one  enterprise, whether or not
arising  in  the  ordinary course of business, and the Representative shall have
received  a  certificate of the President or a Vice President of the Company and
of  the  chief financial or chief accounting officer of the Company, dated as of
Closing  Time,  to  the  effect that (i) there has been no such material adverse
change,  (ii) the representations and warranties in Section 1(a) hereof are true
and correct with the same force and effect as though expressly made at and as of
Closing  Time,  (iii) the Company has complied with all agreements and satisfied
all  conditions  on its part to be performed or satisfied at or prior to Closing
Time,  and  (iv)  no stop order suspending the effectiveness of the Registration
Statement  has  been  issued  and  no  proceedings  for  that  purpose have been
instituted  or, to the knowledge of the Company, are pending or are contemplated
by  the  Commission.

     (e)     Accountant's  Comfort Letter.  At the time of the execution of this
Agreement,  the  Representative shall have received from Decosimo a letter dated
such  date, in form and substance reasonably satisfactory to the Representative,
together  with  signed or reproduced copies of such letter for each of the other
Underwriters  containing  statements  and  information  of  the  type ordinarily
included  in  accountants' "comfort letters" to underwriters with respect to the

<PAGE>
financial  statements  and  certain  financial  information  contained  in  the
Registration  Statement  and  the  Prospectus.

     (f)     Bring-down  Comfort  Letter.  At  Closing  Time, the Representative
shall  have  received  from  Decosimo a letter, dated as of Closing Time, to the
effect  that  they reaffirm the statements made in the letter furnished pursuant
to  subsection  (e)  of this Section, except that the specified date referred to
shall be a date not more than three (four, if the pricing occurs after 4:30 P.M.
Eastern  time  on  any  given  day)  business  days  prior  to  Closing  Time.

     (g)     Approval  of  Listing.  At  Closing Time, the Securities shall have
been  approved  for  inclusion  in  the  Nasdaq National Market, subject only to
official  notice  of  issuance.

     (h)     No  Objection.  The  NASD  has confirmed that it has not raised any
objection  with  respect  to the fairness and reasonableness of the underwriting
terms  and  arrangements.

     (i)     Lock-up  Agreements.  Prior  to the distribution of the preliminary
Prospectus, the Representative shall have received an agreement substantially in
the  form of Exhibit C hereto signed by the persons listed on Schedule D hereto.

     (j)     Delivery  of  Prospectus.  The Company shall have complied with the
provisions hereof with respect to the furnishing of prospectuses on the New York
Business  Day  next  succeeding  the  date  of  this  Agreement.

     (k)     No  Termination Event.  On or after the date hereof there shall not
have  occurred  any  of  the  events,  circumstances or occurrences set forth in
Section  9(a).

     (l)     DTC.  The  Company  shall  have taken all actions as are reasonably
required  to  render the Securities eligible to be traded via DTC, including but
not  limited  to  delivery  of  a  Blanket  Letter  of  Representations  to DTC.

     (m)     Conditions to Purchase of Option Securities.  In the event that the
Underwriters  exercise  their option provided in Section 2(b) hereof to purchase
all  or any portion of the Option Securities, the representations and warranties
of the Company contained herein and the statements in any certificates furnished
by  the  Company  and  any subsidiary of the Company hereunder shall be true and
correct  with the same force and effect as though expressly made at each Date of
Delivery  and,  at  the relevant Date of Delivery, the Representative shall have
received:

          (i) Officers' Certificate. A certificate, dated such Date of Delivery,
              ---------------------
     of  the  President  or  a  Vice  President  of the Company and of the chief
     financial  or  chief  accounting officer of the Company confirming that the
     certificate  delivered  at the Closing Time pursuant to Section 5(d) hereof
     remains  true  and  correct  in  all  material  respects as of such Date of
     Delivery.

          (ii)  Opinion  of Counsel for Company. The favorable opinion of Powell
                -------------------------------
     Goldstein LLP, counsel for the Company, in the form and with respect to the
     matters  set  forth  on Exhibit A, dated such Date of Delivery, relating to
     the  Option  Securities  to  be  purchased  on  such  Date  of Delivery and
     otherwise  to  the  same  effect  as  the  opinion required by Section 5(b)
     hereof.

<PAGE>
          (iii)  Opinion  of  Counsel for Underwriters. The favorable opinion of
                 -------------------------------------
     Alston  &  Bird,  LLP,  counsel  for  the  Underwriters, dated such Date of
     Delivery, relating to the Option Securities to be purchased on such Date of
     Delivery  and  otherwise  to  the  same  effect  as the opinion required by
     Section  5(c)  hereof.

          (iv)  Bring-down  Comfort  Letter. A letter from Decosimo, in form and
                ---------------------------
     substance reasonably satisfactory to the Representative and dated such Date
     of  Delivery,  substantially  in  the same form and substance as the letter
     furnished  to  the  Representative  pursuant to Section 5(f) hereof, except
     that  the  "specified  date"  in  the  letter  furnished  pursuant  to this
     paragraph  shall  be  a  date not more than five days prior to such Date of
     Delivery.

          (v)  No  Termination Event. There shall not have occurred prior to the
               ---------------------
     Date  of Delivery any of the events, circumstances or occurrences set forth
     in  Section  9(a).

     (n)     Additional  Documents.  At  Closing  Time  and  at  each  Date  of
Delivery,  as  the  case  may  be,  counsel for the Underwriters shall have been
furnished  with such documents and opinions from the Company as they may require
for  the  purpose  of  enabling  them  to pass upon the issuance and sale of the
Securities  as  herein contemplated, or in order to evidence the accuracy of any
of  the  representations  or  warranties,  or  the  fulfillment  of  any  of the
conditions,  herein  contained;  and  all  proceedings  taken  by the Company in
connection  with  the issuance and sale of the Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Representative and
counsel  for  the  Underwriters.

