8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

October 1, 2004

(Date of earliest event reported)

CITIZENS, INC.

(Exact name of registrant as specified in its charter)

COLORADO	0-16509	84-0755371
(State or other jurisdiction	(Commission	(I.R.S. Employer
of incorporation)	File Number)	Identification No.)

400 East Anderson Lane
Austin, Texas 78752
(Address of principal executive offices) (Zip Code)

Registrant’s telephone, including area code: (512) 837-7100

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

( ) Written Communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

( ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

( ) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

( ) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

2nd Amendment to Loan Agreement

Security Agreement

Subordinated Debenture

Term Note

Press Release

Item 2.01: Completion of Acquisition or Disposition of Assets

     On October 1, 2004, the Registrant, Citizens, Inc., through its primary insurance subsidiary, Citizens Insurance Company of America (“CICA”), completed the acquisition of Security Plan Life Insurance Company (“Security”), a Louisiana-domiciled stock life insurance company. Security was acquired from its owner, Mayflower National Life Insurance Company (“Mayflower”) pursuant to a Stock Purchase Agreement (the “Purchase Agreement”) entered into by Citizens and Mayflower on June 17, 2004, under which CICA purchased all of the outstanding common stock of Security. The Purchase Agreement was included as an exhibit to a Form 8-K of Citizens filed on June 21, 2004.

     Under the Purchase Agreement, CICA paid $85 million in cash for Security. CICA paid the purchase price with internal funds and through a $30 million borrowing on Citizens’ line of credit.

     Citizens issued a press release on October 1, 2004, announcing the acquisition which is filed as Exhibit 99.1 to this report on Form 8-K and incorporated herein by reference.

Item 2.03: Creation of a Direct Financial Obligation

     As part of the financing for the acquisition of Security as discussed in the above item, Citizens borrowed $30 million against its line of credit with Regions Bank and loaned the money to CICA. In connection therewith, Citizens entered into a Second Amendment to Loan Agreement dated October 1, 2004 with Regions Bank (the “Amended Loan Agreement”). Under the Amended Loan Agreement, Citizens converted into a term loan its $30 million advance against the line of credit. Under the term loan, Citizens is to repay the principal portion of the loan in ten semi-annual installments of $3,000,000 beginning on May 1, 2005, with the final installment of principal and any accrued and unpaid interest due on November 1, 2009. Interest on the unpaid principal balance of the loan is to be paid on the fifth day of each month following the end of each fiscal quarter of Citizens. The interest rate is equal to 30-day LIBOR (London InterBank Offered Rate) plus 1.80% per year.

     Because the maximum borrowing authorization on Citizens line of credit is $30 million, the line has been drawn down to zero. Under the Amended Loan Agreement, upon any prepayment or repayment of the term loan described above, the line of credit is to be reinstated to an aggregate amount equal to the difference between (a) $30 million minus (b) the aggregate outstanding prinicipal amount under the term loan.

     CICA has issued to Citizens a Subordinated Debenture in the principal amount of $30 million plus interest equal to 30-day LIBOR (London InterBank Offered Rate) plus 1.80% per year. Because CICA is a insurance company formed under the laws of Colorado, under the subordinated debenture, any principal and accrued interest is not a legal liability of CICA until repayment of interest or principal has received the prior written approval of the Commissioner of Insurance for the State of Colorado. Under Colorado Insurance law, repayment under the subordinated debenture may only be made out of the surplus funds of CICA. The subordinated debenture is subordinate to policyholders and to claimant and beneficiary claims, as well as to all

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other classes of creditors senior to the subordinated debenture. In the event of a reorganization, dissolution or liquidation of CICA, Citizens (or successor stockholders of CICA) will be entitled to a preferential right in the remaining assets of CICA equal to the unpaid principal and accrued interest under the subordinated debenture.

     In connection with the Amended Loan Agreement, CICA entered into a Security Agreement with Regions Bank dated October 1, 2004. Pursuant to the security agreement, CICA granted a security interest in all of the outstanding shares of common stock of Security purchased by CICA (the “Collateral”) by delivering to Regions Bank possession of the shares. In addition, CICA agreed that the Collateral will also extend to the following property that CICA becomes entitled to receive in connection with the Collateral: (a) any stock certificate representing a stock dividend or any certificate in connection with a recapitalization, merger, combination or similar transaction regarding Security; (b) any option warrant or subscription right with respect to the Collateral; (c) any dividends or distributions by Security; (d) any interest in principal payments; and (e) any conversion or redemption proceeds relating to the Collateral; provided, however, that unless there is an event of default on the term loan by Citizens, CICA shall be entitled to all cash dividends and all principal and interest paid on the Collateral. Although Regions Bank will hold the Collateral in its possession, CICA retains the voting rights incident to the Collateral as long as term loan is not in default.

Item 9.01: Financial Statements and Exhibits

     (a) It is impracticable to provide financial statements relative to Security at this time. In accordance with Item 9.01(a)(4), Citizens will file the required financial statements as an amendment to this Form 8-K as soon as practicable, but not later than 71 days after this report on Form 8-K must be filed.

     (b) It is impracticable to provide pro forma financial information relative to Security and the Citizens at this time. In accordance with Item 9.01(b)(2), Citizens will file the required financial statements as an amendment to this Form 8-K as soon as practicable, but not later than 71 days after this report on Form 8-K must be filed.

(c) Exhibits

     Filed herewith is the following exhibit:

Exhibit No.	Description
10.11(a)	Second Amendment to Loan Agreement between Citizens, Inc. and Regions Bank dated October 1, 2004.
10.11(b)	Security Agreement between Citizens Insurance Company of America and Regions Bank dated October 1, 2004.
10.11(c)	Subordinated Debenture dated October 1, 2004, issued by Citizens Insurance Company of America to Citizens, Inc.

3

Exhibit No.	Description
10.11(d)	Term Note dated October 1, 2004, issued by Citizens, Inc. to Regions Bank.
99.1	Press Release dated October 1, 2004.

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SIGNATURE

     Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CITIZENS, INC.
By:	/s/ Mark A. Oliver
	Mark A. Oliver, President

Date: October 6, 2004

5

EXHIBIT INDEX

Exhibit No.	Description
10.11(a)	Second Amendment to Loan Agreement between Citizens, Inc. and Regions Bank dated October 1, 2004.
10.11(b)	Security Agreement between Citizens Insurance Company of America and Regions Bank dated October 1, 2004.
10.11(c)	Subordinated Debenture dated October 1, 2004, issued by Citizens Insurance Company of America to Citizens, Inc.
10.11(d)	Term Note dated October 1, 2004, issued by Citizens, Inc. to Regions Bank.
99.1	Press Release dated October 1, 2004.

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EX-10.11(A)

                                                                EXHIBIT 10.11(a)

                       SECOND AMENDMENT TO LOAN AGREEMENT

      THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Second Amendment"), dated
as of October 1, 2004, is between CITIZENS, INC., a Colorado corporation
("Borrower") and REGIONS BANK, an Alabama banking association ("Bank").

                                   BACKGROUND

      A. Borrower and Bank are parties to that certain Loan Agreement, dated as
of March 22, 2004, as amended by that certain Letter Agreement Amendment, dated
as of July 8, 2004 and that certain First Amendment to Loan Agreement, dated as
of July 8, 2004 (the "Loan Agreement"). The terms defined in the Loan Agreement
and not otherwise defined herein shall be used herein as defined in the Loan
Agreement.

      B. Borrower and Bank desire to amend the Loan Agreement to provide for
matters with respect to the acquisition by CICA of all of the issued and
outstanding capital stock of Security Plan Life Insurance Company ("Security
Plan"), a Louisiana insurance company (the "Security Plan Acquisition") with the
proceeds of an Acquisition Advance.

      C. Borrower and Bank desire to amend the Security Agreement dated as of
March 22, 2004, made by Borrower in favor of Bank, to reflect the issuance to
Borrower of a Surplus Debenture.

      D. Bank hereby agrees to amend the Loan Agreement, subject to the terms
and conditions set forth herein.

      NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, Borrower and Bank
covenant and agree as follows:

      1. AMENDMENT TO LOAN AGREEMENT.

      (a) The definition of "Acquisition Advance" set forth in Section 1.1 of
the Loan Agreement is hereby amended to read as follows:

            "Acquisition Advance" means a Revolving Advance to be used for an
      Acquisition by Borrower or CICA of an operating insurance company or a
      holding company engaged solely in the business of insurance through one or
      more subsidiaries.

      (b) The definition of "Acquisition Consideration" set forth in Section 1.1
of the Loan Agreement is hereby amended to read as follows:

            "Acquisition Consideration" means the consideration given by
      Borrower or CICA for an Acquisition, including but not limited to the sum
      of (without duplication) (a) the fair market value of any cash, property
      (including capital

                                       1


      stock) or services given, plus (b) consideration paid with proceeds of
      Indebtedness permitted pursuant to this Agreement, plus (c) the amount of
      any Indebtedness assumed, incurred or guaranteed (to the extent not
      otherwise included) in connection with such Acquisition by Borrower or
      CICA.

      (c) The definition of "Interest Payment Date" set forth in Section 1.1 of
the Loan Agreement is hereby amended to read as follows:

            "Interest Payment Date" means (a) the fifth day of each month
      following the end of each fiscal quarter of Borrower, and (b)(i) with
      respect to the Revolving Loan, the Maturity Date or (ii) with respect to
      the Term Loan, the Term Loan Maturity Date.

      (d) The definition of "Loan Documents" set forth in Section 1.1 of the
Loan Agreement is hereby amended to read as follows:

            "Loan Documents" means this Agreement, the Note, the Term Note, the
      Security Agreement, the CICA Security Agreement, and any other
      instruments, documents, and agreements executed and/or delivered pursuant
      to the terms of this Agreement, and any future amendments, modifications,
      restatements, renewals, or extensions hereof or thereof.

      (e) The definition of "Obligations" set forth in Section 1.1 of the Loan
Agreement is hereby amended to read as follows:

            "Obligations" means all present and future indebtedness,
      obligations, and liabilities, and all renewals and extensions thereof, or
      any part thereof, of Borrower to Bank arising pursuant to this Agreement,
      the Note, the Term Note or any of the other Loan Documents, and all
      interest accruing thereon and costs, expenses, and reasonable attorney's
      fees incurred in the enforcement or collection thereof, regardless of
      whether such indebtedness, obligations, and liabilities are direct,
      indirect, fixed, contingent, liquidated, unliquidated, joint, several, or
      joint and several, including, but not limited to, the indebtedness,
      obligations, and liabilities evidenced, secured, or arising pursuant to
      any of the Loan Documents, and all renewals and extensions thereof, or any
      part thereof, and all present and future amendments thereto, and including
      all amounts that would be owed by Borrower or any other Person under any
      Loan Document but for the fact that they are unenforceable or not
      allowable due to the existence of a proceeding pursuant to Debtor Relief
      Laws involving Borrower or any other Person (including all such amounts
      that would become due or would be secured but for the filing of any
      petition, or the commencement of any proceeding, under any Debtor Relief
      Laws).

      (f) The definition of "Revolving Commitment" set forth in Section 1.1 of
the Loan Agreement is hereby amended to read as follows:

                                       2


            "Revolving Commitment" means the obligation of Bank to make the
      Revolving Advances, pursuant to Section 2.1, in the aggregate principal
      amount not to exceed the difference between (a) $30,000,000 minus (b) the
      Term Outstanding Amount.

