Document:

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                                                                 EXHIBIT 10.10.1

                    FIRST AMENDMENT TO CONSULTING AGREEMENT

     This FIRST AMENDMENT TO CONSULTING AGREEMENT (this "Amendment") is made as
of December 21, 1999, by and between VARIFLEX, INC., a Delaware Corporation
("Company"), and RAYMOND H. LOSI, an individual ("Consultant").

                                   RECITALS

     A.   Consulting Agreement.  Consultant and Company are parties to that
          --------------------
certain Consulting Agreement dated as of November 18, 1997 (the "Consulting
Agreement"), pursuant to which Consultant is retained by the Company to serve as
a consultant for a two year term commencing on the date thereof at a salary of
$100,000 per year.

     B.   Amendment to Consulting Agreement.  The Board of Directors and
          ---------------------------------
Compensation Committee of the Company have discussed the valuable contribution
Consultant has provided to the Company and have ratified an amendment to the
Consulting Agreement which extends its terms on a month-to-month basis,
terminable by either party on sixty (60) days prior written notice, at a fee of
$1,000 per month.

NOW, THEREFORE, in consideration of all of the foregoing, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby
acknowledge and agree as follows:

     I.   Amendment of Paragraph I (a) - Term and Compensation.  Paragraph I (a)
          ----------------------------------------------------
of the Consulting Agreement is hereby amended in its entirety to read in full as
follows:

     "(a)  Consultant will assist the Company in the capacity as an independent
     consultant by rendering advice and assistance on such matters as the
     Company may specifically request, including providing advice and assistance
     with Consultant's past areas of responsibility; provided that Consultant
     shall not be required to render services for more than twenty (20) hours
     per month. The initial term of this Agreement shall be two years,
     commencing on the date of this Agreement and ending on November 18, 1999.
     Thereafter, the term of this Agreement shall continue through November 30,
     1999 and then shall continue on a month-to-month basis, commencing on
     December 1, 1999, with either Consultant or the Company having the right to
     terminate this Agreement without cause; provided, however, that in order to
     terminate this Agreement, either Consultant or the Company, as the case may
     be, must provide the other with at least sixty (60) days prior written
     notice of such termination.
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     2.   Amendment of Paragraph I (b) - Term and Compensation.  The first
          ----------------------------------------------------
sentence of paragraph I(b) of the Consulting Agreement is hereby amended by
deleting the words "One Hundred Thousand Dollars ($100,000) per year" after the
words "a salary of' and before the word "payable," and replacing them with the
words "One Thousand Dollars ($1,000) per month."

     3.   Effect of this Amendment.  Except as amended hereby, the Consulting
          ------------------------
Agreement shall remain in full force and effect.

     4.   Execution in Counterparts and By Facsimile.  This Amendment may be
          ------------------------------------------
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute one and same agreement. A facsimile execution copy of this
Amendment shall be binding and have the same force and effect as the original.
of this Amendment.

COMPANY:

VARIFLEX, INC.,
a Delaware corporation

/s/ Roger M. Wasserman
---------------------------
By: Roger M. Wasserman
    Chief Financial Officer

CONSULTANT:

/s/ Raymond H. Losi
------------------------
By: Raymond H. Losi
    an individual<PAGE>

                                                                   Exhibit 10.20

Bank of America

                                                         Business Loan Agreement

This Agreement dated as of March 31, 2000, is between Bank of America, N.A. (the
                           --------  ----
"Bank") and Variflex, Inc. (the "Borrower").

1.   LINE OF CREDIT AMOUNT AND TERMS

1.1  Line of Credit Amount

(a)  During the availability period described below, the Bank will provide a
     line of credit to the Borrower. The amount of the line of credit will be
     the lesser of Eight Million and 00/100 Dollars ($8,000,000.00) or the sum
     of 60% of short-term investments and 60% of gross accounts receivable (the
     "Commitment").

(b)  This is a revolving line of credit providing for letters of credit and
     shipside bonds.

(c)  The Borrower agrees that if at any time the total amount of any letters of
     credit, including amounts drawn on letters of credit and not yet
     reimbursed, and shipside bonds, exceed the Commitment, the Borrower will
     prepay the excess amount on the Bank's demand.

1.2  Availability Period.  The line of credit is available between the date of
this Agreement and December 31, 2001, or such earlier date as the availability
may terminate as provided in this Agreement (the "Expiration Date").

1.3  Letters of Credit.

(a)  This line of credit may be used for financing:

     (I)   commercial letters of credit with a maximum maturity of 180 days but
           not to extend more than 120 days beyond the Expiration Date. Each
           commercial letter of credit will require drafts payable at sight.