     (o)     Termination  of  Agreement.  If  any  condition  specified  in this
Section  5  shall  not have been fulfilled when and as required to be fulfilled,
this  Agreement,  or,  in  the  case  of any condition to the purchase of Option
Securities  on  a  Date  of  Delivery  which  is  after  the  Closing  Time, the
obligations  of  the  several  Underwriters  to  purchase  the  relevant  Option
Securities,  may  be  terminated  by the Representative by written notice to the
Company at any time at or prior to Closing Time or such Date of Delivery, as the
case  may  be,  and such  termination shall be without liability of any party to
any other party except as provided in Section 4 and except that Sections 1, 6, 7
and  8  shall  survive any such termination and remain in full force and effect.

     SECTION  6.     Indemnification.
                     ---------------

     (a)     Indemnification  of Underwriters.  The Company and the Subsidiaries
agree,  jointly  and  severally, to indemnify and hold harmless each Underwriter
and  each  person,  if  any,  who controls any Underwriter within the meaning of
Section  15  of  the 1933 Act or Section 20 of the 1934 Act to the extent and in
the  manner  set  forth  in  clauses  (i),  (ii)  and  (iii)  below:

<PAGE>
          (i)  against  any  and  all loss, liability, claim, damage and expense
     whatsoever,  as  incurred,  arising  out of any untrue statement or alleged
     untrue statement of a material fact contained in the Registration Statement
     (or  any  amendment  thereto),  including the Rule 430A Information and the
     Rule  434  Information,  if applicable, or the omission or alleged omission
     therefrom  of a material fact required to be stated therein or necessary to
     make  the  statements  therein  not misleading or arising out of any untrue
     statement  or  alleged  untrue statement of a material fact included in any
     preliminary  prospectus  or  the Prospectus (or any amendment or supplement
     thereto),  or the omission or alleged omission therefrom of a material fact
     necessary  in  order  to  make  the statements therein, in the light of the
     circumstances  under  which  they  were  made,  not  misleading;

          (ii)  against  any  and all loss, liability, claim, damage and expense
     whatsoever,  as  incurred,  to  the  extent of the aggregate amount paid in
     settlement  of  any  litigation,  or any investigation or proceeding by any
     governmental  agency  or  body,  commenced  or  threatened, or of any claim
     whatsoever  based  upon  any such untrue statement or omission, or any such
     alleged  untrue  statement  or  omission; provided that (subject to Section
     6(d) below) any such settlement is effected with the written consent of the
     Company;  and

          (iii)  against  any and all expense whatsoever, as incurred (including
     the fees and disbursements of counsel chosen by Keefe Bruyette), reasonably
     incurred  in  investigating, preparing or defending against any litigation,
     or  any  investigation  or  proceeding  by any governmental agency or body,
     commenced or threatened, or any claim whatsoever based upon any such untrue
     statement or omission, or any such alleged untrue statement or omission, to
     the  extent  that  any  such  expense  is not paid under (i) or (ii) above;

provided,  however,  that  this indemnity agreement shall not apply to any loss,
--------   -------
liability,  claim,  damage  or  expense  to the extent arising out of any untrue
statement  or  omission or alleged untrue statement or omission made in reliance
upon  and in conformity with written information furnished to the Company by any
Underwriter  through  Keefe  Bruyette  expressly  for  use  in  the Registration
Statement  (or  any  amendment thereto), including the Rule 430A Information, if
applicable, or any preliminary prospectus or the Prospectus (or any amendment or
supplement  thereto);  provided  further  that the parties acknowledge and agree
that  the  only  information  that  any Underwriter has furnished to the Company
specifically for inclusion in the Registration Statement, preliminary prospectus
and Prospectus (or any amendment or supplement thereto) are the last sentence of
the last paragraph on the front cover page of the Prospectus and the preliminary
prospectus  regarding  the  anticipated  delivery  date  of  the Securities, the
concession  and  reallowance  figures appearing in the Prospectus in the section
entitled  "Underwriting"  and  the  information  contained  under  the  captions
"Underwriting  -  Stabilization"  and  "Underwriting  -  Passive Market Making."

     (b)     Indemnification  of Company and Directors and Officers. Underwriter
severally agrees to indemnify and hold harmless the Company, its directors, each
of  its officers who signed the Registration Statement, and each person, if any,
who  controls  the  Company  within the meaning of Section 15 of the 1933 Act or
Section  20  of the 1934 Act, against any and all loss, liability, claim, damage
and  expense  described  in  the  indemnity  contained in subsection (a) of this
Section,  as  incurred, but only with respect to untrue statements or omissions,
or  alleged

<PAGE>
untrue  statements  or  omissions,  made  in  the Registration Statement (or any
amendment  thereto),  including the Rule 430A Information, if applicable, or any
preliminary  prospectus  or  the  Prospectus  (or  any  amendment  or supplement
thereto)  in  reliance upon and in conformity with written information furnished
to  the  Company by such Underwriter through Keefe Bruyette expressly for use in
the  Registration  Statement  (or  any  amendment  thereto)  or such preliminary
prospectus  or the Prospectus (or any amendment or supplement thereto), provided
that  the  parties  acknowledge and agree that the only written information that
any  Underwriter  has furnished to the Company specifically for inclusion in the
Registration  Statement, preliminary prospectus and Prospectus (or any amendment
or  supplement thereto) are the last sentence of the last paragraph on the front
cover  page  of  the  Prospectus  and  the  preliminary prospectus regarding the
anticipated  delivery  date  of  the  Securities, the concession and reallowance
figures  appearing in the Prospectus  in the section entitled "Underwriting" and
the  information contained under the captions "Underwriting - Stabilization" and
"Underwriting  -  Passive  Market  Making."