      (g) Section 1.1 of the Loan Agreement is hereby amended by adding the
defined terms "CICA Security Agreement," "Loan," "Second Amendment," "Second
Amendment Effective Date," "Semi-Annual Date," "Term Loan," "Term Note," "Term
Maturity Date," and "Term Outstanding Amount" thereto in proper alphabetical
order to read as follows:

            "CICA Security Agreement" means that certain Security Agreement,
      dated as of October 1, 2004, executed by CICA pursuant to the Second
      Amendment whereby CICA pledges 100% of the issued and outstanding capital
      stock of Security Plan as collateral security for payment of the
      Obligations, as the same may be amended, modified, supplemented or
      restated from time to time.

            "Loan" means an extension of credit by Bank to Borrower under
      Article II in the form of the Revolving Loan or the Term Loan.

            "Second Amendment" means the Second Amendment to Loan Agreement,
      dated as of October 1, 2004, between Borrower and Bank.

            "Second Amendment Effective Date" means the date that all of the
      conditions to effectiveness set forth in Section 3 of the Second Amendment
      have been satisfied.

            "Security Plan" has the meaning given to such term in the Background
      provision of the Second Amendment.

            "Semi-Annual Date" means the last Business Day of each June and
      December during the term of this Agreement.

            "Term Loan" has the meaning set forth in Section 2.1(b).

            "Term Note" means the promissory note issued by Borrower pursuant to
      this Agreement to evidence the Term Loan in substantially the same form as
      Exhibit B hereto.

            "Term Maturity Date" means the earlier of (a) November 1, 2009, and
      (b) the date the Obligations are accelerated.

            "Term Outstanding Amount" means the aggregate outstanding principal
      amount of the Term Loan after giving effect to any prepayments or
      repayments of the Term Loan occurring on such date.

      (h) Article II of the Loan Agreement is hereby amended to read as follows:

                                       3


                                   ARTICLE II

                          REVOLVING LOAN AND TERM LOAN

            Section 2.1 Revolving Advances and Term Loan.

            (a) Revolving Advances. Subject to the terms and conditions herein
      set forth, Bank agrees to make advances to Borrower from time to time on
      any Business Day during the period from the Closing Date to the Maturity
      Date (the "Revolving Advances"), in an aggregate amount not to exceed at
      any time outstanding the Revolving Commitment (such outstanding Revolving
      Advances collectively referred to herein as the "Revolving Loan"). Bank
      shall have no obligation to make a Revolving Advance (a) to the extent the
      amount of the requested Revolving Advance plus all outstanding Revolving
      Advances exceeds the Revolving Commitment, (b) to the extent the amount of
      a requested Acquisition Advance exceeds 90% of the Acquisition
      Consideration for such Acquisition, and (c) to the extent the amount of a
      requested Corporate Advance plus all outstanding Corporate Advances
      exceeds $5,000,000 in the aggregate. Borrower's obligation to pay the
      Revolving Advances shall be evidenced by the Note and, except for the
      Corporate Advances, shall be secured by the Collateral. Within the limits
      set forth in this Section 2.1, Borrower may borrow, prepay pursuant to
      Section 2.3 and reborrow. Upon the conversion of the outstanding Revolving
      Advances to the Term Loan on the Second Amendment Effective Date as set
      forth in Section 2.1(b), the Revolving Commitment shall be automatically
      reduced to zero and Bank shall make no additional Revolving Advances to
      Borrower; provided, however, upon each prepayment or repayment of the Term
      Loan by Borrower, the Revolving Commitment shall be reinstated to an
      aggregate amount equal to the difference between (a) $30,000,000 minus (b)
      the Term Outstanding Amount.

            (b) Term Loan. Subject to the terms and conditions herein set forth,
      Bank agrees convert the Revolving Advances outstanding on the Second
      Amendment Effective Date to a term loan (the "Term Loan") to Borrower in
      an aggregate principal amount not to exceed $30,000,000. Borrower's
      obligation to pay the Term Loan shall be evidenced by the Term Note and
      shall be secured by the Collateral. The Term Loan may not be repaid and
      then reborrowed.

            Section 2.2 Procedures for Requesting Revolving Advances. Borrower
      shall comply with the following procedures in requesting Revolving
      Advances:

            (a) Time for Requests. Borrower shall submit a Request for each (i)
      Acquisition Advance of less than $12,000,000 and Corporate Advance not
      later than 11:00 a.m. on the Business Day which is the date such Revolving
      Advance is to be made, and (ii) Acquisition Advance equal to or in excess
      of $12,000,000, not later than at least twenty (20) days before the date
      such requested Revolving Advance is to be made. Each such Request shall be
      effective

                                       4


      upon receipt by Bank, shall be in writing signed by two (2) Authorized
      Representatives of Borrower or persons whom Bank reasonably believes to be
      an Authorized Representative of Borrower, and shall specify whether the
      requested Revolving Advance shall be an Acquisition Advance or a Corporate
      Advance. Bank may, in its sole discretion, accept and honor telephonic or
      electronic (including facsimile) requests for Revolving Advances, and if
      Bank does accept and honor any telephonic or electronic request, it may
      require written confirmation thereof from Borrower. Borrower shall repay
      all Revolving Advances even if Bank does not receive such confirmation and
      even if the person requesting a Revolving Advance was not in fact
      authorized to do so. Any request for a Revolving Advance, whether written
      or telephonic, shall be deemed to be a representation by Borrower that the
      applicable conditions set forth in Article V have been satisfied as of the
      time of the request.

            (b) Disbursement. Upon fulfillment of the applicable conditions set
      forth in Article V, Bank shall disburse the proceeds of the requested
      Revolving Advance by crediting the same to Borrower's demand deposit
      account maintained with Bank unless Bank and Borrower shall agree in
      writing to another manner of disbursement.

            Section 2.3 Voluntary Prepayments. Borrower may, upon notice to
      Bank, at any time or from time to time voluntarily prepay the Loans in
      whole or in part without premium or penalty; provided that (i) such notice
      must be received by Bank not later than 11:00 a.m. of the date of
      prepayment; (ii) any prepayment of the Loans shall be in a principal
      amount of $100,000 or a whole multiple thereof (or, in each case if less,
      the entire principal amount thereof then outstanding). Each such notice
      shall specify the date and amount of such prepayment and whether such Loan
      is a Revolving Loan or a Term Loan. If such notice is given by Borrower,
      Borrower shall make such prepayment and the payment amount specified in
      such notice shall be due and payable on the date specified therein.

            Section 2.4 Mandatory Prepayments. On or before any date of any
      reduction of the Revolving Commitment, Borrower shall prepay Revolving
      Loans in an amount necessary to reduce the sum of Revolving Loans to an
      amount less than or equal to the Revolving Commitment as so reduced.

            Section 2.5 Repayment of the Loans.

            (a) To the extent not otherwise required to be paid earlier as
      provided herein, Borrower shall repay the Revolving Loan on the Maturity
      Date.

            (b) To the extent not otherwise required to be paid earlier as
      provided herein, Borrower shall repay the Term Loan on each Semi-Annual
      Date and on the Term Maturity Date based upon the amounts set forth below
      next to each such Semi-Annual Date:

                                       5




 Semi-Annual Date         Amortization
 ----------------         ------------
                   
May 1, 2005                $3,000,000

November 1, 2005           $3,000,000

May 1, 2006                $3,000,000

November 1, 2006           $3,000,000

May 1, 2007                $3,000,000

November 1, 2007           $3,000,000

May 1, 2008                $3,000,000

November 1, 2008           $3,000,000

May 1, 2009                $3,000,000

Term Maturity Date         $3,000,000
                      and all other unpaid
                      principal amount of
                      the Term Loan and
                      unpaid obligations
                      accrued in connection
                      with the Term Loan


            Section 2.6 Interest.

            (a) Subject to the provisions of subsection (b) below, each Loan
      shall bear interest on the outstanding principal amount thereof at a rate
      per annum equal to the lesser of (x) the Highest Lawful Rate or (y) the
      Rate.

            (b) If any amount payable by Borrower under any Loan Document is not
      paid when due (giving effect, however, to any applicable grace periods),
      whether at stated maturity, by acceleration or otherwise, such amount
      shall thereafter bear interest at a fluctuating interest rate per annum at
      all times, to the fullest extent permitted by applicable Laws, equal to
      the lesser of (x) the Default Rate or (y) the Highest Lawful Rate.
      Furthermore, upon the request of Bank, while any Default exists, Borrower
      shall pay interest on the principal amount of all outstanding Obligations
      hereunder at a fluctuating interest rate per annum at all times, to the
      fullest extent permitted by applicable Laws, equal to lesser of (x) the
      Default Rate or (y) the Highest Lawful Rate. Accrued and unpaid interest
      on past due amounts (including interest on past due interest) shall be due
      and payable upon demand.

                                       6


            (c) Interest on each Loan shall be due and payable in arrears on
      each Interest Payment Date applicable thereto and at such other times as
      may be specified herein. Interest hereunder shall be due and payable in
      accordance with the terms hereof before and after judgment, and before and
      after the commencement of any proceeding under any Debtor Relief Law.

            (d) The Rate shall be reset at the end of each 30-day period during
      the term of the Loans.

            Section 2.7 Computation of Interest. Subject to Section 10.15, all
      computations of interest for Loans shall be made on the basis of a year of
      360 days and the actual number of days elapsed.

            Section 2.8 Payments Generally.

            (a) All payments to be made by Borrower shall be made without
      condition or deduction for any counterclaim, defense, recoupment, setoff
      or Taxes. Except as otherwise expressly provided herein, all payments by
      Borrower hereunder shall be made to Bank, at the Principal Office of Bank
      in Dollars and in immediately available funds not later than 11:00 a.m. on
      the date specified herein. All payments received by Bank after 2:00 p.m.
      shall be deemed received on the next succeeding Business Day and any
      applicable interest or fee shall continue to accrue.

            (b) If any payment to be made by Borrower shall come due on a day
      other than a Business Day, payment shall be made on the next following
      Business Day, and such extension of time shall be reflected in computing
      interest or fees, as the case may be.

            (c) Nothing herein shall be deemed to obligate Bank to obtain the
      funds for any Revolving Advance in any particular place or manner or to
      constitute a representation by Bank that it has obtained or will obtain
      the funds for any Revolving Advance in any particular place or manner.

            (d) Borrower agrees to pay any and all present or future stamp,
      court or documentary taxes and any other excise or property taxes or
      charges or similar levies which arise from any payment made under any Loan
      Document or from the execution, delivery, performance, enforcement or
      registration of, or otherwise with respect to, any Loan Document.

            Section 2.9 Termination of Revolving Commitment.

            (a) Borrower shall have the right to terminate the Revolving
      Commitment at any time.

            (b) On the Maturity Date, the Revolving Commitment shall
      automatically terminate.

                                       7


            (c) Upon any termination of the Revolving Commitment pursuant to
      this Section 2.9, Borrower shall immediately make a prepayment of
      Revolving Loans in accordance with Section 2.4 unless otherwise mutually
      agreed upon by Borrower and Bank. Borrower shall not have any right to
      rescind any termination. Once terminated, the Revolving Commitment may not
      be reinstated.