     (ii)  The following letters of credit are outstanding from the Bank for the
           account of the Borrower:

               Letter of Credit Number          Amount
               -----------------------          ------

                    1055206                   $ 64,404.00
                    1055456                   $     32.64
                    1080626                   $905,384.67
                    1081439                   $ 81,600.00
                    1083034                   $ 26,036.00
                    1083849                   $285,438.72
                    1085125                   $424,756.80
                    1085126                   $255,922.50
                    1085127                   $ 96,293.82
                    1088290                   $ 17,500.00
                    1088291                   $122,500.00
                    1088292                   $ 35,000.00
                    1088293                   $ 52,500.00
                    1088294                   $ 52,500.00
                    1088295                   $ 87,500.00
                    1088296                   $ 52,500.00
                    1088297                   $ 87,500.00
                    1088298                   $ 17,500.00
                    1088299                   $ 35,000.00
                    1088300                   $ 35,000.00
                    1088301                   $ 17,500.00
                    1088329                   $135,226.20
                    1088330                   $222.627.50
                    1088718                   $ 21,517.20

  As of the date of this Agreement, these letters of credit shall be deemed to
  be outstanding under this Agreement, and shall be subject to all the terms and
  conditions stated in this Agreement.

(b)  The Borrower agrees:

                                      -1-
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     (I)   any sum drawn under a letter of credit may, at the option of the
           Bank, be added to the principal amount outstanding under this
           Agreement

     (ii)  if there is a default under this Agreement, to immediately prepay and
           make the Bank whole for any outstanding letters of credit.

     (iii) the issuance of any letter of credit and any amendment to a letter of
           credit is subject to the Bank's written approval and must be in form
           and content satisfactory to the Bank and in favor of a beneficiary
           acceptable to the Bank.

     (iv)  to sign the Bank's form Application and Agreement for Commercial
           Letter of Credit.

     (v)   to pay the following issuance and other fees for issuing and
           processing letters of credit:

               Issuance Fee                     1/10%, minimum $90
               Amendment Fee (Increase)         1/10%, minimum $70
               Other Amendments                                $70
               Negotiation Fee                                 $80

     (vi)  to allow the Bank to automatically charge its checking account for
           applicable fees, discounts, and other charges.

1.4  Shipside Bonds. This line of credit up to a maximum face value
outstanding of Five Hundred Thousand and 00/100 Dollars ($500,000.00) may be
used for financing shipside bonds. The Borrower agrees:

(a)  any sum owed to the Bank under a shipside bond may, at the option of the
     Bank, be added to the principal amount outstanding under this Agreement.
     The amount will bear interest and be due as described elsewhere in this
     Agreement.

(b)  if there is a default under this Agreement, to immediately prepay and make
     the Bank whole for any outstanding shipside bonds.

(c)  the issuance of any shipside bond is subject to the Bank's express
     approval and must be in form and content satisfactory to the Bank.

(d)  to sign the Bank's application, security agreement and other standard forms
     for shipside bonds, and to pay any issuance and/or other fees that the Bank
     notifies the Borrower will be charged for issuing and processing shipside
     bonds for the Borrower.

(e)  to allow the Bank to automatically charge its checking account for
     applicable fees, discounts, and other charges.

2.   EXPENSES

2.1  Expenses. The Borrower agrees to immediately repay the Bank for expenses
     that include, but are not limited to, filing, recording and search fees,
     appraisal fees, title report fees and documentation fees.

2.2  Reimbursement Costs.
(a)  The Borrower agrees to reimburse the Bank for any expenses it incurs in the
     preparation of this Agreement and any agreement or instrument required by
     this Agreement. Expenses include, but are not limited to, reasonable
     Attorneys' fees, including any allocated costs of the Bank's in-house
     counsel.

COLLATERAL

3.1  Personal Property. The Borrower's obligations to the Bank under this
     Agreement will be secured by personal property the Borrower now owns or
     will own in the future as listed below. The collateral is further defined
     in security agreement(s) executed by the Borrower. In addition, all
     personal property collateral securing this Agreement shall also secure all
     other present and future obligations of the Borrower to the Bank (excluding
     any consumer credit covered by the federal Truth in Lending law, unless the
     Borrower has otherwise agreed in writing). All personal property collateral
     securing any other present or future obligations of the Borrower to the
     Bank shall also secure this Agreement.

                                      -2-
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(a)  Inventory.

(b)  Receivables.

4.   DISBURSEMENTS, PAYMENTS AND COSTS

4.1  Requests for Credit. Each request for an extension of credit will be made
     in writing in a manner acceptable to the Bank, or by another means
     acceptable to the Bank.

4.2  Disbursements and Payments.  Each disbursement by the Bank and each payment
     by the Borrower will be:

(a)  made at the Bank's branch (or other location) selected by the Bank from
     time to time;
(b)  made for the account of the Bank's branch selected by the Bank from time to
     time;
(c)  made in immediately available funds, or such other type of funds selected
     by the Bank;
(d)  evidenced by records kept by the Bank. In addition, the Bank may, at its
     discretion, require the Borrower to sign one or more promissory notes.

