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                                                                EXHIBIT 10.12(g)

NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.

                                 CITIZENS, INC.

                                     WARRANT

Warrant No. 001                                            Dated: July 12, 2004

         Citizens, Inc., a Colorado corporation (the "COMPANY"), hereby
certifies that, for value received, Mainfield Enterprises, Inc. or its
registered assigns (the "HOLDER"), is entitled to purchase from the Company up
to a total of 118,698 shares of Class A common stock (the "COMMON STOCK"), of
the Company (each such share, a "WARRANT SHARE" and all such shares, the
"WARRANT SHARES") at an exercise price equal to $7.96 per share (as adjusted
from time to time as provided in Section 9, the "EXERCISE PRICE"), at any time
and from time to time from and after the date hereof and through and including
the seven (7) year anniversary of the date hereof (the "EXPIRATION DATE"), and
subject to the following terms and conditions. This Warrant (this "WARRANT") is
one of a series of similar warrants issued pursuant to that certain Securities
Purchase Agreement, dated as of the date hereof, by and among the Company and
the Purchasers identified therein (the "PURCHASE AGREEMENT"). All such warrants
are referred to herein, collectively, as the "WARRANTS."

         1. Definitions. In addition to the terms defined elsewhere in this
Warrant, capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement.

         2. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "WARRANT
REGISTER"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

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         3. Registration of Transfers. The Company shall register the transfer
of any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Transfer Agent or to the Company at its address specified herein. Upon
any such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "NEW WARRANT"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.

         4. Exercise and Duration of Warrant.

                  (a) This Warrant shall be exercisable by the registered Holder
at any time and from time to time on or after the date hereof to and including
the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date,
the portion of this Warrant not exercised prior thereto shall be and become void
and of no value; provided that, if the average of the Closing Prices for the
five Trading Days immediately prior to (but not including) the Expiration Date
exceeds the Exercise Price on the Expiration Date, then this Warrant shall be
deemed to have been exercised in full (to the extent not previously exercised)
on a "cashless exercise" basis (if then permitted) at 6:30 P.M. New York City
time on the Expiration Date.

                  (b) A Holder may exercise this Warrant by delivering to the
Company (i) an exercise notice, in the form attached hereto (the "EXERCISE
NOTICE"), appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares as to which this Warrant is
being exercised (which may take the form of a "cashless exercise" if so
indicated in the Exercise Notice and if a "cashless exercise" may occur at such
time pursuant to Section 10 below) and the date such items are delivered to the
Company (as determined in accordance with the notice provisions hereof) is an
"EXERCISE DATE." The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder. Execution and delivery of the
Exercise Notice shall have the same effect as cancellation of the original
Warrant and issuance of a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.

         5. Delivery of Warrant Shares.

                  (a) Upon exercise of this Warrant, the Company shall promptly
(but in no event later than three Trading Days after the Exercise Date) issue or
cause to be issued and cause to be delivered to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate for
the Warrant Shares issuable upon such exercise, free of restrictive legends
unless a registration statement covering the resale of the Warrant Shares and
naming the Holder as a selling stockholder thereunder is not then effective and
the Warrant Shares are not freely transferable without volume restrictions
pursuant to Rule 144 under the Securities Act. The Holder, or any Person so
designated by the Holder to receive Warrant Shares, shall be deemed to have
become holder of record of such Warrant Shares as of the Exercise Date. The
Company shall, upon request of the Holder, use its best efforts to deliver

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Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation performing similar functions.

                  (b) This Warrant is exercisable, either in its entirety or,
from time to time, for a portion of the number of Warrant Shares. Upon surrender
of this Warrant following one or more partial exercises, the Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.

                  (c) In addition to any other rights available to a Holder, if
the Company fails to deliver to the Holder a certificate representing Warrant
Shares by the third Trading Day the date on which delivery of such certificate
is required by this Warrant, and if after such third Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares that the
Holder anticipated receiving from the Company (a "BUY-IN"), then in the Holder's
sole discretion, the Company shall within three Trading Days after the Holder's
request, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "BUY-IN PRICE"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate.

                  (d) The Company's obligations to issue and deliver Warrant
Shares in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares. Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver certificates representing
shares of Common Stock upon exercise of this Warrant as required pursuant to the
terms hereof.

         6. Charges, Taxes and Expenses. Issuance and delivery of certificates
for shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder or an Affiliate thereof. The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this Warrant
or receiving Warrant Shares upon exercise hereof.

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         7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.

         8. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable. The
Company will take all such action as may be necessary to assure that such shares
of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any securities exchange
or automated quotation system upon which the Common Stock may be listed.

         9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.

                  (a) Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock
or otherwise makes a distribution on any class of capital stock that is payable
in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, or (iii) combines outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination.

