VARIFLEX INC
SECURITY AGREEMENT DATED MARCH 31, 2000
<DOCUMENT>
<TYPE>EX-10.21
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>SECURITY AGREEMENT DATED MARCH 31, 2000
<TEXT>

<PAGE>

                                                                   Exhibit 10.21

BankofAmerica

                           Security Agreement (Receivables and Inventory)

1.   THE SECURITY.
The undersigned Variflex, Inc. ("Borrower") hereby assigns and grants to Bank of
America, N.A. ("Bank") a security interest in the following described property
("Collateral"):

     A.   All of the following, whether now owned or hereafter acquired by
          Borrower: accounts, contract rights, chattel paper, instruments,
          deposit accounts, and general intangibles.
     B.   All inventory now owned or hereafter acquired by Borrower.
     C.   All negotiable and nonnegotiable documents of title now owned or
          hereafter acquired by Borrower.
     D.   All rights under contracts of insurance now owned or hereafter
          acquired by Borrower covering any of the above-described property.
     E.   All proceeds, product, rents and profits now owned or hereafter
          acquired by Borrower of any of the above-described property.
     F.   All books and records now owned or hereafter acquired by Borrower
          pertaining to any of the above-described property, including but not
          limited to any computer-readable memory and any computer hardware or
          software necessary to process such memory ("Books and Records").

2.   THE INDEBTEDNESS.
The collateral secures and will secure all Indebtedness of Borrower to Bank. For
the purposes of this Agreement, "Indebtedness" means all loans and advances made
by Bank to Borrower and all other obligations and liabilities of Borrower to
Bank, whether now existing or hereafter incurred or created, whether voluntary
or involuntary, whether due or not due, whether absolute or contingent, or
whether incurred directly or acquired by Bank by assignment or otherwise. Unless
Borrower shall have otherwise agreed in writing, Indebtedness, for the purposes
of this Agreement, shall not include "consumer credit' subject to the disclosure
requirements of the Federal Truth in Lending Act or any regulations promulgated
thereunder.

3.   BORROWER'S COVENANTS.
Borrower covenants and warrants that unless compliance is waived by Bank in
writing:

     A.   Borrower will properly preserve the Collateral; defend the Collateral
          against any adverse claims and demands; and keep accurate Books and
          Records.
     B.   Borrower has notified Bank in writing of, and will notify Bank in
          writing prior to any change in the locations of (1) Borrower's place
          of business or Borrower's chief executive office if Borrower has more
          than one place of business and (ii) any Collateral, including the
          Books and Records.
     C.   Borrower will notify Bank in writing prior to any change in Borrower's
          name, identity or business structure.
     D.   Borrower will maintain and keep in force insurance covering Collateral
          designated by Bank against fire and extended coverages. Such insurance
          shall require losses to be paid on a replacement cost basis, be issued
          by insurance companies acceptable to Bank and include a loss payable
          endorsement in favor of Bank in a form acceptable to Bank.
     E.   Borrower has not granted and will not grant any security interest in
          any of the Collateral except to Bank, and will keep the Collateral
          free of all liens, claims, security interests and encumbrances of any
          kind or nature, except the security interest of Bank.
     F.   Borrower will not sell, lease, agree to sell or lease, or otherwise
          dispose of, or remove from Borrower's place of business (i) any
          inventory except in the ordinary course of business as heretofore
          conducted by Borrower, or (ii) any other Collateral except with the
          prior written consent of Bank.
     G.   Borrower will promptly notify Bank in writing of any event which
          affects the value of any Collateral, the ability of Borrower or Bank
          to dispose of any Collateral, or the rights and remedies of Bank in
          relation thereto, including but not limited to, the levy of any legal
          process against any Collateral and the adoption of any marketing
          order, arrangement or procedure affecting the Collateral, whether
          governmental or otherwise.
     H.   If any Collateral is or becomes the subject of any negotiable document
          of title including any warehouse receipt or bill of lading, Borrower
          shall immediately deliver such document to Bank.
     1.   Until Bank exercises its rights to make collection, Borrower will
          diligently collect all Collateral.

4.   ADDITIONAL OPTIONAL REQUIREMENTS.
Borrower agrees that Bank may at its option at any time, whether or not Borrower
is in default:

     A.   Require Borrower to segregate all collections and proceeds of the
          Collateral so that they are capable of identification and deliver
          daily such collections and proceeds to Bank in kind.
     B.   Require Borrower to deliver to Bank (i) copies of or extracts from the
          Books and Records, and (ii) information on any contracts or other
          matters affecting the Collateral.
     C.   Examine the Collateral, including the Books and Records, and make
          copies of or extracts from the Books and Records, and for such
          purposes enter at any reasonable time upon the property where any
          Collateral or any Books and Records are located.

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     D.   Require Borrower to deliver to Bank any instruments or chattel paper.
     E.   Require Borrower to obtain Bank's prior written consent to any sale,
          lease, agreement to sell or lease, or other disposition of any
          inventory.
     F.   Notify any account debtors, any buyers of the Collateral, or any other
          persons of Bank's interest in the Collateral.
     G.   Require Borrower to direct all account debtors to forward all payments
          and proceeds of the Collateral to a post office box under Bank's
          exclusive control.
     H.   Demand and collect any payments and proceeds of the Collateral. In
          connection therewith Borrower irrevocably authorizes Bank to endorse
          or sign Borrower's name on all checks, drafts, collections, receipts
          and other documents, and to take possession of and open the mail
          addressed to Borrower and remove therefrom any payments and proceeds
          of the Collateral.