4.3  Telephone and Telefax Authorization.

(a)  The Bank may honor telephone or telefax instructions for advances or
     repayments and telefax requests for the issuance of letters of credit
     given, or purported to be given, by any one of the individuals authorized
     to sign loan agreements on behalf of the Borrower, or any other individual
     designated by any one of such authorized signers.

(b)  Advances will be deposited in and repayments will be withdrawn from the
     Borrower's account number 17699-00587, or such other of the Borrower's
     accounts with the Bank as designated in writing by the Borrower.

(c)  The Borrower will indemnify and hold the Bank harmless from all liability,
     loss, and costs in connection with any act resulting from telephone or
     telefax instructions the Bank reasonably believes are made by any
     individual authorized by the Borrower to give such instructions. This
     paragraph will survive this Agreements termination, and will benefit the
     Bank and its officers, employees, and agents.

4.4  Direct Debit (Pre-Billing).

(a)  The Borrower agrees that the Bank will debit the Borrower's deposit account
     number 17699-00587, or such other of the Borrower's accounts with the Bank
     as designated in writing by the Borrower (the "Designated Account') on the
     date each payment of interest and any fees from the Borrower becomes due
     (the "Due Date"). If the Due Date is not a banking day, the Designated
     Account will be debited on the next banking day.

(b)  Approximately 10 days prior to each Due Date, the Bank will mail to the
     Borrower a statement of the amounts that will be due on that Due Date (the
     "Billed Amount"). The calculation will be made on the assumption that no
     new extensions of credit or payments will be made between the date of the
     billing statement and the Due Date, and that there will be no changes in
     the applicable interest rate.

(c)  The Bank will debit the Designated Account for the Billed Amount,
     regardless of the actual amount due on that date (the "Accrued Amount"). If
     the Billed Amount debited to the Designated Account differs from the
     Accrued Amount, the discrepancy will be treated as follows:

     (i)  If the Billed Amount is less than the Accrued Amount, the Billed
          Amount for the following Due Date will be increased by the amount of
          the discrepancy. The Borrower will not be in default by reason of any
          such discrepancy.

     (ii) If the Billed Amount is more than the Accrued Amount, the Billed
          Amount for the following Due Date will be decreased by the amount of
          the discrepancy.

          Regardless of any such discrepancy, interest will continue to accrue
          based on the actual amount of principal outstanding without
          compounding. The Bank will not pay the Borrower interest on any
          overpayment.

(d)  The Borrower will maintain sufficient funds in the Designated Account to
     cover each debit. If there are insufficient funds in the Designated Account
     on the date the Bank enters any debit authorized by this Agreement, the
     debit will be reversed.

                                      -3-
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4.5  Banking Days.  Unless otherwise provided in this Agreement, a banking day
     is a day other than a Saturday or a Sunday on which the Bank is open for
     business in California. All payments and disbursements which would be due
     on a day which is not a banking day will be due on the next banking day.
     All payments received on a day which is not a banking day will be applied
     to the credit on the next banking day.

4.6  Taxes.  If any payments to the Bank under this Agreement are made from
     outside the United States, the Borrower will not deduct any foreign taxes
     from any payments it makes to the Bank. If any such taxes are imposed on
     any payments made by the Borrower (including payments under this
     paragraph), the Borrower will pay the taxes and will also pay to the Bank,
     at the time interest is paid, any additional amount which the Bank
     specifies as necessary to preserve the after-tax yield the Bank would have
     received if such taxes had not been imposed. The Borrower will confirm that
     it has paid the taxes by giving the Bank official tax receipts (or
     notarized copies) within 30 days after the due date.

4.7  Additional Costs. The Borrower will pay the Bank, on demand, for the Bank's
     costs or losses arising from any statute or regulation, or any request or
     requirement of a regulatory agency which is applicable to all national
     banks or a class of all national banks. The costs and losses will be
     allocated to the loan in a manner determined by the Bank, using any
     reasonable method. The costs include the following:

(a)  any reserve or deposit requirements; and

(b)  any capital requirements relating to the Bank's assets and commitments for
     credit.

4.8  Interest Calculation.  Except as otherwise stated in this Agreement, all
     interest and fees, if any, will be computed on the basis of a 360-day year
     and the actual number of days elapsed. This results in more interest or a
     higher fee than if a 365-day year is used. Installments of principal which
     are not paid when due under this Agreement shall continue to bear interest
     until paid.

4.9  Default Rate. Upon the occurrence of any default under this Agreement,
     principal amounts outstanding under this Agreement will at the option of
     the Bank bear interest at the Bank's Prime Rate plus 2 percentage points.
     This will not constitute a waiver of any default.

The Prime Rate is the rate of interest publicly announced from time to time by
the Bank as its Prime Rate. The Prime Rate is set by the Bank based on various
factors, including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans. The Bank may price loans to its customers at, above, or below the Prime
Rate. Any change in the Prime Rate shall take effect at the opening of business
on the day specified in the public announcement of a change in the Bank's Prime
Rate.