     (c)     Actions  against  Parties;  Notification.  Each  indemnified  party
shall  give  notice  as  promptly as reasonably practicable to each indemnifying
party  of  any  action commenced against it in respect of which indemnity may be
sought  hereunder,  but  failure  to  so  notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it  from  any  liability  which  it  may  have otherwise than on account of this
indemnity  agreement.  In  the  case  of parties indemnified pursuant to Section
6(a)  above,  counsel  to  the  indemnified  parties  shall be selected by Keefe
Bruyette,  and,  in  the  case  of  parties indemnified pursuant to Section 6(b)
above,  counsel to the indemnified parties shall be selected by the Company.  An
indemnifying party may participate at its own expense in the defense of any such
action;  provided,  however,  that  counsel  to the indemnifying party shall not
(except  with  the  consent  of  the  indemnified  party) also be counsel to the
indemnified  party.  In  no  event  shall the indemnifying parties be liable for
fees  and  expenses  of more than one counsel (in addition to any local counsel)
separate  from  their own counsel for all indemnified parties in connection with
any  one  action  or  separate  but  similar  or  related  actions  in  the same
jurisdiction  arising  out of the same general allegations or circumstances.  No
indemnifying  party  shall, without the prior written consent of the indemnified
parties,  settle  or  compromise  or  consent  to the entry of any judgment with
respect  to  any  litigation,  or  any  investigation  or  proceeding  by  any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect  of  which  indemnification  or  contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent (i)
includes  an  unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to  act  by  or  on  behalf  of  any  indemnified  party.

     (d)     Settlement without Consent if Failure to Reimburse.  If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified  party  for  fees  and  expenses of counsel, such indemnifying party
agrees  that it shall be liable for any settlement of the nature contemplated by
Section  6(a)(ii) effected without its written consent if (i) such settlement is
entered  into  more than 45 days after receipt by such indemnifying party of the
aforesaid  request,  (ii)  such indemnifying party shall have received notice of
the  terms  of  such  settlement at least 30 days prior to such settlement being
entered  into  and  (iii)  such  indemnifying

<PAGE>
party  shall  not have reimbursed such indemnified party in accordance with such
request  prior  to  the  date  of  such  settlement.

     SECTION  7.     Contribution.  If  the  indemnification  provided  for  in
                     ------------
Section  6  hereof  is  for  any  reason  unavailable to or insufficient to hold
harmless  an  indemnified  party  in respect of any losses, liabilities, claims,
damages  or  expenses  referred  to  therein, then each indemnifying party shall
contribute  to the aggregate amount of such losses, liabilities, claims, damages
and  expenses  incurred  by  such  indemnified  party,  as incurred, (i) in such
proportion  as  is  appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of  the Securities pursuant to this Agreement or (ii) if the allocation provided
by  clause  (i)  is  not  permitted  by applicable law, in such proportion as is
appropriate  to reflect not only the relative benefits referred to in clause (i)
above  but  also  the  relative  fault of the Company on the one hand and of the
Underwriters  on  the  other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as  any  other  relevant  equitable  considerations.

     The  relative  benefits  received  by  the  Company on the one hand and the
Underwriters on the other hand in connection with the offering of the Securities
pursuant  to  this  Agreement  shall  be  deemed  to  be  in the same respective
proportions  as  the  total  net  proceeds  from  the offering of the Securities
pursuant  to  this Agreement (before deducting expenses) received by the Company
and  the  total underwriting discount received by the Underwriters, in each case
as  set  forth  on  the  cover  of  the  Prospectus.

     The  relative  fault of the Company on the one hand and the Underwriters on
the  other hand shall be determined by reference to, among other things, whether
any  such  untrue  or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company  or  by  the  Underwriters  and the parties' relative intent, knowledge,
access  to  information  and opportunity to correct or prevent such statement or
omission.

     The  Company  and  the  Underwriters  agree  that  it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation  (even  if  the  Underwriters  were  treated  as  one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable  considerations  referred  to  above in this Section 7.  The aggregate
amount  of  losses,  liabilities,  claims,  damages  and expenses incurred by an
indemnified  party  and  referred  to above in this Section 7 shall be deemed to
include  any  legal  or  other  expenses reasonably incurred by such indemnified
party  in  investigating,  preparing or defending against any litigation, or any
investigation  or  proceeding  by  any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement  or  omission  or  alleged  omission.

     Notwithstanding  the  provisions of this Section 7, no Underwriter shall be
required  to  contribute  any  amount in excess of the amount by which the total
price  at  which the Securities underwritten by it and distributed to the public
were  offered  to  the  public  exceeds  the  amount  of  any damages which such
Underwriter  has  otherwise been required to pay by reason of any such untrue or
alleged  untrue  statement  or  omission  or  alleged  omission.

<PAGE>
     No  person  guilty  of  fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who  was  not  guilty  of  such  fraudulent  misrepresentation.

     For  purposes  of  this  Section  7,  each  person, if any, who controls an
Underwriter  within  the  meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each  director  of  the  Company,  each  officer  of  the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the  meaning  of  Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have  the  same  rights  to  contribution  as  the  Company.  The  Underwriters'
respective  obligations  to contribute pursuant to this Section 7 are several in
proportion  to  the  number  of  Initial  Securities  set  forth  opposite their
respective  names  in  Schedule  A  hereto  and  not  joint.

     SECTION  8.     Representations,  Warranties  and  Agreements  to  Survive
                     ----------------------------------------------------------
Delivery.  All  representations,  warranties  and  agreements  contained in this
--------
Agreement  or  in  certificates  of  officers  of  the Company or any Subsidiary
submitted  pursuant hereto, shall remain operative and in full force and effect,
regardless  of  any  investigation  made  by  or on behalf of any Underwriter or
controlling  person,  or  by  or  on  behalf  of  the Company, and shall survive
delivery  of  the  Securities  to  the  Underwriters.

     SECTION  9.     Termination  of  Agreement.
                     --------------------------

     (a)     Termination;  General.  The  Representative  may  terminate  this
Agreement,  by written notice to the Company, at any time at or prior to Closing
Time  (i)  if  there  has been, since the time of execution of this Agreement or
since  the  respective dates as of which information is given in the Prospectus,
any  Material  Adverse Effect, or (ii) if there has occurred (A) any outbreak or
escalation  of hostilities involving the United States or the declaration by the
United  States  of  a  national  emergency  or war, or (B) any other calamity or
crisis  or  any  change  in  financial,  political or economic conditions in the
United  States  or  elsewhere,  including  without  limitation,  as  a result of
terrorist  activities occurring after the date hereof, if the effect of any such
event  specified  in  (A)  or (B) in the judgment of the Representative makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of  the  Securities  being delivered at the Date of Delivery on the terms and in
the  manner contemplated in the Prospectus (iii) if trading in any securities of
the  Company  has  been suspended or materially limited by the Commission or the
Nasdaq  National  Market, or if trading generally on the American Stock Exchange
or  the  New  York  Stock  Exchange  or  in  the Nasdaq National Market has been
suspended  or  materially limited, or minimum or maximum prices for trading have
been  fixed,  or  maximum  ranges  for prices have been required, by any of said
exchanges  or  by  such  system  or  by  order  of  the Commission, the National
Association  of Securities Dealers, Inc. or any other governmental authority, or
(iv)  if a banking moratorium has been declared by either Federal or New York or
Tennessee  authorities  or  a  material  disruption  in  commercial  banking  or
securities  settlement  or clearance services in the United States has occurred.

