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                                                                     EXHIBIT 4.2


                                 TRUST AGREEMENT

         This Trust Agreement, dated as of May 9, 2001, (this "Trust
Agreement"), between Standard Management Corporation, an Indiana corporation
(the "Depositor") and Bankers Trust (Delaware), a Delaware banking corporation,
as trustee (the "Trustee"). The Depositor and the Trustee hereby agree as
follows:

         1.       The trust created hereby (the "Trust") shall be known as "SMAN
Capital Trust I" in which name the Trustee, or the Depositor to the extent
provided herein, may engage in the transactions contemplated hereby, make and
execute contracts, and sue and be sued.

         2.       The Depositor hereby assigns, transfers, conveys and sets over
to the Trustee the sum of One Hundred Dollars ($100.00). The Trustee hereby
acknowledges receipt of such amount in trust from the Depositor, which amount
shall constitute the initial trust estate. The Trustee hereby declares that it
will hold the trust estate in trust for the Depositor. It is the intention of
the parties hereto that the Trust created hereby constitute a business trust
under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801, et
seq. (the "Business Trust Act"), and that this document constitute the governing
instrument of the Trust. The Trustee is hereby authorized and directed to
execute and file a certificate of trust with the Delaware Secretary of State in
accordance with the provisions of the Business Trust Act.

         3.       The Depositor and the Trustee will enter into an Amended and
Restated Trust Agreement, satisfactory to each such party and substantially in
the form included as an exhibit to the 1933 Act Registration Statement (as
defined below), to provide for the contemplated operation of the Trust created
hereby and the issuance of the Preferred Securities and Common Securities
referred to therein. Prior to the execution and delivery of such Amended and
Restated Trust Agreement, the Trustee shall not have any duty or obligation
hereunder or with respect to the trust estate, except as otherwise required by
applicable law or as may be necessary to obtain prior to such execution and
delivery of any licenses, consents or approvals required by applicable law or
otherwise.

         4.       The Depositor and the Trustee hereby authorize and direct the
Depositor, as the sponsor of the Trust, (i) to file with the Securities and
Exchange Commission (the "Commission") and execute, in each case on behalf of
the Trust, (a) the Registration Statement on Form S-1 (the "1933 Act
Registration Statement"), including any pre-effective or post-effective
amendments to the 1933 Act Registration Statement (and any registration
statement filed pursuant to Rule 462 promulgated pursuant to the Securities Act
of 1933, as amended) relating to the registration under the Securities Act of
1933, as amended, of the Preferred Securities of the Trust and possible certain
other securities; and (b) a Registration Statement on Form 8-A (the "1934 Act
Registration Statement") (including all pre-effective and post-effective
amendments thereto) relating to the registration of the Preferred Securities of
the Trust under the Securities Exchange Act of 1934, as amended; (ii) to file
with the Nasdaq Stock Market ("Nasdaq") and execute on behalf of the Trust one
or more listing applications and all other applications, statements,
certificates, agreements, and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on the National Market
System of the


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Nasdaq Stock Market; (iii) to file and execute on behalf of the Trust such
applications, reports, surety bonds, irrevocable consents, appointments of
attorney for service of process and other papers and documents as shall be
necessary or desirable to register the Preferred Securities under the securities
or blue sky laws of such jurisdictions as the Depositor, on behalf of the Trust,
may deem necessary or desirable; and (iv) to execute on behalf of the Trust an
Underwriting Agreement relating to the Preferred Securities, among the Trust,
the Depositor and the several Underwriter(s) named therein, substantially in the
form included as an exhibit to the 1933 Act Registration Statement. In the event
that any filing referred to in clauses (i), (ii) and (iii) above is required by
the rules and regulations of the Commission, Nasdaq or state securities or blue
sky laws, to be executed on behalf of the Trust by the Trustee, the Trustee, in
its capacity as a Trustee of the Trust, is hereby authorized and, to the extent
so required, directed to join in any such filing and to execute on behalf of the
Trust any and all of the foregoing, it being understood that Bankers Trust
(Delaware) in its capacity as a Trustee of the Trust shall not be required to
join in any such filing or execute on behalf of the Trust any such document
unless required by the rules and regulations of the Commission, Nasdaq, or state
securities or blue sky laws. In connection with the filings referred to above,
the Depositor hereby constitutes and appoints Ronald D. Hunter and Stephen M.
Coons and each of them, as its true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for the Depositor or in the
Depositor's name, place and stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to the 1933 Act
Registration Statement (and any registration statement filed pursuant to Rule
462 promulgated pursuant to the Securities Act of 1933, as amended) and the 1934
Act Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Commission, Nasdaq and
administrators of the state securities or blue sky laws, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as the Depositor might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their respective substitute or substitutes, shall do
or cause to be done by virtue hereof.

         5.       This Trust Agreement may be executed in one or more
counterparts.

         6.       The number of Trustees initially shall be one (1) and
thereafter the number of Trustees shall be such number as shall be fixed from
time to time by a written instrument signed by the Depositor which may increase
or decrease the number of Trustees; provided, however, that to the extent
required by the Business Trust Act, one Trustee shall either be a natural person
who is a resident of the State of Delaware or, if not a natural person, an
entity which has its principal place of business in the State of Delaware and
otherwise meets the requirements of applicable Delaware law. Subject to the
foregoing, the Depositor is entitled to appoint or remove without cause any
Trustee at any time. The Trustees may resign upon thirty (30) days' prior notice
to the Depositor.

         7.       This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).


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         IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed as of the day and year first above written.

                           Standard Management Corporation, as Depositor



                           By:    /s/ Stephen M. Coons
                                  ---------------------------------------------
                           Name:  Stephen M. Coons
                           Title: Executive Vice President and General Counsel


                           Bankers Trust (Delaware), as Trustee



                           By:    /s/ John V. Lavin
                                  ---------------------------------------------

                                  Name:  John V. Lavin
                                         --------------------------------------
                                  Title: Assistant Vice President
                                         --------------------------------------


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