5.   CONDITIONS

The Bank must receive the following items, in form and content acceptable to the
Bank, before it is required to extend any credit to the Borrower under this
Agreement:

5.1  Authorizations. Evidence that the execution, delivery and performance by
     the Borrower of this Agreement and any instrument or agreement required
     under this Agreement have been duly authorized.

5.2  Governing Documents.  A copy of the Borrower's articles of incorporation.

5.3  Security Agreements. Signed original security agreements, assignments,
     financing statements and fixture filings (together with collateral in which
     the Bank requires a possessory security interest), which the Bank requires.

5.4  Evidence of Priority. Evidence that security interests and liens in favor
     of the Bank are valid, enforceable, and prior to all others' rights and
     interests, except those the Bank consents to in writing.

5.5  Insurance. Evidence of insurance coverage, as required in the "Covenants"
     section of this Agreement.

5.6  Other Items.  Any other items that the Bank reasonably requires.

6.   REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewed representation:

6.1  Organization of Borrower. The Borrower is a corporation duly formed and
     existing under the laws of the state where organized.

                                      -4-
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6.2    Authorization. This Agreement, and any instrument or agreement required
       hereunder, are within the Borrower's powers, have been duly authorized,
       and do not conflict with any of its organizational papers.

6.3    Enforceable Agreement. This Agreement is a legal, valid and binding
       agreement of the Borrower, enforceable against the Borrower in accordance
       with its terms, and any instrument or agreement required hereunder, when
       executed and delivered, will be similarly legal, valid, binding and
       enforceable.

6.4    Good Standing. In each state in which the Borrower does business, it is
       properly licensed, in good standing, and, where required, in compliance
       with fictitious name statutes.

6.5    No Conflicts. This Agreement does not conflict with any law, agreement,
       or obligation by which the Borrower is bound.

6.6.1  Financial Information.  All financial and other information that has been
       or will be supplied to the Bank is:

(a)    sufficiently complete to give the Bank accurate knowledge of the
       Borrower's (and any guarantors) financial condition, I including all
       material contingent liabilities.

(b)    in compliance with all government regulations that apply.

6.6.2  Lawsuits. There is no lawsuit, tax claim or other dispute pending or
       threatened against the Borrower which, if lost, would impair the
       Borrower's financial condition or ability to repay the loan, except as
       have been disclosed in writing to the Bank.

6.8    Collateral. All collateral required in this Agreement is owned by the
       grantor of the security interest free of any title defects or any liens
       or interests of others.

6.9.1  Permits, Franchises. The Borrower possesses all permits, memberships,
       franchises, contracts and licenses required and all trademark rights,
       trade name rights, patent rights and fictitious name rights necessary to
       enable it to conduct the business in which it is now engaged.

6.10   Other Obligations. The Borrower is not in default on any obligation for
       borrowed money, any purchase money obligation or any other material
       lease, commitment, contract, instrument or obligation.

6.11   Income Tax Matters.  The Borrower has no knowledge of any pending
       assessments or adjustments of its income tax for any year.

6.12   No Event of Default.  There is no event which is, or with notice or lapse
       of time or both would be, a default under this Agreement.

6.13   Insurance.  The Borrower has obtained, and maintained in effect, the
       insurance coverage required in the "Covenants" section of this Agreement.

6.14   Location of Borrower.  The Borrower's place of business (or, if the
       Borrower has more than one place of business, its chief executive office)
       is located at the address listed under the Borrower's signature on this
       Agreement.

7.     COVENANTS

The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:

7.1    Use of Proceeds.  To use the proceeds of the credit only to finance
       importation of inventory.

7.2    Financial Information. To provide the following financial information and
       statements in form and content acceptable to the Bank, and such
       additional information as requested by the Bank from time to time:

(a)    Within 120 days of the Borrower's fiscal year end, the Borrower's annual
       financial statements. These financial statements must be audited by a
       Certified Public Accountant acceptable to the Bank. The statements shall
       be prepared on a consolidated basis.

(b)    Within 45 days of the Borrowees period end, the Borrower's quarterly
       financial statements. These financial statements may be company prepared.
       The statements shall be prepared on a consolidated basis.

(c)    Copies of the Borrower's Form 10-K Annual Report and Form 1 O-Q Quarterly
       Report within 15 days after the date of filing with the Securities and
       Exchange Commission.

                                      -5-
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                                                                   Exhibit 10.20

(d)  Copies of the Borrower's annual forecast within 90 days of the Borrower's
     fiscal year end; forecast to consist of monthly balance sheets, income
     statements and cash flows.

(e)  A monthly summary of the Borrower's accounts receivable aging, as of the
     last day of the month within 20 days after the end of each month, along
     with a borrowing base certificate.