                  (b) Pro Rata Distributions. If the Company, at any time while
this Warrant is outstanding, distributes to holders of Common Stock (i)
evidences of its indebtedness, (ii) any security (other than a distribution of
Common Stock covered by the preceding paragraph), (iii) rights or warrants to
subscribe for or purchase any security, or (iv) any other asset (in each case,
"DISTRIBUTED PROPERTY"), then in each such case the Exercise Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution shall be adjusted (effective on such
record date) to equal the product of such Exercise Price times a fraction of
which the denominator shall be the average of the Closing

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Prices for the five Trading Days immediately prior to (but not including) such
record date and of which the numerator shall be such average less the then fair
market value of the Distributed Property distributed in respect of one
outstanding share of Common Stock, as determined by the Company's independent
certified public accountants that regularly examine the financial statements of
the Company (an "APPRAISER"). In such event, the Holder, after receipt of the
determination by the Appraiser, shall have the right to select an additional
appraiser (which shall be a nationally recognized accounting firm), in which
case such fair market value shall be deemed to equal the average of the values
determined by each of the Appraiser and such appraiser. As an alternative to the
foregoing adjustment to the Exercise Price, at the request of the Holder
delivered before the 90th day after such record date, the Company will deliver
to such Holder, within five Trading Days after such request (or, if later, on
the effective date of such distribution), the Distributed Property that such
Holder would have been entitled to receive in respect of the Warrant Shares for
which this Warrant could have been exercised immediately prior to such record
date. If such Distributed Property is not delivered to a Holder pursuant to the
preceding sentence, then upon expiration of or any exercise of this Warrant that
occurs after such record date, such Holder shall remain entitled to receive, in
addition to the Warrant Shares otherwise issuable upon such exercise (if
applicable), such Distributed Property.

                  (c) Fundamental Transactions. If, at any time while this
Warrant is outstanding, (i) the Company effects any merger or consolidation of
the Company with or into another Person in which the Company is not the
surviving entity, (ii) the Company effects any sale of all or substantially all
of its assets in one or a series of related transactions, (iii) any tender offer
or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (iv) the Company effects
any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property (other than as a result of a subdivision
or combination of shares of Common Stock covered by Section 9(a) above) (in any
such case, a "FUNDAMENTAL TRANSACTION"), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon
the occurrence of such Fundamental Transaction if it had been, immediately prior
to such Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the "ALTERNATE CONSIDERATION").
The aggregate Exercise Price for this Warrant will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate Exercise
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. At the Holder's
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder's right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (c) and insuring that this Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction. If

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any Fundamental Transaction constitutes or results in a Change of Control, then
at the request of the Holder delivered before the tenth (10th) day after the
consummation of such Change of Control, the Company (or any such successor or
surviving entity) will purchase this Warrant from the Holder for a purchase
price, payable in cash within five Trading Days after such request (or, if
later, on the effective date of the Fundamental Transaction), equal to the Black
Scholes value of the remaining unexercised portion of this Warrant on the date
of such request.

                  (d) Subsequent Equity Sales.

                           (i) If, at any time while this Warrant is
         outstanding, the Company or any Subsidiary issues additional shares of
         Common Stock or rights, warrants, options or other securities or debt
         convertible, exercisable or exchangeable for shares of Common Stock or
         otherwise entitling any Person to acquire shares of Common Stock
         (collectively, "COMMON STOCK EQUIVALENTS") at an effective net price
         (excluding customary investment banking fees) to the Company per share
         of Common Stock (the "EFFECTIVE PRICE") less than the Exercise Price
         (as adjusted hereunder to such date), then the Exercise Price shall be
         reduced to equal the product of (A) the Exercise Price in effect
         immediately prior to such issuance of Common Stock or Common Stock
         Equivalents times (B) a fraction, the numerator of which is the sum of
         (1) the number of shares of Common Stock outstanding immediately prior
         to such issuance, plus (2) the number of shares of Common Stock which
         the aggregate Effective Price of the Common Stock issued (or deemed to
         be issued) would purchase at the Exercise Price, and the denominator of
         which is the aggregate number of shares of Common Stock outstanding or
         deemed to be outstanding immediately after such issuance. For purposes
         of this paragraph, in connection with any issuance of any Common Stock
         Equivalents, (A) the maximum number of shares of Common Stock
         potentially issuable at any time upon conversion, exercise or exchange
         of such Common Stock Equivalents (the "DEEMED NUMBER") shall be deemed
         to be outstanding upon issuance of such Common Stock Equivalents, (B)
         the Effective Price applicable to such Common Stock shall equal the
         minimum dollar value of consideration payable to the Company to
         purchase such Common Stock Equivalents and to convert, exercise or
         exchange them into Common Stock (net of any discounts, fees,
         commissions and other expenses), divided by the Deemed Number, and (C)
         no further adjustment shall be made to the Exercise Price upon the
         actual issuance of Common Stock upon conversion, exercise or exchange
         of such Common Stock Equivalents.

                           (ii) If, at any time while this Warrant is
         outstanding, the Company or any Subsidiary issues Common Stock
         Equivalents with an Effective Price or a number of underlying shares
         that floats or resets or otherwise varies or is subject to adjustment
         based (directly or indirectly) on market prices of the Common Stock (a
         "FLOATING PRICE SECURITY"), then for purposes of applying the preceding
         paragraph in connection with any subsequent exercise, the Effective
         Price will be determined separately on each Exercise Date and will be
         deemed to equal the lowest Effective Price at which any holder of such
         Floating Price Security is entitled to acquire Common Stock on such
         Exercise Date (regardless of whether any such holder actually acquires
         any shares on such date).

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                           (iii) Notwithstanding the foregoing, no adjustment
         will be made under this paragraph (d) in respect of any Excluded Stock.

                  (e) Number of Warrant Shares. Simultaneously with any
adjustment to the Exercise Price pursuant to paragraphs (a), (b) or (d) of this
Section, the number of Warrant Shares that may be purchased upon exercise of
this Warrant shall be increased or decreased proportionately, so that after such
adjustment the aggregate Exercise Price payable hereunder for the increased or
decreased number of Warrant Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.

