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                                                                 EXHIBIT 10.21.1

                AMENDMENT NO. 1 AND WAIVER TO SECURITY AGREEMENT
                           (RECEIVABLES AND INVENTORY)


          This Amendment No. 1 (the "Amendment") dated as of June 12, 2001, is
between Bank of America, N.A. (the "Bank") and Variflex, Inc. (the "Borrower").

                                    RECITALS
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          A. The Bank and the Borrower entered into a certain Security Agreement
(Receivables and Inventory) dated as of March 31, 2000 (the "Agreement").

          B. The Bank and the Borrower desire to amend and waive the Borrower's
breach of the Agreement.

                                    AMENDMENT
                                    ---------

          1. Definitions. Capitalized terms used but not defined in this
             -----------
Amendment shall have the meaning given to them in the Agreement.

          2. Amendments. The Agreement is hereby amended as follows:
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               2.1 Paragraph 1B. is amended and restated in its entirety as
               follows:

               "B. All inventory now owned or hereafter acquired by Borrower,
               excluding, however, inventory subject to a license agreement
               between the Borrower and Disney Enterprises, Inc. dated March 17,
               1999. (`License Agreement')."

                                     WAIVER
                                     ------

          The Borrower has breached Paragraph 5B. of the Agreement by pledging
inventory as collateral to the Bank which the Borrower is prohibited from
pledging to the Bank pursuant to the "License Agreement."

          The Bank waives compliance with the breach and hereby releases a
portion of the Borrower's inventory as collateral.

          This waiver applies only to this breach. This waiver does not apply to
any other breach that may now exist or may occur after the date of this waiver
with respect to the breach or any other term, condition, or covenant of the
Agreement. All other terms and conditions of the Agreement remain unchanged.

          3. Representations and Warranties. When the Borrower signs this
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Amendment, the Borrower represents and warrants to the Bank that: (a) there is
no event which is, or with notice or lapse of time or both would be, a default
under the Agreement except those events, if any, that have been disclosed in
writing to the Bank or waived in writing by the Bank, (b) the representations
and warranties in the Agreement are true as of the date of this Amendment as if
made on the date of this Amendment, (c) this Amendment is within the Borrower's
powers, has been duly authorized, and does not conflict with any of the
Borrower's organizational papers, and (d) this Amendment does not conflict with
any law, agreement, or obligation by which the

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Borrower is bound.

     4.   Effect of Amendment. Except as provided in this Amendment, all of the
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terms and conditions of the Agreement shall remain in full force and effect.


     This Amendment is executed as of the date stated at the beginning of this
Amendment.

VARIFLEX, INC.                                  BANK OF AMERICA, N. A.


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

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