STANDARD MANAGEMENT CORPORATION







                          NOTE AGREEMENT




                   Dated as of November 8, 1996




                                Re:

         $4,000,000 Senior Subordinated Convertible Note
                       Due December 31, 2003









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                         TABLE OF CONTENTS

                                                             PAGE

SECTION 1.   DESCRIPTION OF NOTE AND COMMITMENTS               1

      1.1    Description of Note                               1
      1.2    Commitments, Closing Date                         1
      1.3    Conversion. . . . . . . . . . . . . . . . . .     2

SECTION 2.   PREPAYMENT OF NOTE                                3

      2.1    Restriction on Prepayment                         3
      2.2    Mandatory Prepayments in Certain Events           3
      2.3    Prepayments at Option of the Company              3
      2.4    Direct Payment                                    4

SECTION 3.   REPRESENTATIONS                                   4

      3.1    Representations of the Company                    4
      3.2    Representations of the Purchaser                  5

SECTION 4.   CLOSING CONDITIONS                                5

      4.1    Closing Certificate                               5
      4.2    Legal Opinion                                     5
      4.3    Company's Existence and Authority                 6
      4.4    Consent and Approvals                             6
      4.5    Registration Rights Agreement . . . . . . . .     6
      4.6    Legality of Investment                            6
      4.7    Satisfactory Proceedings                          6
      4.8    Acquisition of Shelby                             6
      4.9    Use of Proceeds                                   6
      4.10   Waiver of Conditions                              7

SECTION 5.   COMPANY COVENANTS                                 7

      5.1    Corporate Existence, Etc.                         7
      5.2    Insurance                                         7
      5.3    Taxes, Claims for Labor and Materials,
               Compliance with Laws                            8
      5.4    Maintenance of Material Properties, Etc.          8
      5.5    Nature of Business                                9
      5.6    Limitations on Indebtedness                       9
      5.7    Limitations on Liens                              9
      5.8    Reinsurance                                      10
      5.9 Financial Covenants 10
      5.10   Sales of Assets                                  11
      5.11   Loans and Investments . . . . . . . . . . . .    11
      5.12   Guaranties, Etc . . . . . . . . . . . . . . .    11
      5.13   Mergers                                          11
      5.14   Transactions with Affiliates                     12
      5.15   Limitation on Sale and Lease-Backs               12
      5.16   Repurchases of Note                              12
      5.17   Dividends                                        12
      5.18   Termination of Pension Plans                     13
      5.19   Reports and Rights of Inspection                 13
      5.20   Leases                                           15
      5.21   Investment Advisory Agreement                    15

SECTION 6.   EVENTS OF DEFAULT AND REMEDIES THEREFOR          15

      6.1    Events of Default                                15
      6.2    Notice to Holders                                18
      6.3    Acceleration of Maturity                         18
      6.4    Rescission of Acceleration                       18

SECTION 7.   AMENDMENTS, WAIVERS AND CONSENTS                 19

      7.1    Consent Required                                 19
      7.2    Effect of Amendment or Waiver                    19

SECTION 8.   INTERPRETATION OF AGREEMENT; DEFINITIONS         19

      8.1    Definitions                                      19
      8.2    Accounting Principles                            26

SECTION 9.   MISCELLANEOUS                                    26

      9.1    Note Register                                    26
      9.2    Exchange of Note                                 26
      9.3    Loss, Theft, Etc. of Note                        27
      9.4    Expenses; Stamp Tax Indemnity                    27
      9.5    Indemnities                                      27
      9.6    Powers and Rights Not Waived; Remedies
              Cumulative                                      28
      9.7    Notices                                          28
      9.8    Reproduction of Documents                        28
      9.9    Counterparts                                     29
      9.10   Successors and Assigns                           29
      9.11   Survival of Covenants and Representations        29
      9.12   Severability                                     29
      9.13   Governing Law                                    29
      9.14   Captions                                         30
      9.15   Waiver of Jury Trial                             30

ATTACHMENTS TO NOTE AGREEMENT:

EXHIBIT A    Form of Senior Subordinated Convertible Note
             Due December 31, 2003

EXHIBIT B    Representations and Warranties

EXHIBIT C    Financial Covenants

EXHIBIT D    Reporting Requirements




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                                                             PAGE

                          NOTE AGREEMENT


             THIS NOTE AGREEMENT (this "Agreement") is made and entered
into as of November 8, 1996 by and between Standard Management Corporation,
an Indiana corporation (the "Company") and Great American Reserve Insurance
Company, a Texas Corporation ("the Purchaser").

             WHEREAS, the Company desires that the Purchaser lend money to
the company as provided herein and the Purchaser is prepared to lend such
money.

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

SECTION 1.  DESCRIPTION OF NOTE AND COMMITMENT.

      1.1.    DESCRIPTION OF NOTE.  The Company has duly authorized the
issuance and sale of its Senior Subordinated Convertible Note Due December
31, 2003 in the aggregate principal amount of Four Million Dollars
($4,000,000) (the "Note"), in the form of EXHIBIT A, and shall bear
interest at a rate of 12% per annum.  The Note will be dated the date of
issue, will bear interest from such date as respectively set forth therein,
payable quarterly on the first day of each January, April, July and October
in each year (commencing January 1, 1997) and at maturity.  The Note will
bear interest on overdue principal (including any overdue prepayment of
principal) and on any overdue installment of interest at the Overdue Rate
after the due date thereof, whether by mandatory prepayment, by
acceleration or otherwise, until paid.  The Note will be expressed to
mature on December 31, 2003 and will be subject to mandatory prepayments
prior to such date.  Interest on the Note shall be computed on the basis of
a 360-day year of twelve 30-day months.  At its option until December 31,
2000, the Company may pay quarterly interest by notifying the Purchaser in
writing to add the amount of the interest payment then due and payable to
the Note; PROVIDED, HOWEVER, that for all periods for which the Company
makes such election, the Note shall bear interest at a rate of 14% per
annum.  The Note is not subject to prepayment or redemption at the option
of the Company prior to its expressed maturity date except on the terms and
subject to the conditions referred to in SECTION 2 of this Agreement.  The
terms which are capitalized herein shall have the meanings set forth in
SECTION 8.1 hereof unless the context shall otherwise require.

      1.2.  COMMITMENTS, CLOSING DATE.  Subject to the terms and conditions
hereof and on the basis of the representations and warranties hereinafter
set forth, the Company agrees to issue and sell to the Purchaser, and the
Purchaser agrees to purchase from the Company on the Closing Date at a
price of 100% of the principal amount, the Note.

      Delivery of the Note on the Closing Date will be made at such place
as the parties hereto mutually agree against payment therefor by wire
transfer of federal funds currently and immediately available in
Indianapolis, Indiana, (net of the funds to be paid to the Purchaser for
the purchase of the Warrants and the payment of a fee as specified in
SECTION 4.9) for credit to such account or accounts as the Company shall
specify by not less than three Business Days' prior written notice.

On the Closing Date the Company will deliver to the Purchaser the Note in
the principal amount of Four Million Dollars ($4,000,000).

      1.3.  CONVERSION.  (a)  The Purchaser may, at the Purchaser's option,
at any time, and from time to time, prior to payment in full of the Note,
convert the outstanding principal amount of the Note and any accrued and
unpaid interest due pursuant to SECTION 1.1 in whole or in part (the
"Conversion Amount") into fully paid and non-assessable shares (but only
into full shares) of the common stock, without par value of the Company
(the "Common Shares"), at a price equal to the amount of $5.75 per Common
Share (the "Conversion Rate").  Provided, however, the Conversion Rate
shall increase to the amount of $6.00 per Common Share if the Company gives
notice that it intends and has the demonstrated financial ability to prepay
in full the Note within one year after the date hereof; provided, further,
such notice of prepayment must contain evidence satisfactory to Purchaser
of the Company's ability to prepay the Note in full and such evidence may
consist of a bank or other financing commitment letter or a registration
statement.  In order to exercise this conversion right, the Purchaser must
send written notice of the conversion to the Company at least 10 days prior
to the specified conversion date.  On the conversion date (or as soon
thereafter as is reasonably practicable), the Company shall issue to the
Purchaser a share certificate for the Common Shares acquired upon
conversion.  The Purchaser's right to elect to convert the Conversion
Amount of the Note into Common Shares shall not be affected by any
prepayment notice given by the Company, so long as the Company receives the
Purchaser's written notice of the conversion at least five Business Days
before the date upon which Company specified in its notice that it would
prepay the Note;

      (b)    The Conversion Rate shall be adjusted as provided in the Note.

