DEFERRAL AND WAIVER AGREEMENT

     THIS DEFERRAL AND WAIVER AGREEMENT is made and entered into this 15th
day of December, 2000 ("Effective Date"), by and between BANK ONE,
COLORADO, N.A., a national banking association ("Lender") and VARI-L,
INC., a Colorado corporation (the "Borrower").  Capitalized terms used in
this Deferral and Waiver Agreement and not defined herein shall have the
meaning set forth in the Loan Documents.

                                 RECITALS

     A.   On March 24, 2000, the Lender and Borrower entered into a
Revolving Loan Agreement ("Loan Agreement"), Revolving Note, General
Security Agreement and other documents executed by or on behalf of the
Borrower to the Lender in connection with the Revolving Loan
(collectively, the "Loan Documents"). Pursuant to the terms of the Loan
Agreement, Lender agreed to make Revolving Advances of the Revolving Loan
to the Borrower.

     B.   Borrower hereby acknowledges that as of the date hereof, it is
and continues to be in default under the Loan Documents and is unable to
cure certain defaults.

     C.   Borrower has requested that Lender enter into this Deferral and
Waiver Agreement in order to give the Borrower time to undertake diligent
efforts to develop and implement a business plan to resolve certain
issues.

     D. Lender is willing to enter into this Deferral and Waiver
Agreement, but only upon the terms and conditions set forth herein.

     E. As contemplated in paragraph 17 of the Deferral and Waiver
Agreement dated September 28, 2000, Lender engaged an appraiser to value
the Borrower's equipment.  The appraiser completed its appraisal of the
equipment's value, resulting in a significant reduction in the borrowing
Base as defined in section 6 below.  In order to cure the shortfall in the
Borrowing Base, Borrower has agreed to make an additional principal
reduction payment as detailed in paragraph 5 below.

     NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are
hereby mutually acknowledged, the parties do hereby agree as follows:

     1.   AFFIRMATION OF RECITALS.  The Recitals set forth above are true
and correct and are incorporated herein by this reference.

     2.   ACKNOWLEDGMENT OF DEFAULT.  Borrower acknowledges that it is in
default of certain loan covenants, representations, obligations and
warranties under the Loan Documents, including, but not limited to the
following:  Litigation (Section 5.5 of the Loan Agreement); Full
Disclosure (Section 5.10 of the Loan Agreement); Financial Condition
(Section 5.13 of the Loan Agreement); Financial Statements (Section 6.2 of
the Loan Agreement); Notices (Section 6.8 of the Loan Agreement); and
Financial Covenants (Section 6.14 of the Loan Agreement) (collectively the
"Existing Events of Default").

     3.   LENDER'S FORBEARANCE.  Provided that Borrower is not in default
under the terms of this Deferral and Waiver Agreement, Lender agrees:  (a)
not to declare any further Events of Default under the Loan Documents; (b)
not to accelerate the amounts due under the Loan Documents; and, (c) to
forbear, defer and otherwise refrain from exercising its other rights and
remedies under the Loan Documents for the period from the Effective Date
through March 31, 2001 (the "Deferral Period").  Principal payments
together with accrued interest (as calculated pursuant to paragraph 4
below) plus a fee of $22,000.00 shall be due and payable on the Effective
Date.

     4.   INTEREST RATE ON REVOLVING LOAN.  From and after December 15,
2000, interest on the unpaid principal due with respect to the Revolving
Loan shall accrue and be payable at the rate of the Prime Rate (as defined
in the Loan Agreement) plus two percent to move with Prime ("TMWP")
payable at times determined under the Loan Documents.  Upon the occurrence
of any Event of Default of this Deferral and Waiver Agreement, in the
Lender's sole discretion and without waiving any of its other rights and
remedies, the amount due on the Revolving Loan shall bear interest at the
Default Rate of Prime plus five percent.  Borrower agrees that interest
shall no longer be applied at the LIBOR or Adjusted LIBOR Rate.

     5.   PRINCIPAL REDUCTION PAYMENT.  Notwithstanding any other
provision of the Loan Documents to the contrary, Borrower agrees as part
of this Deferral and Waiver Agreement and in consideration for Lender's
forbearance to pay to Lender as a principal reduction payment under the
Revolving Loan the amount of $1,100,000 in cash, certified or cashiers
check, other current funds or wire transfer funds on the Effective Date.
Provided there are no Events of Default and subject to paragraph 6 below,
no other principal payment shall be due during the Deferral Period.