(f)  A monthly borrowing base certificate as of the last day of the month within
     20 days after the end of each month.

(g)  Copies of the Borrower's brokerage account statement(s) and money market
     account statement(s) within 20 days after the end of each month.

7.3  Tangible Net Worth. To maintain on a consolidated basis tangible net worth
     equal to at least Twenty Five Million Dollars ($25,000,000).

"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
unamortized debt discount and expense, capitalized or deferred research and
development costs, deferred marketing expenses, deferred receivables, and other
like intangibles) less total liabilities, including but not limited to accrued
and deferred income taxes, and any reserves against assets.

7.4  Total Liabilities to Tangible Net Worth. To maintain on a consolidated
     basis a ratio of total liabilities to tangible net worth not exceeding
     0.51.0.

"Total liabilities" means the sum of current liabilities including undrawn
amounts of outstanding letters of credit plus long term liabilities.

7.5  Other Debts. Not to have outstanding or incur any direct or contingent
     liabilities (other than those to the Bank), or become liable for the
     liabilities of others, without the Bank's written consent. This does not
     prohibit:

(a)  Acquiring goods, supplies, or merchandise on normal trade credit.

(b)  Endorsing negotiable instruments received in the usual course of business.

(c)  Obtaining surety bonds in the usual course of business.

(d)  Liabilities in existence on the date of this Agreement disclosed in writing
     to the Bank.

(e)  Indebtedness assumed in connection with transactions permitted in Paragraph
     7.21 (f) below.

7.6  Other Liens. Not to create, assume, or allow any security interest or lien
     (including judicial liens) on property the Borrower now or later owns,
     except

(a)  Liens and security interest in favor of the Bank.

(b)  Liens for taxes not yet due.

(c)  Liens outstanding on the date of this Agreement disclosed in writing to the
     Bank.

7.7  Capital Stock Repurchase. Not to purchase more than One Million Dollars
     ($1,000,000) of its outstanding stock during term of this commitment.

7.8  Loans to Officers or Affiliates.  Not to make any loans, advances or other
     extensions of credit (including extensions of credit in the nature of
     accounts receivable or notes receivable arising from the sale or lease of
     goods or services) to any of the Borrower's executives, officers, directors
     or shareholders (or any relatives of any of the foregoing), or to any
     affiliated entities.

7.9  Loans and Investments.  Not to have any existing, or make any new, loans or
     other extensions of credit to, or investments in, any individual or entity,
     or make any capital contributions or other transfers of assets to any
     individual or entity, except for:

(a)  existing investments in the Borrower's current subsidiaries.

(b)  extensions of credit in the nature of accounts receivable or notes
     receivable arising from the sale or lease of goods or services in the
     ordinary course of business to non-affiliated entities.

                                      -6-
<PAGE>

(c)  investments in any of the following:

     (i)   certificates of deposit;

     (ii)  U.S. treasury bills and other obligations of the federal government.

(d)  extensions of credit in the nature of accounts receivable or notes
     receivable arising from the sale or lease of goods or services in the
     ordinary course of business to non-affiliated entities.

7.10 Change of Ownership. Not to cause, permit, or suffer any change, direct or
     indirect, in the Borrower's capital ownership.

7.11 Change of Management. Not to make any substantial change in its present
     executive or management personnel.

7.12 Notices to Bank. To promptly notify the Bank in writing of-

(a)  any lawsuit over Five Hundred Thousand Dollars ($500,000) against the
     Borrower (or any guarantor).
(b)  any substantial dispute between the Borrower (or any guarantor) and any
     government authority.
(c)  any event of default under this Agreement or any event which, with notice
     or lapse of time or both, would constitute an event of default.

(d)  any material adverse change in the Borrower's (or any guarantor's) business
     condition (financial or otherwise), operations, properties or prospects, or
     ability to repay the credit

(e)  any change in the Borrowers name, legal structure, place of business, or
     chief executive office if the Borrower has more than one place of business.

(f)  any actual contingent liabilities of the Borrower (or any guarantor), and
     any such contingent liabilities which are reasonably foreseeable.

7.13 Books and Records.  To maintain adequate books and records.

7.14 Audits. To allow the Bank and its agents to inspect the Borrower's
     properties and examine, audit, and make copies of books and records at any
     reasonable time. If any of the Borrowees properties, books or records are
     in the possession of a third party, the Borrower authorizes that third
     party to permit the Bank or its agents to have access to perform
     inspections or audits and to respond to the Bank's requests for information
     concerning such properties, books and records.

7.15 Compliance with Laws.  To comply with the laws (including any fictitious
     name statute), regulations, and orders of any government body with
     authority over the Borrower's business.

7.16 Preservation of Rights.  To maintain and preserve all rights, privileges,
     and franchises the Borrower now has.

7.17 Maintenance of Properties. To make any repairs, renewals, or replacements
     to keep the Borrower's properties in good working condition.