      (i) Section 3.1 of the Loan Agreement is hereby amended by amending clause
(a) thereof to read as follows:

      (a)   any and all shares of capital stock of any Subsidiary hereafter
            acquired or formed by Borrower or CICA using all or a portion of
            proceeds from any Revolving Advance, which shall not be less than
            100% of issued and outstanding capital stock or other equity
            interests of such entity;

      (j) Section 5.3 of the Loan Agreement is hereby amended to read as
follows:

            Section 5.3 Conditions Precedent to All Acquisition Advances. In
      addition to the conditions precedent in Sections 5.1 and 5.2, the
      obligations of Bank to make each Acquisition Advance shall be subject to
      the conditions precedent that Bank shall receive prior to or on the date
      of such Acquisition Advance, an assignment of proceeds of a Surplus
      Debenture in at least the amount of such Acquisition Advance, any
      amendments or supplements to the Security Agreement or the CICA Security
      Agreement required by Bank, and evidence that the Acquisition to which
      such requested Acquisition Advance relates has been approved by the board
      of directors or other governing body of the Person being acquired.

      (k) Section 6.1 of the Loan Agreement is hereby amended to read as
follows:

            Section 6.1 Proceeds. Use the proceeds of the Loans for proper
      corporate purposes and as represented and warranted herein.

      (l) Section 6.10 of the Loan Agreement is hereby amended to read as
follows:

            Section 6.10 Expenses of Bank. Promptly pay all reasonable costs,
      fees, and expenses paid or incurred by Bank incident to any of the Loan
      Documents (including reasonable attorneys' fees and expenses incurred in
      connection with the negotiation, preparation, and execution thereof and
      any amendment thereto and the making of the Loans, whether or not the
      transactions contemplated hereby are consummated) or the valid enforcement
      of the obligations of Borrower, or the valid exercise of any Rights
      (including, but not limited to, reasonable attorneys' fees and court
      costs), all of which shall be and become a part of the Obligations.

      (m) Section 7.20 of the Loan Agreement is hereby amended to read as
follows:

            Section 7.20 Use of Proceeds. Use the proceeds of any portion of the
      Loans to directly or indirectly purchase or carry Margin Stock.

                                       8


      (n) Section 10.5 of the Loan Agreement is hereby amended to read as
follows:

            Section 10.5 Right of Set-off. Upon the occurrence and during the
      continuance of any Default under Sections 7.9, 7.10, 7.11 and 8.1, Bank
      (and each of its affiliates) is hereby authorized at any time and from
      time to time, to the fullest extent permitted by law, to set off and apply
      any and all deposits (general or special, time or demand, provisional or
      final) at any time held and other indebtedness at any time owing by Bank
      (or any of its affiliates) to or for the credit or the account of Borrower
      against any and all of the obligations of Borrower now or hereafter
      existing under this Agreement, the Note and the Term Note, irrespective of
      whether Bank shall have made any demand under this Agreement, the Note or
      the Term Note and although such obligations may be unmatured. Bank agrees
      promptly to notify Borrower after any such set-off and application;
      provided, however, that the failure to give such notice shall not affect
      the validity of such set-off and application. The rights of Bank under
      this Section 10.5 are in addition to other rights and remedies (including,
      without limitation, other rights of set-off) that Bank may have.

      (o) Section 10.15 of the Loan Agreement is hereby amended to read as
follows:

            Section 10.15 No Usury Intended; Usury Savings Clause. In no event
      shall interest contracted for, charged or received under this Agreement,
      the Note, the Term Note or any other Loan Document, plus any other charges
      in connection herewith or therewith which constitute interest exceed the
      Highest Lawful Rate permitted by applicable Law. If Bank shall receive
      interest (including any charges or other amounts which constitute
      interest) in an amount that exceeds the Highest Lawful Rate, the excess
      interest shall be applied to the principal of the Loans or, if it exceeds
      such unpaid principal, refunded to Borrower. In determining whether the
      interest contracted for, charged, or received by Bank exceeds the Highest
      Lawful Rate, Bank may, to the extent permitted by applicable Law, (a)
      characterize any payment that is not principal as an expense, fee, or
      premium rather than interest, (b) exclude voluntary prepayments and the
      effects thereof, and (c) amortize, prorate, allocate, and spread in equal
      or unequal parts the total amount of interest throughout the contemplated
      term of the Obligations hereunder.

      (p) Schedule 4.10 to the Loan Agreement is hereby amended to be in the
form attached to this Second Amendment as Schedule 4.10.

      (q) Schedule 4.12 to the Loan Agreement is hereby amended to be in the
form attached to this Second Amendment as Schedule 4.12.

      (r) Schedule 4.14 to the Loan Agreement is hereby amended to be in the
form attached to this Second Amendment as Schedule 4.14.

                                       9


      (s) Schedule 4.21 to the Loan Agreement is hereby amended to be in the
form attached to this Second Amendment as Schedule 4.21.

      (t) A new Exhibit B is hereby added to the Loan Agreement to be in the
form attached to this Second Amendment as Exhibit B.

      2. AMENDMENT TO SECURITY AGREEMENT. Schedule A to the Security Agreement
is hereby amended, to be in the form attached to this Second Amendment as
Schedule A.

      3. REPRESENTATIONS AND WARRANTIES TRUE; NO DEFAULT. By its execution and
delivery hereof, the Borrower represents and warrants that, as of the date
hereof:

      (a) the representations and warranties contained in the Loan Agreement and
the other Loan Documents are true and correct on and as of the date hereof as
made on and as of such date;

      (b) no event has occurred and is continuing which constitutes a Default;

      (c) (i) the Borrower has full power and authority to execute and deliver
this Second Amendment and the Term Note, (ii) this Second Amendment and the Term
Note have been duly executed and delivered by the Borrower, and (iii) this
Second Amendment, the Term Note and the Loan Agreement, as amended hereby,
constitute the legal, valid and binding obligations of the Borrower, enforceable
in accordance with their respective terms, except as enforceability may be
limited by applicable Debtor Relief Laws and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law) and except as rights to indemnity may be limited by federal or state
securities laws;

      (d) neither the execution, delivery and performance of this Second
Amendment, the Term Note or the Loan Agreement, as amended hereby, nor the
consummation of any transactions contemplated herein or therein, will conflict
with any Law or articles of incorporation or bylaws of the Borrower, or any
indenture, agreement or other instrument to which the Borrower or any of its
property is subject; and

      (e) no authorization, approval, consent, or other action by, notice to, or
filing with, any Governmental Authority or other Person not previously obtained
is required for the execution, delivery or performance by the Borrower of this
Second Amendment or the Term Note.

      4. CONDITIONS TO EFFECTIVENESS. This Second Amendment shall be effective
upon satisfaction or completion of the following:

      (a) the representations and warranties set forth in Section 2 of this
Second Amendment shall be true and correct;

      (b) Bank shall have received counterparts of this Second Amendment
executed by the Borrower and the Bank;

                                       10


      (c) Bank shall have received a certified resolution of the Board of
Directors of the Borrower authorizing the execution, delivery and performance of
this Second Amendment and the Term Note;

      (d) Bank shall have received an assignment of proceeds of a Surplus
Debenture in connection with the Acquisition Advance made for the Security Plan
Acquisition in form and substance satisfactory to Bank and approved by the
appropriate Insurance Regulatory Authorities;

      (e) Bank shall have received (i) evidence that the conditions precedent to
all Acquisition Advances set forth in Section 5.3 of the Loan Agreement have
been satisfied with respect to the Security Plan Acquisition and (ii) copies of
the acquisition documents and pro forma Financial Statements of Borrower
required pursuant to Section 5.4 of the Loan Agreement with respect to the
Security Plan Acquisition;

      (f) Bank shall have received an opinion of Borrower's General Counsel, as
counsel to Borrower, in form and substance satisfactory to Bank, with respect to
matters set forth in Sections 2(c), (d) and (e) of this Second Amendment;

      (g) Bank shall have received the duly executed Term Note;

      (h) Bank shall have received payment of all outstanding legal fees and
expenses in respect of the Loan Agreement;

      (i) Bank shall have received an Officer's Certificate of Security Plan in
form and substance satisfactory to Bank;

      (j) Bank shall have received an Officer's Certificate of CICA in form and
substance satisfactory to Bank, including resolutions authorizing the execution
of the Surplus Debenture in connection with the Security Plan Acquisition and
the CICA Security Agreement; and

      (k) Bank shall have received in form and substance satisfactory to Bank
and its counsel, such other documents, certificates and instruments as Bank
shall require.

      5. REFERENCE TO THE LOAN AGREEMENT.

      (a) Upon the effectiveness of this Second Amendment, each reference in the
Loan Agreement to "this Agreement", "hereunder", or words of like import shall
mean and be a reference to the Loan Agreement, as affected and amended hereby.

      (b) The Loan Agreement, as amended by the amendments referred to above,
shall remain in full force and effect and is hereby ratified and confirmed.

      6. COSTS, EXPENSES AND TAXES. Borrower agrees to pay on demand all
reasonable costs and expenses of Bank in connection with the preparation,
reproduction, execution and delivery of this Second Amendment and the other
instruments and documents to

                                       11


be delivered hereunder (including the reasonable fees and out-of-pocket expenses
of counsel for the Bank with respect thereto).

      7. EXECUTION IN COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which when taken together shall constitute but one and the same
instrument. For purposes of this Second Amendment, a counterpart hereof (or
signature page thereto) signed and transmitted by any Person party hereto to
Bank (or its counsel) by facsimile machine, telecopier or electronic mail is to
be treated as an original. The signature of such Person thereon, for purposes
hereof, is to be considered as an original signature, and the counterpart (or
signature page thereto) so transmitted is to be considered to have the same
binding effect as an original signature on an original document.

      8. GOVERNING LAW; BINDING EFFECT. This Second Amendment shall be governed
by and construed in accordance with the laws of the State of Texas applicable to
agreements made and to be performed entirely within such state, provided that
each party shall retain all rights arising under federal law, and shall be
binding upon the parties hereto and their respective successors and assigns.

      9. HEADINGS. Section headings in this Second Amendment are included herein
for convenience of reference only and shall not constitute a part of this Second
Amendment for any other purpose.

      10. ENTIRE AGREEMENT. THE LOAN AGREEMENT, AS AMENDED BY THIS SECOND
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

                   REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

                                       12


      IN WITNESS WHEREOF, this Second Amendment is executed as of the date first
set forth above.

                                                BORROWER:

                                                CITIZENS, INC.

                                                By: /s/ Mark A. Oliver
                                                    ---------------------------
                                                Name: Mark A. Oliver
                                                Title: President



                                                BANK:

                                                REGIONS BANK

                                                By: /s/ Todd A. Self
                                                    ---------------------------
                                                Name: Todd A. Self
                                                Title: Vice President



                                    EXHIBIT B

                                FORM OF TERM NOTE

      $________________                                      September ___, 2004

      FOR VALUE RECEIVED, the undersigned, CITIZENS, INC., a Colorado
corporation ("Maker"), hereby unconditionally promises to pay to the order of
REGIONS BANK, an Alabama banking association ("Bank"), at the Principal Office
specified in the hereinafter defined Loan Agreement, the principal amount of
______________________ DOLLARS ($____________) or so much thereof as may be
disbursed and outstanding hereunder, under the Loan Agreement or under the other
Loan Documents, such amount being due and payable in the amounts and at such
times as are specified in the Loan Agreement.

      Maker further agrees to pay interest at the Principal Office of Bank on
the unpaid principal amount hereof from time to time at the applicable rate per
annum and on the dates set forth in the Loan Agreement until such principal
amount is paid in full (both before and after judgment).