     6.   BORROWING BASE. During the Deferral Period the Borrower shall
establish and maintain its Borrowing Base at a value of no less than
$8,800,000 as calculated based on the following criteria:

<TABLE>
<CAPTION>
   <S>         <C>                           <C>
     a.        raw materials                 30%
     b.        work in progress               0%
     c.        finished goods                60%
     d.        accounts receivable           75%
               (aged less than 90 days)
                                             e.   equipment (1) Equipment
                                             acquired prior to November 1,
                                             2000 shall be valued at the
                                             Forced Liquidation Value
                                             ("FLV") based on the
                                             equipment appraisal
                                             determined by BL Enterprises
                                             dated November 1, 2000; (2)
                                             equipment acquired subsequent
                                             to November 1, 2000 shall be
                                             valued at 30% of Borrower's
                                             purchase price if the
                                             equipment is used or pre-
                                             owned; and, (3) equipment
                                             acquired subsequent to
                                             November 1, 2000 shall be
                                             valued at 60% of Borrower's
                                             purchase price, if the
                                             equipment is new.
</TABLE>

Before any additional equipment may be added to the Borrowing Base,
Borrower shall provide Lender with a copy of the paid invoice for any new
or used equipment purchased after November 1, 2000.  For purposes of
determining the Borrowing Base:  (a) raw materials and finished goods
shall be valued using the standard costs employed by Borrower in its books
and records; and (b) accounts receivable shall be valued at the amount set
forth in the Borrower's books and records, net of reserves and credits.
Fixed assets or equipment financed by a person or entity other than Lender
shall be excluded from the Borrowing Base.  The Borrower shall determine
its Borrowing Base bi-monthly (as of the 15th and the last day of each
month), the results of which Borrower shall provide Lender within ten
business days thereafter.  If any bi-monthly report provided to Lender in
accordance with this paragraph 6 reflects that the Borrowing Base (as
determined by the foregoing criteria) is less than $8,800,000, Borrower
shall immediately pay to Lender an amount equal to any shortfall between
the Borrowing Base and $8,800,000 (the "Shortfall Payment").  With the
exception of a Shortfall Payment that may result from the March 31, 2001
determination of the Borrowing Base, Borrower may deposit any other
Shortfall Payment into a Lender-controlled disbursement account where it
shall remain until the next determination of the Borrowing Base (a
"Shortfall Deposit").  If at the next determination of the Borrowing Base,
the Borrowing Base is at least $8,800,000, the previous Shortfall Deposit
shall be released to the Borrower.  Conversely, if as a result of the next
determination of the Borrowing Base, the Borrowing Base is again less than
$8,800,000, the Shortfall Deposit shall be released to the Lender and
Borrower shall deposit into the disbursement account an amount equal to
the Shortfall Payment less the amount of all Shortfall Deposits released
to the Lender. The failure of Borrower to timely pay the Shortfall Payment
to Lender shall constitute an Event of Default hereunder.

     7.   RESTRICTION ON REVOLVING LOAN.  Notwithstanding any other
provision of the Loan Documents to the contrary and in consideration of
Lender's forbearance, Borrower agrees that the amount available to
Borrower under the  Revolving Loan is $8,800,000 and upon any principal
reduction payment by Borrower of such amount, Borrower shall not have the
ability to reborrow any further amounts otherwise available under the
Revolving Loan.

     8.   NO REVOLVING ADVANCE.  Notwithstanding any other provision of
the Loan Documents to the contrary, Borrower acknowledges that until
further agreement by the Lender, the Lender shall have no obligation to
make any additional Revolving Advance under the Revolving Loan.

     9.   COVENANT NOT TO LIEN OR ENCUMBER.  Borrower shall not permit the
Collateral to be encumbered by any security interest except for the
benefit of the Lender; provided, however, that subject to the Lender's
approval, Borrower may grant liens, security interests, leases or other
encumbrances solely on equipment it acquires after the Effective Date.
Lender's approval shall not be unreasonably withheld.

     10.  SUCCESSORS AND ASSIGNS.  The parties agree that this Deferral
and Waiver Agreement and the Revolving Note shall be binding upon, and
inure to the benefit of the parties hereto and their respective
successors, heirs, administrators and assigns; except that the Borrower
may not transfer or assign any of its rights or obligations hereunder
without the Lender's prior written consent.

     11.  WAIVER OF EVENTS OF DEFAULT.  Provided that the Borrower is not
in default hereunder, Lender agrees, only during the Deferral Period, to
waive the Existing Events of Default under the Loan Documents.  Subsequent
to the Deferral Period, Lender may exercise any right, remedy, power or
privilege available under the Loan Documents or under this Deferral and
Waiver Agreement.