      (c)    Notwithstanding any other provisions of this SECTION 1.3 to
the contrary, the conversion rights of the Purchaser shall be subject to
compliance with all applicable federal and state securities laws, and the
Company agrees to execute all required agreements and documents required by
the Company to establish compliance with such laws; and

      (d)    The Company shall at all times reserve and keep available and
free of preemptive rights out of its authorized but unissued Common Shares,
solely for the purpose of issuance upon conversion of the Note, that number
of Common Shares as shall from time to time be sufficient to effect the
conversion of the Note, and if at any time the number of authorized but
unissued Common Shares shall not be sufficient to effect the exercise of
the Note, the Company shall take the corporate action necessary to increase
the number of its authorized Common Shares to a number sufficient for this
purpose.

SECTION 2.  PREPAYMENT OF NOTE.

      2.1    RESTRICTION ON PREPAYMENT.  No prepayment of the Note may be
made except to the extent and in the manner expressly provided in this
Agreement.

      2.2.    MANDATORY PREPAYMENTS IN CERTAIN EVENTS.  The Note shall be
subject to mandatory prepayment in the amount described below, pro-rata
among all holders, on the terms hereinafter set forth, upon the occurrence
of any of the following events and so long as such prepayment is not
prohibited by the Fleet Credit Agreement:

      (a)  the Company or any Subsidiary shall sell any assets other than
as permitted by Section 5.10;

      (b)  the Company or any Subsidiary shall issue any Indebtedness other
than as permitted by SECTION 5.6; or

      (c)  the Company shall issue and sell any Common Stock in one or more
public offerings or private placements for aggregate cash proceeds to the
Company (net of all reasonable and appropriate commissions, fees and
expenses) in excess of $1,000,000 in any fiscal year.

      Any mandatory prepayment made pursuant to this SECTION 2.2 shall be
in an aggregate amount equal to the fair market value of the proceeds to
the Company (net of all reasonable and appropriate fees and expenses) from
any transaction described in clause (a), (b) or (c) and shall be preceded
by the notice hereinafter described.

      The prepayment price of the Note prepaid pursuant to this SECTION 2.2
shall be equal to 100% of the principal amount thereof to be prepaid plus
accrued interest thereon to the date fixed for prepayment.

      2.3.    PREPAYMENTS AT OPTION OF THE COMPANY.  The Company, upon not
less than thirty nor more than sixty days' prior written notice of the date
and principal amount of any optional prepayment to the holder of the Note,
shall be entitled to prepay at any time all or any portion of the Note.

      Any notice of prepayment pursuant to SECTION 2.2 or this SECTION 2.3
shall (i) make reference to the applicable Section(s), (ii) state whether
the Note is to be prepaid in whole, and (iii) state the prepayment date and
price.  The Company shall, on such prepayment date, make the required
prepayment.

      2.4.  DIRECT PAYMENT.    Notwithstanding anything to the contrary in
this Agreement or the Note, in case the Note is owned by the Purchaser or
its nominee (or owned by any other institutional holder who has given
written notice to the Company requesting that the provision of this SECTION
2.4 shall apply), the Company will promptly and punctually pay when due the
principal thereof and interest thereon, without any presentment thereof
directly to such Purchaser or such subsequent holder at the address of such
Purchaser or at such other address as such Purchaser or such subsequent
holder may from time to time designate in writing to the Company or, if a
bank account is designated for the Purchaser or in any written notice to
the Company from such Purchaser or any such subsequent holder, the Company
will make such payments in immediately available funds to such bank
account, marked for attention as indicated, or in such other manner or to
such other account of such Purchaser or such holder in any bank in the
United States as such Purchaser or any such subsequent holder may from time
to time direct in writing.  The holder of any Note to which this SECTION
2.4 applies agrees that in the event it shall sell or transfer any such
Note it will (A) prior to the delivery of such Note make a notation thereon
of all principal, if any, prepaid thereon and of the date to which interest
has been paid thereon, and (B) promptly notify the Company in writing of
the name and address of the transferee of the Note so transferred.  To the
extent this SECTION 2.4 applies, the Company shall be entitled to presume
conclusively that the original or such subsequent institutional holder as
shall have requested the provisions hereof to apply to its Note remains the
holder of such Note until (1) the Company shall have received from the
transferor thereof written notice of the transfer of such Note and of the
name and address of the transferee, or (2) such Note shall have been
presented to the Company as evidence of the transfer.  The Purchaser
agrees, and any subsequent holder requesting direct payment pursuant to
this SECTION 2.4 shall by requesting direct payment be deemed to have
agreed, to return the Note to the Company promptly following the final
payment thereof.


SECTION 3.  REPRESENTATIONS.

      3.1.  REPRESENTATIONS OF THE COMPANY.  The Company represents and
warrants that all representations set forth in EXHIBIT B attached hereto
are true and correct as of the date hereof and are incorporated herein by
reference with the same force and effect as though herein set forth in
full.

      3.2.  REPRESENTATIONS OF THE PURCHASER.  The Purchaser represents,
and in entering into this Agreement the Company understands, that (1) the
Purchaser is acquiring the Note for the purpose of investment and not with
a view to the resale or distribution thereof, and that the Purchaser has no
present intention of selling, negotiating, transferring or otherwise
disposing of the Note, but without prejudice, however, to the Purchaser's
right at all times to sell or otherwise dispose of all or any part of the
Note pursuant to a registration statement which has become effective under
the Securities Act of 1933, as amended (the "Act"), or in a transaction
exempt from the registration requirements of such Act, and (2) the
Purchaser is an "accredited investor" as defined in Rule 501(a) of
Regulation D under the Act.  The Purchaser acknowledges that the Note it is
purchasing on the Closing Date will not, as of said Closing Date, be
registered under the Act, and except as provided in the Registration Rights
Agreement, that the Company assumes no obligation to register the Note
under the Act and that the Note may only be offered or sold in compliance
with the Act and applicable state securities laws.


SECTION 4.  CLOSING CONDITIONS.

      The Purchaser's obligations to purchase the Note on the Closing Date
shall be subject to the performance by the Company of its agreements
hereunder which by the terms hereof are to be performed at or prior to the
time of delivery of the Note and to the following further conditions
precedent:

      4.1.  CLOSING CERTIFICATE.  Concurrently with the delivery of the
Note to the Purchaser on the Closing Date, the Purchaser shall have
received a certificate dated the Closing Date, signed by the Secretary of
the Company, certifying, among other things, (a) a true and correct copy of
the Certificate of Incorporation of the Company, and all amendments, if
any, thereto, (b) a true and correct copy of the By-Laws of the Company as
then in effect, (c) copies of all corporate action taken by the Company,
including resolutions of its Board of Directors authorizing the execution,
delivery and performance of this Agreement, the Note and each other
document to be delivered by the Company pursuant to this Agreement, and (d)
the names and true signatures of the officers of the Company authorized to
sign this Agreement, the Note and each other document to be delivered by
the Borrower under this Agreement.

      4.2.  LEGAL OPINION.  Concurrently with the delivery of the Note to
the Purchaser on the Closing Date, the Purchaser shall have received a
favorable opinion of counsel for the Company in form and substance
satisfactory to the Purchaser in all respects, dated the Closing Date.

      4.3.  COMPANY'S EXISTENCE AND AUTHORITY.  On or prior to the Closing
Date, the Purchaser shall have received, in form and substance reasonably
satisfactory to it and its special  counsel, such documents and evidence
with respect to the Company establishing the existence and good standing of
the Company and its Subsidiaries and the Company's authorization of the
transactions contemplated by this Agreement.

      4.4.  CONSENT AND APPROVALS.  Any consents or approvals required to
be obtained from any holder or holders of any outstanding Security of the
Company or any other Person and any amendments of agreements pursuant to
which any Securities may have been issued which shall be necessary to
permit the consummation of the transactions contemplated hereby on the
Closing Date shall have been obtained and all such consents or amendments
shall be satisfactory in form and substance to the Purchaser and its
special counsel.

      4.5    REGISTRATION RIGHTS AGREEMENT.  The parties shall have entered
into a Registration Rights Agreement substantially similar to the
registration rights agreement by and between the Company and Fleet National
Bank.

      4.6.  LEGALITY OF INVESTMENT.  The Note to be purchased by the
Purchaser shall be a legal investment for the Purchaser under the laws of
each jurisdiction to which it may be subject (including legality by virtue
of resort to any so-called basket provisions of such laws).

      4.7.  SATISFACTORY PROCEEDINGS.  All proceedings taken in connection
with the transactions contemplated by this Agreement, and all documents
necessary to the consummation thereof, shall be reasonably satisfactory in
form and substance to the Purchaser and its special counsel, and the
Purchaser shall have received a copy (executed or certified as may be
appropriate) of all legal documents or proceedings taken in connection with
the consummation of said transactions.

