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                                                                    EXHIBIT 10.3




                              VARI-L COMPANY, INC.
                             TANDEM STOCK OPTION AND
                         STOCK APPRECIATION RIGHTS PLAN

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                                TABLE OF CONTENTS
<Table>


<S>                                                                                                              <C>
1.    Purpose.....................................................................................................1

2.    General Provisions..........................................................................................1

3.    Eligibility.................................................................................................2

4.    Number of Shares Subject to Plan............................................................................2

5.    Stock Option................................................................................................2

6.    Stock Appreciation Rights...................................................................................5

7.    Capital Adjustments.........................................................................................8

8.    Nontransferability..........................................................................................8

9.    Amendment, Suspension, or Termination of Plan...............................................................8

10.   Effective Date..............................................................................................9

11.   Termination Date............................................................................................9

12.   Resale of Shares Purchased..................................................................................9

13.   Acceleration of Options.....................................................................................9

14.   Written Notice Required; Tax Withholding...................................................................10

15.   Compliance with Securities Laws............................................................................10

16.   Waiver of Vesting Restrictions by Committee................................................................10

17.   Reports to Participants....................................................................................10

18.   No Employee Contract.......................................................................................10
</Table>




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                             TANDEM STOCK OPTION AND
                         STOCK APPRECIATION RIGHTS PLAN
                 AS AMENDED AND RESTATED AS OF DECEMBER 27, 2000


         1. Purpose. Vari-L Company, Inc. (the "Company") hereby establishes the
Tandem Stock Option and Stock Appreciation Rights Plan (the "Plan"). The purpose
of the Plan is to advance the interests of the Company and its stockholders by
providing a means by which the Company shall be able to attract and retain
competent officers, directors, key employees, advisors and consultants by
providing them with an opportunity to participate in the increased value of the
Company which their effort, initiative, and skill have helped produce.

         2. General Provisions.

                  (a) The Plan will be administered by the Compensation
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall be comprised of two or more independent outside directors
designated by the Board of Directors. The Committee shall have full power to
construe and interpret the Plan and to establish and amend rules and regulations
for its administration. Notwithstanding the foregoing, if it would be consistent
with all applicable law, including, without limitation, Rule 16b-3 promulgated
under the Securities Exchange Act of 1934 as amended ("Rule 16b-3") and the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder (including, without limitation, the regulations relating
to Section 162(m) of the Code), then the Plan may be administered by the Board
of Directors, and if so administered all subsequent references to the Committee
shall be read as referring to the Board of Directors. Any action of the
Committee with respect to the Plan shall be taken by majority vote or by the
unanimous written consent of the Committee members.

                  (b) The Committee shall determine, in its sole discretion,
which participants under the Plan shall be granted stock options or stock
appreciation rights, the time or times at which options and rights are granted,
as well as the number of shares and the duration of the options or rights which
are granted to participants, provided, however, that no participant may be
granted more than 300,000 options during any three year period under the Plan.

                  (c) The Committee shall also determine any other terms and
conditions relating to options and rights granted under the Plan as the
Committee may prescribe, in its sole discretion.

                  (d) The Committee may, in its discretion, delegate its
administrative duties with respect to the Plan to an officer or employees, or to
a committee composed of officers or employees, of the Company.


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                  (e) The Committee shall make all other determinations and take
all other actions which it deems necessary or advisable for the administration
of the Plan.

                  (f) All decisions, determinations and interpretations made by
the Committee shall be binding and conclusive on all participants in the Plan
and on their legal representatives, heirs and beneficiaries.

                  (g) Notwithstanding anything to the contrary herein, the
Committee shall have no authority to determine the amount, price or timing of
grants hereunder to members of the Committee, unless, and only to the extent
that, its exercise of such authority is consistent with all applicable laws,
including, without limitation, Rule 16b-3.