                  (f) Calculations. All calculations under this Section 9 shall
be made to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.

                  (g) Notice of Adjustments. Upon the occurrence of each
adjustment pursuant to this Section 9, the Company at its expense will promptly
compute such adjustment in accordance with the terms of this Warrant and prepare
a certificate setting forth such adjustment, including a statement of the
adjusted Exercise Price and adjusted number or type of Warrant Shares or other
securities issuable upon exercise of this Warrant (as applicable), describing
the transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company's Transfer Agent.

                  (h) Notice of Corporate Events. If the Company (i) declares a
dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including without limitation any granting of rights
or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or solicits stockholder approval for any Fundamental Transaction or (iii)
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice describing
the material terms and conditions of such transaction, at least 15 calendar days
prior to the applicable record or effective date on which a Person would need to
hold Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order
to insure that the Holder is given the practical opportunity to exercise this
Warrant prior to such time so as to participate in or vote with respect to such
transaction; provided, however, that the failure to deliver such notice or any
defect therein shall not affect the validity of the corporate action required to
be described in such notice.

         10. Payment of Exercise Price. The Holder shall pay the Exercise Price
in immediately available funds; provided, however, if the Registration Statement
is not effective as of the Exercise Date (which shall not be before the 120th
day after the Closing Date) or as of the Expiration Date, the Holder may then
satisfy its obligation to pay the Exercise Price through a "cashless exercise,"
in which event the Company shall issue to the Holder the number of Warrant
Shares determined as follows:

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                             X = Y [(A-B)/A]
                  where:

                             X = the number of Warrant Shares to be issued to
                             the Holder.

                             Y = the number of Warrant Shares with
                             respect to which this Warrant is
                             being exercised.

                             A = the average of the Closing Prices
                             for the five Trading Days immediately
                             prior to (but not including) the
                             Exercise Date.

                             B = the Exercise Price.

                  For purposes of Rule 144 promulgated under the Securities Act,
it is intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Purchase Agreement.

         11. Limitation on Exercise. (a) Notwithstanding anything to the
contrary contained herein, the number of shares of Common Stock that may be
acquired by the Holder upon any exercise of this Warrant (or otherwise in
respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder's for purposes of Section 13(d) of the Exchange Act does not
exceed 9.99% (the "MAXIMUM PERCENTAGE") of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of an
Exercise Notice hereunder will constitute a representation by the Holder that it
has evaluated the limitation set forth in this paragraph and determined that
issuance of the full number of Warrant Shares requested in such Exercise Notice
is permitted under this paragraph. The Company's obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section shall be
suspended (and shall not terminate or expire notwithstanding any contrary
provisions hereof) until such time, if any, as such shares of Common Stock may
be issued in compliance with such limitation. By written notice to the Company,
the Holder may waive the provisions of this Section or increase or decrease the
Maximum Percentage to any other percentage specified in such notice, but (i) any
such waiver or increase will not be effective until the 61st day after such
notice is delivered to the Company, and (ii) any such waiver or increase or
decrease will apply only to the Holder and not to any other holder of Warrants.

                  (b) Notwithstanding anything to the contrary contained herein,
the maximum number of shares of Common Stock that the Company may issue pursuant
to the Transaction Documents at an effective purchase price less than the
Closing Price on the Trading Day immediately preceding the Closing Date equals
6,986,734 shares (the "ISSUABLE MAXIMUM"),

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unless the Company obtains shareholder approval in accordance with the rules and
regulations of the Trading Market. If, at the time any Holder requests an
exercise of any of the Warrants, the Actual Minimum (excluding any shares issued
or issuable at an effective purchase price in excess of the Closing Price on the
Trading Day immediately preceding the Closing Date) exceeds the Issuable Maximum
(and if the Company has not previously obtained the required shareholder
approval), then the Company shall issue to the Holder requesting such exercise a
number of shares of Common Stock not exceeding such Holder's pro-rata portion of
the Issuable Maximum (based on such Holder's share (vis-a-vis other Holders) of
the aggregate purchase price paid under the Purchase Agreement and taking into
account any Warrant Shares previously issued to such Holder), and the remainder
of the Warrant Shares issuable in connection with such exercise or conversion
(if any) shall constitute "Excess Shares" pursuant to Section 11(c) below. For
the purposes hereof, "ACTUAL MINIMUM" shall mean, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Underlying
Shares issuable upon exercise in full of all Warrants, ignoring any limits on
the number of shares of Common Stock that may be owned by a Holder at any one
time.

                  (c) In the event that any Holder's receipt of shares of Common
Stock upon exercise of this Warrant is restricted based on the Issuable Maximum,
the Company shall either: (i) use best efforts to obtain the required
shareholder approval necessary to permit the issuance of such Excess Shares as
soon as is reasonably possible, but in any event not later than the 60th day
after the event giving rise to such Excess Shares, or (ii) within five Trading
Days after such event, pay cash to such Holder, as liquidated damages and not as
a penalty, in an amount equal to the Black Scholes value of this Warrant with
respect to the portion of this Warrant which is unexercisable due to the
Issuable Maximum after giving effect to the limitations in Section 11(b),
measured as of the date of such event or, if greater, the date of payment (such
difference, the "CASH AMOUNT"). No shares of Common Stock that were issued
pursuant to the Transaction Documents may be entitled to vote to approve the
issuance of such Excess Shares. If the Company elects the first option under the
first sentence of this Section 11(c) and the Company fails to obtain the
required shareholder approval on or prior to the 60th day after such event, then
within five Trading Days after such 60th day, the Company shall pay the Cash
Amount to such Holder, as liquidated damages and not as a penalty. The portion
of this Warrant in respect of which the Cash Amount has been paid shall be
cancelled and retired and the Company shall have no further obligation with
respect thereto.