     (b)     Liabilities.  If  this  Agreement  is terminated in accordance with
this  Section 9, such termination shall be without liability of any party to any
other  party  except  as provided in Section 4 hereof, and provided further that
Sections  1,  6, 7 and 8 shall survive such termination and remain in full force
and  effect.

<PAGE>
     SECTION 10.     Default by One or More of the Underwriters.  If one or more
                     ------------------------------------------
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the  Securities  which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representative shall have the right, within 24
      --------------------
hours  thereafter,  to  make  arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of  the  Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Representative shall not have completed
such  arrangements  within  such  24-hour  period,  then:

     (a)     if  the  number  of Defaulted Securities does not exceed 10% of the
number  of  Securities  to be purchased on such date, each of the non-defaulting
Underwriters shall be obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective underwriting obligations
hereunder  bear  to  the  underwriting  obligations  of  all  non-defaulting
Underwriters,  or

     (b)     if  the number of Defaulted Securities exceeds 10% of the number of
Securities  to be purchased on such date, this Agreement or, with respect to any
Date  of  Delivery  which  occurs  after the Closing Time, the obligation of the
Underwriters  to purchase and of the Company to sell the Option Securities to be
purchased and sold on such Date of Delivery shall terminate without liability on
the  part  of  any  non-defaulting  Underwriter.

     No  action  taken  pursuant  to  this  Section shall relieve any defaulting
Underwriter  from  liability  in  respect  of  its  default.

     In  the event of any such default which does not result in a termination of
this  Agreement or, in the case of a Date of Delivery which is after the Closing
Time,  which  does  not  result  in  a  termination  of  the  obligation  of the
Underwriters to purchase and the Company to sell the relevant Option Securities,
as the case may be, either (i) the Representative or (ii) the Company shall have
the right to postpone Closing Time or the relevant Date of Delivery, as the case
may  be,  for  a period not exceeding seven days in order to effect any required
changes in the Registration Statement or Prospectus or in any other documents or
arrangements.  As  used  herein,  the  term  "Underwriter"  includes  any person
                                              -----------
substituted  for  an  Underwriter  under  this  Section  10.

     SECTION  11.     Default  by  the  Company.  If  the  Company shall fail at
                      -------------------------
Closing Time or at the Date of Delivery to sell the number of Securities that it
is  obligated to sell hereunder, then this Agreement shall terminate without any
liability  on  the  part of any nondefaulting party; provided, however, that the
provisions  of  Sections 1, 4, 6, 7 and 8 shall remain in full force and effect.
No  action  taken  pursuant  to  this  Section  shall  relieve  the Company from
liability,  if  any,  in  respect  of  such  default.

     SECTION  12.     Notices.  All  notices  and other communications hereunder
                      -------
shall  be  in  writing  and shall be deemed to have been duly given if mailed or
transmitted  by  any  standard  form  of  telecommunication.  Notices  to  the
Underwriters shall be directed to the Representative at Keefe, Bruyette & Woods,
Inc.,  787  Seventh  Avenue,  4th  Floor, New York, New York 10019, attention of
General  Counsel;  notices  to  the  Company  shall  be  directed to it at First
Security  Group  Inc., 817 Broad Street, Chattanooga, Tennessee 37402, attention
of  Rodger  B. Holley, with a copy (which shall not constitute notice) to Powell
Goldstein  LLP,  One  Atlantic  Center,

<PAGE>
Fourteenth  Floor,  1201  W.  Peachtree  Street,  N.W.,  Atlanta, Georgia 30309,
attention  of  Kathryn  L.  Knudson.

     SECTION  13.     Parties.  This Agreement shall inure to the benefit of and
                      -------
be  binding  upon  the  Underwriters  and  the  Company  and  their  respective
successors.  Nothing  expressed  or  mentioned  in this Agreement is intended or
shall  be  construed  to  give  any  person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons  and  officers  and  directors referred to in Sections 6 and 7 and their
heirs  and  legal representatives, any legal or equitable right, remedy or claim
under  or  in respect of this Agreement or any provision herein contained.  This
Agreement  and  all  conditions and provisions hereof are intended to be for the
sole  and  exclusive  benefit  of  the  Underwriters  and  the Company and their
respective  successors,  and said controlling persons and officers and directors
and  their  heirs  and  legal  representatives,  and for the benefit of no other
person,  firm  or  corporation.  No purchaser of Securities from any Underwriter
shall  be  deemed  to  be  a  successor  by  reason  merely  of  such  purchase.

     SECTION  14.     GOVERNING  LAW AND TIME.  THIS AGREEMENT SHALL BE GOVERNED
                      -----------------------
BY  AND  CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  EXCEPT
AS  OTHERWISE  SET  FORTH  HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY
TIME.

     SECTION  15.     General Provisions.  This Agreement constitutes the entire
                      ------------------
agreement  of  the parties to this Agreement and supersedes all prior written or
oral  and  all  contemporaneous oral agreements, understandings and negotiations
with  respect  to  the subject matter hereof.  This Agreement may be executed in
two  or more counterparts, each one of which shall be an original, with the same
effect  as  if  the signatures thereto and hereto were upon the same instrument.
This  Agreement  may  not be amended or modified unless in writing by all of the
parties  hereto,  and  no  condition  herein  (express or implied) may be waived
unless  waived  in writing by each party whom the condition is meant to benefit.
The  Article  and  Section  headings  herein  and  the Table of Contents are for
convenience  only  and  shall  not  affect  the  construction  hereof.