      4.8.  ACQUISITION OF SHELBY.  Concurrently with the delivery of the
Note to the Purchaser on the Closing Date, the Company shall have completed
the acquisition of Shelby and made provision satisfactory to the Purchaser
and its special counsel for the statutory merger of Shelby into Standard
Life.

      4.9.  USE OF PROCEEDS.  The Company shall use the proceeds from the
issuance of the Note as follows:  (i) Three Million Three Hundred Thousand
dollars ($3,300,000) to pay a portion of the purchase price to acquire
Shelby, (ii) Six Hundred Thousand Dollars ($600,000) to purchase the
Warrants from Conseco, Inc., an Indiana Corporation; and (iii) One Hundred
Thousand Dollars ($100,000) to pay the Purchaser a fee for agreeing to
enter into this Agreement.  None of such proceeds will be used, directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" within the meaning of Regulation
G or U (or any successor regulation) promulgated by the Board of Governors
of the Federal Reserve System as from time to time in effect.

      4.10.  WAIVER OF CONDITIONS.  If on the Closing Date the Company
fails to tender to the Purchaser the Note to be issued to the Purchaser on
such date or if the conditions specified in this SECTION 4 have not been
fulfilled, the Purchaser may thereupon elect to be relieved of all further
obligations under this Agreement.  Without limiting the foregoing, if the
conditions specified in this SECTION 4 have not been fulfilled, the
Purchaser may waive in writing the compliance by the Company with any such
condition to such extent as the Purchaser may in its sole discretion
determine.  Nothing in this SECTION 4.10 shall operate to relieve the
Company of any of its obligations hereunder or to waive any of the
Purchaser's rights against the Company.

SECTION 5.  COMPANY COVENANTS.

      From and after the Closing Date and continuing so long as any amount
remains unpaid under the Note:

      5.1.  CORPORATE EXISTENCE, ETC.  The Company will preserve and keep
in force and effect, and will cause each Subsidiary to preserve and keep in
force and effect, its respective corporate existence and all material
licenses and permits necessary to the proper conduct of its business,
PROVIDED that the foregoing shall not prevent (x) the liquidation of or the
transfer, sale or other disposition of any asset in accordance with SECTION
5.10 or (y) any other transaction otherwise permitted or consented to under
this Agreement.

      5.2.  INSURANCE.  (a) The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or
similar businesses and owning and operating similar properties.  The
Company will maintain in force life insurance coverage by a financially
sound and reputable insurer (other than an Affiliate of the Company) on
Ronald D. Hunter in form and substance satisfactory to the purchasers
naming the Company as loss payee in an amount not less than Four Million
Dollars ($4,000,000).  The Company shall furnish to the Purchaser on or
prior to the Closing Date a summary of insurance in force as of such date.
The Company shall give notice to the Purchaser of any reduction in coverage
or other material changes to the insurance maintained by the Company and
its Subsidiaries.

      (b)  At any time that the Company shall own any physical assets, it
shall maintain physical damage insurance coverage at least equal to the
fair market value of such assets and reasonable liability insurance
thereon, and with respect to each liability or physical damage insurance
policy covering any of the property of the Company, the Company will cause
such policy to provide, pursuant to endorsements in form and substance
satisfactory to the Purchaser, that the insurer will give the Purchaser 30
days prior written notice of the termination of such policy.

      5.3.  TAXES, CLAIMS FOR LABOR AND MATERIALS, COMPLIANCE WITH LAWS.
(a) The Company will promptly pay and discharge, and will cause each
Subsidiary promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Subsidiary,
respectively, or upon or in respect of all or any part of the Property or
business of the Company or such Subsidiary, and all claims for work, labor
or materials, which if unpaid could become a Lien or charge upon any
Property of the Company or such Subsidiary, which Lien or charge could
materially and adversely affect the Properties, business or financial
condition of the Company and its Subsidiaries considered as one enterprise;
PROVIDED that the Company or such Subsidiary shall not be required to pay
any such tax, assessment, charge, levy, or claim if (1) the validity,
applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or
sale of any material Property of the Company or such Subsidiary or any
material interference with the use thereof by the Company or such
Subsidiary, and (2) the Company or such Subsidiary shall set aside on its
books reserves reasonably deemed by it to be adequate with respect thereto.

      (b)  The Company will promptly comply, and will cause each Subsidiary
to promptly comply, with all laws, ordinances or governmental rules and
regulations to which it is subject, including without limitation ERISA and
all Environmental Legal Requirements, the violation of which could
materially and adversely affect the Properties, business or financial
condition of the Company and its Subsidiaries considered as one enterprise
or could result in any Lien or charge upon any Property of the Company or
any Subsidiary, which Lien or charge could materially and adversely affect
the properties, business or financial condition of the Company and its
Subsidiaries considered as one enterprise.

      5.4.  MAINTENANCE OF MATERIAL PROPERTIES, ETC.  The Company will
maintain, preserve and keep, and will cause each Subsidiary to maintain,
preserve and keep, its Properties which are used in the conduct of its
business (whether owned in fee or a leasehold interest), excluding any
Properties that the Company or any Subsidiary reasonably determines to be
surplus, obsolete or otherwise not useful in the conduct of its respective
business and excluding any Properties the failure to maintain, preserve and
keep which would not have a material and adverse effect on the Properties,
business or financial condition of the Company and its Subsidiaries
considered as one enterprise, in good repair and working order, normal wear
and tear excepted, and from time to time will make all necessary repairs,
replacements, renewals and additions which in the opinion of the Company
will maintain the efficiency thereof.

      5.5.  NATURE OF BUSINESS.  The Company and its Subsidiaries will
continue to engage in substantially the same types of businesses in which
they are engaged as of the date hereof.

      5.6.  LIMITATIONS ON INDEBTEDNESS.  The Company will not, and will
not permit any Subsidiary to, create, assume, issue, guarantee, suffer to
exist or otherwise incur any  Indebtedness, except:

             (a)  Indebtedness of the Company under this Agreement and the
      Note;

             (b)  Indebtedness existing as of the date hereof and set forth
      on SCHEDULE 5.6;

             (c)  Indebtedness of the Company under the Fleet Credit
      Agreement;

             (d)  Accounts payable to trade creditors for goods or services
      which are not aged more than sixty days from billing date, and
      current operating liabilities (other than for borrowed money) which
      are not more than sixty  days past due, in each case incurred in the
      ordinary course of business and paid within the specified time,
      unless contested in good faith and by appropriate proceedings and for
      which appropriate reserves are maintained;

             (e)  Indebtedness between Subsidiaries of the Company or
      between a Subsidiary of the Company and the Company; and

             (f) Indebtedness of the Company or any of its Subsidiaries, if
      any, secured by purchase-money Liens permitted by SECTION 5.7 hereof.

      5.7.  LIMITATIONS ON LIENS.  The Company will not, and will not
permit any Subsidiary to, create, assume or incur, or suffer to exist, any
mortgage, pledge, security interest, encumbrance, lien or charge of any
kind on its or their property, whether now owned or hereafter acquired, or
upon any income or profits therefrom (collectively, "Liens"), except:

             (a)  Liens in favor of Fleet National Bank arising under the
      Fleet Credit Agreement;

             (b)  Liens in favor of the Purchaser arising under this
      Agreement;

             (c)  Liens for taxes or assessments or other governmental
      charges or levies not yet due and payable or, if due and payable,
      Liens which are being contested in good faith by appropriate
      proceedings and for which appropriate reserves are maintained;

             (d).Liens imposed by law, such as mechanics', materialmen's,
landlords', warehousemen's, and carriers' Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are
not past due for more than sixty days or which are being contested in good
faith by appropriate proceedings and for which appropriate reserves have
been established;

             (e)  Liens under workmen's compensation, unemployment
      insurance, social security, or similar legislation;

             (f)  Liens incurred in the ordinary course of business
      relating to deposits or pledges to secure the performance of bids,
      tenders, contracts (other than contract for the payment of money),
      leases (permitted under the terms of this Agreement), or public or
      statutory obligations, surety, stay, appeal, indemnity, performance,
      or other similar bonds, or other similar obligations;

             (g)  Judgment and other similar Liens arising in connection
      with court proceedings, provided the execution or other enforcement
      of such Liens is effectively stayed and claims secured thereby are
      being actively contested in good faith and by appropriate
      proceedings;

             (h)  Easements, rights-of-way, restrictions, and other similar
      encumbrances which, in the aggregate, do not materially interfere
      with the occupation, use, and enjoyment by the Company or any of its
      Subsidiaries of the property or assets encumbered thereby in the
      normal course of its business or materially impair the value of the
      property subject thereto; and

             (i)  Existing Liens specified in SCHEDULE 5.7 hereto.