         12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant. If
any fraction of a Warrant Share would, except for the provisions of this
Section, be issuable upon exercise of this Warrant, the number of Warrant Shares
to be issued will be rounded up to the nearest whole share.

         13. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any

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Trading Day, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices or communications shall be as set forth in the Purchase Agreement.

         14. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.

         15. Miscellaneous.

                  (a) Subject to the restrictions on transfer set forth on the
first page hereof, this Warrant may be assigned by the Holder. This Warrant may
not be assigned by the Company except to a successor in the event of a
Fundamental Transaction. This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
Subject to the preceding sentence, nothing in this Warrant shall be construed to
give to any Person other than the Company and the Holder any legal or equitable
right, remedy or cause of action under this Warrant. This Warrant may be amended
only in writing signed by the Company and the Holder and their successors and
assigns.

                  (b) The Company will not, by amendment of its governing
documents or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, the Company (i) will not
increase the par value of any Warrant Shares above the amount payable therefor
on such exercise, (ii) will take all such action as may be reasonably necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable Warrant Shares on the exercise of this Warrant, and (iii)
will not close its shareholder books or records in any manner which interferes
with the timely exercise of this Warrant.

                  (c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF
NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION

                                       10
<PAGE>

DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND HOLDER HEREBY WAIVE ALL RIGHTS TO A TRIAL BY
JURY.

                  (d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.

                  (e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]

                                       11
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

                                            CITIZENS, INC.

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

                                       12
<PAGE>

                             FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)

To: Citizens, Inc.

The undersigned is the Holder of Warrant No. 001 (the "WARRANT") issued by
Citizens, Inc., a Colorado corporation (the "COMPANY"). Capitalized terms used
herein and not otherwise defined have the respective meanings set forth in the
Warrant.

1.       The Warrant is currently exercisable to purchase a total of
         ______________ Warrant Shares.

2.       The undersigned Holder hereby exercises its right to purchase
         _________________ Warrant Shares pursuant to the Warrant.

3.       The Holder intends that payment of the Exercise Price shall be made as
         (check one):

                                    ____    "Cash Exercise"

                                    ____    "Cashless Exercise"

4.       If the holder has elected a Cash Exercise, the holder shall pay the sum
         of $____________ to the Company in accordance with the terms of the
         Warrant.

5.       Pursuant to this exercise, the Company shall deliver to the holder
         _______________ Warrant Shares in accordance with the terms of the
         Warrant.

6.       Following this exercise, the Warrant shall be exercisable to purchase a
         total of ______________ Warrant Shares.

Dated:_______________,________          Name of Holder:

                                        (Print)________________________

                                        By:____________________________
                                        Name:__________________________
                                        Title:_________________________

                                        (Signature must conform in all respects
                                        to name of holder as specified on the
                                        face of the Warrant)

<PAGE>

                               FORM OF ASSIGNMENT

         [To be completed and signed only upon transfer of Warrant]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Citizens, Inc. to
which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of Citizens, Inc. with full power of
substitution in the premises.

Dated:______________,__________

                                    ____________________________________________
                                    (Signature must conform in all respects to
                                    name of holder as specified on the face of
                                    the Warrant)
                                    __________________________________
                                    Address of Transferee

                                    __________________________________

                                    __________________________________

In the presence of:

_____________________________<PAGE>

                                                                EXHIBIT 10.12(h)

NEITHER THESE SECURITIES NOR THE SECURITIES FOR WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.

                                 CITIZENS, INC.

                                     WARRANT

Warrant No. 002                                             Dated: July 12, 2004

         Citizens, Inc., a Colorado corporation (the "COMPANY"), hereby
certifies that, for value received, Steelhead Investments Ltd. or its registered
assigns (the "HOLDER"), is entitled to purchase from the Company up to a total
of 118,698 shares of Class A common stock (the "COMMON STOCK"), of the Company
(each such share, a "WARRANT SHARE" and all such shares, the "WARRANT SHARES")
at an exercise price equal to $7.96 per share (as adjusted from time to time as
provided in Section 9, the "EXERCISE PRICE"), at any time and from time to time
from and after the date hereof and through and including the seven (7) year
anniversary of the date hereof (the "EXPIRATION DATE"), and subject to the
following terms and conditions. This Warrant (this "WARRANT") is one of a series
of similar warrants issued pursuant to that certain Securities Purchase
Agreement, dated as of the date hereof, by and among the Company and the
Purchasers identified therein (the "PURCHASE AGREEMENT"). All such warrants are
referred to herein, collectively, as the "WARRANTS."

         1. Definitions. In addition to the terms defined elsewhere in this
Warrant, capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement.

         2. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "WARRANT
REGISTER"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, absent actual notice to the contrary.