                            [Signatures on Next Page]

<PAGE>
     If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company, whereupon this instrument, along with all
counterparts, will become a binding agreement among the Underwriters and the
Company in accordance with its terms.

                                          Very  truly  yours,

                                          FIRST  SECURITY  GROUP,  INC.

                                          By: /s/ William L. Lusk, Jr.
                                             ----------------------------------
                                          Name: William L. Lusk, Jr.
                                                -------------------------------
                                          Title: CFO & EVP
                                                 ------------------------------

CONFIRMED  AND  ACCEPTED,
  as of the date first above written:

KEEFE  BRUYETTE  &  WOODS,  INC.

By:  /s/ Jeffrey D. Evans
     -----------------------------------
     Authorized  Signatory

For  itself  and  as  Representative  of  the  other
Underwriters  named  in  Schedule  A  hereto.

     Jeffrey D. Evans
     Managing Director
     Keefe, Bruyette & Woods, Inc.

<PAGE>
<TABLE>
<CAPTION>
                       SCHEDULE A

                                               Maximum
                                              Number of
                               Number of        Option
                                Initial    Securities to be
Name of Underwriter            Securities        Sold
-----------------------------  ----------  ----------------
<S>                            <C>         <C>
Keefe, Bruyette & Woods, Inc.   2,670,000           400,500

Raymond James . . . . . . . .   1,112,500           166,875

Sterne, Agee & Leach, Inc.. .     667,500           100,125

Morgan Keegan & Company, Inc.      40,000             6,000

Wunderlich Securities Inc.. .      10,000             1,500

  Total . . . . . . . . . . .   4,500,000           675,000
</TABLE>

                                    Sch A - 1
<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE B

                                                      Maximum Number
                              Number of Initial    of Option Securities
                            Securities to be Sold       to Be Sold
                            ---------------------  --------------------
<S>                         <C>                    <C>
First Security Group, Inc.              4,500,000               675,000
                            ---------------------  --------------------
Total. . . . . . . . . . .              4,500,000               675,000
                            =====================  ====================
</TABLE>

                                    Sch B - 1
<PAGE>
                                   SCHEDULE C

                           FIRST SECURITY GROUP, INC.
                        4,500,000 shares of Common Stock
                           (Par Value $0.01 Per Share)

     1.     The  public  offering price per share for the Securities, determined
as  provided  in  said  Section  2,  shall  be  $     .

     2.     The  purchase  price  per share for the Securities to be paid by the
several  Underwriters  shall  be  $9.30,  being  an  amount  equal to the public
offering  price set forth above less $0.70 per share; provided that the purchase
price  per  share  for  any Option Securities purchased upon the exercise of the
over-allotment  option  described  in Section 2(b) shall be reduced by an amount
per  share  equal  to any dividends or distributions declared by the Company and
payable  on  the  Initial  Securities  but not payable on the Option Securities.

                                    Sch C - 1
<PAGE>
                                   SCHEDULE D

           List of persons and entities subject to lock-up agreements

1.   Rodger  B.  Holley

2.   Lloyd  L.  Montgomery,  III

3.   J.C.  Harold  Anders

4.   Carol  H.  Jackson

5.   Ralph  L.  Kendell

6.   William  B.  Kilbride

7.   D.  Ray  Marler

8.   Hugh  J.  Moser,  III

9.   H.  Patrick  Wood

10.  William  L.  Lusk,  Jr.

                                    Sch D - 1
<PAGE>
                                   SCHEDULE E

                                  Subsidiaries

FSGBank,  National  Association

Kenesaw  Leasing,  Inc.

J&S  Leasing,  Inc.

FSG Reinsurance Company

First Security Intangible Properties, Inc.

First Security Investments, Inc.

First Security Holdings, Inc.

First State Holdings, Inc.

Premier National Services, Inc.

                                    Sch E - 1
<PAGE>
                                                                       Exhibit A

                      FORM OF OPINION OF COMPANY'S COUNSEL
                           TO BE DELIVERED PURSUANT TO
                                  SECTION 5(b)

     (i)     The  Company  is  a  registered bank holding company under the Bank
Holding Company Act of 1956, as amended ("BHCA"), and has been duly incorporated
                                          ----
and  is validly existing as a corporation in good standing under the laws of the
State  of  Tennessee.  The  activities of each of the Company's subsidiaries are
permissible  for  a  subsidiary  of  a  bank  holding  company.

     (ii)     The  Company  has  the corporate power and authority to own, lease
and  operate  its  properties  and  to  conduct its business as described in the
Prospectus  and  to  enter  into  and perform its obligations under the Purchase
Agreement.

     (iii)     The  Company  is  duly  qualified  or  authorized  as  a  foreign
corporation to transact business and is in good standing in each jurisdiction in
which  such  qualification  is  required,  whether by reason of the ownership or
leasing  of  property or the conduct of business, except where the failure so to
qualify or to be in good standing would not result in a Material Adverse Effect.

     (iv)     The  authorized,  issued  and  outstanding  capital  stock  of the
Company  is as set forth in the Prospectus in the column entitled "Actual" under
the  caption "Capitalization" (except for subsequent issuances, if any, pursuant
to  the  Purchase  Agreement or pursuant to reservations, agreements or employee
benefit  plans  referred  to  in  the  Prospectus or pursuant to the exercise of
convertible  securities or options referred to in the Prospectus); the shares of
issued  and  outstanding  capital stock of the Company have been duly authorized
and  validly  issued and are fully paid and non-assessable; and to our knowledge
after  due  inquiry,  none  of  the  outstanding  shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights of any
securityholder  of  the  Company.

     (v)     The Securities to be purchased by the Underwriters from the Company
have  been duly authorized for issuance and sale to the Underwriters pursuant to
the Purchase Agreement and, when issued and delivered by the Company pursuant to
the  Purchase  Agreement  against  payment of the consideration set forth in the
Purchase Agreement, will be validly issued and fully paid and non-assessable and
no  holder  of  the Securities is or will be subject to personal liability under
the  Tennessee  Business  Corporation  Act  by  reason  of  being such a holder.

     (vi)     The  issuance  and  sale  of  the Securities by the Company is not
subject  to  the preemptive or other similar rights of any securityholder of the
Company.