         3. Eligibility. Officers, directors and employees of the Company and
advisors and consultants to the Company shall be eligible to participate in the
Plan and to receive options and rights hereunder, provided, however, that: (i)
Incentive Stock Options may only be granted to employees (including officers and
directors who are employees) of the Company or its subsidiaries; and (ii)
advisors and consultants shall be eligible for grants only if they provide bona
fide services that are not rendered in connection with the offer or sale of
securities or in a capital-raising transaction.

         4. Number of Shares Subject to Plan. The aggregate number of shares of
the Company's $.01 par value Common Stock which may be granted to participants
shall be 3,624,000 shares, subject to adjustment only as provided in Sections
5(h) and 7 hereof. These shares may consist of shares of the Company's
authorized but unissued Common Stock or shares of the Company's authorized and
issued Common Stock reacquired by the Company and held in its treasury or any
combination thereof. If an option granted under this Plan is surrendered, or for
any other reason ceases to be exercisable in whole or in part, the shares as to
which the option ceases to be exercisable shall be available for options to be
granted to the same or other participants under the Plan, except to the extent
that an option is deemed surrendered by the exercise of a tandem stock
appreciation right and that right is paid by the Company in stock, in which
event the shares issued in satisfaction of the right shall not be available for
new options or rights under the Plan.

         5. Stock Option.

                  (a) Type of Options. Options granted on or after January 28,
1994 may be either Nonqualified Stock Options or Incentive Stock Options as
determined by the Committee in its sole discretion and as reflected in the
Notice of Grant issued by the Committee. All Options granted under the Plan
prior to January 28, 1994 were nonqualified stock options. "Incentive Stock
Option" means an option intended to qualify as an incentive stock option within
the meaning of Section 422 of the Code. "Nonqualified Stock Option" means an
option not intended to


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qualify as an Incentive Stock Option or an Incentive Stock Option which is
converted to a Nonqualified Stock Option under Section 5(f) hereof.

                  (b) Option Price. The price at which options may be granted
under the Plan shall be determined as follows:

                           (i) For Incentive Stock Options the option price
shall be equal to 100% of the Fair Market Value of the stock on the date the
option is granted provided, however, that Incentive Stock Options granted to any
person who, at the time such option is granted owns (as defined in Section 422
of the Code) shares possessing more than 10% of the total combined voting power
of all classes of shares of the Company or its parent or subsidiary corporation,
the Option Price shall be 110% of the Fair Market Value.

                           (ii) For Nonqualified Stock Options the option price
may be less than the Fair Market Value of the stock on the date of grant, but in
no event shall the option price be less than fifty percent 50% of the Fair
Market Value of the stock on the date the option is granted.

                           (iii) For purposes of this Plan, and except as
otherwise set forth herein, "Fair Market Value" shall mean (a) if there is an
established market for the Company's Common Stock on a stock exchange, in an
over-the-counter market or otherwise, the closing price on the date of grant, or
(b) as otherwise specified by the Committee. In the case of automatic grants to
Committee members, the Fair Market Value shall be the closing price on the date
of grant.

                  (c) Exercise of Option. The right to purchase shares covered
by any option or options under this Plan shall be exercisable only in accordance
with the terms and conditions of the grant to the participant. Such terms and
conditions may include a time period or schedule whereby some of the options
granted may become exercisable, or "vested", over time and certain conditions,
such as continuous service or specified performance criteria or goals, must be
satisfied for such vesting. The determination as to whether to impose any such
vesting schedule or requirements, and the terms of such schedule or
requirements, shall be within the sole discretion of the Committee. These terms
and conditions may be different for different participants so long as all
options satisfy the requirements of the Plan.

                  Options shall be paid for in cash or in shares of the
Company's Common Stock, which shares shall be valued at the Fair Market Value of
the shares on the date of exercise, or any combination thereof. The Committee
may, in its discretion and subject to ratification by the entire Board of
Directors, loan one or more participants all or a portion of the exercise price,
together with the amount of any tax liability incurred by the participant as a
result of the exercise of the option, for up to three (3) years with interest
payable at the prime rate quoted in the Wall Street Journal on the date of
exercise. Members of the Committee may


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receive such loans for the exercise of their options without Committee approval
or Board ratification.