      This Term Note evidences the Term Loan made pursuant to, and has been
executed and delivered under, and is subject to the terms and conditions, of,
that certain Loan Agreement dated effective as of March 22, 2004 (as the same
may be amended, modified, supplemented, renewed, extended, restated,
substituted, increased, rearranged and/or replaced from time to time, the "Loan
Agreement"), among the Maker and Bank, and is the Term Note referred to therein.
Unless otherwise defined herein or unless the context hereof otherwise requires
each term used herein with its initial letter capitalized has the meaning given
to such term in the Loan Agreement. Reference is made to the Loan Agreement and
the other Loan Documents for provisions affecting this Term Note regarding
payments and mandatory and voluntary prepayments, acceleration of maturity,
exercise of Rights, payment of attorneys' fees, court costs, and other costs of
collection, certain waivers by Maker and others now or hereafter obligated for
payment of any sums due hereunder, and security for the payment hereof.

      All payments due to the Bank hereunder shall be made in Dollars in
immediately available funds a the place and in the manner specified in the Loan
Agreement.

      This Term Note is (a) entitled to the benefits of the Loan Documents and
(b) secured by the Collateral.

      Upon the occurrence of any one or more Defaults specified in the Loan
Agreement, all amounts then remaining unpaid on this Term Note shall become, or
may be declared to be, immediately due and payable, all as provided herein. The
Maker hereby waives diligence, presentment, demand, protest, notice of default,
notice of intention to accelerate, notice of acceleration and notice of any kind
whatsoever.

      THIS TERM NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.



      THIS TERM NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

      EXECUTED and delivered on the first date written above.

                                                CITIZENS, INC.

                                                By: ________________________
                                                    Mark A. Oliver
                                                    President



                                  SCHEDULE 4.10



                                  SCHEDULE 4.12



                                  SCHEDULE 4.14



                                  SCHEDULE 4.21



                                  SCHEDULE A TO
                               SECURITY AGREEMENT
                              DATED March 22, 2004

The following property is a part of the Collateral as defined in Subsection
1(b):

      Surplus Debenture No. 2004-1 dated October 1, 2004, in the original
      principal amount of $30,000,000.00 executed by Citizens Insurance Company
      of America, a Colorado insurance company and payable to the order of
      Debtor.

EX-10.11(B)

                                                                EXHIBIT 10.11(b)

                               SECURITY AGREEMENT

      THIS SECURITY AGREEMENT ("Agreement") is made as of the 1st day of
October, 2004, by CITIZENS INSURANCE COMPANY OF AMERICA, a Colorado insurance
corporation ("CICA"), in favor of REGIONS BANK, an Alabama banking corporation
("Bank").

                                   BACKGROUND.

      Pursuant to the Loan Agreement, Borrower will receive a loan from Bank in
the principal amount of $30,000,000 and will use the proceeds of such loan to
purchase a surplus debenture issued by CICA in the original principal amount of
$30,000,000. CICA will use the proceeds of such surplus debenture to pay a
portion of the purchase price for all of the authorized, issued and outstanding
capital stock of SPLIC. Upon the acquisition of such stock, SPLIC shall be a
wholly-owned Subsidiary of CICA. CICA is a wholly-owned Subsidiary of Borrower.
It is a condition precedent to the making of the loan by Bank to Borrower that
CICA execute and deliver this Agreement.

                                   AGREEMENT.

      For value received, CICA hereby agrees with Secured Party as follows:

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

            (a)   The term "Borrower" shall mean Citizens, Inc., a Colorado
            corporation.

            (b)   The term "Code" shall mean the Uniform Commercial Code as in
      effect in the State of Texas on the date of this Agreement or as it may
      hereafter be amended from time to time.

            (c)   The term "Collateral" shall mean all of the following property
      of CICA, whether now owned or hereafter acquired: (a) any and all shares
      of capital stock and other equity interest of SPLIC (including but not
      limited to the capital stock described on Schedule A), which shall be not
      less than 100% of issued and outstanding capital stock or other equity
      interests of SPLIC, (b) all certificates, instruments and/or other
      documents evidencing the foregoing, (c) all renewals, replacements and
      substitutions of all of the foregoing, (d) all Additional Property (as
      hereinafter defined), and (e) all products and proceeds of all of the
      foregoing. The designation of proceeds does not authorize CICA to sell,
      transfer or otherwise convey any of the foregoing property. The delivery
      at any time by CICA to Secured Party of any property as a pledge to secure
      payment or performance of any indebtedness or obligation whatsoever shall
      also constitute a pledge of such property as Collateral hereunder.

            (d)   The term "CICA" shall mean Citizens Insurance Company of
      America, a Colorado insurance corporation.

            (e)   The term "Indebtedness" shall mean all indebtedness,
      obligations and liabilities of Borrower to Secured Party of any kind or
      character, now existing or



      hereafter arising, whether direct, indirect, related, unrelated, fixed,
      contingent, liquidated, unliquidated, joint, several or joint and several,
      and regardless of whether such indebtedness, obligations and liabilities
      may, prior to their acquisition by Secured Party, be or have been payable
      to or in favor of a third party and subsequently acquired by Secured Party
      (it being contemplated that Secured Party may make such acquisitions from
      third parties), including without limitation all indebtedness, obligations
      and liabilities of Borrower to Secured Party now existing or hereafter
      arising by note, draft, acceptance, guaranty, endorsement, letter of
      credit, assignment, purchase, overdraft, discount, indemnity agreement or
      otherwise, including without limitation that certain promissory note of
      Borrower, dated as of March 22, 2004, payable to the order of Secured
      Party in the original principal amount of $30,000,000, and any and all
      amendments, renewals, extensions, modifications, supplements and
      restatements thereof, (ii) all accrued but unpaid interest on any of the
      indebtedness described in (i) above, (iii) all obligations of Borrower to
      Secured Party under any documents evidencing, securing, governing and/or
      pertaining to all or any part of the indebtedness described in (i) and
      (ii) above, (iv) all costs and expenses incurred by Secured Party in
      connection with the collection and administration of all or any part of
      the indebtedness and obligations described in (i), (ii) and (iii) above or
      the protection or preservation of, or realization upon, the collateral
      securing all or any part of such indebtedness and obligations, including
      without limitation all reasonable attorneys' fees, (v) all renewals,
      extensions, modifications and rearrangements of the indebtedness and
      obligations described in (i), (ii), (iii) and (iv) above, and all amounts
      that would be owed by Borrower under any Loan Document but for the fact
      that such amounts are unenforceable or not allowable due to the existence
      of a proceeding pursuant to any CICA Relief Law (as defined in the Loan
      Agreement) involving CICA or any Person (including all such amounts that
      would become due or would be secured but for the filing of any petition,
      or the commencement of any proceeding, under CICA Relief Laws.

            (f)   The term "Loan Agreement" shall mean that certain Loan
      Agreement between Borrower, as the borrower, and Secured Party, as the
      lender, dated as of March 22, 2004, and any and all amendments, renewals,
      extensions, modifications, supplements and restatements thereof.

            (g)   The term "Loan Documents" shall mean all instruments and
      documents evidencing, securing, governing, guaranteeing and/or pertaining
      to the Indebtedness, as such instruments and documents may be amended,
      renewed, extended, modified, supplemented, or restated from time to time.

            (h)   The term "Obligated Party" shall mean any party other than
      CICA who secures, guarantees and/or is otherwise obligated to pay all or
      any portion of the Indebtedness.

            (i)   The term "Secured Party" shall mean Bank, its successors and
      assigns, including without limitation, any party to whom Bank, or its
      successors or assigns, may assign its rights and interests under this
      Agreement.

                                     Page 2


            (j)   The term "SPLIC" means Security Plan Life Insurance Company, a
      Louisiana insurance corporation.

All words and phrases used herein which are expressly defined in Section 1.201,
Chapter 8 or Chapter 9 of the Code shall have the meaning provided for therein.
Other words and phrases defined elsewhere in the Code shall have the meaning
specified therein except to the extent such meaning is inconsistent with a
definition in Section 1.201, Chapter 8 or Chapter 9 of the Code.

            2.    SECURITY INTEREST. As security for the Indebtedness, CICA, for
value received, hereby grants to Secured Party a continuing security interest in
the Collateral.

            3.    ADDITIONAL PROPERTY. Collateral shall also include the
following property (collectively, the "Additional Property") which CICA becomes
entitled to receive or shall receive in connection with any Collateral: (a) any
stock certificate including without limitation, any certificate representing a
stock dividend or any certificate in connection with any recapitalization,
reclassification, merger, consolidation, conversion, combination of shares,
stock split or spin-off; (b) any option, warrant, subscription or right, whether
as an addition to or in substitution of any Collateral; (c) any dividends or
distributions of any kind whatsoever, whether distributable in cash, stock or
other property; (d) any interest or principal payments; and (e) any conversion
or redemption proceeds; provided, however, that until the occurrence of an Event
of Default (as hereinafter defined), CICA shall be entitled to all cash
dividends and all principal and interest paid on the Collateral free of the
security interest created under this Agreement. All Additional Property received
by CICA shall be received in trust for the benefit of Secured Party. All
Additional Property and all certificates or other written instruments or
documents evidencing and/or representing the Additional Property that is
received by CICA, together with such instruments of transfer as Secured Party
may request, shall immediately be delivered to or deposited with Secured Party
and held by Secured Party as Collateral under the terms of this Agreement. If
the Additional Property received by CICA shall be shares of stock or other
securities, such shares of stock or other securities shall be duly endorsed in
blank or accompanied by proper instruments of transfer and assignment duly
executed in blank with, if requested by Secured Party, signatures guaranteed by
a bank or member firm of the New York Stock Exchange, all in form and substance
satisfactory to Secured Party. Secured Party shall be deemed to have possession
of any Collateral in transit to Secured Party or its agent.

            4.    VOTING RIGHTS. As long as no Event of Default shall have
occurred hereunder and subject to Section 11(i), any voting rights incident to
any stock or other securities pledged as Collateral may be exercised by CICA;
provided, however, that CICA will not exercise, or cause to be exercised, any
such voting rights, without the prior written consent of Secured Party, if the
direct or indirect effect of such vote will result in an Event of Default
hereunder.

            5.    MAINTENANCE OF COLLATERAL. Other than the exercise of
reasonable care to assure the safe custody of any Collateral in Secured Party's
possession from time to time, Secured Party does not have any obligation, duty
or responsibility with respect to the Collateral. Without limiting the
generality of the foregoing, Secured Party shall not have any obligation, duty
or responsibility to do any of the following: (a) ascertain any maturities,
calls, conversions, exchanges, offers, tenders or similar matters relating to
the Collateral or informing CICA with respect to any such matters; (b) fix,
preserve or exercise any right, privilege or option (whether

                                     Page 3


conversion, redemption or otherwise) with respect to the Collateral unless (i)
CICA makes written demand to Secured Party to do so, (ii) such written demand is
received by Secured Party in sufficient time to permit Secured Party to take the
action demanded in the ordinary course of its business, and (iii) CICA provides
additional collateral, acceptable to Secured Party in its sole discretion; (c)
collect any amounts payable in respect of the Collateral (Secured Party being
liable to account to CICA only for what Secured Party may actually receive or
collect thereon); (d) sell all or any portion of the Collateral to avoid market
loss; (e) sell all or any portion of the Collateral unless and until (i) CICA
makes written demand upon Secured Party to sell the Collateral, and (ii) CICA
provides additional collateral, acceptable to Secured Party in its sole
discretion; or (f) hold the Collateral for or on behalf of any party other than
CICA.