     12.  NO DEFENSES, WAIVERS.  As of the date of this Deferral and
Waiver Agreement, the Borrower acknowledges that it has no defense,
offset, or counterclaims to any of Borrower's obligations under the Loan
Documents.  To the extent that any such defenses, claims or offsets exist
as of the date hereof, they are hereby waived and released by Borrower in
consideration of Lender's execution of this Deferral and Waiver Agreement.
Borrower has duly authorized, executed and delivered this Deferral and
Waiver Agreement to Lender, and the Borrower acknowledges that the Loan
Documents are valid and enforceable in accordance with their terms against
the Borrower.

     13.  EVENTS OF DEFAULT.  The occurrence of any one or more of the
following shall constitute an Event of Default under this Deferral and
Waiver Agreement:

          (a)  a materially false or misleading representation or warranty
contained in this Deferral and Waiver Agreement, or the existence of a
misrepresentation of fact or fraud contained in any document or
information submitted or communicated to Lender on or after August 8,
2000, in support of this Deferral and Waiver Agreement;

          (b)  material breach or violation of any terms, covenant or
condition contained in this Deferral and Waiver Agreement; and

          (c)  any other Event of Default under any of the Loan Documents
subsequent to the Effective Date other than any of the Existing Events of
Default or other than an act or omission that would again become an Event
of Default solely by the passage of time.

     14.  TERMINATION; REMEDIES.  Immediately following the occurrence of
any default under this Deferral and Waiver Agreement, Lender may, at its
option, (a) terminate its obligations to waive the defaults set forth in
paragraph 2 and terminate its obligations to defer payments as contained
herein without notice or demand to the Borrower and (b) pursue any other
remedies available to it under the Loan Documents or otherwise.  If not
sooner terminated, Lender's obligation to waive the defaults set forth in
paragraph 2 and defer payments as set forth herein shall terminate
automatically and without notice to or action by Borrower on March 31,
2001.

     15.  NO WAIVER OF  REMEDIES.  Lender expressly reserves any and all
rights and remedies available to it under this Deferral and Waiver
Agreement and the Loan Documents, at law or in equity in the event the
Borrower defaults under this Deferral and Waiver Agreement.  No failure to
exercise, or delay by Lender in exercising, any right, power or privilege
hereunder shall preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege.  The rights and remedies
provided in this Deferral and Waiver Agreement and the Loan Documents are
cumulative and not exclusive of each other or of any right or remedy
provided by law or in equity.  No notice to or demand upon the Borrower in
any instance shall, in itself, entitle the Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the right of Lender to any other or further action in any
circumstances without notice or demand.

     16.  INSPECTION OF PROPERTY, BOOKS AND RECORDS.  In accordance with
Lender's right of inspection set forth in Section 6.7 of the Loan
Agreement, Lender's authorized officers, employees and agents shall have
the specific right to inspect (and make copies of or abstracts therefrom)
the accounts receivable, at the expense of the Borrower and at any
reasonable time and as often as the Lender may reasonably request.

     17.  APPRAISAL OF EQUIPMENT.  Lender's authorized officers, employees
and agents shall have the right to obtain an appraisal of any equipment of
Borrower, at Borrower's expense, and to inspect Borrower's equipment at
any reasonable time and as often as Lender may reasonably request.  Lender
agrees to provide Borrower with a copy of third-party appraisals Lender
obtains during the Deferral Period.

     18.  REPORTING.  Borrower shall promptly apprise and inform Lender of
all significant pleadings and Court Orders concerning any lawsuits or
governmental proceedings in which Borrower is a party, all decisions of
the Security Exchange Commission and NASDAQ that concern Borrower, all
actions and lawsuits filed with any Court or governmental agency
subsequent to the Effective Date and all significant developments that
concern Borrower.

     19.  EXPENSES; ATTORNEYS' FEES.  In addition to all other amounts
that are now due or may hereafter become due to Lender under the Loan
Documents or this Deferral and Waiver Agreement, the Borrower shall
reimburse Lender for all amounts reasonably incurred by or on behalf of
Lender for attorneys' fees, recording expenses, title insurance fees, UCC
searches, and all other reasonable expenses incurred by or on behalf of
Lender by reason of the matters specified herein and for the preparation
of this Deferral and Waiver Agreement and all other documents necessary
and required to effectuate the provisions hereof including, without
limitation, all reasonable costs and expenses with respect to the
Borrower's compliance with the terms and conditions hereof and Lender's
enforcement thereof.  Borrower shall reimburse Lender for all outstanding
attorneys' fees, costs and expenses within 15 days notice of such
attorneys' fees, costs and expenses.  In the event any dispute shall arise
concerning the subject matter of this Deferral and Waiver Agreement,
Lender shall be entitled to recover from the Borrower its reasonable
attorneys' fees and costs incurred in the enforcement of any of the
provisions set forth herein.  The rights and remedies of Lender contained
in this paragraph shall be in addition to, and not in lieu of, the rights
and remedies contained in the Loan Documents and as provided by law.