         The Committee may also permit a participant to effect a net exercise of
an option without tendering any shares of the Company's stock as payment for the
option. In such an event, the participant will be deemed to have paid for the
exercise of the option with shares of the Company's stock and shall receive from
the Company a number of shares equal to the difference between the shares that
would have been tendered and the number of options exercised.

         The Committee may also cause the Company to enter into arrangements
with one or more licensed stock brokerage firms whereby participants may
exercise options without payment therefor but with irrevocable orders to such
brokerage firm to immediately sell the number of shares necessary to pay the
exercise price for the option and the withholding taxes, if any, and then to
transmit the proceeds from such sales directly to the Company in satisfaction of
such obligations.

                  (d) Duration of Options. Unless otherwise prescribed by the
Committee or this Plan, options granted hereunder shall expire ten (10) years
from the date of grant, subject to early termination as provided in Section 5(f)
hereof.

                  (e) Incentive Stock Options Limitations. In no event shall an
Incentive Stock Option be granted to any person who, at the time such option is
granted, owns (as defined in Section 422 of the Code) shares possessing more
than 10% of the total combined voting power of all classes of shares of the
Company or of its parent or subsidiary corporation, unless the option price is
at least 110% of the Fair Market Value of the stock subject to the Option, and
such Option is by its terms not exercisable after the expiration of five (5)
years from the date such Option is granted. Moreover, the aggregate Fair Market
Value (determined as of the time that option is granted) of the shares with
respect to which Incentive Stock Options are exercisable for the first time by
any individual employee during any single calendar year under the Plan shall not
exceed $100,000. In addition, in order to receive the full tax benefits of an
Incentive Stock Option, the employee must not resell or otherwise dispose of the
stock acquired upon exercise of the Incentive Stock Option until two (2) years
after the date the option was granted and one (1) year after it was exercised.

                  (f) Early Termination of Options. In the event a participant's
employment with or service to the Company shall terminate as the result of total
disability or the result of retirement at 65 years of age or later, then any
options granted to such participant shall terminate and may no longer be
exercised three (3) months after the time such participant is no longer an
employee, officer or director of, or advisor or consultant to, the Company. If
the participant dies while employed or engaged by the Company, to the extent
that the option was exercisable at the time of the participant's death, such
option may, within one year after the participant's death, be exercised by the
person or persons to whom the participant's rights under




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the option shall pass by will or by the applicable laws of descent and
distribution; provided, however, that an option may not be exercised to any
extent after the expiration of the option as originally granted. In the event a
participant's employment or engagement by the Company shall terminate as the
result of any circumstances other than those referred to above, whether
terminated by the participant or the Company, with or without cause, then all
options granted to such participant under this Plan shall terminate and no
longer be exercisable as of the date of such termination, provided, however,
that if an employee with an Incentive Stock Option terminates employment prior
to its exercise, but after such termination becomes or remains a non-employee
officer, director, advisor or consultant eligible for Nonqualified Stock Options
hereunder, then the Incentive Stock Option shall be converted to a Nonqualified
Stock Option on the date the Incentive Stock Option would otherwise have
terminated.

                  An employee who is absent from work with the Company because
of total disability, as defined below, shall not by virtue of such absence alone
be deemed to have terminated such participant's employment with the Company. All
rights which such participant would have had to exercise options granted
hereunder will be suspended during the period of such absence and may be
exercised cumulatively by such participant upon his return to the Company so
long as such rights are exercised prior to the expiration of the option as
originally granted. For purposes of this Plan, "total disability" shall mean
disability, as a result of sickness or injury, to the extent that the
participant is prevented from engaging in any substantial gainful activity and
is eligible for and receives a disability benefit under Title II of the Federal
Social Security Act.