      5.8.   REINSURANCE.  Except for reinsurance on annuity products sold
after the date hereof in the ordinary course of business consistent with
past practice, the Company will not permit any insurance company Subsidiary
to enter into any reinsurance or other similar agreement with respect to
10% or more of its respective assets or liabilities in any fiscal year.
Any reinsurance or other similar agreement will be entered into only with a
company that is rated A or better by A.M. Best Company, Inc.

      5.9.   FINANCIAL COVENANTS.  The Company will comply with all of the
financial covenants set forth in EXHIBIT C attached hereto, and the same is
hereby incorporated by reference with the same force and effect as though
herein set forth in full.

      5.10.  SALES OF ASSETS.  The Company will not, and will not permit
any Subsidiary to, sell, lease, assign, transfer or otherwise dispose of
any of its now owned or hereafter acquired assets (including, without
limitation, shares of stock and indebtedness of any Subsidiary of the
Company, receivables and leasehold interests), except:

             (a)  the sale or other disposition of assets no longer used or
      useful in the conduct of its business; or

             (b)  investment securities disposed of in the ordinary course
      of business.

      5.11.  LOANS AND INVESTMENTS.  Subject to the limitations set forth
below, the Company shall not make, or permit any of its Subsidiaries to
make, any loan or advance to any Person, or purchase or otherwise acquire,
or permit any of its Subsidiaries to purchase or otherwise acquire, any
capital stock, assets, obligations, or other securities of, make any
capital contribution to, or otherwise invest in or acquire any interest in
any Person except that, so long as the Company complies at all times with
the financial covenants set forth in SECTION 5.9 herein, (i) the Company
and its Subsidiaries may make investments in fixed maturities securities
rated less than "BBB" by Moody's Investor Services or Standard & Poor's
Corporation and in mortgage loans, real estate, collateral loans, common
and nonredeemable preferred stocks and other invested assets as long as the
total of such investments does not exceed 10% of the total consolidated
investments of the Company and its Subsidiaries and (ii) nothing herein
shall limit the ability of the Company and its Subsidiaries to invest all
or any portion of their respective assets in fixed maturities securities
rated at least "BBB" by Moody's Investor Service or Standard & Poor's
corporation, other investment grade bonds or securities guaranteed by the
United States Government.

      5.12.  GUARANTIES, ETC.  The Company shall not assume, guarantee,
endorse, or otherwise be or become directly or contingently responsible or
liable, or permit any of its Subsidiaries to assume, guarantee, endorse, or
otherwise be or become directly or contingently responsible or liable
(including, but not limited to, an agreement to purchase any obligation,
stock, assets, goods, or services, or to supply or advance any funds,
assets, goods, or services, or to maintain or cause such Person to maintain
a minimum working capital or net worth or otherwise to assure the creditors
of any Person against loss) for obligations of any Person, except (1)
guarantee by endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business; and
(2) existing guaranties specified in SCHEDULE 5.12.

      5.13.  MERGERS, ETC.  The Company will not, and will not permit any
Subsidiary to, merge with or into any Person or consolidate with, or sell,
assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions), all or substantially all of the assets or business
of any Person, except:

             (a)  any Subsidiary may merge with or into any Wholly-owned
      Subsidiary so long as the Wholly-owned Subsidiary is the surviving
      entity; and

             (b)  any Subsidiary may merge into the Company.


      5.14.  TRANSACTIONS WITH AFFILIATES.

      The Company will not, enter into, or permit any of its Subsidiaries
to enter into, any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service
with any Affiliate, which individually or in the aggregate for the Company
and its Subsidiaries aggregate more than $250,000 per fiscal year, except
in the ordinary course of and pursuant to the reasonable requirements of
the Company or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Company or such Subsidiary than would be
obtained in a comparable arm's-length transaction with a Person not an
Affiliate and except for the transactions listed on SCHEDULE 5.14 and
SCHEDULE 5.17.

      5.15.  LIMITATION ON SALE AND LEASE-BACKS.  Except for existing Liens
specified in SCHEDULE 5.6, the Company will not enter into, or permit any
Subsidiary to enter into, any arrangement with any bank, insurance company
or other lender or investor, or to which any such lender or investor is a
party, providing for the leasing to the Company or any Subsidiary of any
Property or Properties which has been or is to be sold or transferred by
the Company or any Subsidiary to such lender or investor or to any Person
to which funds have been or are to be advanced by such lender or investor,
in whole or in part, on the security of the leased Property.

      5.16.  REPURCHASES OF NOTE.   Neither the Company nor any Subsidiary
nor any Affiliate, directly or indirectly, may repurchase or make any offer
to repurchase the Note unless the offer has been made to repurchase, pro-
rata, from all holders of the Note at the same time and upon equivalent
terms.  In case the Company repurchases any Note, such Note shall
thereafter be canceled, the Company shall receive a prepayment credit to be
applied in inverse order of maturity, commencing with the payment due upon
the final maturity of the Note, and no Note shall be issued in substitution
thereof.

      5.17.  DIVIDENDS.  The Company shall cause its Subsidiaries to pay to
the Company such amounts as will be sufficient for the Company to perform
its obligations under the Fleet Credit Agreement, this Agreement and the
Note and the surplus debentures listed on SCHEDULE 5.17 (with respect to
interest payments only) so long as such amounts may be legally paid under
applicable insurance laws or are otherwise approved by insurance
regulators; PROVIDED that the inability of any Subsidiary to pay dividends
shall not affect the Company's payment and other obligations under this
Agreement and the Note.

      5.18.  TERMINATION OF PENSION PLANS.  The Company will not, and will
not permit any Subsidiary to, terminate any Plan maintained by it in a
manner which would result in the imposition of a Lien on any Property of
the Company or any Subsidiary pursuant to ERISA.


      5.19.  REPORTS AND RIGHTS OF INSPECTION.

             (a)  The Company will keep, and will cause each Subsidiary to
      keep, proper books of record and account in which full and accurate
      entries will be made of all dealings or transactions of or in
      relation to the business and affairs of the Company or such
      Subsidiary, in accordance with GAAP and SAP, and will furnish to the
      Purchaser so long as the Purchaser is the holder of any Note and to
      each other institutional holder of the then outstanding Note the
      reports set forth on EXHIBIT D attached hereto and any special
      reports or information requested by and/or furnished to Fleet
      National Bank and the same is hereby incorporated by reference with
      the same force and effect as though herein set forth in full.

             (b)  The Company will permit the Purchaser, so long as the
      Purchaser is the holder of any Note, (or such Persons as either the
      Purchaser or such holder may designate) to visit and inspect any of
      the properties of the Company or any Subsidiary, to examine all their
      books of account and financial records of operations, and at the
      expense of such holder to make copies and extracts therefrom, and to
      discuss their respective affairs, finances and accounts with their
      respective officers, other executives and independent public
      accountants (and by this provision the Company authorizes said
      accountants to discuss with the Purchaser the finances and affairs of
      the Company and its Subsidiaries), all at such reasonable times and
      as often as may be reasonably requested.  The Company shall not be
      required to pay or reimburse the Purchaser or any such holder for
      expenses which the Purchaser or any such holder may incur in
      connection with any such visitation or inspection unless a Default or
      an Event of Default shall have occurred and be continuing hereunder.