      6.    REPRESENTATIONS AND WARRANTIES. CICA hereby represents and warrants
the following to Secured Party:

            (a)   Due Authorization. The execution, delivery and performance of
      this Agreement and all of the other Loan Documents by CICA have been duly
      authorized by all necessary corporate action of CICA, to the extent CICA
      is a corporation, or by all necessary partnership action, to the extent
      CICA is a partnership.

            (b)   Enforceability. This Agreement and the other Loan Documents
      constitute legal, valid and binding obligations of CICA, enforceable in
      accordance with their respective terms, except as limited as to
      enforcement of remedies by bankruptcy, insolvency or similar laws of
      general application relating to the enforcement of creditors' rights and
      except to the extent specific remedies may generally be limited by
      equitable principles.

            (c)   Ownership and Liens. CICA has good and marketable title to the
      Collateral free and clear of all liens, security interests, encumbrances
      or adverse claims, except for the security interest created by this
      Agreement. No dispute, right of setoff, counterclaim or defense exists
      with respect to all or any part of the Collateral. CICA has not executed
      any other security agreement currently affecting the Collateral and no
      financing statement or other instrument similar in effect covering all or
      any part of the Collateral is on file in any recording office except as
      may have been executed or filed in favor of Secured Party.

            (d)   No Conflicts or Consents. Neither the ownership, the intended
      use of the Collateral by CICA, the grant of the security interest by CICA
      to Secured Party herein nor the exercise by Secured Party of its rights or
      remedies hereunder, will (i) conflict with any provision of (A) any
      domestic or foreign law, statute, rule or regulation, (B) the articles or
      certificate of incorporation, charter, bylaws or partnership agreement, as
      the case may be, of CICA, or (C) any agreement, judgment, license, order
      or permit applicable to or binding upon CICA or otherwise affecting the
      Collateral, or (ii) result in or require the creation of any lien, charge
      or encumbrance upon any assets or properties of CICA or of any person
      except as may be expressly contemplated in the Loan Documents. Except as
      expressly contemplated in the Loan Documents, no consent, approval,
      authorization or order of, and no notice to or filing with, any court,
      governmental authority or third party is required in connection with the
      grant by CICA of

                                     Page 4


      the security interest herein or the exercise by Secured Party of its
      rights and remedies hereunder.

            (e)   Security Interest. CICA has and will have at all times full
      right, power and authority to grant a security interest in the Collateral
      to Secured Party in the manner provided herein, free and clear of any
      lien, security interest or other charge or encumbrance. This Agreement
      creates a legal, valid and binding security interest in favor of Secured
      Party in the Collateral.

            (f)   Location/Identity. CICA's residence or chief executive office,
      as the case may be, and the office where the records concerning the
      Collateral are kept is located at its address set forth on the signature
      page hereof. CICA's exact legal name, entity type, state of organization,
      federal taxpayer identification number and organizational number issued by
      the appropriate authority of the State of Colorado (the "Organizational
      Information") are as set forth on the signature page hereof. CICA is not
      organized in more than one jurisdiction. Except as specified herein, the
      Organizational Information shall not change. During the five years
      preceding the date of this Agreement, CICA has not had or operated under
      any name other than its name as stated on the signature page of this
      Agreement, has not been organized under the laws of any jurisdiction other
      than Colorado, has not been organized as a type of entity other than an
      insurance corporation and the chief executive office of CICA has not been
      located at any address other than as set forth on the signature page
      hereof.

            (g)   Solvency of CICA. As of the date hereof, and after giving
      effect to this Agreement and the completion of all other transactions
      contemplated by CICA at the time of the execution of this Agreement, (i)
      CICA is and will be solvent, (ii) the fair saleable value of CICA's assets
      exceeds and will continue to exceed CICA's liabilities (both fixed and
      contingent), (iii) CICA is and will continue to be able to pay its debts
      as they mature, and (iv) if CICA is not an individual, CICA has and will
      have sufficient capital to carry on CICA's businesses and all businesses
      in which CICA is about to engage.

            (h)   Nature of Ownership. CICA is the registered owner of the
      securities pledged as Collateral and a certificate has been issued in
      CICA's name to evidence CICA's ownership in such securities.

            (i)   Securities. Any certificates evidencing securities pledged as
      Collateral are valid and genuine and have not been altered. All securities
      pledged as Collateral have been duly authorized and validly issued, are
      fully paid and non-assessable, and were not issued in violation of the
      preemptive rights of any party or of any agreement by which CICA or the
      issuer thereof is bound. No restrictions or conditions exist with respect
      to the transfer or voting of any securities pledged as Collateral, except
      as has been disclosed to Secured Party in writing. No issuer of such
      securities has any outstanding stock rights, rights to subscribe, options,
      warrants or convertible securities outstanding or any other rights
      outstanding entitling any party to have issued to such party capital stock
      of such issuer, except as has been disclosed to Secured Party in writing.
      Schedule A contains a complete and correct description of each certificate
      or other instrument included in or

                                     Page 5


      evidencing Collateral. Schedule B is a complete and correct list of the
      exact name of the issuer of all Collateral described on Schedule A, its
      jurisdiction of organization, its federal taxpayer identification number,
      and the authorized, issued and outstanding capital stock of such issuer.
      CICA's interest in such issuer is as stated on Schedule A.

            (j)   Benefit. This Agreement may reasonably be expected to benefit,
      directly or indirectly, CICA, and the Board of Directors of CICA has
      determined that this Agreement may reasonably be expected to benefit,
      directly or indirectly, CICA. CICA is familiar with, and has independently
      reviewed the books and records regarding, the financial condition of
      Borrower and is familiar with the value of any and all collateral intended
      to be security for the payment of all or any part of the Indebtedness;
      provided, however, CICA is not relying on such financial condition or
      collateral as an inducement to enter into this Agreement.

      7.    AFFIRMATIVE COVENANTS. CICA will comply with the covenants contained
in this Section at all times during the period of time this Agreement is
effective unless Secured Party shall otherwise consent in writing.

            (a)   Ownership and Liens. CICA will maintain good and marketable
      title to all Collateral free and clear of all liens, security interests,
      encumbrances or adverse claims, except for the security interest created
      by this Agreement and the security interests and other encumbrances
      expressly permitted by the other Loan Documents. CICA will not permit any
      dispute, right of setoff, counterclaim or defense to exist with respect to
      all or any part of the Collateral. CICA will cause any financing statement
      or other security instrument with respect to the Collateral to be
      terminated, except as may exist or as may have been filed in favor of
      Secured Party. CICA will defend at its expense Secured Party's right,
      title and security interest in and to the Collateral against the claims of
      any third party.

            (b)   Inspection of Books and Records. CICA will keep adequate
      records concerning the Collateral and will permit Secured Party and all
      representatives and agents appointed by Secured Party to inspect CICA's
      books and records of or relating to the Collateral at any time during
      normal business hours, to make and take away photocopies, photographs and
      printouts thereof and to write down and record any such information.

            (c)   Adverse Claim. CICA covenants and agrees to promptly notify
      Secured Party of any claim, action or proceeding affecting title to the
      Collateral, or any part thereof, or the security interest created
      hereunder and, at CICA's expense, defend Secured Party's security interest
      in the Collateral against the claims of any third party. CICA also
      covenants and agrees to promptly deliver to Secured Party a copy of all
      written notices received by CICA with respect to the Collateral, including
      without limitation, notices received from the issuer of any securities
      pledged hereunder as Collateral.

            (d)   Delivery of Instruments and/or Certificates. Contemporaneously
      herewith, CICA covenants and agrees to deliver to Secured Party any
      certificates, documents or instruments representing or evidencing the
      Collateral, together with

                                     Page 6


      CICA's endorsement thereon and/or accompanied by proper instruments of
      transfer and assignment duly executed in blank with, if requested by
      Secured Party, signatures guaranteed by a bank or member firm of the New
      York Stock Exchange, all in form and substance satisfactory to Secured
      Party. If required by Secured Party, CICA also covenants and agrees to
      cooperate with Secured Party in registering the pledge of the securities
      pledged as Collateral with the issuer of such securities.

            (e)   Further Assurances. CICA will from time to time at its expense
      promptly execute and deliver all further instruments and documents and
      take all further action necessary or appropriate or that Secured Party may
      request in order (i) to perfect and protect the security interest created
      or purported to be created hereby and the first priority of such security
      interest, (ii) to enable Secured Party to exercise and enforce its rights
      and remedies hereunder in respect of the Collateral, and (iii) to
      otherwise effect the purposes of this Agreement, including without
      limitation, executing and filing such financing or continuation
      statements, or any amendments thereto.

      8.    NEGATIVE COVENANTS. CICA will comply with the covenants contained in
this Section at all times during the period of time this Agreement is effective,
unless Secured Party shall otherwise consent in writing.

            (a)   Transfer or Encumbrance. CICA will not (i) sell, assign (by
      operation of law or otherwise) or transfer CICA's rights in any of the
      Collateral, (ii) grant a lien or security interest in or execute, file or
      record any financing statement or other security instrument with respect
      to the Collateral to any party other than Secured Party, or (iii) deliver
      actual or constructive possession of any certificate, instrument or
      document evidencing and/or representing any of the Collateral to any party
      other than Secured Party.

            (b)   Impairment of Security Interest. CICA will not take or fail to
      take any action which would in any manner impair the value or
      enforceability of Secured Party's security interest in any Collateral.

            (c)   Dilution of Ownership. As to any securities pledged as
      Collateral, CICA will not consent to or approve of the issuance of (i) any
      additional shares of any class of securities of such issuer (unless
      immediately upon issuance additional securities are pledged and delivered
      to Secured Party pursuant to the terms hereof to the extent necessary to
      give Secured Party a security interest after such issuance in at least the
      same percentage of such issuer's outstanding securities as Secured Party
      had before such issuance), (ii) any instrument convertible voluntarily by
      the holder thereof or automatically upon the occurrence or non-occurrence
      of any event or condition into, or exchangeable for, any such securities,
      or (iii) any warrants, options, contracts or other commitments entitling
      any third party to purchase or otherwise acquire any such securities.

            (d)   Restrictions on Securities. CICA will not enter into any
      agreement creating, or otherwise permit to exist, any restriction or
      condition upon the transfer,

                                     Page 7


      voting or control of any securities pledged as Collateral, except as
      consented to in writing by Secured Party.

      9.    RIGHTS OF SECURED PARTY. Secured Party shall have the rights
contained in this Section at all times during the period of time this Agreement
is effective.

            (a)   Power of Attorney. CICA hereby irrevocably appoints Secured
      Party as CICA's attorney-in-fact, such power of attorney being coupled
      with an interest, with full authority in the place and stead of CICA and
      in the name of CICA or otherwise, to take any action and to execute any
      instrument which Secured Party may from time to time in Secured Party's
      discretion deem necessary or appropriate to accomplish the purposes of
      this Agreement (subject to Section 11(i)), including without limitation,
      the following action: (i) transfer any securities, instruments, documents
      or certificates pledged as Collateral in the name of Secured Party or its
      nominee; (ii) use any interest, premium or principal payments, conversion
      or redemption proceeds or other cash proceeds received in connection with
      any Collateral to reduce any of the Indebtedness; (iii) exchange any of
      the securities pledged as Collateral for any other property upon any
      merger, consolidation, reorganization, recapitalization or other
      readjustment of the issuer thereof, and, in connection therewith, to
      deposit and deliver any and all of such securities with any committee,
      depository, transfer agent, registrar or other designated agent upon such
      terms and conditions as Secured Party may deem necessary or appropriate;
      (iv) exercise or comply with any conversion, exchange, redemption,
      subscription or any other right, privilege or option pertaining to any
      securities pledged as Collateral; provided, however, except as provided
      herein, Secured Party shall not have a duty to exercise or comply with any
      such right, privilege or option (whether conversion, redemption or
      otherwise) and shall not be responsible for any delay or failure to do so;
      and (v) file any claims or take any action or institute any proceedings
      which Secured Party may deem necessary or appropriate for the collection
      and/or preservation of the Collateral or otherwise to enforce the rights
      of Secured Party with respect to the Collateral.