     (vii)     FSGBank,  National  Association  has  been  duly organized and is
validly  existing  as  a  national  bank  in good standing under the laws of the
jurisdiction  of  its organization, and each other subsidiary of the Company has
been  duly  incorporated  and,

<PAGE>
except  for  Premier  National  Services, Inc. ("PNS"), is validly existing as a
                                                 ---
corporation  in  good  standing  under  the  laws  of  the  jurisdiction  of its
incorporation.  Each  subsidiary  of  the  Company  other than PNS has the power
(corporate  or otherwise) and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and is duly qualified
or  authorized  as  a  foreign  corporation  to transact business and is in good
standing  in  each jurisdiction in which such qualification is required, whether
by  reason  of  the ownership or leasing of property or the conduct of business,
except  where  the  failure  so  to  qualify or to be in good standing would not
result  in  a Material Adverse Effect; all of the issued and outstanding capital
stock  of  each subsidiary has been duly authorized and validly issued, is fully
paid  and  non-assessable (except as otherwise provided in 12 U.S.C. Section 55)
and,  to  our  knowledge,  is  owned  by  the  Company,  directly  or  through
subsidiaries,  free  and clear of any security interest, mortgage, pledge, lien,
encumbrance,  claim  or equity; to our knowledge, none of the outstanding shares
of  capital stock of any subsidiary was issued in violation of the preemptive or
similar  rights  of  any  securityholder  of  such  subsidiary.

     (viii)     The  Purchase  Agreement  has been duly authorized, executed and
delivered by the Company and, assuming due authorization, execution and delivery
by  the  Underwriters,  will  constitute  the valid and binding agreement of the
Company  enforceable against the Company in accordance with its terms, except as
may  be  limited  or  otherwise  affected  by  (A)  bankruptcy,  insolvency,
reorganization,  moratorium,  fraudulent  conveyance  or other similar statutes,
rules,  regulations or other laws affecting the enforcement of creditors' rights
and  remedies  generally,  and  (B)  the unavailability of, or limitation on the
availability of, a particular right or remedy (whether in a proceeding in equity
or  at law) because of an equitable principle, public policy or a requirement as
to  commercial  reasonableness,  conscionability  or  good  faith.

     (ix)     The Registration Statement, including any Rule 462(b) Registration
Statement,  has  been declared effective under the 1933 Act; any required filing
of the Prospectus pursuant to Rule 424(b) has been made in the manner and within
the  time  period required by Rule 424(b); and, to the best of our knowledge, no
stop  order  suspending  the  effectiveness of the Registration Statement or any
Rule  462(b)  Registration  Statement  has been issued under the 1933 Act and no
proceedings  for  that purpose have been instituted or are pending or threatened
by  the  Commission.

     (x)     The  Registration Statement, including any Rule 462(b) Registration
Statement and the Rule 430A Information, as applicable, the Prospectus, and each
amendment  or  supplement  to the Registration Statement, Preliminary Prospectus
and Prospectus (other than (a) the financial statements and notes and supporting
schedules included therein or omitted therefrom and (b) the information provided
by  the  Representative,  including  the  concession  and  reallowance  figures
appearing  in  the  Prospectus  in  the  section entitled "Underwriting" and the
information  contained  under  the  captions  "Underwriting - Stabilization" and
"Underwriting - Passive Market Making", as to which we need express no opinion),
as  of  their  respective  effective  or issue dates, complied as to form in all
material  respects  with  the  requirements  of  the  1933  Act.

                                      A - 2
<PAGE>
     (xi)     The form of certificate used to evidence the Common Stock complies
in  all  material  respects with all applicable statutory requirements, with any
applicable  requirements  of  the  charter  and  by-laws  of the Company and the
requirements  of  the  Nasdaq  National  Market.

     (xii)     To  our knowledge, there is not pending or threatened any action,
suit,  proceeding,  inquiry  or  investigation,  to  which  the  Company  or any
subsidiary is a party, or to which the property of the Company or any subsidiary
is  subject,  before  or  brought  by  any court or governmental agency or body,
domestic  or foreign, which might reasonably be expected to result in a Material
Adverse  Effect,  or  which  might  reasonably  be  expected  to  materially and
adversely affect the properties or assets thereof considered in the aggregate or
that could adversely affect the consummation of the transactions contemplated in
the  Purchase  Agreement  or  the  performance by the Company of its obligations
thereunder.

     (xiii)     The  information  in  the  Prospectus  under  "Risk  Factors,"
"Description  of  Capital  Stock"  and  "Underwriting"  and  in the Registration
Statement  under  Item  14,  in  each instance to the extent that it constitutes
matters  of law, summaries of legal matters, the Company's charter and bylaws or
legal  proceedings,  or  legal  conclusions,  have  been  reviewed by us and are
accurate  and  complete  in  all  material  respects.

     (xiv)     To  our  knowledge, there are no statutes or regulations that are
required  to  be described in the Prospectus that are not described as required.

     (xv)     All  descriptions  in  the Registration Statement of contracts and
other  documents  to  which  the  Company  or  its  subsidiaries are a party are
accurate  in  all  material respects; to our knowledge, there are no franchises,
contracts,  indentures,  mortgages,  loan  agreements,  notes,  leases  or other
instruments  required  to  be  described  or  referred  to  in  the Registration
Statement  or  to  be  filed  as  exhibits thereto other than those described or
referred  to  therein or filed or incorporated by reference as exhibits thereto,
and  the descriptions thereof or references thereto are accurate in all material
respects.

     (xvi)     Except  for  the  administrative  dissolution of PNS, neither the
Company nor any subsidiary is in violation of its charter or by-laws, and to our
knowledge,  no  default  by  the  Company  or  any  subsidiary exists in the due
performance  or  observance  of any obligation, agreement, covenant or condition
contained  in  any contract, indenture, mortgage, loan agreement, note, lease or
other  agreement  or  instrument  that  is  described  or  referred  to  in  the
Registration  Statement  or the Prospectus or filed or incorporated by reference
as  an exhibit to the Registration Statement, which would individually or in the
aggregate  have  a  Material  Adverse  Effect.