             (c)  Any information regarding the Company or any Subsidiary
      which is, pursuant to this Agreement, provided to, or obtained or
      examined by, (1) the Purchaser, or any of the its representatives,
      while the Purchaser or its nominee holds the Note, or (2) any other
      holder of the Note, or any of its representatives, while such holder
      holds such Note, shall be considered and treated by the Purchaser and
      its representatives and each other holder of the Note and its
      representatives as confidential.  The Purchaser agrees that it will
      not disclose any such information without the prior written consent
      of the Company (which consent shall not be unreasonably withheld)
      other than on a confidential basis to (1) any one or more of the
      Purchaser's respective directors, employees, agents, attorneys and
      accountants who would have access to such information in the normal
      course of the performance of such Person's duties and (2) the other
      holders of the Note who first agree to be bound by the
      confidentiality provisions hereof, or any one or more of the
      directors, employees, agents, attorneys and accountants of such other
      holders of the Note who would have access to such information in the
      normal course of the performance of such Person's duties;  PROVIDED
      that the Purchaser may disclose or disseminate any such information:

             (i) as has become generally available to the public (other
      than in violation of this Agreement);

             (ii) to such third parties as the Purchaser may, in its
      discretion, deem reasonably necessary or desirable in connection with
      or in response to (1) compliance with any law (including without
      limitation any applicable Freedom of Information Act), ordinance or
      governmental order, regulation, rule, policy, subpoena,
      investigation, regulatory authority request or requests, or (2) any
      order, decree, judgment, subpoena, notice of discovery or similar
      ruling or pleading issued, filed served or purported on its face to
      be issued, filed or served (x) by or under authority of any court,
      tribunal, arbitration board of any governmental or industry agency,
      commission, authority, board or similar entity or (y) in connection
      with any proceeding, case or matter pending (or on its face purported
      to be pending) before any court, tribunal, arbitrator or board of any
      governmental agency, commission, authority, similar entity, it being
      understood that the Purchaser will use its best efforts to give prior
      notice to the Company thereof;

             (iii) to any prospective purchaser, securities broker or
      dealer or investment banker in connection with the resale or proposed
      resale of any portion of the Note after such party shall have agreed
      to maintain the confidentiality of any information furnished by the
      Company to the extent required hereunder;

             (iv)  to the NAIC;

             (v)  to any entity utilizing such information to rate or
      classify debt or equity securities or to report to the public
      concerning the industry of which it is a part; and
             (vi)  to enforce or protect its rights under this Agreement or
      the Note.

             (d)  Neither the Purchaser nor any other holder or holders of
      the Note will be liable for the breach of this provision by any other
      holder of the Note.

      5.20.  LEASES.  The Company shall not create, incur, assume, or
suffer to exist, or permit any of its Subsidiaries to create, incur,
assume, or suffer to exist, any obligation as lessee for the rental or hire
of any real or personal Property, except:

             (a)  Capitalized Leases, if any, permitted under SECTION 5.7
      hereof;

             (b)  Leases existing on the date of this Agreement and any
      extensions or renewals thereof;

             (c)  Leases (other than Capitalized Leases) which do not in
      the aggregate require the Company and its Subsidiaries on a
      consolidated basis to make payments (including taxes, insurance,
      maintenance and similar expenses which the Company or any of its
      Subsidiaries is required to pay under the terms of any lease) in any
      fiscal year of the Company in excess of One Million Four Hundred
      Thirty Thousand Dollars ($1,430,000); and

             (d)  Leases between the Company and any of its Subsidiaries.

      5.21.  INVESTMENT ADVISORY AGREEMENT.  Pursuant to that certain
Investment Advisory Agreement between Standard Life and Conseco Capital
Management Inc. ("Conseco Capital") dated as of August 1, 1991, (the
"Investment Advisory Agreement"), Conseco Capital provides investment
advice, among other services, to the Company.  Neither the Company nor
Standard Life shall replace Conseco Capital with any other party or allow
any party other than Conseco Capital to provide the services currently
covered under the Investment Advisory Agreement with respect to the
Company, any of the Company's assets or any assets of any of the Company's
Subsidiaries domiciled in the United States without the prior written
consent of the holder of the Note.


SECTION 6.  EVENTS OF DEFAULT AND REMEDIES THEREFOR.

      6.1.   EVENTS OF DEFAULT.  If any of the following events ("Events of
Default") shall occur and be continuing:

             (a)  The Company should fail to pay or prepay, as and when due
      and payable, any principal under the Note;

             (b)  The Company should fail to pay or prepay, as and when due
      and payable, any interest due on the Note and such failure to pay or
      prepay shall continue for more than three (3) Business Days;

             (c)  Any representation or warranty made or deemed made by the
      Company in this Agreement or in the Note or which is contained in any
      certificate, document, opinion, financial or other statement
      furnished at any time or in connection with this Agreement, shall
      prove to have been incorrect in any material respect on or as of the
      date made or deemed made;

             (d)  The Company shall fail to perform or observe any term,
      covenant, or agreement contained in any Loan Document (other than the
      provisions of SECTION 5 of this Agreement) to which it is a party on
      its part to be performed or observed;

             (e)  The Company shall fail or perform or observe any term,
      covenant, or agreement contained in SECTION 5 of this Agreement and
      such failure shall remain unremedied until the earlier of ten (10)
      Business Days after (i) written notice thereof shall be given to the
      Company by the Purchaser, or (ii) the Company is notified of such
      failure or should have been notified of such failure pursuant to
      SECTION 6.2 hereof;

             (f)  An event of default shall occur pursuant to the Fleet
      Credit Agreement;

             (g)  The Company or any of its Subsidiaries shall (i) fail to
      pay any of its Debt (after giving effect to any applicable grace
      period), or any interest or premium thereon, when due (whether by
      scheduled maturity, required prepayment, acceleration, demand, or
      otherwise), or (ii) fail to perform or observe any term, covenant, or
      condition on its part to be performed or observed under any agreement
      or instrument relating to any such Debt, when required to be
      performed or observed, if the effect of such failure to perform or
      observe is to accelerate, or to permit the acceleration after the
      giving of notice or passage of time, or both, of the maturity of such
      Debt, whether or not such failure to perform or observe shall be
      waived by the holder of such Debt; or any such Debt shall be declared
      to be due and payable, or required to be prepaid (other than by a
      regularly scheduled required prepayment), prior to the stated
      maturity thereof;

             (h)  The Company or any of its Subsidiaries (i) shall
      generally not, or shall be unable to, or shall admit in writing its
      inability to pay its Debt as such Debt become due; or (ii) shall make
      an assignment for the benefit of creditors, petition or apply to any
      tribunal for the appointment of a custodian, receiver, or trustee for
      it or a substantial part of its assets; or (iii) shall commence any
      proceeding under any bankruptcy, reorganization, arrangements,
      readjustment of debt, dissolution, or liquidation law or statute of
      any jurisdiction, whether now or hereafter in effect; or (iv) shall
      have any such petition or application filed or any such proceeding
      commenced against it in which an order for relief is entered or
      adjudication or appointment is made and which remains undismissed for
      a period of sixty (60) days or more; or (v) by any act or omission
      shall indicate its consent to, approval of, or acquiescence in any
      such petition, application, or proceeding or order for relief or the
      appointment of a custodian, receiver, or trustee for all or any
      substantial part of its properties; or (vi) shall suffer any such
      custodianship, receivership, or trusteeship to continue undischarged
      for a period of sixty (60) days or more;

             (i)  One or more judgments, decrees, or orders for the payment
      of money in excess of $250,000 in the aggregate shall be rendered
      against the Company or any of its Subsidiaries, and such judgments,
      decrees, or orders shall continue unsatisfied and in effect for a
      period of thirty (30) consecutive days without being vacated,
      discharged, satisfied, or stayed or bonded pending appeal;

             (j)  Any of the following events occur or exist with respect
      to the Company, any of its Subsidiaries, or any ERISA Affiliate:  (a)
      any Prohibited Transaction involving any Plan; (b) any Reportable
      Event with respect to any Plan; (c) the filing under Section 4041 of
      ERISA of a notice of intent to terminate any Plan or the termination
      of any Plan; (d) any event or circumstance that might constitute
      grounds entitling the PBGC to institute proceedings under Section
      4042 of ERISA for the termination of, or for the appointment of a
      trustee to administer, any Plan, or the institution by the PBGC of
      any such proceedings; (e) complete or partial withdrawal under
      Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
      reorganization, insolvency, or termination of any Multiemployer Plan;
      and in each case above, such event or condition, together with all
      other events or conditions, if any, could in the reasonable opinion
      of the Purchaser subject the Company, or any of its Subsidiaries, or
      any ERISA Affiliate to any tax, penalty, or other liability to a
      Plan, a Multiemployer Plan, the PBGC, or otherwise (or any
      combination thereof) which in the aggregate exceed or may exceed
      $250,000; or

             (k)  Any change in the current ownership or management of the
      Company or Standard Life that would effect a change in "control" (as
      such term is defined under the applicable definitional section of the
      Indiana Insurance Law) of the Company and Standard Life.

      6.2.   NOTICE TO HOLDERS.  When any Event of Default described in the
foregoing SECTION 6.1 has occurred, or if the holder of the Note or of any
other evidence of Indebtedness of the Company gives any notice or takes any
other action with respect to a claimed default, the Company agrees to give
notice within ten (10) days of such event and the action which is proposed
to be taken by the Company with respect thereto to the holder of the Note
then outstanding, such notice to be in writing and sent in the manner
provided in SECTION 9.7 hereof.