<PAGE>

         3. Registration of Transfers. The Company shall register the transfer
of any portion of this Warrant in the Warrant Register, upon surrender of this
Warrant, with the Form of Assignment attached hereto duly completed and signed,
to the Transfer Agent or to the Company at its address specified herein. Upon
any such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "NEW WARRANT"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Warrant.

         4. Exercise and Duration of Warrant.

                  (a) This Warrant shall be exercisable by the registered Holder
at any time and from time to time on or after the date hereof to and including
the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date,
the portion of this Warrant not exercised prior thereto shall be and become void
and of no value; provided that, if the average of the Closing Prices for the
five Trading Days immediately prior to (but not including) the Expiration Date
exceeds the Exercise Price on the Expiration Date, then this Warrant shall be
deemed to have been exercised in full (to the extent not previously exercised)
on a "cashless exercise" basis (if then permitted) at 6:30 P.M. New York City
time on the Expiration Date.

                  (b) A Holder may exercise this Warrant by delivering to the
Company (i) an exercise notice, in the form attached hereto (the "EXERCISE
NOTICE"), appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares as to which this Warrant is
being exercised (which may take the form of a "cashless exercise" if so
indicated in the Exercise Notice and if a "cashless exercise" may occur at such
time pursuant to Section 10 below) and the date such items are delivered to the
Company (as determined in accordance with the notice provisions hereof) is an
"EXERCISE DATE." The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder. Execution and delivery of the
Exercise Notice shall have the same effect as cancellation of the original
Warrant and issuance of a New Warrant evidencing the right to purchase the
remaining number of Warrant Shares.

         5. Delivery of Warrant Shares.

                  (a) Upon exercise of this Warrant, the Company shall promptly
(but in no event later than three Trading Days after the Exercise Date) issue or
cause to be issued and cause to be delivered to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate for
the Warrant Shares issuable upon such exercise, free of restrictive legends
unless a registration statement covering the resale of the Warrant Shares and
naming the Holder as a selling stockholder thereunder is not then effective and
the Warrant Shares are not freely transferable without volume restrictions
pursuant to Rule 144 under the Securities Act. The Holder, or any Person so
designated by the Holder to receive Warrant Shares, shall be deemed to have
become holder of record of such Warrant Shares as of the Exercise Date. The
Company shall, upon request of the Holder, use its best efforts to deliver

                                       2
<PAGE>

Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation performing similar functions.

                  (b) This Warrant is exercisable, either in its entirety or,
from time to time, for a portion of the number of Warrant Shares. Upon surrender
of this Warrant following one or more partial exercises, the Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.

                  (c) In addition to any other rights available to a Holder, if
the Company fails to deliver to the Holder a certificate representing Warrant
Shares by the third Trading Day the date on which delivery of such certificate
is required by this Warrant, and if after such third Trading Day the Holder
purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of the Warrant Shares that the
Holder anticipated receiving from the Company (a "BUY-IN"), then in the Holder's
sole discretion, the Company shall within three Trading Days after the Holder's
request, either (i) pay cash to the Holder in an amount equal to the Holder's
total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the "BUY-IN PRICE"), at which point the Company's
obligation to deliver such certificate (and to issue such Common Stock) shall
terminate, or (ii) promptly honor its obligation to deliver to the Holder a
certificate or certificates representing such Common Stock and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In Price over the
product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company's obligation to
deliver such certificate.

                  (d) The Company's obligations to issue and deliver Warrant
Shares in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares. Nothing herein shall limit a Holder's right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company's failure to timely deliver certificates representing
shares of Common Stock upon exercise of this Warrant as required pursuant to the
terms hereof.

         6. Charges, Taxes and Expenses. Issuance and delivery of certificates
for shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder or an Affiliate thereof. The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this Warrant
or receiving Warrant Shares upon exercise hereof.

                                       3
<PAGE>

         7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.

         8. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Warrant Shares upon exercise of this Warrant as herein
provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of persons other than the Holder (taking into
account the adjustments and restrictions of Section 9). The Company covenants
that all Warrant Shares so issuable and deliverable shall, upon issuance and the
payment of the applicable Exercise Price in accordance with the terms hereof, be
duly and validly authorized, issued and fully paid and nonassessable. The
Company will take all such action as may be necessary to assure that such shares
of Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any securities exchange
or automated quotation system upon which the Common Stock may be listed.

         9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.

                  (a) Stock Dividends and Splits. If the Company, at any time
while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock
or otherwise makes a distribution on any class of capital stock that is payable
in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock
into a larger number of shares, or (iii) combines outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Exercise Price
shall be multiplied by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination.