7.18 Perfection of Liens. To help the Bank perfect and protect its security
     interests and liens, and reimburse it for related costs it incurs to
     protect its security interests and liens.

7.19 Cooperation. To take any action reasonably requested by the Bank to carry
     out the intent of this Agreement.

7.20 Insurance.

(a)  Insurance Covering Collateral. To maintain all risk property damage
     insurance policies covering the tangible property comprising the
     collateral. Each insurance policy must be in an amount acceptable to the
     Bank. The insurance must be issued by an insurance company acceptable to
     the Bank and must include a lender's loss payable endorsement in favor of
     the Bank in a form acceptable to the Bank.

(b)  General Business Insurance. To maintain insurance satisfactory to the Bank
     as to amount, nature and carrier covering property damage (including loss
     of use and occupancy) to any of the Borrower's properties, public liability
     insurance including coverage for contractual liability, product liability
     and workers' compensation, and any other insurance which is usual for the
     Borrower's business.

                                      -7-
<PAGE>

(c)  Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank
     a copy of each insurance policy, or, if permitted by the Bank, a
     certificate of insurance listing all insurance in force.

7.21 Additional Negative Covenants. Not to, without the Bank's written consent:

(a)  engage in any business activities substantially different from the
     Borrower's present business.

(b)  liquidate or dissolve the Borrower's business.

(c)  enter into any consolidation, merger, or other combination, or become a
     partner in a partnership, a member of a joint venture, or a member of a
     limited liability company.

(d)  sell, assign, lease, transfer or otherwise dispose of any part of the
     Borrower's business or Borrower's assets.

(e)  enter into any sale and leaseback agreement covering any of its fixed
     assets.

(f)  acquire or purchase a business or its assets or enter into a joint venture,
     unless the total consideration for such acquisition or purchase (including
     assumption of debt or capital contributions) would not exceed Five Million
     Dollars ($5,000,000).

(g)  voluntarily suspend its business for more than 7 days in any 30 day period.

7.22 ERISA Plans.  Promptly during each year, to pay contributions adequate to
     meet at least the minimum funding standards under ERISA with respect to
     each and every Plan; file each annual report required to be filed pursuant
     to ERISA in connection with each Plan for each year; and notify the Bank
     within ten (10) days of the occurrence of any Reportable Event that might
     constitute grounds for termination of any capital Plan by the Pension
     Benefit Guaranty Corporation or for the appointment by the appropriate
     United States District Court of a trustee to administer any Plan. "ERISX
     means the Employee Retirement Income Security Act of 1974, as amended from
     time to time. Capitalized terms in this paragraph shall have the meanings
     defined within ERISA.

8.   HAZARDOUS WASTE INDEMNIFICATION

The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrowers property or
operations or property leased to the Borrower. The indemnity includes but is not
limited to attorneys' fees (including the reasonable estimate of the allocated
cost of in-house counsel and staff). The indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys and assigns. "Hazardous substances" means any substance,
material or waste that is or becomes designated or regulated as "toxic,"
"hazardous," "pollutant," or "contaminant' or a similar designation or
regulation under any federal, state or local law (whether under common law,
statute, regulation or otherwise) or judicial or administrative interpretation
of such, including without limitation petroleum or natural gas. This indemnity
will survive repayment of the Borrower's obligations to the Bank.

9.   DEFAULT.  If any of the following events occurs, the Bank may do one or
     more of the following: declare the Borrower in default, stop making any
     additional credit available to the Borrower, and require the Borrower to
     repay its entire debt immediately and without prior notice. If an event of
     default occurs under the paragraph entitled "Bankruptcy," below, with
     respect to the Borrower, then the entire debt outstanding under this
     Agreement will automatically be due immediately.

9.1  Failure to Pay.  The Borrower fails to make a payment under this Agreement
     when due.

9.2  Lien Priority. The Bank fails to have an enforceable first lien (except for
     any prior liens to which the Bank has consented in writing) on or security
     interest in any property given as security for this Agreement (or any
     guaranty).

9.3  False Information. The Borrower (or any guarantor) has given the Bank false
     or misleading information or representations.

9.4  Bankruptcy. The Borrower (or any guarantor) files a bankruptcy petition, a
     bankruptcy petition is filed against the Borrower (or any guarantor) or the
     Borrower (or any guarantor) makes a general assignment for the benefit of
     creditors.

9.5  Receivers. A receiver or similar official is appointed for the Borrower's
     (or any guarantor's) business, or the business is terminated.

                                      -8-
<PAGE>

9.6  Lawsuits. Any lawsuit or lawsuits are filed against the Borrower (or any
     guarantor) in an aggregate amount of One Hundred Thousand Dollars
     ($100,000) or more in excess of any insurance coverage.