      6.3.   ACCELERATION OF MATURITY.  During the existence of an Event of
Default the holder of the Note who or which has not consented to any waiver
with respect to such Event of Default may, at its option, by notice in
writing to the Company, declare the Note then held by such holder to be,
and such Note shall thereupon become, forthwith due and payable, together
with all interest accrued thereon, and to the extent not prohibited by
applicable law, interest on such principal and accrued interest at the
Overdue Rate for the period from and after the date of acceleration to and
including the date of payment thereof, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly
waived, and the Company shall forthwith pay to such holder the entire such
amount.  The holder of the Note may proceed to protect and enforce its
rights either by suit in equity and/or by action at law, whether for
specific performance of any covenant or agreement contained in this
Agreement or in the Note, or in aid of the exercise of any power granted
herein or therein or proceed to obtain judgment or any other relief
whatsoever appropriate to the action or proceeding, or proceed to enforce
any other legal or equitable right of any such holder of the Note.  Upon
the Note becoming due and payable as a result of any Event of Default as
aforesaid, the Company will forthwith pay in cash to the holder of the Note
the entire principal, and interest accrued on the Note and interest on such
principal, and accrued interest at the Overdue Rate for the period from and
after the date of acceleration to and including the date of payment
thereof.  No course of dealing on the part of any holder of the Note nor
any delay or failure on the part of any holder of the Note to exercise any
right shall operate as a waiver of such right or otherwise prejudice such
holder's rights, powers and remedies.  The Company further agrees, to the
extent not prohibited by applicable law, to pay to the holder of the Note
all costs and expenses reasonably incurred by it in the collection of the
Note upon any Event of Default hereunder or thereon, including without
limitation reasonable compensation to such holder's or holders' attorneys
for all services rendered in connection therewith.

      6.4.   RESCISSION OF ACCELERATION.  The provisions of SECTION 6.3 are
subject to the condition that if the principal of and accrued interest on
the outstanding Note has been declared immediately due and payable by
reason of the occurrence of any Event of Default, the holder may, by
written notice to the Company, rescind and annul such declaration and the
consequences thereof, PROVIDED that at the time such declaration is
annulled and rescinded:

             (a)  no judgment or decree shall have been entered for the
      payment of any monies due pursuant to the Note or this Agreement;

             (b)  all arrears of interest upon the Note and all other sums
      payable under the Note and under this Agreement (except any principal
      or interest on the Note which has become due and payable solely by
      reason of such declaration under SECTION 6.3) shall have been duly
      paid; and

             (c)  each and every other Event of Default shall have been
      made good, cured or waived pursuant to SECTION 7.1;

and PROVIDED FURTHER, that no such rescission and annulment shall extend to
or affect any subsequent Event of Default or impair any right consequent
thereto.


SECTION 7.  AMENDMENTS, WAIVERS AND CONSENTS.

      7.1.   CONSENT REQUIRED.  Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Company shall
have obtained the consent in writing of the holder; PROVIDED that without
the written consent of the holder of the Note outstanding, no such waiver,
modification, alteration or amendment shall be effective (a) which will
change the time of payment of the principal of or the interest on the Note
or change the principal amount thereof or change the rate of interest
thereon, or (b) which will change any of the provisions with respect to
prepayments.

      7.2.   EFFECT OF AMENDMENT OR WAIVER.  Any amendment or waiver under
this Agreement shall apply equally to all of the holders of the Note and
shall be binding upon them, upon each future holder of the Note and upon
the Company, whether or not such Note shall have been marked to indicate
such amendment or waiver.  No such amendment or waiver shall extend to or
affect any obligation not expressly amended or waived or impair any right
consequent thereon.


SECTION 8.  INTERPRETATION OF AGREEMENT; DEFINITIONS.

      8.1.   DEFINITIONS.  Unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings,
and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:

      "ACT" is defined in SECTION 3.2.

      "AFFILIATE" means any Person (other than a Subsidiary) (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, or (b) which
beneficially owns or holds (i) 10% or more of any class of the Voting Stock
of the Company or (ii) 10% or more of the Voting Stock (or in the case of a
Person which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by the Company or a Subsidiary.  The
term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract or
otherwise.

      "ANNUAL STATEMENT" shall mean the annual financial statement of the
Company or any Subsidiary as required to be filed with Indiana State
Insurance Department or other applicable authority, together with all
exhibits or schedules filed therewith, prepared in conformity with SAP.

      "BUSINESS DAY" means any day other than a Saturday, Sunday or other
day on which The Federal Reserve Bank of Chicago is required by law to
close.

      "CAPITAL LEASE" means any lease, the obligation for rentals with
respect to which is required to be capitalized on a balance sheet of the
lessee in accordance with GAAP, or for which the amount of the asset and
liability thereunder as if so capitalized is required to be disclosed in a
note to such balance sheet in accordance with GAAP, together with any other
lease which is in substance a financing lease.

      "CLOSING DATE" means November 8, 1996.

      "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor or superseding tax laws of the United States of
America together with all regulations promulgated thereunder.

      "COMMON SHARES" is defined in SECTION 1.3.

      "CONVERSION AMOUNT" is defined in SECTION 1.3.

      "CONVERSION RATE" is defined in SECTION 1.3.

      "DEBT" means (i) all indebtedness or liability for borrowed money or
for the deferred purchase price of property or services (excluding trade
obligations incurred in the ordinary course of business which are not
outstanding more than ninety days from the date of invoice thereof); (ii)
all obligations as lessee under Capital Leases; (iii) all current
liabilities in respect of unfunded vested benefits under any Plans; (iv)
all obligations under letters of credit issued for the account of any
Person; (v) all obligations arising under acceptance facilities; (vi) all
guaranties, endorsements (other than for collection or deposit in the
ordinary course of business), and other contingent obligations to purchase,
to provide funds for payment, to supply funds to invest in any Person, or
otherwise to assure a creditor against loss; (vii) all obligations secured
by any lien on Property, whether or not the obligations have been assumed
by the owner thereof; (viii) all other items of indebtedness which in
accordance with GAAP would be included in determining total indebtedness as
shown on the liability side of a balance sheet at the date as of which
indebtedness is to be determined; and (ix) all indebtedness or liability of
the Company to the Purchaser with respect to the Note.  Notwithstanding the
foregoing, the term "Debt" shall not include (i) any indebtedness or
liability associated with the issuance in 1996 by the Company of 300,000
shares of Class S preferred stock to various persons in settlement of a
certain class action against the Company, (ii) any intercompany debt
existing on the date hereof between the Company and Standard Management
International, S.A., or (iii) any indebtedness existing on the date hereof
between Standard Life and Standard Development, L.L.C.

      "DEFAULT" means any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute
an Event of Default as defined in SECTION 6.1.

      "EBIT" means, for any Person, for any period earnings before Interest
Expense, taxes and extraordinary items for such Person determined in
accordance with GAAP.

      "ENVIRONMENTAL LEGAL REQUIREMENT" means any applicable law, statute
or ordinance relating to public health, safety or the environment,
including without limitation any such applicable law, statute or ordinance
relating to releases, discharges or emissions to air, water, land or
groundwater, to the withdrawal or use of groundwater, to the use and
handling of polychlorinated biphenyl or asbestos, to the disposal,
transportation, treatment, storage or management of solid or hazardous
wastes or to exposure to toxic or hazardous materials, to the handling,
transportation, discharge or release of gaseous or liquid substances and
any regulation, order, notice or demand issued pursuant to any such law,
statute or ordinance, in each case applicable to the property of the
Company and its Subsidiaries or the operation, construction or modification
of any thereof, including without limitation the following:  the Clean Air
Act, the Federal Water Pollution Control Act, the Safe Drinking Water Act,
the Toxic Substances Control Act, the Comprehensive Environmental Response
Compensation and Liability Act as amended by the Superfund Amendments and
Reauthorization Act of 1986, the Resource Conservation and Recovery Act as
amended by the Solid and Hazardous Waste Amendments of 1984, the
Occupational Safety and Health Act, the Emergency Planning and Community
Right-to-Know Act of 1986, the Solid Waste Disposal Act, and any state
statutes addressing similar matters or providing for financial
responsibility for cleanup or other actions with respect to the release or
threatened release of hazardous substances and any state nuisance statute.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or supplemented from time to time, and the rules, regulations and
published interpretations issued in connection therewith.

      "ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which, together with the Company, would be treated as a
single employer under Section 4001 of ERISA.

      "FIXED CHARGE COVERAGE RATIO" means, as at any date and calculated on
a consolidated basis, the ratio of (a) the sum of allowable dividends of
the Company's insurance Subsidiaries and the Company's and its Subsidiaries
EBIT (calculated for immediately preceding four fiscal quarters) to (b) the
Company's and its Subsidiaries' Interest Expense plus the amount of
principal installments and other principal maturities of Debt of the
Company and its Subsidiaries (calculated for the four fiscal quarters
immediately following such date).