                  (b) Pro Rata Distributions. If the Company, at any time while
this Warrant is outstanding, distributes to holders of Common Stock (i)
evidences of its indebtedness, (ii) any security (other than a distribution of
Common Stock covered by the preceding paragraph), (iii) rights or warrants to
subscribe for or purchase any security, or (iv) any other asset (in each case,
"DISTRIBUTED PROPERTY"), then in each such case the Exercise Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution shall be adjusted (effective on such
record date) to equal the product of such Exercise Price times a fraction of
which the denominator shall be the average of the Closing

                                       4
<PAGE>

Prices for the five Trading Days immediately prior to (but not including) such
record date and of which the numerator shall be such average less the then fair
market value of the Distributed Property distributed in respect of one
outstanding share of Common Stock, as determined by the Company's independent
certified public accountants that regularly examine the financial statements of
the Company (an "APPRAISER"). In such event, the Holder, after receipt of the
determination by the Appraiser, shall have the right to select an additional
appraiser (which shall be a nationally recognized accounting firm), in which
case such fair market value shall be deemed to equal the average of the values
determined by each of the Appraiser and such appraiser. As an alternative to the
foregoing adjustment to the Exercise Price, at the request of the Holder
delivered before the 90th day after such record date, the Company will deliver
to such Holder, within five Trading Days after such request (or, if later, on
the effective date of such distribution), the Distributed Property that such
Holder would have been entitled to receive in respect of the Warrant Shares for
which this Warrant could have been exercised immediately prior to such record
date. If such Distributed Property is not delivered to a Holder pursuant to the
preceding sentence, then upon expiration of or any exercise of this Warrant that
occurs after such record date, such Holder shall remain entitled to receive, in
addition to the Warrant Shares otherwise issuable upon such exercise (if
applicable), such Distributed Property.

                  (c) Fundamental Transactions. If, at any time while this
Warrant is outstanding, (i) the Company effects any merger or consolidation of
the Company with or into another Person in which the Company is not the
surviving entity, (ii) the Company effects any sale of all or substantially all
of its assets in one or a series of related transactions, (iii) any tender offer
or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (iv) the Company effects
any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property (other than as a result of a subdivision
or combination of shares of Common Stock covered by Section 9(a) above) (in any
such case, a "FUNDAMENTAL TRANSACTION"), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon
the occurrence of such Fundamental Transaction if it had been, immediately prior
to such Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the "ALTERNATE CONSIDERATION").
The aggregate Exercise Price for this Warrant will not be affected by any such
Fundamental Transaction, but the Company shall apportion such aggregate Exercise
Price among the Alternate Consideration in a reasonable manner reflecting the
relative value of any different components of the Alternate Consideration. If
holders of Common Stock are given any choice as to the securities, cash or
property to be received in a Fundamental Transaction, then the Holder shall be
given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. At the Holder's
request, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the
foregoing provisions and evidencing the Holder's right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms
of any agreement pursuant to which a Fundamental Transaction is effected shall
include terms requiring any such successor or surviving entity to comply with
the provisions of this paragraph (c) and insuring that this Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction. If

                                       5
<PAGE>

any Fundamental Transaction constitutes or results in a Change of Control, then
at the request of the Holder delivered before the tenth (10th) day after the
consummation of such Change of Control, the Company (or any such successor or
surviving entity) will purchase this Warrant from the Holder for a purchase
price, payable in cash within five Trading Days after such request (or, if
later, on the effective date of the Fundamental Transaction), equal to the Black
Scholes value of the remaining unexercised portion of this Warrant on the date
of such request.

                  (d) Subsequent Equity Sales.

                           (i) If, at any time while this Warrant is
         outstanding, the Company or any Subsidiary issues additional shares of
         Common Stock or rights, warrants, options or other securities or debt
         convertible, exercisable or exchangeable for shares of Common Stock or
         otherwise entitling any Person to acquire shares of Common Stock
         (collectively, "COMMON STOCK EQUIVALENTS") at an effective net price
         (excluding customary investment banking fees) to the Company per share
         of Common Stock (the "EFFECTIVE PRICE") less than the Exercise Price
         (as adjusted hereunder to such date), then the Exercise Price shall be
         reduced to equal the product of (A) the Exercise Price in effect
         immediately prior to such issuance of Common Stock or Common Stock
         Equivalents times (B) a fraction, the numerator of which is the sum of
         (1) the number of shares of Common Stock outstanding immediately prior
         to such issuance, plus (2) the number of shares of Common Stock which
         the aggregate Effective Price of the Common Stock issued (or deemed to
         be issued) would purchase at the Exercise Price, and the denominator of
         which is the aggregate number of shares of Common Stock outstanding or
         deemed to be outstanding immediately after such issuance. For purposes
         of this paragraph, in connection with any issuance of any Common Stock
         Equivalents, (A) the maximum number of shares of Common Stock
         potentially issuable at any time upon conversion, exercise or exchange
         of such Common Stock Equivalents (the "DEEMED NUMBER") shall be deemed
         to be outstanding upon issuance of such Common Stock Equivalents, (B)
         the Effective Price applicable to such Common Stock shall equal the
         minimum dollar value of consideration payable to the Company to
         purchase such Common Stock Equivalents and to convert, exercise or
         exchange them into Common Stock (net of any discounts, fees,
         commissions and other expenses), divided by the Deemed Number, and (C)
         no further adjustment shall be made to the Exercise Price upon the
         actual issuance of Common Stock upon conversion, exercise or exchange
         of such Common Stock Equivalents.

                           (ii) If, at any time while this Warrant is
         outstanding, the Company or any Subsidiary issues Common Stock
         Equivalents with an Effective Price or a number of underlying shares
         that floats or resets or otherwise varies or is subject to adjustment
         based (directly or indirectly) on market prices of the Common Stock (a
         "FLOATING PRICE SECURITY"), then for purposes of applying the preceding
         paragraph in connection with any subsequent exercise, the Effective
         Price will be determined separately on each Exercise Date and will be
         deemed to equal the lowest Effective Price at which any holder of such
         Floating Price Security is entitled to acquire Common Stock on such
         Exercise Date (regardless of whether any such holder actually acquires
         any shares on such date).

