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                               SECOND AMENDMENT 
                                      TO
                        STANDARD INDUSTRIAL LEASE - NET
                        -------------------------------

     This Second Amendment to the June 8, 1992 Standard Industrial Lease - Net 
is made and entered into as of November 18, 1996, by and between S&B Mortgage 
Investment Company, hereinafter called "Lessor", and Variflex, Inc. (formerly 
Variflex of California), hereinafter called "Lessee", and is made with reference
to the following facts:

      A. WHEREAS, Lessor and Lessee are parties to a certain Standard Industrial
Lease - Net dated June 8, 1992, which was amended by the First Amendment dated
March 20, 1995, for the premises known as 5152 North Commerce Avenue, Moorpark,
California, and described as a concrete tilt-up industrial facility comprised of
approximately 104,000 square feet of M-2 zoned land; and


     B. WHEREAS, Lessor and Rolls-Royce Motor Cars, Inc., a Delaware corporation
("Rolls-Royce"), are parties to a certain Standard Industrial/Commercial 
Single-Tenant Lease - Net, dated May 21, 1991, for the premises known as 5156 
North Commerce Avenue, Moorpark, California, and described as a concrete 
tilt-up building of approximately 31,233 square feet of M-2 zoned land; and

     C. WHEREAS, Lessee presently subleases from Rolls-Royce a substantial
portion of the property commonly known as 5156 North Commerce Avenue, Moorpark,
California, and may desire to continue to occupy said Premises either as a
subtenant of Rolls-Royce or as a tenant of Lessor for a term consistent with
Lessee's lease term pursuant to the Lease by which Lessee possesses the property
commonly known as 5152 North Commerce Avenue, Moorpark, California; and


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     D.  WHEREAS, Lessor and Lessee are desirous of amending said June 8, 1992 
Standard Industrial Lease - Net as hereinafter provided;

     NOW, THEREFORE, the parties respectfully agree as follows:

     1.  Regarding Page 1, Paragraph 3.1, Term, the term of this Lease shall be 
                                          ----
extended for three (3) years, commencing on January 1, 1998, and ending on 
December 31, 2000.

     2.  Regarding Page 1, Paragraph 4, Rent, the monthly rent Lessee shall pay 
                                        ----
to Lessor, in advance, during the extended term provided for in this Second 
Amendment (commencing on January 1, 1998 and ending on December 31, 2000) for 
the Premises known as 5152 North Commerce Avenue, Moorpark shall be $34,320.00.

     3.  Regarding Page 1, Paragraph 4, Rent, the $33,280.00 which was paid to 
                                        ----
Lessor by Lessee upon the execution of the Lease on or about June 8, 1992, shall
be applied towards the rent due as and for the last month of the extended term, 
rather than to be applied towards the rent due for the month of the extended 
term, rather than to be applied towards the rent due for the month of December, 
1997.

     4.  Regarding Page 1, Paragraph 4, Rent, the Base Rent payable during each 
                                        ----
year of the extended term beginning January 1, 1999 shall be adjusted upward in
direct proportion to any increase in the Consumer Price Index as hereinafter
defined. The base figure for computing the adjusted minimum rent shall be the
last figure for the Consumer Price Index for Urban Wage Earners and Clerical
Workers, Los Angeles Metropolitan Area All Items, based on the year 1982-84 =
100, published by the United States Department of Labor Statistics (the "Index")
as of January 1, 1998 (the "Beginning Index Figure"). The figure for computing
the adjustment shall be the figure for the Index published as to each succeeding
annual anniversary of such extended rental year during the term.

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<PAGE>
 
      If the Index is changed at any time during the term so that the base year
differs from that used to compute the Beginning Index Figure, the Index shall be
converted in accordance with the conversion factor published by the United
States Department of Labor, Bureau of Labor Statistics. If the Index is
discontinued or revised at any time during the Term such other government index
or computation which replaces it shall be used in order to obtain substantially
the same result as would be obtained if the Index had not been discontinued or
revised. Upon any adjustment in the rent pursuant to other provisions of this
Lease, the rent as so adjusted shall become the base rent for later CPI
adjustments and the Beginning Index Figure shall be the last figure for the
Index prior to the effective date of the adjustment in the Base Rent.

     5.  Regarding Page 1, Paragraph 2, Premises, upon the termination of the 
                                        --------
May 21, 1991 Lease between Lessor and Rolls-Royce Motor Cars, Inc., covering 
5156 North Commerce Avenue, Moorpark, Lessor shall not lease all or any part of 
the Premises commonly known as 5156 North Commerce Avenue, Moorpark to any 
third person without first notifying Lessee in writing that said Lease with 
Rolls-Royce is terminated and that Lessor intends to relet the subject Premises 
to a third party. Lessee shall have the right, within 20 days after receipt of 
Lessor's notice, to advise Lessor in writing of its agreement to expand the 
Premises to include not only 5152 North Commerce Avenue but also 5156 North 
Commerce Avenue on all of the same Lease terms and conditions specified in the 
June 8, 1992 Standard Industrial Lease - Net, as amended, by and between S&B 
Mortgage Investment Company and Variflex of California, including, without 
limitation, the provisions relating to the rights and obligations of the parties
with respect to alterations. So long as Lessee provides Lessor with said notice
of intent to expand the Premises to also include 5156 North Commerce Avenue,
Moorpark, then Lessor will allow such inclusion so long as the total rent
payable to Lessor by Lessee for both the original premises (5152 North Commerce
Avenue, Moorpark, California) and the expanded premises (5156 North Commerce
Avenue, Moorpark, California) will be $47,460.00 rent per month. If Lessee does
not provide Lessor with the written notice provided in this Paragraph 5 and
execute a formal lease amendment within said 20 days to expand the Premises to
include 5156 North Commerce Avenue, Moorpark, this right of first refusal shall
lapse and terminate and Lessor thereafter shall have the right to lease

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<PAGE>
 
to any third party, to Rolls Royce, or to extend the existing lease covering 
5156 North Commerce Avenue, Moorpark, or any part of it to a third person upon 
any terms and conditions desired by Lessor. In the event Lessee exercises its 
right to expand the Premises to include both 5152 and 5156 North Commerce 
Avenue, as provided in this Paragraph 5, then Page 2, paragraph 1.3(a), 
Property Insurance, shall be amended so that the amount of insurance to be
------------------ 
obtained by the insuring party covering loss or damages to the Premises shall be
increased from $3,500,000.00 to $5,000,000.00 for both properties, which is the
agreed upon replacement value.

     6.  Except as herein mentioned, the Lease remains unmodified and in full 
force and effect.

     IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment 
to Standard Industrial Lease - Net as of November 18, 1996, at Ventura County, 
California.


LESSOR:                                 LESSEE:

S&B MORTGAGE INVESTMENT COMPANY         VARIFLEX, INC.
2541 Uranium Drive                      5152 North Commerce Avenue
Oxnard, California 93030                Moorpark, California  93021

By /s/  Stanley C. Hess                 By  /s/ Raymond H. Losi, II
  -----------------------------           ------------------------------
   STANLEY C. HESS                        RAYMOND H. LOSI, II, President

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