9.7  Judgments. Any judgments or arbitration awards are entered against the
     Borrower (or any guarantor), or the Borrower (or any guarantor) enters into
     any settlement agreements with respect to any litigation or arbitration, in
     an aggregate amount of One Hundred Thousand Dollars ($100,000) or more in
     excess of any insurance coverage.

9.8  Govemment Action. Any government authority takes action that the Bank
     believes materially adversely affects the Borrower's (or any guarantor's)
     financial condition or ability to repay.

9.9  Material Adverse Change. A material adverse change occurs, or is reasonably
     likely to occur, in the Borrower's (or any guarantor's) business condition
     (financial or otherwise), operations, properties or prospects, or ability
     to repay the credit.

9.10 Cross-default. Any default occurs under any agreement in connection with
     any credit the Borrower (or any guarantor) has obtained from anyone else or
     which the Borrower (or any guarantor) has guaranteed.

9.11 Default under Related Documents. Any guaranty, subordination agreement,
     security agreement, deed of trust, or other document required by this
     Agreement is violated or no longer in effect.

9.12 Other Bank Agreements. The Borrower (or any guarantor) fails to meet the
     conditions of, or fails to perform any obligation under any other agreement
     the Borrower (or any guarantor) has with the Bank or any affiliate of the
     Bank.

9.13 Other Breach Under Agreement. The Borrower fails to meet the conditions of,
     or fails to perform any obligation under,* any term of this Agreement not
     specifically referred to in this Article. This includes any failure or
     anticipated failure by the Borrower to comply with any financial covenants
     set forth in this Agreement, whether such failure is evidenced by financial
     statements delivered to the Bank or is otherwise known to the Borrower or
     the Bank.

10.  ENFORCING THIS AGREEMENT; MISCELLANEOUS

10.1 GAAP. Except as otherwise stated in this Agreement, all financial
     information provided to the Bank and all financial covenants will be made
     under generally accepted accounting principles, consistently applied.

10.2 Califomia Law.  This Agreement is governed by California law.

10.3 Successors and Assigns. This Agreement is binding on the Borrower's and the
     Bank's successors and assignees. The Borrower agrees that it may not assign
     this Agreement without the Bank's prior consent. The Bank may sell
     participations in or assign this loan, and may exchange financial
     information about the Borrower with actual or potential participants or
     assignees. If a participation is sold or the loan is assigned, the
     purchaser will have the right of set-off against the Borrower.

10.4 Arbitration.

(a)  This paragraph concerns the resolution of any controversies or claims
     between the Borrower and the Bank, whether arising in contract, tort or by
     statute, including but not limited to controversies or claims that arise
     out of or relate to: (i) this Agreement (including any renewals, extensions
     or modifications); or (ii) any document related to this Agreement
     (collectively a "Claim').

(b)  At the request of the Borrower or the Bank, any Claim shall be resolved by
     arbitration in accordance with the Federal Arbitration Act (Title 9,
     U.S.Code) (the "Act"). The Act will apply even though this Agreement
     provides that it is governed by the law of a specified state.

(c)  Arbitration proceedings will be determined in accordance with the Act, the
     rules and procedures for the arbitration of financial services disputes of
     J.A.M.S./Endispute or any successor thereof C'J.A.M.S."), and the terms of
     this paragraph. In the event of any inconsistency, the terms of this
     paragraph shall control.

(d)  The arbitration shall be administered by J.A.M.S. and conducted in any U.
     S. state where real or tangible personal property collateral for this
     credit is located or if there is no such collateral, in .All Claims shall
     be determined by one arbitrator; however, if Claims exceed Five Million
     Dollars ($5,000,000), upon the request of any party, the Claims shall be
     decided by three arbitrators. All arbitration hearings shall commence
     within ninety (90) days of the demand for arbitration and close within
     ninety (90) days of commencement and the award of the arbitrator(s) shall
     be issued within thirty (30) days of the close of the hearing. However, the
     arbitrator(s), upon a showing of good cause, may extend the commencement of
     the hearing for up to an additional sixty (60) days. The arbitrator(s)
     shall provide a concise written statement of reasons for the award. The
     arbitration award may be submitted to any court having jurisdiction to be
     confirmed and enforced.

                                      -9-
<PAGE>

(e)    The arbitrator(s) will have the authority to decide whether any Claim is
       barred by the statute of limitations and, if so, to dismiss the
       arbitration on that basis. For purposes of the application of the statute
       of limitations, the service on J.A.M.S. under applicable J.A.M.S. rules
       of a notice of Claim is the equivalent of the filing of a lawsuit. Any
       dispute concerning this arbitration provision or whether a Claim is
       arbitrable shall be determined by the arbitrator(s). The arbitrator(s)
       shall have the power to award legal fees pursuant to the terms of this
       Agreement.