            (b)   Performance by Secured Party. If CICA fails to perform any
      agreement or obligation provided herein, Secured Party may itself perform,
      or cause performance of, such agreement or obligation, and the expenses of
      Secured Party incurred in connection therewith shall be a part of the
      Indebtedness, secured by the Collateral and payable by CICA on demand.

Notwithstanding any other provision herein to the contrary, Secured Party does
not have any duty to exercise or continue to exercise any of the foregoing
rights and shall not be responsible for any failure to do so or for any delay in
doing so.

      10.   EVENTS OF DEFAULT. Each of the following constitutes an "Event of
Default" under this Agreement:

            (a)   Failure to Pay Indebtedness. The failure, refusal or neglect
      of Borrower to make any payment of principal or interest on the
      Indebtedness, any other amounts due under the Loan Documents, or any
      portion thereof, as the same shall become due and payable; or

                                     Page 8


            (b)   Non-Performance of Covenants. The failure of Borrower or any
      Obligated Party to punctually and properly perform, observe, or comply
      with any covenant, agreement, warranty or condition required herein or in
      any of the other Loan Documents; or

            (c)   Default Under other Loan Documents. The occurrence of a
      default or an event of default under the Loan Agreement or any of the
      other Loan Documents; or

            (d)   Misrepresentation. Any representation contained herein or in
      any of the other Loan Documents made by Borrower or any Obligated Party is
      false, misleading or erroneous in any material respect; or

            (e)   Default to Third Party. The occurrence of any event which
      permits the acceleration of the maturity of any indebtedness owing by
      Borrower or any Obligated Party to any third party under any agreement or
      undertaking; or

            (f)   Execution on Collateral. The Collateral or any portion thereof
      is taken on execution or other process of law in any action against CICA;
      or

            (g)   Abandonment. CICA abandons the Collateral or any portion
      thereof; or

            (h)   Action by Other Lienholder. The holder of any lien or security
      interest on any of the assets of CICA, including without limitation, the
      Collateral (without hereby implying the consent of Secured Party to the
      existence or creation of any such lien or security interest on the
      Collateral), declares a default thereunder or institutes foreclosure or
      other proceedings for the enforcement of its remedies thereunder; or

            (i)   Liquidation, Death and Related Events. If CICA or any
      Obligated Party is an entity, the liquidation, dissolution, merger or
      consolidation of any such entity or, if CICA or any Obligated Party is an
      individual, the death or legal incapacity of any such individual; or

            (j)   Dilution of Ownership. The issuer of any securities
      constituting Collateral hereafter issues any shares of any class of
      capital stock (unless immediately upon issuance, additional securities are
      pledged and delivered to Secured Party pursuant to the terms hereof to the
      extent necessary to give Secured Party a security interest after such
      issuance in at least the same percentage of such issuer's outstanding
      securities as Secured Party had before such issuance) or any options,
      warrants or other rights to purchase any such capital stock; or

            (k)   Bankruptcy of CICA or Issuer. (i) The issuer of any securities
      constituting Collateral or CICA files a petition for relief under any CICA
      Relief Law or it or any of its property is the subject of a
      conservatorship, receivership or similar proceeding, (ii) an involuntary
      petition for relief is filed against any such issuer or CICA under any
      CICA Relief Law and such involuntary petition is not dismissed within
      thirty (30) days after the filing thereof, or (iii) an order for relief
      naming any such issuer or CICA is entered under any CICA Relief Law.

                                     Page 9


      11.   REMEDIES AND RELATED RIGHTS. If an Event of Default shall have
occurred, and without limiting any other rights and remedies provided herein,
under any of the other Loan Documents or otherwise available to Secured Party,
Secured Party may exercise one or more of the rights and remedies provided in
this Section.

            (a)   Remedies. Secured Party may from time to time at its
      discretion, without limitation and without notice except as expressly
      provided in any of the Loan Documents:

                  (i)   exercise in respect of the Collateral all the rights and
            remedies of a secured party under the Code (whether or not the Code
            applies to the affected Collateral);

                  (ii)  reduce its claim to judgment or foreclose or otherwise
            enforce, in whole or in part, the security interest granted
            hereunder by any available judicial procedure;

                  (iii) sell or otherwise dispose of, at its office, on the
            premises of CICA or elsewhere, the Collateral, as a unit or in
            parcels, by public or private proceedings, and by way of one or more
            contracts (it being agreed that the sale or other disposition of any
            part of the Collateral shall not exhaust Secured Party's power of
            sale, but sales or other dispositions may be made from time to time
            until all of the Collateral has been sold or disposed of or until
            the Indebtedness has been paid and performed in full), and at any
            such sale or other disposition it shall not be necessary to exhibit
            any of the Collateral;

                  (iv)  buy the Collateral, or any portion thereof, at any
            public sale;

                  (v)   buy the Collateral, or any portion thereof, at any
            private sale if the Collateral is of a type customarily sold in a
            recognized market or is of a type which is the subject of widely
            distributed standard price quotations;

                  (vi)  apply for the appointment of a receiver for the
            Collateral, and CICA hereby consents to any such appointment; and

                  (vii) at its option, retain the Collateral in satisfaction of
            the Indebtedness whenever the circumstances are such that Secured
            Party is entitled to do so under the Code or otherwise.

      CICA agrees that in the event CICA is entitled to receive any notice under
      the Uniform Commercial Code, as it exists in the state governing any such
      notice, of the sale or other disposition of any Collateral, reasonable
      notice shall be deemed given when such notice is deposited in a depository
      receptacle under the care and custody of the United States Postal Service,
      postage prepaid, at CICA's address set forth on the signature page hereof,
      five (5) days prior to the date of any public sale, or after which a
      private sale, of any of such Collateral is to be held. Secured Party shall
      not be obligated to make any sale of Collateral regardless of notice of
      sale having been given. Secured Party may adjourn any public or private
      sale from time to time by announcement at the time and place fixed

                                     Page 10


      therefor, and such sale may, without further notice, be made at the time
      and place to which it was so adjourned. CICA further acknowledges and
      agrees that the redemption by Secured Party of any certificate of deposit
      pledged as Collateral shall be deemed to be a commercially reasonable
      disposition under Section 9.627(b) of the Code.

            (b)   Private Sale of Securities. CICA recognizes that Secured Party
      may be unable to effect a public sale of all or any part of the securities
      pledged as Collateral because of restrictions in applicable federal and
      state securities or insurance laws and that Secured Party may, therefore,
      determine to make one or more private sales of any such securities to a
      restricted group of purchasers who will be obligated to agree, among other
      things, to acquire such securities for their own account, for investment
      and not with a view to the distribution or resale thereof. CICA
      acknowledges that each any such private sale may be at prices and other
      terms less favorable then what might have been obtained at a public sale
      and, notwithstanding the foregoing, agrees that each such private sale
      shall be deemed to have been made in a commercially reasonable manner and
      that Secured Party shall have no obligation to delay the sale of any such
      securities for the period of time necessary to permit the issuer to
      register such securities for public sale under any federal or state
      securities laws. CICA further acknowledges and agrees that any offer to
      sell such securities which has been made privately in the manner described
      above to not less than five (5) bona fide offerees shall be deemed to
      "commercially reasonable" for the purposes of Section 9.627(b) of the
      Code, notwithstanding that such sale may not constitute a "public
      offering" under any federal or state securities laws and that Secured
      Party may, in such event, bid for the purchase of such securities.

            (c)   Application of Proceeds. If any Event of Default shall have
      occurred, Secured Party may at its discretion apply or use any cash held
      by Secured Party as Collateral, and any cash proceeds received by Secured
      Party in respect of any sale or other disposition of, collection from, or
      other realization upon, all or any part of the Collateral as follows in
      such order and manner as Secured Party may elect:

                  (i)   to the repayment or reimbursement of the reasonable
            costs and expenses (including, without limitation, reasonable
            attorneys' fees and expenses) incurred by Secured Party in
            connection with (A) the administration of the Loan Documents, (B)
            the custody, preservation, use or operation of, or the sale of,
            collection from, or other realization upon, the Collateral, and (C)
            the exercise or enforcement of any of the rights and remedies of
            Secured Party hereunder;

                  (ii)  to the payment or other satisfaction of any liens and
            other encumbrances upon the Collateral;

                  (iii) to the satisfaction of the Indebtedness;

                  (iv)  by holding such cash and proceeds as Collateral;

                  (v)   to the payment of any other amounts required by
            applicable law (including without limitation, Section 9.615 of the
            Code or any other applicable statutory provision); and

                                     Page 11


                  (vi)  by delivery to CICA or any other party lawfully entitled
            to receive such cash or proceeds whether by direction of a court of
            competent jurisdiction or otherwise.

            (d)   Deficiency. In the event that the proceeds of any sale of,
      collection from, or other realization upon, all or any part of the
      Collateral by Secured Party are insufficient to pay all amounts to which
      Secured Party is legally entitled, Borrower and any party who guaranteed
      or is otherwise obligated to pay all or any portion of the Indebtedness
      shall be liable for the deficiency, together with interest thereon as
      provided in the Loan Documents.

            (e)   Non-Judicial Remedies. In granting to Secured Party the power
      to enforce its rights hereunder without prior judicial process or judicial
      hearing, CICA expressly waives, renounces and knowingly relinquishes any
      legal right which might otherwise require Secured Party to enforce its
      rights by judicial process. CICA recognizes and concedes that non judicial
      remedies are consistent with the usage of trade, are responsive to
      commercial necessity and are the result of a bargain at arm's length.
      Nothing herein is intended to prevent Secured Party or CICA from resorting
      to judicial process at either party's option.

            (f)   Other Recourse. CICA waives any right to require Secured Party
      to proceed against any third party, exhaust any Collateral or other
      security for the Indebtedness, or to have any third party joined with CICA
      in any suit arising out of the Indebtedness or any of the Loan Documents,
      or pursue any other remedy available to Secured Party. CICA further waives
      any and all notice of acceptance of this Agreement and of the creation,
      modification, rearrangement, renewal or extension of the Indebtedness.
      CICA further waives any defense arising by reason of any disability or
      other defense of any third party or by reason of the cessation from any
      cause whatsoever of the liability of any third party. Until all of the
      Indebtedness shall have been paid in full, CICA shall have no right of
      subrogation and CICA waives the right to enforce any remedy which Secured
      Party has or may hereafter have against any third party, and waives any
      benefit of and any right to participate in any other security whatsoever
      now or hereafter held by Secured Party. CICA authorizes Secured Party, and
      without notice or demand and without any reservation of rights against
      CICA and without affecting CICA's liability hereunder or on the
      Indebtedness, to (i) take or hold any other property of any type from any
      third party as security for the Indebtedness, and exchange, enforce, waive
      and release any or all of such other property, (ii) apply such other
      property and direct the order or manner of sale thereof as Secured Party
      may in its discretion determine, (iii) renew, extend, accelerate, modify,
      compromise, settle or release any of the Indebtedness or other security
      for the Indebtedness, (iv) waive, enforce or modify any of the provisions
      of any of the Loan Documents executed by any third party, and (v) release
      or substitute any third party.