     (xvii)     No  filing  with,  or authorization, approval, consent, license,
order,  registration,  qualification  or  decree  of,  any court or governmental
authority  or agency other than under the 1933 Act, which have been obtained (or
as  may  be required (a) under the rules and regulations of the NASD, (b) by any
foreign  governmental  entity or of the laws, rules or regulation of any foreign
jurisdiction or (c) under the securities or blue sky laws of the various states,
as  to  which  in  each  case  we  need  express  no  opinion)

                                      A - 3
<PAGE>
is necessary or required in connection with the due authorization, execution and
delivery  of  the  Purchase  Agreement  or  for  the offering, issuance, sale or
delivery  of  the  Securities.

     (xviii)     The  execution,  delivery  and  performance  of  the  Purchase
Agreement  and the consummation of the transactions contemplated in the Purchase
Agreement  and in the Registration Statement (including the issuance and sale of
the  Securities  and  the use of the proceeds from the sale of the Securities as
described  in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and will
not,  whether with or without the giving of notice or lapse of time or both, (a)
to  our  knowledge,  conflict  with  or  constitute  a  breach of, or default or
Repayment  Event  (as  defined  in  Section 1(a)(xii) of the Purchase Agreement)
under or result in the creation or imposition of any lien, charge or encumbrance
upon  any  property  or  assets of the Company or any subsidiary pursuant to any
contract,  indenture,  mortgage,  deed of trust, loan or credit agreement, note,
lease or any other agreement or instrument, known to us, to which the Company or
any  subsidiary  is  a  party  or by which it or any of them may be bound, or to
which  any of the property or assets of the Company or any subsidiary is subject
(except  for  such  conflicts,  breaches  or  defaults  or  liens,  charges  or
encumbrances  that  would not have a Material Adverse Effect), (b) result in any
violation  of  the  provisions  of  the charter or by-laws of the Company or any
subsidiary,  (c)  result  in  any  violation  or  breach  of any applicable law,
statute,  rule, regulation, judgment, order, writ or decree, known to us, of any
government,  government  instrumentality  or  court, domestic or foreign, having
jurisdiction  over  the  Company  or  any  subsidiary or any of their respective
properties,  assets  or  operations.

     (xix)     The  Company  is  not and after giving effect to the offering and
sale  of  the  Securities and the use of proceeds, an "investment company" or an
entity "controlled" by an "investment company," as such terms are defined in the
1940  Act.

     (xx)     To  our knowledge, without independent investigation and except as
set  forth  on Schedule I hereto, neither the Company nor FSGBank (a) is a party
to  or  subject  to any order, decree, agreement, memorandum of understanding or
similar  arrangement with, or a commitment letter, supervisory letter or similar
submission  to,  any  governmental  entity  charged  with  the  supervision  or
regulation  of  depository  institutions or engaged in the insurance of deposits
(including  the  FDIC)  or  the  supervision  or  regulation of it or any of its
subsidiaries  and (b) has been advised by any such governmental entity that such
governmental  entity  is  contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum  of  understanding,  commitment letter, supervisory letter or similar
submission.

     (xxi)     With  respect  to  the  Sarbanes-Oxley  Act  of  2002:

          (A)  The  Company has adopted a Code of Ethics and Code of Conduct for
     senior  financial  officers meeting the requirements of 17 CFR Part 228.406
     and  an  audit  committee  charter  meeting  the  requirements  of  Rule
     4350(d)(1)(C)  of  the  Nasdaq  Marketplace  Rules;

                                      A - 4
<PAGE>
          (B) The Company's Board of Directors has determined that a majority of
     its members and all of the members of its compensation and audit committees
     are independent under applicable Nasdaq Marketplace Rules, and based solely
     on  our  review  of written representations furnished by such directors, to
     our  knowledge  no independent director of the Company has any relationship
     prohibited  under Rule 4200(a)(15)(A) through (G) of the Nasdaq Marketplace
     Rules  and  no audit committee member has any relationship prohibited under
     Rule  4350(d)(2)(a)(1)  of  the  Nasdaq  Marketplace  Rules;

          (C)  The  Board  of  Directors  has  adopted  a  policy  regarding the
     nominations  process  pursuant  to  Rule  4350(b)(4)(B)  of  the  Nasdaq
     Marketplace  Rules  that  provides  for  the  nomination  of  directors  in
     accordance  with  such  rules;  and

          (D)  The  certifications  pursuant  to  Section  302  and  906  of the
     Sarbanes-Oxley  Act  of  2002  contained  in the Company's periodic reports
     filed  with the Securities and Exchange Commission ("SEC") since August 14,
                                                          ---
     2002, complied as to form in all material respects with the requirements of
     such Act and the SEC regulations promulgated thereunder; provided, however,
     that  we  do not give any opinion as to the accuracy of the content of such
     certifications.

     (xxii)     To  our knowledge, the Company and FSGBank have not received any
communication from any governmental entity asserting that the Company or FSGBank
is  not  currently  in  compliance  with  any  statute,  law,  rule, regulation,
decision,  directive  or  order.

          In  addition,  although  we  do  not assume any responsibility for the
accuracy,  completeness  or  fairness  of  the  statements  contained  in  the
Registration  Statement  or the Prospectus, except for those referred to in this
opinion  in  subsections  (iv),  (xiii), (xiv) and (xv), nothing has come to our
attention  that  would lead us to believe that the Registration Statement or any
amendment  thereto, including the Rule 430A Information (if applicable), (except
for  financial  statements  and  schedules  and other financial data included or
omitted  therefrom,  as  to  which  we need make no statement), at the time such
Registration  Statement  or  any  such  amendment became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to  be stated therein or necessary to make the statements therein not misleading
or  that  the  Prospectus  or  any  amendment  or supplement thereto (except for
financial  statements and schedules and other financial data included or omitted
therefrom,  as  to  which we need make no statement), at the time the Prospectus
was  issued,  at the time any such amended or supplemented prospectus was issued
or  at  the Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to make the
statements  therein,  in  the  light  of the circumstances under which they were
made,  not  misleading.