                  (g) Automatic Grants to Committee Members. Except as provided
in Section 2(g) hereof, no action may be taken by the Committee to grant any
options to members of the Committee. Notwithstanding the foregoing and
irrespective of any action by the Committee, on the date of each meeting of the
Board of Directors or a committee thereof, each member of the Committee and of
the Audit Committee (other than members who are officers or employees of the
Company) of such committee that attends such meeting in person shall receive a
grant of a ten year fully vested Nonqualified Stock Options to purchase 500
shares of the Company's Common Stock at an exercise price equal to the Fair
Market Value calculated in accordance with Section 5(b).

                  (h) Reload by Payment in Shares. To the extent that a
participant pays for the exercise of an option with shares of the Company's
stock rather than cash, the tendered shares shall be deemed to be added back to
the Plan, increasing the total number of shares subject to and reserved for the
Plan by that amount.

         6. Stock Appreciation Rights.

                  (a) Grant. Stock appreciation rights may be granted by the
Committee under this Plan upon such terms and conditions as it may prescribe. A
stock appreciation right



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may be granted only in connection with an option previously granted to or to be
granted under this Plan. Each stock appreciation right shall become
nonexercisable and be forfeited if the related option is exercised. "Stock
appreciation right" as used in this Plan means a right to receive the excess of
Fair Market Value, on the date of exercise, of a share of the Company's Common
Stock on which an appreciation right is exercised over the option price provided
for in the related option and is issued in consideration of services performed
for the Company or for its benefit by the participant. Such excess is hereafter
called "the differential."

                  (b) Exercise of Stock Appreciation Rights. Stock appreciation
rights shall be exercisable and be payable in the following manner:

                           (i) A stock appreciation right shall be exercisable
by the participant at the same time or times that the option to which it relates
could be exercised. A participant wishing to exercise a stock appreciation right
shall give written notice of such exercise to the Company. Upon receipt of such
notice, the Company shall determine, in its sole discretion, whether the
participant's stock appreciation rights shall be paid in cash or in shares of
the Company's Common Stock or any combination of cash and shares and thereupon
shall, without deducting any transfer or issue tax, deliver to the person
exercising such right an amount of cash or shares of the Company's Common Stock
or a combination thereof with a value equal to the differential. The date the
Company receives the written notice of exercise hereunder is the exercise date.
The shares issued upon the exercise of a stock appreciation right may consist of
shares of the Company's authorized but unissued Common Stock or of its
authorized and issued Common Stock reacquired by the Company and held in its
treasury or any combination thereof. No fractional share of Common Stock shall
be issued; rather, the Committee shall determine whether cash shall be given in
lieu of such fractional share or whether such fractional share shall be
eliminated.

                           (ii) The exercise of a stock appreciation right shall
automatically result in the surrender of the related stock option by the
participant on a share for share basis. Likewise, the exercise of a stock option
shall automatically result in the surrender of the related stock appreciation
right. Shares covered by surrendered options shall be available for granting
further options under this Plan except to the extent and in the amount that such
rights are paid by the Company with shares of stock, as more fully discussed in
Section 4 hereof.

                           (iii) The Committee may impose any other terms and
conditions it prescribes upon the exercise of a stock appreciation right, which
conditions may include a condition that the stock appreciation right may only be
exercised in accordance with rules and regulations adopted by the Committee from
time to time.

                  (c) Limitation on Payments. Notwithstanding any other
provision of this Plan, the Committee may from time to time determine, including
at the time of exercise, the maximum amount of cash or stock which may be given
upon exercise of any stock appreciation



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right in any year, provided, however, that all such amounts shall be paid in
full no later than the end of the year immediately following the year in which
the participant exercised such stock appreciation rights. Any determination
under this paragraph may be changed by the Committee from time to time provided
that no such change shall require the participant to return to the Company any
amount theretofore received or to extend the period within which the Company is
required to make full payment of the amount due as the result of the exercise of
the participant's stock appreciation rights.