      "FLEET CREDIT AGREEMENT" means the Amended and Restated Revolving
Line of Credit Agreement between the Company and Fleet National Bank dated
as of November 8, 1996.

      "GAAP" means United States generally accepted accounting principles
from time to time in effect and applicable to the consolidated financial
statements of the Company.  Whenever any accounting term is used herein
which is not otherwise defined, it shall be interpreted in accordance with
GAAP, except where statutory accounting principles are stated to be
applicable.

      "GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.

      "GUARANTEES" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing or in effect
guaranteeing any obligations of any other Person (the "primary obligor") in
any manner, whether directly or indirectly, including without limitation
all such  obligations incurred through an agreement, contingent or
otherwise, by such Person (a) to purchase such obligations or any property
or assets constituting security therefor, (b) to advance or supply funds
(1) for the purchase or payment of such obligations, or (2) to maintain
working capital or other balance sheet condition or (3) otherwise to
advance or make available funds for the purchase or payment of such
obligations, (c) to lease property or to purchase Securities or other
property or services primarily for the purpose of assuring the owner of
such obligations of the ability of the primary obligor to make payment of
the obligations, or (d) otherwise to assure the owner of the obligations of
the primary obligor against loss in respect thereof; PROVIDED, HOWEVER,
that any obligation which is set forth in clause (a), (b), (c) or (d) above
shall not be included in the definition of Guarantees if such obligation is
otherwise included in clause (a), (b), (c) or (d) of the definition of
Indebtedness; PROVIDED, FURTHER, that obligations under life insurance or
annuity policies issued by the Company or its insurance company
Subsidiaries and obligations of the Company or its insurance company
Subsidiaries in respect of reinsurance transactions shall not be included
in the definition of Guarantees.  For the purposes of all computations made
under this Agreement, a Guarantee in respect of any Indebtedness for
borrowed money shall be deemed to be Indebtedness equal to the maximum
principal amount of such Indebtedness for borrowed money which has been
guaranteed, and a Guarantee in respect of any other obligation shall be
deemed to be Indebtedness equal to the maximum aggregate amount of the
obligation so guaranteed.

      "HAZARDOUS MATERIALS" means, any hazardous materials, hazardous
wastes, hazardous constituents, hazardous or toxic substances, petroleum
products (including crude oil or any fraction thereof), defined or
regulated as such in or under any Environmental Legal Requirement.

      "INDEBTEDNESS" of any Person means and includes all (a) obligations
of such Person for borrowed money or to pay the deferred purchase price of
property, (b) obligations secured by any lien or other charge upon property
or assets owned by such Person to the extent of the value of such property
or assets, regardless of whether or not such Person has assumed or become
liable for the payment of such obligations, (c) obligations created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding the fact that
the rights and remedies of the seller, lender or lessor under such
agreement upon the occurrence of an event of default thereunder are limited
to repossession or sale of property, (d) capitalized rentals under any
Capitalized Lease, and (e) Guarantees; PROVIDED  that obligations under
life insurance or annuity polices issued by the Company or its insurance
company Subsidiaries and obligations of the Company or its insurance
company Subsidiaries in respect of reinsurance transactions shall not be
included in the definition of Indebtedness.

      "INSURANCE CODE" shall mean the Insurance Code of the State of
Indiana and any other applicable jurisdictions and any successor statute(s)
of similar import, together with the regulations thereunder, as amended or
otherwise modified and in effect from time to time.  References to sections
of the Insurance Code shall be construed to also refer to successor
sections.

      "INTEREST EXPENSE" shall mean, with respect to any Person, for any
period, the sum, for such Person in accordance with GAAP of (a) all
interest on Debt that is accrued as an expense during such period
(including, without limitation, imputed interest on Capital Lease
obligations), plus (b) all amounts paid, accrued or amortized as an
expenses during such period in respect of interest rate protection
agreements, minus (c) all amounts received or accrued as income during such
period in respect of interest rate protection agreements.

      "INVESTMENT" of any Person means any investment so classified under
GAAP, whether by stock purchase, capital contribution, loan, advance,
purchase of property or otherwise.

      "LIENS" are defined in SECTION 5.7.

      "LOAN DOCUMENTS" means this Agreement, the Note, Registration Rights
Agreement and all other agreements, instruments and documents related to or
delivered by the Company or any Subsidiary in connection with any of the
foregoing.

      "MULTIEMPLOYER PLAN" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Company or any ERISA Affiliate.

      "NAIC" means the National Association of Insurance Commissioners and
any entity succeeding to any or all of its functions.

      "NOTE" is defined in SECTION 1.1.

      "OVERDUE RATE" means with respect to any Note 3% per annum over the
interest rate otherwise borne by such Note.

      "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

      "PERSON" means an individual, partnership, corporation, trust, joint
stock company or unincorporated organization or joint venture, and a
government or agency or political subdivision thereof.

      "PLANS" means any employee benefit pension plan which is maintained
by the Company or any Subsidiary and is covered by Title IV of ERISA or
subject to the funding standards of Section 412 of the Internal Revenue
Code of 1986, as amended.

      "PROHIBITED TRANSACTION" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Code.

      "PROPERTY" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.

      "PRO-RATA" means pro-rata based on the aggregate outstanding
principal on all the Notes from time to time.

      "REAL PROPERTIES" shall have the meaning assigned to such term in
SCHEDULE 3.1 of this Agreement.


      "REPORTABLE EVENT" means (i) any of the events set forth in Sections
4043, 4068 or 4063 of ERISA (ii) any event requiring the Borrower or any
ERISA Affiliate to provide security to a Plan under Section 401(a)(20) of
the Code or (iii) any failure to make payments required by Section 412(m)
of the Code.

      "SAP" shall mean, as to any insurance company Subsidiary, the
statutory accounting practices prescribed or permitted by the insurance
regulatory authority of such insurance company Subsidiary's state of
domicile with whom such Subsidiary is required to file its financial
statements.

      "SECURITY" has the same meaning as in SECTION 2(1) of the Act.

      "SHELBY" means Shelby Life Insurance Company, a Tennessee insurance
company.

      The term "SUBSIDIARY" means, as to any particular parent corporation,
any corporation or other entity of which more than 50% (by number of votes)
of the Voting Stock shall be owned by such parent corporation and/or one or
more corporations which are themselves subsidiaries of such parent
corporation.  The term "SUBSIDIARY" shall mean a direct or indirect
subsidiary of the Company.

      "STANDARD LIFE" means Standard Life Insurance Company of Indiana, an
Indiana corporation.

      "VOTING STOCK" means Securities of any class or classes, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect
the corporate directors (or Persons performing similar functions),
irrespective of whether or not at the time Securities of any class or
classes shall have or might have special voting powers or rights by reason
of the occurrence of any contingency.

      "WARRANTS" means that certain Warrant No. 4 of the Company, dated
July 1, 1992, to purchase 112,010 shares of Common Stock of the Company,
plus any subsequent replacements, substitutions or additions in connection
with such warrant, which amount is currently equal to 128,922 shares of
Common Stock of the Company.

      "WHOLLY-OWNED" when used in connection with any Subsidiary means a
Subsidiary of which all of the issued and outstanding shares of stock
(except shares required by applicable law as directors' qualifying shares)
shall be owned by the Company and/or one or more of its Wholly-owned
Subsidiaries.

      8.2.   ACCOUNTING PRINCIPLES.  Where the character or amount of any
asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required
to be made for the purposes of this Agreement, the same shall be done in
accordance with GAAP, to the extent applicable, except where statutory
accounting principles are applicable or where GAAP is inconsistent with the
requirements of this Agreement, in which event the latter shall be
controlling.


SECTION 9.  MISCELLANEOUS.

      9.1.   NOTE REGISTER.  The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Note
(hereinafter called the "Note Register"), and the Company will register or
transfer or cause to be registered or transferred, as hereinafter provided
and under such reasonable regulations as it may reasonably prescribe, the
Note issued pursuant to this Agreement.

      At any time, and from time to time, the holder of such Note that has
been duly registered as hereinabove provided may transfer such Note upon
surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the holder
of such Note or its attorney duly authorized in writing.

      The Person in whose name the Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes of this
Agreement.  Payment of or on account of the principal, and interest on the
Note shall be made to or upon the written order of such holder.