5. DEFAULTS.
Any one or more of the following shall be a default hereunder:

     A.   Borrower fails to pay any indebtedness when due.
     B.   Borrower breaches any term, provision, warranty or representation
          under this Agreement or under any other obligation of Borrower to
          Bank.
     C.   Any custodian, receiver or trustee is appointed to take possession,
          custody or control of all or a substantial portion of the property of
          Borrower or of any guarantor of any indebtedness.
     D.   Borrower or any guarantor of any indebtedness becomes insolvent, or is
          generally not paying or admits in writing its inability to pay ts
          debts as they become due, fails in business, makes a general
          assignment for the benefit of creditors, dies or commences any case,
          proceeding or other action under any bankruptcy or other law for the
          relief of, or relating to, debtors.
     E.   Any case, proceeding or other action is commenced against Borrower or
          any guarantor of any indebtedness under any bankruptcy or other law
          for the relief of, or relating to, debtors.
     F.   Any involuntary lien of any kind or character attaches to any
          Collateral.
     G.   Any financial statements, certificates, schedules or other information
          now or hereafter furnished by Borrower to Bank proves false or
          incorrect in any material respect.

6.   BANK'S REMEDIES AFTER DEFAULT.
     In the event of any default Bank may do any one or more of the following:

     A.   Declare any indebtedness immediately due and payable, without notice
          or demand.
     B.   Enforce the security interest given hereunder pursuant to the Uniform
          Commercial Code and any other applicable law.
     C.   Enforce the security interest of Bank in any deposit account of
          Borrower maintained with Bank by applying such account to the
          Indebtedness.
     D.   Require Borrower to assemble the Collateral, including the Books and
          Records, and make them available to Bank at a place designated by
          Bank.
     E.   Enter upon the property where any Collateral, including any Books and
          Records are located and take possession of such Collateral and such
          Books and Records, and use such property (including any buildings and
          facilities) and any of Borrower's equipment, if Bank deems such use
          necessary or advisable in order to take possession of, hold, preserve,
          process, assemble, prepare for sale or lease, market for sale or
          lease, sell or lease, or otherwise dispose of, any Collateral.
     F.   Grant extensions and compromise or settle claims with respect to the
          Collateral for less than face value, all without prior notice to
          Borrower.
     G.   Use or transfer any of Borrower's rights and interest in any
          Intellectual Property now owned or hereafter acquired by Borrower, if
          Bank deems such use or transfer necessary or advisable in order to
          take possession of, hold, preserve, process, assemble, prepare for
          sale or lease, market for sale or lease, sell or lease, or otherwise
          dispose of, any Collateral. Borrower agrees that any such use or
          transfer shall be without any additional consideration to Borrower. As
          used in this paragraph, "Intellectual Property" includes, but is not
          limited to, all trade secrets, computer software, service marks,
          trademarks, trade names, trade styles, copyrights, patents,
          applications for any of the foregoing, customer lists, working
          drawings, instructional manuals, and rights in processes for technical
          manufacturing, packaging and labelling in which Borrower has any right
          or interest, whether by ownership, license, contract or otherwise.
     H.   Have a receiver appointed by any court of competent jurisdiction to
          take possession of the Collateral.
     I.   Take such measures as Bank may deem necessary or advisable to take
          possession of, hold, preserve, process, assemble, insure, prepare for
          sale or lease, market for sale or lease, sell or lease, or otherwise
          dispose of, any Collateral, and Borrower hereby irrevocably
          constitutes and appoints Bank as Borrower's attorney-in-fact to
          perform all acts and execute all documents in connection therewith.

                                      -2-
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7.   MISCELLANEOUS.
     A.   Any waiver, expressed or implied, of any provision hereunder and any
          delay or failure by Bank to enforce any provision shall not preclude
          Bank from enforcing any such provision thereafter.
     B.   Borrower shall, at the request of Bank, execute such other agreements,
          documents, instruments, or financing statements in connection with
          this Agreement as Bank may reasonably deem necessary.
     C.   All notes, security agreements, subordination agreements and other
          documents executed by Borrower or furnished to Bank in connection with
          this Agreement must be in form and substance satisfactory to Bank.
     D.   This Agreement shall be governed by and construed according to the
          laws of the State of California, to the jurisdiction of which the
          parties hereto submit
     E.   All rights and remedies herein provided are cumulative and not
          exclusive of any rights or remedies otherwise provided by law. Any
          single or partial exercise of any right or remedy shall not preclude
          the further exercise thereof or the exercise of any other right or
          remedy.
     F.   All terms not defined herein are used as set forth in the Uniform
          Commercial Code.
     G.   In the event of any action by Bank to enforce this Agreement or to
          protect the security interest of Bank in the Collateral, or to take
          possession of, hold, preserve, process, assemble, insure, prepare for
          sale or lease, market for sale or lease, sell or lease, or otherwise
          dispose of, any Collateral, Borrower agrees to pay immediately the
          costs and expenses thereof, together with reasonable attorney's fees
          and allocated costs for in-house legal services.
     H.   Any Borrower who is married agrees that such Borrower's separate
          property shall be liable for payment of the Indebtedness if such
          Borrower is personally liable for the Indebtedness.

Date:  March 31, 2000
       --------------------

Bank of America, N.A.                   Borrower:
                                        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

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