                  (d) Expiration or termination of stock appreciation rights.

                           (i) Each stock appreciation right and all rights and
obligations thereunder shall expire on the date on which the related option
expires or terminates.

                           (ii) A stock appreciation right shall terminate and
may no longer be exercised upon the expiration or termination of the related
option.



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         7. Capital Adjustments. The aggregate number of shares of the Company's
Common Stock subject to this Plan, the maximum number of shares as to which
options may be granted to any one participant hereunder, and the number of
shares and the price per share subject to outstanding options, shall be
appropriately adjusted by the Committee for any increase or decrease in the
number of shares of Common Stock which the Company has issued resulting from any
stock split, reverse stock split, stock dividend, combination of shares or any
other change, or any exchange for other securities or any reclassification,
merger, reorganization, consolidation, redesignation, recapitalization, or
otherwise. Similar adjustments shall be made to the terms of stock appreciation
rights.

         8. Nontransferability. During a participant's lifetime, an option may
be exercisable only by the participant and options granted under the Plan and
the rights and privileges conferred thereby shall not be subject to execution,
attachment or similar process and may not be transferred, assigned, pledged or
hypothecated in any manner (whether by operation of law or otherwise) other than
by will or by the applicable laws of descent and distribution. Notwithstanding
the foregoing, to the extent permitted by applicable law and Rule 16b-3, the
Committee may (i) permit a recipient of a Nonqualified Stock Option to designate
in writing during the participant's lifetime a beneficiary to receive and
exercise the participant's Nonqualified Stock Options in the event of such
participant's death (as provided in Section 5(f)), (ii) grant Nonqualified Stock
Options that are transferable to the immediate family or a family trust of the
recipient, and (iii) modify existing Nonqualified Stock Options to be
transferable to the immediate family or a family trust of the recipient. Any
other attempt to transfer, assign, pledge, hypothecate or otherwise dispose of
any option under the Plan or of any right or privilege conferred thereby,
contrary to the provisions of the Plan shall be null and void.

         9. Amendment, Suspension, or Termination of Plan. The Board of
Directors or the Committee may at any time suspend or terminate the Plan and may
amend it from time to time in such respects as the Board of Directors or the
Committee may deem advisable in order that options and rights granted hereunder
shall conform to any change in the law, or in any other respect which the Board
of Directors or the Committee may deem to be in the best interests of the
Company; provided, however, that no such amendment shall, without the
participant's consent, alter or impair any of the rights or obligations under
any option or stock appreciation rights theretofore granted to him under the
plan; and provided further that no such amendment shall, without shareholder
approval: increase the total number of shares available for grants of options or
rights under the Plan (except as provided by Section 7 hereof); or effect any
change to the Plan which is required to be approved by shareholder by law,
including, without limitation, the regulations promulgated under Section 422 and
Section 162(m) of the Code. In addition, the provisions of Section 5(g) relating
to the amount, price and timing of grants to members of the Committee shall not
be amended more than once every six (6) months other than to comport with
applicable changes to the Code, the Employee Retirement Income Security Act or
rules thereunder.



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         10. Effective Date. The effective date of the Plan shall be December
31, 1987, provided, however, that the effective date of the Plan as it relates
to Incentive Stock Options shall be January 28, 1994 and no Incentive Stock
Option may be granted hereunder before January 28, 1994. If the January 28, 1994
amendment to and restatement of the Plan is not approved by the affirmative vote
of a majority of the Company's shareholders on or before January 28, 1995, then
the Plan shall remain in effect as it was last amended on June 14, 1990. The
failure of the shareholders to approve such amendment and restatement of the
Plan shall not, however, affect the validity, duration or any other terms and
conditions of options or rights granted prior to January 28, 1994, and shall
affect the terms and conditions of options or rights granted after that date
only to the extent required by law.

         11. Termination Date. Unless this Plan shall have been previously
terminated by the Committee, this Plan shall terminate on January 28, 2004,
except as to options and rights theretofore granted and outstanding under the
Plan at that date, and no stock option or stock appreciation rights shall be
granted after that date.