                                       6
<PAGE>

                           (iii) Notwithstanding the foregoing, no adjustment
         will be made under this paragraph (d) in respect of any Excluded Stock.

                  (e) Number of Warrant Shares. Simultaneously with any
adjustment to the Exercise Price pursuant to paragraphs (a), (b) or (d) of this
Section, the number of Warrant Shares that may be purchased upon exercise of
this Warrant shall be increased or decreased proportionately, so that after such
adjustment the aggregate Exercise Price payable hereunder for the increased or
decreased number of Warrant Shares shall be the same as the aggregate Exercise
Price in effect immediately prior to such adjustment.

                  (f) Calculations. All calculations under this Section 9 shall
be made to the nearest cent or the nearest 1/100th of a share, as applicable.
The number of shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the account of the Company, and the
disposition of any such shares shall be considered an issue or sale of Common
Stock.

                  (g) Notice of Adjustments. Upon the occurrence of each
adjustment pursuant to this Section 9, the Company at its expense will promptly
compute such adjustment in accordance with the terms of this Warrant and prepare
a certificate setting forth such adjustment, including a statement of the
adjusted Exercise Price and adjusted number or type of Warrant Shares or other
securities issuable upon exercise of this Warrant (as applicable), describing
the transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the Company will
promptly deliver a copy of each such certificate to the Holder and to the
Company's Transfer Agent.

                  (h) Notice of Corporate Events. If the Company (i) declares a
dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including without limitation any granting of rights
or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or solicits stockholder approval for any Fundamental Transaction or (iii)
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice describing
the material terms and conditions of such transaction, at least 15 calendar days
prior to the applicable record or effective date on which a Person would need to
hold Common Stock in order to participate in or vote with respect to such
transaction, and the Company will take all steps reasonably necessary in order
to insure that the Holder is given the practical opportunity to exercise this
Warrant prior to such time so as to participate in or vote with respect to such
transaction; provided, however, that the failure to deliver such notice or any
defect therein shall not affect the validity of the corporate action required to
be described in such notice.

         10. Payment of Exercise Price. The Holder shall pay the Exercise Price
in immediately available funds; provided, however, if the Registration Statement
is not effective as of the Exercise Date (which shall not be before the 120th
day after the Closing Date) or as of the Expiration Date, the Holder may then
satisfy its obligation to pay the Exercise Price through a "cashless exercise,"
in which event the Company shall issue to the Holder the number of Warrant
Shares determined as follows:

                                       7
<PAGE>

                             X = Y [(A-B)/A]
                  where:

                             X = the number of Warrant Shares to be issued to
                             the Holder.

                             Y = the number of Warrant Shares with
                             respect to which this Warrant is
                             being exercised.

                             A = the average of the Closing Prices
                             for the five Trading Days immediately
                             prior to (but not including) the
                             Exercise Date.

                             B = the Exercise Price.

                  For purposes of Rule 144 promulgated under the Securities Act,
it is intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
commenced, on the date this Warrant was originally issued pursuant to the
Purchase Agreement.

         11. Limitation on Exercise. (a) Notwithstanding anything to the
contrary contained herein, the number of shares of Common Stock that may be
acquired by the Holder upon any exercise of this Warrant (or otherwise in
respect hereof) shall be limited to the extent necessary to insure that,
following such exercise (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with the Holder's for purposes of Section 13(d) of the Exchange Act does not
exceed 9.99% (the "MAXIMUM PERCENTAGE") of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such exercise). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of an
Exercise Notice hereunder will constitute a representation by the Holder that it
has evaluated the limitation set forth in this paragraph and determined that
issuance of the full number of Warrant Shares requested in such Exercise Notice
is permitted under this paragraph. The Company's obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section shall be
suspended (and shall not terminate or expire notwithstanding any contrary
provisions hereof) until such time, if any, as such shares of Common Stock may
be issued in compliance with such limitation. By written notice to the Company,
the Holder may waive the provisions of this Section or increase or decrease the
Maximum Percentage to any other percentage specified in such notice, but (i) any
such waiver or increase will not be effective until the 61st day after such
notice is delivered to the Company, and (ii) any such waiver or increase or
decrease will apply only to the Holder and not to any other holder of Warrants.

                  (b) Notwithstanding anything to the contrary contained herein,
the maximum number of shares of Common Stock that the Company may issue pursuant
to the Transaction Documents at an effective purchase price less than the
Closing Price on the Trading Day immediately preceding the Closing Date equals
6,986,734 shares (the "ISSUABLE MAXIMUM"),

                                       8
<PAGE>

unless the Company obtains shareholder approval in accordance with the rules and
regulations of the Trading Market. If, at the time any Holder requests an
exercise of any of the Warrants, the Actual Minimum (excluding any shares issued
or issuable at an effective purchase price in excess of the Closing Price on the
Trading Day immediately preceding the Closing Date) exceeds the Issuable Maximum
(and if the Company has not previously obtained the required shareholder
approval), then the Company shall issue to the Holder requesting such exercise a
number of shares of Common Stock not exceeding such Holder's pro-rata portion of
the Issuable Maximum (based on such Holder's share (vis-a-vis other Holders) of
the aggregate purchase price paid under the Purchase Agreement and taking into
account any Warrant Shares previously issued to such Holder), and the remainder
of the Warrant Shares issuable in connection with such exercise or conversion
(if any) shall constitute "Excess Shares" pursuant to Section 11(c) below. For
the purposes hereof, "ACTUAL MINIMUM" shall mean, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Underlying
Shares issuable upon exercise in full of all Warrants, ignoring any limits on
the number of shares of Common Stock that may be owned by a Holder at any one
time.