            (g)   Voting Rights. Upon the occurrence of an Event of Default,
      CICA will not exercise any voting rights with respect to securities
      pledged as Collateral. CICA hereby irrevocably appoints Secured Party as
      CICA's attorney-in-fact (such power of attorney being coupled with an
      interest) and proxy to exercise any voting rights with

                                     Page 12


      respect to CICA's securities pledged as Collateral upon the occurrence of
      an Event of Default.

            (h)   Dividend Rights and Interest Payments. Upon the occurrence of
      an Event of Default:

                  (i)   all rights of CICA to receive and retain the dividends
            and interest payments which it would otherwise be authorized to
            receive and retain pursuant to Section 3 shall automatically cease,
            and all such rights shall thereupon become vested with Secured Party
            which shall thereafter have the sole right to receive, hold and
            apply as Collateral such dividends and interest payments; and

                  (ii)  all dividend and interest payments which are received by
            CICA contrary to the provisions of clause (i) of this Subsection
            shall be received in trust for the benefit of Secured Party, shall
            be segregated from other funds of CICA, and shall be forthwith paid
            over to Secured Party in the exact form received (properly endorsed
            or assigned if requested by Secured Party), to be held by Secured
            Party as Collateral.

            (i)   Insurance Holding Company Laws. Because of laws and
      regulations governing change of control of insurance companies that may be
      applicable (collectively, the "Insurance Holding Company Laws"), certain
      purchasers of the Collateral at foreclosure may be required to obtain
      regulatory approval prior to a final and binding acquisition of the
      Collateral. The CICA acknowledges that such laws and regulations may
      adversely affect the purchase price to be paid by a purchaser of the
      Collateral, or any part thereof, at a private or public foreclosure sale,
      and that the Secured Party may (and is hereby authorized by the CICA to)
      modify the notices, advertisements, terms and procedures of any
      foreclosure sale of the Collateral in order to comply with Insurance
      Holding Company Laws. Without limiting the foregoing, the CICA
      acknowledges that the Secured Party may accept bids at foreclosure sale on
      a provisional basis, pending receipt by the successful bidder of necessary
      regulatory approvals under the Insurance Holding Company Laws. In
      addition, the CICA acknowledges that the Secured Party may (but shall not
      be required to) limit bidding at foreclosure sales to those parties which
      have demonstrated an ability to comply with requirements of the Insurance
      Holding Company Laws. Moreover, the CICA acknowledges that the Secured
      Party may require the successful bidder at a foreclosure sale to execute a
      purchase agreement, deposit a portion of the purchase price, and take
      other actions reflecting the requirements of the Insurance Holding Company
      Laws and the resulting delay in consummating a foreclosure sale.

      12.   MISCELLANEOUS.

            (a)   Entire Agreement. This Agreement contains the entire agreement
      of Secured Party and CICA with respect to the Collateral. If the parties
      hereto are parties to any prior agreement, either written or oral,
      relating to the Collateral, the terms of this Agreement shall amend and
      supersede the terms of such prior agreements as to transactions on or
      after the effective date of this Agreement, but all security agreements,

                                     Page 13


      financing statements, guaranties, other contracts and notices for the
      benefit of Secured Party shall continue in full force and effect to secure
      the Indebtedness unless Secured Party specifically releases its rights
      thereunder by separate release.

            (b)   Amendment. No modification, consent or amendment of any
      provision of this Agreement or any of the other Loan Documents shall be
      valid or effective unless the same is in writing and signed by the party
      against whom it is sought to be enforced.

            (c)   Actions by Secured Party. The lien, security interest and
      other security rights of Secured Party hereunder shall not be impaired by
      (i) any renewal, extension, increase or modification with respect to the
      Indebtedness, (ii) any surrender, compromise, release, renewal, extension,
      exchange or substitution which Secured Party may grant with respect to the
      Collateral, or (iii) any release or indulgence granted to any endorser,
      guarantor or surety of the Indebtedness. The taking of additional security
      by Secured Party shall not release or impair the lien, security interest
      or other security rights of Secured Party hereunder or affect the
      obligations of CICA hereunder.

            (d)   Waiver by Secured Party. Secured Party may waive any Event of
      Default without waiving any other prior or subsequent Event of Default.
      Secured Party may remedy any default without waiving the Event of Default
      remedied. Neither the failure by Secured Party to exercise, nor the delay
      by Secured Party in exercising, any right or remedy upon any Event of
      Default shall be construed as a waiver of such Event of Default or as a
      waiver of the right to exercise any such right or remedy at a later date.
      No single or partial exercise by Secured Party of any right or remedy
      hereunder shall exhaust the same or shall preclude any other or further
      exercise thereof, and every such right or remedy hereunder may be
      exercised at any time. No waiver of any provision hereof or consent to any
      departure by CICA therefrom shall be effective unless the same shall be in
      writing and signed by Secured Party and then such waiver or consent shall
      be effective only in the specific instances, for the purpose for which
      given and to the extent therein specified. No notice to or demand on CICA
      in any case shall of itself entitle CICA to any other or further notice or
      demand in similar or other circumstances.

            (e)   Costs and Expenses. CICA will upon demand pay to Secured Party
      the amount of any and all costs and expenses (including without
      limitation, attorneys' fees and expenses), which Secured Party may incur
      in connection with (i) the preparation of this Agreement and the
      perfection and preservation of the security interests granted under the
      Loan Documents to which CICA is a party, (ii) the administration of the
      Loan Documents, (iii) the custody, preservation, use or operation of, or
      the sale of, collection from, or other realization upon, the Collateral,
      (iv) the exercise or enforcement of any of the rights of Secured Party
      under the Loan Documents, or (v) the failure by CICA to perform or observe
      any of the provisions hereof.

            (f)   GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
      CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE
      FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION
      OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN

                                     Page 14


      RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A
      JURISDICTION OTHER THAN THE STATE OF TEXAS.

            (g)   Choice of Forum: Service of Process and Jurisdiction. Any
      suit, action or proceeding against CICA with respect to the Loan Documents
      or any judgment entered by any court in respect thereof, may be brought in
      the courts of the State of Texas, County of Travis, or in the United
      States courts located in the State of Texas as Secured Party may elect and
      CICA hereby submits to the non-exclusive jurisdiction of such courts for
      the purpose of any such suit, action or proceeding. CICA hereby
      irrevocably consents to the service of process in any suit, action or
      proceeding in said court by the mailing thereof by Secured Party by
      registered or certified mail, return receipt requested, postage prepaid,
      to CICA's address set forth on the signature page of this Agreement or any
      other address provided by CICA to Secured Party in writing. CICA hereby
      irrevocably waives any objections which it may now or hereafter have to
      the laying of venue of any suit, action or proceeding arising out of or
      relating to the Loan Documents brought in the courts located in the State
      of Texas, County of Travis, and hereby further irrevocably waives any
      claim that any such suit, action or proceeding brought in any such court
      has been brought in any inconvenient forum.

            (h)   Severability. If any provision of this Agreement is held by a
      court of competent jurisdiction to be illegal, invalid or unenforceable
      under present or future laws, such provision shall be fully severable,
      shall not impair or invalidate the remainder of this Agreement and the
      effect thereof shall be confined to the provision held to be illegal,
      invalid or unenforceable.

            (i)   No Obligation. Nothing contained herein shall be construed as
      an obligation on the part of Secured Party to extend credit to CICA or
      continue to extend credit to Borrower.

            (j)   Notices. All notices, requests, demands or other
      communications required or permitted to be given pursuant to this
      Agreement shall be in writing and shall be deemed to have been given or
      made (a) when personally delivered, (b) if mailed, when sent by registered
      or certified mail, postage prepaid, (c) if sent by a nationally recognized
      overnight delivery service, on the next business day after delivery to
      such service specifying delivery on the next business day or (d) if
      transmitted by telex, telecopier or facsimile machine, on the day that
      such notice is transmitted and received. The address of each party for the
      purposes hereof is set forth on the signature page of this Agreement.

            (k)   Binding Effect and Assignment. This Agreement (i) creates a
      continuing security interest in the Collateral, (ii) shall be binding on
      CICA and the heirs, executors, administrators, personal representatives,
      successors and assigns of CICA, and (iii) shall inure to the benefit of
      Secured Party and its successors and assigns. Without limiting the
      generality of the foregoing, Secured Party may pledge, assign or otherwise
      transfer the Indebtedness and its rights under this Agreement and any of
      the other Loan Documents to any other party. CICA's rights and obligations
      hereunder may not be assigned or otherwise transferred without the prior
      written consent of Secured Party.

                                     Page 15


            (l)   Termination. It is contemplated by the parties hereto that
      from time to time there may be no outstanding Indebtedness, but
      notwithstanding such occurrences, this Agreement shall remain valid and
      shall be in full force and effect as to subsequent outstanding
      Indebtedness. Upon (i) the satisfaction in full of the Indebtedness, (ii)
      the termination or expiration of any commitment of Secured Party to extend
      credit to Borrower, (iii) written request for the termination hereof
      delivered by to Secured Party, and (iv) written release delivered by
      Secured Party to CICA, this Agreement and the security interests created
      hereby shall terminate. Upon termination of this Agreement and CICA's
      written request, Secured Party will, at CICA's sole cost and expense,
      return to CICA such of the Collateral as shall not have been sold or
      otherwise disposed of or applied pursuant to the terms hereof and execute
      and deliver to CICA such documents as CICA shall reasonably request to
      evidence such termination.

            (m)   JURY TRIAL WAIVER. CICA AND SECURED PARTY EACH HEREBY WAIVE
      ANY RIGHT TO A JURY TRIAL WITH RESPECT TO ANY MATTER ARISING OR RELATING
      TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
      CONTEMPLATED HEREBY OR THEREBY.

            (n)   Cumulative Rights. All rights and remedies of Secured Party
      hereunder are cumulative of each other and of every other right or remedy
      which Secured Party may otherwise have at law or in equity or under any of
      the other Loan Documents, and the exercise of one or more of such rights
      or remedies shall not prejudice or impair the concurrent or subsequent
      exercise of any other rights or remedies.

            (o)   Gender and Number. Within this Agreement, words of any gender
      shall be held and construed to include the other gender, and words in the
      singular number shall be held and construed to include the plural and
      words in the plural number shall be held and construed to include the
      singular, unless in each instance the context requires otherwise.

            (p)   Descriptive Headings. The headings in this Agreement are for
      convenience only and shall in no way enlarge, limit or define the scope or
      meaning of the various and several provisions hereof.

            (q)   Financing Statements. By signing below, CICA authorizes
      Secured Party to authenticate and file financing statements and/or
      amendments thereto and continuations thereof under the provisions of the
      Code.