         12. Resale of Shares Purchased. All shares of stock purchased under
this Plan may be freely resold, subject to applicable state and federal
securities laws restricting their transfer. As a condition to exercise of an
option, the Company may impose various conditions, including a requirement that
the person exercising such option represent and warrant that, at the time of
such exercise, the shares of Common Stock being purchased are being purchased
for investment and not with a view to resale or distribution thereof. The resale
of shares purchased upon the exercise of Incentive Stock Options may, however,
cause the employee to lose certain tax benefits if the employee fails to comply
with the holding period requirements described in Section 5(e) hereof.

         13. Acceleration of Options. If the Company or its shareholders enter
into an agreement to dispose of all or substantially all of the assets or stock
of the Company by means of a sale, merger or other reorganization, liquidation,
or otherwise, any option granted pursuant to the Plan shall become immediately
exercisable with respect to the full number of shares subject to that option
during the period commencing as of the date of the agreement to dispose of all
or substantially all of the assets or stock of the Company and ending when the
disposition of assets or stock contemplated by that agreement is consummated or
the option is otherwise terminated in accordance with its provisions or the
provisions of the Plan, whichever occurs first; provided that no option shall be
immediately exercisable under this Section on account of any agreement of merger
or other reorganization where the shareholders of the Company immediately before
the consummation of the transaction will own 50% or more of the total combined
voting power of all classes of stock entitled to vote of the surviving entity
(whether the Company or some other entity) immediately after the consummation of
the transaction. In the event the transaction contemplated by the agreement
referred to in this section is not consummated, but rather is terminated,
canceled or expires, the options granted pursuant to the Plan shall thereafter
be treated as if that agreement had never been entered into.



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         14. Written Notice Required; Tax Withholding. Any option or right
granted pursuant to the Plan shall be exercised when written notice of that
exercise by the participant has been received by the Company at its principal
office and, with respect to options, when such notice is received and full
payment for the shares with respect to which the option is exercised has been
received by the Company. Participant agrees that, to the extent required by law,
the Company shall withhold or require the payment by participant of any state,
federal or local taxes resulting from the exercise of an option or right,
provided however that to the extent permitted by law, the Committee may in its
discretion, permit some or all of such withholding obligation to be satisfied by
the delivery by the participant of, or the retention by the Company of, shares
of its Common Stock.

         15. Compliance with Securities Laws. Shares shall not be issued with
respect to any option or right granted under the Plan unless the exercise of
that option and the issuance and delivery of the shares pursuant thereto shall
comply with all relevant provisions of state and federal law, including without
limitation the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder and the requirements of any stock exchange or automated
quotation system upon which the shares may then be listed or traded, and shall
be further subject to the approval of counsel for the Company with respect to
such compliance. Further, each participant must consent to the imposition of a
legend on the certificate representing the shares of Common Stock issued upon
the exercise of the option or right restricting their transferability as may be
required by law, the option, or the Plan.

         16. Waiver of Vesting Restrictions by Committee. Notwithstanding any
provision of the Plan, in the event a participant dies, becomes disabled,
retires as an employee, officer or director of, or as an advisor or consultant
to, the Company, the Committee shall have the discretion to waive any vesting
restrictions on the retiree's options, or the early termination of any
Nonqualified Stock Options held by the retiree.

         17. Reports to Participants. The Company shall furnish to each
participant a copy of the annual report sent to the Company's shareholders. Upon
written request, the Company shall furnish to each participant a copy of its
most recent annual report and each quarterly report to shareholders issued since
the end of the Company's most recent fiscal year.

         18. No Employee Contract. The grant of an option or right under the
Plan shall not confer upon any participant any right with respect to
continuation of employment by, or the rendition of advisory or consulting
services to, the Company, nor shall it interfere in any way with the Company's
right to terminate the participant's employment or services at any time.



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