                  (c) In the event that any Holder's receipt of shares of Common
Stock upon exercise of this Warrant is restricted based on the Issuable Maximum,
the Company shall either: (i) use best efforts to obtain the required
shareholder approval necessary to permit the issuance of such Excess Shares as
soon as is reasonably possible, but in any event not later than the 60th day
after the event giving rise to such Excess Shares, or (ii) within five Trading
Days after such event, pay cash to such Holder, as liquidated damages and not as
a penalty, in an amount equal to the Black Scholes value of this Warrant with
respect to the portion of this Warrant which is unexercisable due to the
Issuable Maximum after giving effect to the limitations in Section 11(b),
measured as of the date of such event or, if greater, the date of payment (such
difference, the "CASH AMOUNT"). No shares of Common Stock that were issued
pursuant to the Transaction Documents may be entitled to vote to approve the
issuance of such Excess Shares. If the Company elects the first option under the
first sentence of this Section 11(c) and the Company fails to obtain the
required shareholder approval on or prior to the 60th day after such event, then
within five Trading Days after such 60th day, the Company shall pay the Cash
Amount to such Holder, as liquidated damages and not as a penalty. The portion
of this Warrant in respect of which the Cash Amount has been paid shall be
cancelled and retired and the Company shall have no further obligation with
respect thereto.

         12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant. If
any fraction of a Warrant Share would, except for the provisions of this
Section, be issuable upon exercise of this Warrant, the number of Warrant Shares
to be issued will be rounded up to the nearest whole share.

         13. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Exercise Notice) shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any

                                       9
<PAGE>

Trading Day, (iii) the Trading Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices or communications shall be as set forth in the Purchase Agreement.

         14. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.

         15. Miscellaneous.

                  (a) Subject to the restrictions on transfer set forth on the
first page hereof, this Warrant may be assigned by the Holder. This Warrant may
not be assigned by the Company except to a successor in the event of a
Fundamental Transaction. This Warrant shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns.
Subject to the preceding sentence, nothing in this Warrant shall be construed to
give to any Person other than the Company and the Holder any legal or equitable
right, remedy or cause of action under this Warrant. This Warrant may be amended
only in writing signed by the Company and the Holder and their successors and
assigns.

                  (b) The Company will not, by amendment of its governing
documents or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder against impairment.
Without limiting the generality of the foregoing, the Company (i) will not
increase the par value of any Warrant Shares above the amount payable therefor
on such exercise, (ii) will take all such action as may be reasonably necessary
or appropriate in order that the Company may validly and legally issue fully
paid and nonassessable Warrant Shares on the exercise of this Warrant, and (iii)
will not close its shareholder books or records in any manner which interferes
with the timely exercise of this Warrant.

                  (c) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS
CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF
NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION

                                       10
<PAGE>

DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY AND HOLDER HEREBY WAIVE ALL RIGHTS TO A TRIAL BY
JURY.

                  (d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.

                  (e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]

                                       11
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

                                                  CITIZENS, INC.

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

                                       12
<PAGE>

                             FORM OF EXERCISE NOTICE

(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)

To: Citizens, Inc.

The undersigned is the Holder of Warrant No. 001 (the "WARRANT") issued by
Citizens, Inc., a Colorado corporation (the "COMPANY"). Capitalized terms used
herein and not otherwise defined have the respective meanings set forth in the
Warrant.

1.       The Warrant is currently exercisable to purchase a total of
         ______________ Warrant Shares.

2.       The undersigned Holder hereby exercises its right to purchase
         _________________ Warrant Shares pursuant to the Warrant.

3.       The Holder intends that payment of the Exercise Price shall be made as
         (check one):

                                    ____    "Cash Exercise"

                                    ____    "Cashless Exercise"

4.       If the holder has elected a Cash Exercise, the holder shall pay the sum
         of $____________ to the Company in accordance with the terms of the
         Warrant.

5.       Pursuant to this exercise, the Company shall deliver to the holder
         _______________ Warrant Shares in accordance with the terms of the
         Warrant.

6.       Following this exercise, the Warrant shall be exercisable to purchase a
         total of ______________ Warrant Shares.

Dated:_____________,______              Name of Holder:

                                        (Print)_______________________

                                        By:___________________________
                                        Name:_________________________
                                        Title:________________________

                                        (Signature must conform in all respects
                                        to name of holder as specified on the
                                        face of the Warrant)

<PAGE>

                               FORM OF ASSIGNMENT

         [To be completed and signed only upon transfer of Warrant]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Citizens, Inc. to
which the within Warrant relates and appoints ________________ attorney to
transfer said right on the books of Citizens, Inc. with full power of
substitution in the premises.

Dated:_________________,________

                                    ___________________________________________-
                                    (Signature must conform in all respects to
                                    name of holder as specified on the face of
                                    the Warrant)

                                    ____________________________________________
                                    Address of Transferee

                                    ____________________________________________

                                    ____________________________________________

In the presence of:

_____________________________

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