(f)    This paragraph does not limit the right of the Borrower or the Bank to:
       (i) exercise self-help remedies, such as but not limited to, setoff, (ii)
       initiate judicial or nonjudicial foreclosure against any real or personal
       property collateral; (iii) exercise any judicial or power of sale rights,
       or (iv) act in a court of law to obtain an interim remedy, such as but
       not limited to, injunctive relief, writ of possession or appointment of a
       receiver, or additional or supplementary remedies.

(g)    The filing of a court action is not intended to constitute a waiver of
       the right of the Borrower or the Bank, including the suing party,
       thereafter to require submittal of the Claim to arbitration.

10.5   Severability; Waivers. If any part of this Agreement is not enforceable,
       the rest of the Agreement may be enforced. The Bank retains all rights,
       even if it makes a loan after default. If the Bank waives a default, it
       may enforce a later default. Any consent or waiver under this Agreement
       must be in writing.

10.6   Administration Costs. The Borrower shall pay the Bank for all reasonable
       costs incurred by the Bank in connection with administering this
       Agreement.

10.7   Attorneys' Fees. The Borrower shall reimburse the Bank for any reasonable
       costs and attorneys' fees incurred by the Bank in connection with the
       enforcement or preservation of any rights or remedies under this
       Agreement and any other documents executed in connection with this
       Agreement, and in connection with any amendment, waiver, "workout' or
       restructuring under this Agreement. In the event of a lawsuit or
       arbitration proceeding, the prevailing party is entitled to recover costs
       and reasonable attorneys' fees incurred in connection with the lawsuit or
       arbitration proceeding, as determined by the court or arbitrator. In the
       event that any case is commenced by or against the Borrower under the
       Bankruptcy Code (Title 11, United States Code) or any similar or
       successor statute, the Bank is entitled to recover costs and reasonable
       attorneys' fees incurred by the Bank related to the preservation,
       protection, or enforcement of any rights of the Bank in such a case. As
       used in this paragraph, "attorneys' fees" includes the allocated costs of
       the Bank's in-house counsel.

10.8   One Agreement. This Agreement and any related security or other
       agreements required by this Agreement, collectively:

(a)    represent the sum of the understandings and agreements between the Bank
       and the Borrower concerning this credit;

(b)    replace any prior oral or written agreements between the Bank and the
       Borrower concerning this credit; and

(c)    are intended by the Bank and the Borrower as the final, complete and
       exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.

10.9   Indemnification. The Borrower will indemnify and hold the Bank harmless
       from any loss, liability, damages, judgments, and costs of any kind
       relating to or arising directly or indirectly out of (a) this Agreement
       or any document required hereunder, (b) any credit extended or committed
       by the Bank to the Borrower hereunder, and (c) any litigation or
       proceeding related to or arising out of this Agreement, any such
       document, or any such credit. This indemnity includes but is not limited
       to attorneys' fees (including the allocated cost of in-house counsel).
       This indemnity extends to the Bank, its parent, subsidiaries and all of
       their directors, officers, employees, agents, successors, attorneys, and
       assigns. This indemnity will survive repayment of the Borrower's
       obligations to the Bank. All sums due to the Bank hereunder shall be
       obligations of the Borrower, due and payable immediately without demand.

10.10  Notices. All notices required under this Agreement shall be personally
       delivered or sent by first class mail, postage prepaid, or by overnight
       courier, to the addresses on the signature page of this Agreement, or
       sent by facsimile to the fax numbers listed on the signature page, or to
       such other addresses as the Bank and the Borrower may specify from time
       to time in writing. Notices sent by first class mail shall be deemed
       delivered on the earlier of actual receipt or on the fourth business day
       after deposit in the U.S. mail.

10.11  Headings.  Article and paragraph headings are for reference only and
       shall not affect the interpretation or meaning of any provisions of this
       Agreement.

                                      -10-
<PAGE>

10.12  Counterparts. This Agreement may be executed in as many counterparts as
       necessary or convenient, and by the different parties on separate
       counterparts each of which, when so executed, shall be deemed an original
       but all such counterparts shall constitute but one and the same
       agreement.

10.13  Prior Agreement Superseded. This Agreement supersedes the Business Loan
       Agreement entered into as of January 23, 1998 between the Bank and the
       Borrower, and any credit outstanding thereunder shall be deemed to be
       outstanding under this Agreement.

This Agreement is executed as of the date stated at the top of the first page.

Bank of America, N.A.
National Trust and Savings Association               Variflex, Inc.

  /s/ George W. Simmons                              /s/ Roger M. Wasserman
------------------------                             ---------------------------
By:   George W. Simmons                              By:    Roger M. Wasserman
Title: Vice President                                Title: Chief Financial
                                                     Officer

Address where notices to the Bank are to be sent:    Address for Notices:

Los Angeles - North / Ventura Commercial Banking     5152 North Commerce Avenue
Office #01465                                        Moorpark, CA  93021
5945 Canoga Ave.
Woodland Hills, CA 91367

                                      -11-

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