            (r)   Limitation. Notwithstanding anything in this Agreement to the
      contrary, the obligations of CICA under this Agreement shall be limited to
      a maximum aggregate amount equal to the largest amount that would not
      render CICA's obligations hereunder subject to avoidance as a fraudulent
      transfer or fraudulent conveyance under Section 548 of Title 11 of the
      United States Code or any applicable provisions of comparable law
      (collectively, the "Fraudulent Transfer Laws"), in each case after giving
      effect to all other liabilities of CICA, contingent or otherwise, that are
      relevant under the Fraudulent Transfer Laws and after giving effect as
      assets to the value (as determined under the

                                     Page 16


      applicable provisions of the Fraudulent Transfer Laws) of any rights to
      subrogation, reimbursement or contribution of CICA pursuant to applicable
      law, or any agreement providing for rights of subrogation, reimbursement
      or contribution in favor of CICA, or for an equitable allocation among
      CICA, Borrower, any other Obligated Party, and any other Person of
      obligations arising under guaranties or grants of collateral by such
      Persons.

             THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

                                     Page 17


      EXECUTED as of the date first written above.

CICA's Address:                                 CICA:

Citizens Insurance Company of America           CITIZENS INSURANCE COMPANY OF
400 East Anderson Lane                          AMERICA,
Austin, Texas  78752                            a Colorado insurance corporation
Attention:  Mark A. Oliver, President

Federal taxpayer identification no.: ________   By:    /s/ Mark A. Oliver
Organizational identification no.: __________          -------------------------
                                                       Name:  Mark A. Oliver
                                                       Title: President

Secured Party's Address:

Regions Bank
4314 West Braker Lane, Suite 110
Austin, Texas  78759
Attention:  Todd A. Self

                                     Page 18


                                  SCHEDULE A TO
                               SECURITY AGREEMENT
                              DATED OCTOBER 1, 2004

The following property is a part of the Collateral as defined in Subsection
1(c):

      10,000 shares of common stock of Security Plan Life Insurance Company, a
Louisiana insurance corporation, as evidenced by certificate no. 12 issued in
the name of Citizens Insurance Company of America.

      As of the date of this Agreement, such common stock represents all of the
authorized, issued and outstanding shares of common stock of Security Plan Life
Insurance Company.



                                  SCHEDULE B TO
                               SECURITY AGREEMENT
                              DATED OCTOBER 1, 2004

Issuer Name:                      Security Plan Life Insurance Company

Jurisdiction of Incorporation:    Louisiana

Federal Taxpayer I.D. Number:     72-1308780

Authorized Capital Stock:         10,000 shares of common stock

Issued Capital Stock:             10,000 shares of common stock

Outstanding Capital Stock:        10,000 shares of common stock

EX-10.11(C)

                                                                EXHIBIT 10.11(c)
                      CITIZENS INSURANCE COMPANY OF AMERICA
                                (Insurer's Name)

                             A Colorado Corporation

$30,000,000                                      Subordinated Debenture # 2004-1

FOR VALUE RECEIVED Citizens Insurance Company of America ("Company") subject to
and conditioned upon the terms, conditions, limitations and provisions hereof,
promises to pay to the order of Citizens, Inc. ("Holder") the principal sum of
thirty million dollars ($30,000,000) plus interest at the 30-day LIBOR Rate plus
1.80% per annum, as such rate is determined from time to time, such interest to
accrue daily from the date this Debenture is issued, or October 1, 2004. "LIBOR
Rate" means, for each 30-day period during the term of this note, commencing
with the 30-day period beginning on the date of this note and continuing with
each successive 30-day period thereafter:

      (a) the rate per annum equal to the rate determined by the British
Bankers' Association ("BBA") advisory reference panel of contributor banks to be
the offered rate that appears on Page 3750 of the Telerate screen (or any
successor thereto) that displays an average BBA Interest Settlement Rate for
deposits in U.S. Dollars with a term equivalent to an interest period of 30
days, determined as of approximately 11:00 a.m. (London time) on the first day
of such 30-day period (or if such day is not a business day, on the immediately
preceding day), or

      (b) if the rate referenced in the preceding subsection (a) does not appear
on such page or service or such page or service shall cease to be available, the
rate per annum equal to the rate determined by BBA to be the offered rate on
such other page or such other service that displays an average BBA Interest
Settlement Rate for deposits in U.S. Dollars with a term equivalent of 30 days,
determined as of approximately 11:00 a.m. (London time) on the first day of such
30-day period (or if such day is not a business day, on the immediately
preceding business day), provided such offered rate on such other page of such
other service is substantially comparable to the rate if determined by
subsection (a) above.

THIS DEBENTURE is issued pursuant to Section 10-3-239, C.R.S. and the PRINCIPAL
and ANY ACCRUED INTEREST THEREON shall not be a legal liability of the Company
until repayment of interest or principal has prior written approval of the
Commissioner of Insurance for the State of Colorado.



THE REPAYMENT of principal and/or accrued interest shall be make only out of
surplus funds and only with the PRIOR WRITTEN APPROVAL OF THE COMMISSIONER OF
INSURANCE FOR THE STATE OF COLORADO when he is satisfied that the financial
condition of the Company warrants such action as set forth in Section 10-3-239,
C.R.S. Absent a reorganization, dissolution, 100% reissuance or liquidation of
the Company, approval for repayment may not be given, if after payment of
principal and/or interest, surplus would fall below three (3) times the
authorized control level as required by the most recent risk-based capital
calculation.

In the event of reorganization, dissolution, 100% reissuance or liquidation of
the Company after the retirement of all its outstanding obligations senior to
this Debenture, the holders this Debenture shall be entitled to preferential
right in remaining assets of the Company equal to the face amount of this
Debenture, or unpaid principal balance, plus accrued interest, before any
distribution of such assets to stockholders. Interest shall be payable first,
followed by payment of principal.

This Debenture is subordinate to policyholders to claimant and beneficiary
claims as well as to all other classes of creditors senior to this Debenture.

This Debenture is transferable only by assignment on the books of the Company
upon surrender of this Debenture properly assigned; provided, the grant of a
security interest in or pledge of this Debenture shall not require any such
assignment. The reissued Debenture must be submitted to the Commissioner of
Insurance for the State of Colorado and is subject to all terms, conditions and
limitations contained herein.

IN WITNESS WHEREOF Company has caused this Debenture to be signed by its duly
authorized officers this 1st day of October, 2004.

                                                BY: /s/ Mark A. Oliver
                                                   -----------------------------
                                                   Mark A. Oliver, President

ATTEST:

 /s/ Marcia F. Emmons
- ----------------------------------
Marcia F. Emmons, Secretary
                                       2

EX-10.11(D)

                                                                EXHIBIT 10.11(d)

                                FORM OF TERM NOTE

$30,000,000.00                                                   October 1, 2004

      FOR VALUE RECEIVED, the undersigned, CITIZENS, INC., a Colorado
corporation ("Maker"), hereby unconditionally promises to pay to the order of
REGIONS BANK, an Alabama banking association ("Bank"), at the Principal Office
specified in the hereinafter defined Loan Agreement, the principal amount of
THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00) or so much thereof as may be
disbursed and outstanding hereunder, under the Loan Agreement or under the other
Loan Documents, such amount being due and payable in the amounts and at such
times as are specified in the Loan Agreement.

      Maker further agrees to pay interest at the Principal Office of Bank on
the unpaid principal amount hereof from time to time at the applicable rate per
annum and on the dates set forth in the Loan Agreement until such principal
amount is paid in full (both before and after judgment).

      This Term Note evidences the Term Loan made pursuant to, and has been
executed and delivered under, and is subject to the terms and conditions, of,
that certain Loan Agreement dated effective as of March 22, 2004 (as the same
may be amended, modified, supplemented, renewed, extended, restated,
substituted, increased, rearranged and/or replaced from time to time, the "Loan
Agreement"), among the Maker and Bank, and is the Term Note referred to therein.
Unless otherwise defined herein or unless the context hereof otherwise requires
each term used herein with its initial letter capitalized has the meaning given
to such term in the Loan Agreement. Reference is made to the Loan Agreement and
the other Loan Documents for provisions affecting this Term Note regarding
payments and mandatory and voluntary prepayments, acceleration of maturity,
exercise of Rights, payment of attorneys' fees, court costs, and other costs of
collection, certain waivers by Maker and others now or hereafter obligated for
payment of any sums due hereunder, and security for the payment hereof.

      All payments due to the Bank hereunder shall be made in Dollars in
immediately available funds a the place and in the manner specified in the Loan
Agreement.

      This Term Note is (a) entitled to the benefits of the Loan Documents and
(b) secured by the Collateral.

      Upon the occurrence of any one or more Defaults specified in the Loan
Agreement, all amounts then remaining unpaid on this Term Note shall become, or
may be declared to be, immediately due and payable, all as provided herein. The
Maker hereby waives diligence, presentment, demand, protest, notice of default,
notice of intention to accelerate, notice of acceleration and notice of any kind
whatsoever.

      THIS TERM NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS.

      THIS TERM NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE

                                       1


CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

      EXECUTED and delivered on the first date written above.

                                                CITIZENS, INC.

                                                By: /s/ Mark A. Oliver
                                                    ----------------------------
                                                    Mark A. Oliver
                                                    President
                                       2

EX-99.1

EXHIBIT 99.1

FOR FURTHER INFORMATION CONTACT:
Joel H. Mathis, Vice President
Public Relations and Investor Relations

FOR IMMEDIATE RELEASE

CITIZENS, INC. REPORTS ACQUISITION OF SECURITY PLAN LIFE

Austin, Texas – October 1, 2004 – Citizens, Inc. (NYSE: CIA), announced that its subsidiary, Citizens Insurance Company of America (“CICA”), has acquired Security Plan Life Insurance Company of Donaldsonville, Louisiana (“Security”). The purchase price was $85 million and was funded from cash on hand and a $30 million term loan from Regions Bank.

Security will continue operating as a wholly-owned subsidiary from its headquarters in Louisiana where it focuses on writing home service life insurance products.

Security’s assets are $275 million with annual revenues of $55 million. Prior to the transaction, Citizens, Inc.’s consolidated assets equaled $400 million, with total annual revenue of $95 million.

“The acquisition of Security puts Citizens well on the way to the attainment of its goal of $1 billion of assets by 2010,” said Citizens’ Chairman, Harold E. Riley. “We believe this transaction will be immediately accretive and we are looking forward to opportunities Security brings to us,” he said.

About Citizens, Inc.

Citizens, Inc., parent of Citizens, Inc. Financial Group, a financial services investment company listed on the New York Stock Exchange, symbol CIA, plans to achieve $1 billion in assets, $250 million in revenues and $10 billion of life insurance in force by 2010, via the worldwide sale of U.S. dollar denominated whole life cash value insurance policies, coupled with acquisition of other life insurance companies.

Citizens is included in the Russell 2000® Index, which measures the performance of the largest companies in the U.S. stock market based on market capitalization. Citizens’ stock closed at $5.97 on September 30, 2004.

Additional information is available at the Company’s web site: www.citizensinc.com.

# # #

Information herein contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by words such as “may”, “will”, “expect”, “anticipate” or “continue” or comparable words. In addition, all statements other than statements of historical facts that address activities that the Company expects or anticipates will or may occur in the future are forward-looking statements. Readers are encouraged to read the SEC reports of the Company, particularly its Form 10-K for the fiscal year ended December 31, 2003, for the meaningful cautionary language disclosing why actual results may vary materially from those anticipated by management.

P.O.Box 149151 • Austin, Texas 78714-9151 • Phone 512 837-7100 • Fax 512-836-9334

email: PR@citizensinc.com • web site: www.citizensinc.com