                                      A - 5
<PAGE>
          In  rendering  such  opinions,  such counsel may rely as to matters of
fact  (but  not  as  to  legal  conclusions), to the extent they deem proper, on
certificates  of responsible officers of the Company and public officials.  Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal  opinions,  including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).  "Knowledge" shall include the meaning after
due  inquiry,  except  where  the  context  otherwise  requires.

                                      A - 6
<PAGE>
                                                                       Exhibit B

                                               ________  __,  2005

KEEFE, BRUYETTE & WOODS, INC.
  as Representative of the several
  Underwriters to be named in the
  within-mentioned Underwriting Agreement
787 Seventh Avenue
4th Floor
New York, New York 10019

     Re:  Proposed  Public  Offering  by  First  Security  Group,  Inc.
          -------------------------------------------------------------

Dear  Sirs:

     The  undersigned, a shareholder and an executive officer and/or director of
First Security Group, Inc., a Tennessee corporation (the "Company"), understands
                                                          -------
that  Keefe, Bruyette & Woods, Inc. ("Keefe Bruyette") proposes to enter into an
                                      --------------
Underwriting Agreement (the "Underwriting Agreement") with the Company providing
                             ----------------------
for  the  public  offering  of shares (the "Securities") of the Company's common
                                            -----------
stock, par value of $0.01 per share (the "Common Stock").  In recognition of the
                                          ------------
benefit  that such an offering will confer upon the undersigned as a shareholder
and  an executive officer and/or director of the Company, and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged,  the  undersigned  agrees with each underwriter to be named in the
Underwriting  Agreement  that,  during a period of 180 days from the date of the
Underwriting  Agreement,  the  undersigned  will  not, without the prior written
consent  of  Keefe  Bruyette,  directly  or indirectly, (i) offer, pledge, sell,
contract  to  sell, sell any option or contract to purchase, purchase any option
or  contract  to  sell,  grant  any option, right or warrant for the sale of, or
otherwise dispose of or transfer any shares of the Company's Common Stock or any
securities  convertible  into  or  exchangeable or exercisable for Common Stock,
whether  now  owned  or hereafter acquired by the undersigned or with respect to
which  the  undersigned  has  or hereafter acquires the power of disposition, or
file  any  registration  statement under the Securities Act of 1933, as amended,
with  respect  to  any of the foregoing or (ii) enter into any swap or any other
agreement  or  any  transaction that transfers, in whole or in part, directly or
indirectly,  the  economic consequence of ownership of the Common Stock, whether
any  such  swap  or  transaction is to be settled by delivery of Common Stock or
other securities, in cash or otherwise.  In the event that either (i) during the
period  that begins on the date that is 15 calendar days plus three (3) business
days  before  the last day of the 180-day restricted period and ends on the last
day  of the 180-day restricted period, the Company issues an earnings release or
material  news or a material event relating to the Company occurs, or (ii) prior
to  the  expiration of the 180-day restricted period, the Company announces that
it  will release earnings results during the 16-day period beginning on the last
day  of  the  180-day  restricted period, the restrictions set forth herein will
continue to apply until the expiration of the date that is 15 calendar days plus
three  (3)  business days after the date on which the earnings release is issued
or  the  material  news  or  event  related  to  the  Company  occurs.

     Notwithstanding  the  foregoing,  the  undersigned  may  transfer  the
undersigned's  shares of Common Stock (i) as a bona fide gift or gifts, provided
that  the  donee  or donees agree to be bound in writing by the restrictions set
forth  herein, (ii) to any trust or family limited partnership for the direct or
indirect  benefit of the undersigned or the immediate family of the undersigned,

                                      B - 1
<PAGE>
provided  that the trustee of the trust or general partner of the family limited
partnership,  as  the  case  may  be, agrees to be bound by the restrictions set
forth  herein,  and  provided further that any such transfer shall not involve a
disposition  for  value, (iii) pledged in a bona fide transaction outstanding as
of  the  date  hereof to a lender to the undersigned, as disclosed in writing to
the  underwriters,  (iv)  pursuant  to  the exercise by the undersigned of stock
options  that  have been granted by the Company prior to, and are outstanding as
of, the date of the Underwriting Agreement, where the Common Stock received upon
any  such  exercise is held by the undersigned, individually or as fiduciary, in
accordance  with  the  terms  of  this  Lock-Up  Agreement or (v) with the prior
written  consent  of  Keefe  Bruyette.  For  purposes of this Lock-Up Agreement,
"immediate  family"  shall mean any relationship by blood, marriage or adoption,
not  more  remote  than  first  cousin.  The  undersigned now has and, except as
contemplated  by  clauses (i) through (v) above, for the duration of the Lock-Up
Agreement  will  have  good  and marketable title to the undersigned's shares of
Common  Stock,  free and clear of all liens, encumbrances and claims whatsoever,
except with respect to any liens, encumbrances and claims that were in existence
on  the  date  hereof.  The undersigned also agrees and consents to the entry of
stop  transfer  instructions  with  the  Company's  transfer agent and registrar
against  the  transfer  of  the undersigned's Common Stock, except in compliance
with  this  Lock-Up Agreement.  In furtherance of the foregoing, the Company and
its  transfer  agent  are  hereby  authorized to decline to make any transfer of
securities  if  such  transfer  would  constitute  a violation or breach of this
Lock-Up  Agreement.

     The undersigned represents and warrants that the undersigned has full power
and authority to enter into this Lock-Up Agreement.  The undersigned agrees that
the  provisions  of  this  Lock-Up  Agreement  shall  be  binding  also upon the
successors,  assigns,  heirs  and  personal  representatives of the undersigned.

     The  undersigned  understands  that, if the Underwriting Agreement does not
become  effective,  or  if the Underwriting Agreement (other than the provisions
thereof  which  survive  termination)  shall terminate or be terminated prior to
payment  for  and  delivery  of  the  Common  Stock  to  be sold thereunder, the
undersigned shall be released from all obligations under this Lock-up Agreement.

     This  Lock-up  Agreement  shall  be governed by and construed in accordance
with  the  laws  of  the  State  of  New  York.

                                       Very  truly  yours,

                                       Signature:
                                                 ------------------------------
                                       Print  Name:
                                                   ----------------------------

                                      B - 2

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