      9.2.   EXCHANGE OF NOTE.  At any time, and from time to time, upon
surrender of such Note at its office, the Company will deliver in exchange
therefor, without expense to the holder, except as set forth below a Note
for the same aggregate principal amount as the then unpaid principal amount
of the Note so surrendered, in the denomination of $1,000,000 or integral
multiples thereof (except as may be necessary to reflect any principal
amount not evenly divisible by $1,000,000) as such holder shall specify,
dated as of the date to which interest has been paid on the Note so
surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, payable to such Person or
Persons as may be designated by such holder, and otherwise of the same form
and tenor as the Note so surrendered for exchange.  The Company may require
the payment of a sum sufficient to cover any stamp tax or governmental
charge imposed upon such exchange or transfer.

      9.3.   LOSS, THEFT, ETC. OF NOTE.  Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, mutilation or
destruction of the Note, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity in such form and amount as
shall be reasonably satisfactory to the Company, or in the event of such
mutilation upon surrender and cancellation of the Note, the Company will
make and deliver without expense to the holder thereof, a new Note, of the
same tenor and form, in lieu of such lost, stolen, destroyed or mutilated
Note.  If any Purchaser or any subsequent institutional holder is the owner
of any such lost, stolen or destroyed Note, then the affidavit of any
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of the Note at the time of such loss,
theft or destruction, shall be accepted as satisfactory evidence thereof
and no further indemnity shall be required as a condition to the execution
and delivery of a new Note other than the written agreement of such owner
to indemnify the Company.

      9.4.   EXPENSES; STAMP TAX INDEMNITY.  Whether or not the
transactions herein contemplated shall be consummated, the Company agrees
to pay directly all of the reasonable out-of-pocket expenses incurred by
the Purchaser and each other holder of the Note (including reasonable fees
and disbursements of the Purchaser and its counsel) in connection with the
preparation, execution and delivery of this Agreement and the transactions
contemplated hereby and all similar expenses of any holder of Notes
relating to any amendment, waivers or consents requested or entered into
pursuant to the provisions hereof or relating to any work-out or
restructuring relating to the Company (including, without limitation, the
reasonable fees and expenses of any financial consultant engaged by such
holders in connection therewith).  The Company also agrees that it will pay
and save the Purchaser harmless against any and all liability with respect
to stamp and other taxes, if any, which may be payable or which may be
determined to be payable in connection with the execution and delivery of
this Agreement or the Note, whether or not the Note is then outstanding.
The Company agrees to protect and indemnify the Purchaser against any
liability for any and all brokerage fees and commissions payable or claimed
to be payable to any Person in connection with the transactions
contemplated by this Agreement as a result of any action by the Company.
Without limiting the foregoing, the Company agrees to obtain and pay for a
private placement number for the Note and authorizes the submission of such
information as may be required by Standard & Poor's for the purpose of
obtaining such number.

      9.5.   INDEMNITIES.  (a) The Company agrees to indemnify the
Purchaser and all subsequent holders of the Note against any and all
losses, claims, damages, liabilities and expenses  (including, without
limitation, attorneys' fees and expenses) incurred by the Purchaser or such
holders arising out of, in any way connected with, or as a result of (i)
any acquisition or attempted acquisition of stock or assets of another
Person or entity by the Company or any Subsidiary, (ii) the use by the
Company or any Subsidiary of any of the proceeds of the Note for the making
or furtherance of any such acquisition or attempted acquisition, and (iii)
any claim, litigation, investigation or proceedings related to any of the
foregoing, whether or not any Purchaser or any such holder is a party
thereto.

      (b)  The foregoing agreements and indemnities shall remain operative
and in full force and effect regardless of termination of this Agreement,
the consummation of or failure to consummate the transactions contemplated
by this Agreement or any amendment, supplement, modification or waiver
thereunder, the payment in full of the Note, the invalidity or
unenforceability of any term or provision of this Agreement or the Note or
any other document required hereunder, any investigation made by or on
behalf of the Purchaser, the Company or any Subsidiary, or the content or
accuracy of any representation or warranty made under this Agreement or any
other document required hereunder.

      9.6.   POWERS AND RIGHTS NOT WAIVED; REMEDIES CUMULATIVE.  No delay
or failure on the part of the holder of the Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise
thereof, or the exercise of any other power or right and the rights and
remedies of the holder of the Note are cumulative to and are not exclusive
of any rights or remedies any such holder would otherwise have, and no
waiver or consent, given or extended pursuant to SECTION 7 hereof, shall
extend to or affect any obligation or right not expressly waived or
consented to.

      9.7.   NOTICES.  All communications provided for hereunder shall be
in writing and, if to the Purchaser, delivered or sent by prepaid overnight
air courier, addressed to  the Purchaser at 11825 North Pennsylvania
Street, Carmel, Indiana 46032, Attn:  Lawrence W. Inlow or such other
address as the Purchaser or the subsequent holder of any Note initially
issued hereunder may designate to the Company in writing, and if to the
Company, delivered or sent by prepaid overnight air courier to the Company
at 9100 Keystone Crossing, Suite 600, Indianapolis, Indiana 46240,
Attention: Ronald D. Hunter, or to such other address as the Company may in
writing designate to each of the Purchaser or to a subsequent holder of any
Note initially issued hereunder.

      9.8.   REPRODUCTION OF DOCUMENTS.  This Agreement and all documents
relating thereto, including without limitation (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by
the Purchaser at the closing of its purchase of the Note (except the Note
itself), and (c) financial statements, certificates and other information
previously or hereafter furnished to the Purchaser, may be reproduced by
the Purchaser by any photographic, photostatic, microfilm, micro-card,
miniature photographic or other similar process and the Purchaser may
destroy any original document so reproduced.  The Company agrees and
stipulates that any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding (whether
or not the original is in existence and whether or not such  reproduction
was made by the Purchaser in the regular course of business) and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.

      9.9.   COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each counterpart constituting an original but all together
only one Agreement.

      9.10.  SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
permitted successors and assigns, including each successive holder or
holders of the Note; PROVIDED that any subsequent holder of the Note who is
a Subsidiary or an Affiliate of the Company shall not be entitled to the
voting rights contained in SECTIONS 6.3, 6.4 and 7.1 hereof.

      9.11.  SURVIVAL OF COVENANTS AND REPRESENTATIONS.  All covenants,
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with
the Closing Date, shall survive the closing and the delivery of this
Agreement and the Note.

      9.12.  SEVERABILITY.   Should any part of this Agreement for any
reason be declared invalid, such decision shall not affect the validity of
any remaining portion, which remaining portion shall remain in force and
effect as if this Agreement had been executed with the invalid portion
thereof eliminated and it is hereby declared the intention of the parties
hereto that they would have executed the remaining portion of this
Agreement without including therein any such part, parts, or portion which
may, for any reason, be hereafter declared invalid.

      9.13.  GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE HOLDERS OF THE NOTE AND THE COMPANY HEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF INDIANA (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF), CANNOT BE
CHANGED ORALLY AND SHALL BIND AND INURE TO THE BENEFIT OF THE COMPANY, SUCH
HOLDERS AND THEIR RESPECTIVE HEIRS, SUCCESSORS AND ASSIGNS.  THE COMPANY
AGREES THAT ANY DISPUTE ARISING OUT OF THIS AGREEMENT SHALL BE SUBJECT TO
THE JURISDICTION OF BOTH THE STATE AND FEDERAL COURTS IN INDIANA.  FOR THE
PURPOSE, THE COMPANY HEREBY SUBMITS TO THE JURISDICTION AND VENUE OF THE
STATE AND FEDERAL COURTS IN INDIANA.  THE COMPANY FURTHER AGREES TO ACCEPT
SERVICE OF PROCESS OUT OF ANY OF THE BEFORE MENTIONED COURTS IN ANY SUCH
DISPUTE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE
ADDRESS SET FORTH IN THIS AGREEMENT.

      9.14.  CAPTIONS.  The descriptive headings of the various Sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.


      9.15.  WAIVER OF JURY TRIAL.  The Purchaser or the other holders of
the Note and the Company hereby waive trial by jury in any litigation in
any courts with respect to, in connection with, or arising out of this
Agreement or any instrument or document delivered pursuant to this
Agreement or the validity, protection, interpretation, collection or
enforcement thereof, or any other claim or dispute howsoever arising,
between the Company and the Purchaser or the other holders of the Note.

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<PAGE>

                                                             PAGE



      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of
the date first above written.

                              STANDARD MANAGEMENT CORPORATION



                              By:  /S/ JOHN J. QUINN



                              GREAT AMERICA RESERVE INSURANCE COMPANY



                              By:  /S/ LAWRENCE W. INLOW




G:\LEGAL\KSK\STAN3.REV