     20.  GOVERNING LAW.  This Deferral and Waiver Agreement shall be
construed in accordance with the laws of the State of  Colorado.

     21.  DISPUTE RESOLUTION.  Section 10.11 Waiver of Right to Trial by
Jury, Section 10.15 Submission to Jurisdiction/Service of Process and
Section 10.16 Limitation of Liability of the Loan Agreement specifically
apply to this Deferral and Waiver Agreement and are incorporated herein as
if fully set forth.  Section 10.12 Arbitration of the Loan Agreement is
not applicable to this Deferral and Waiver Agreement.  Section 10.12
Arbitration of the Loan Agreement is not applicable to this Deferral and
Waiver Agreement.

     22.  CONSTRUCTION.  This Deferral and Waiver Agreement shall not be
construed more strictly against Lender merely by virtue of the fact that
the same has been prepared by Lender or its counsel, it being recognized
that the Borrower and Lender have contributed substantially and materially
to the preparation of this Deferral and Waiver Agreement, and the Borrower
and Lender each acknowledge and waive any claim contesting the existence
and the adequacy of the consideration given by any of the other parties
hereto in entering into this Deferral and Waiver Agreement.

     23.  ENTIRE AGREEMENT AND RATIFICATION.  Borrower and Lender each
acknowledge that there are no other agreements or representations, either
oral or written, express or implied, not embodied in this Deferral and
Waiver Agreement and the Loan Documents, which, together, represent a
complete integration of all prior and contemporaneous agreements and
understandings of the Borrower and Lender, and subject to the
modifications herein, the provisions of the Loan Documents are hereby
ratified and confirmed.

     24.  CONSENT TO AGREEMENT.  Borrower acknowledges that it has
thoroughly read and reviewed the terms and provisions of this Deferral and
Waiver Agreement and is familiar with the same, that the terms and
provisions contained herein are clearly understood by it and have been
fully and unconditionally consented to by it and that the Borrower has had
the full benefit and advice of counsel of its own selection, or the
opportunity to obtain the benefit and advice of counsel of its own
selection, in regard to understanding the terms, meaning and effect of
this Deferral and Waiver Agreement and that this Deferral and Waiver
Agreement has been entered into by the Borrower freely, voluntarily, with
full knowledge, and without duress, and that in executing this Deferral
and Waiver Agreement, the Borrower is relying on no other representations
either written or oral, express or implied, made to the Borrower by any
other party hereto, and that the consideration received by the Borrower
hereunder has been actual and adequate.

     25.  RELEASE.  As additional consideration for Lender entering into
this Deferral and Waiver Agreement, the Borrower hereby fully and
unconditionally releases and forever discharges Lender, its agents,
servants, employees, directors, officers, attorneys, branches, affiliates,
subsidiaries, successors and assigns and all persons, firms, corporations,
and organizations acting in its behalf of and from all damage, loss,
claims, demands, liabilities, obligations, actions and causes of action
whatsoever which the Borrower may now have or claim to have against Lender
as of the date of this Deferral and Waiver Agreement, whether presently
known or unknown, and of every nature and extent whatsoever on account of
or in any way affecting, concerning, arising out of or founded upon the
Loan Documents including, but not limited to, all such loss or damage of
any kind heretofore sustained, or that may arise as a consequence of the
dealings between the parties up to and including the date of this Deferral
and Waiver Agreement.

     26.  COUNTERPARTS.  It is understood and agreed that this Deferral
and Waiver Agreement may be executed in several counterparts, each of
which shall, for all purposes, be deemed an original and all of such
counterparts, taken together, shall constitute one and the same Deferral
and Waiver Agreement, even though all of the parties hereto may not have
executed the same counterpart of this Deferral and Waiver Agreement.

     27.  MISCELLANEOUS.  This Deferral and Waiver Agreement is made for
the sole protection of Lender and the Borrower and their respective
successors and assigns.  No other person shall have any right whatsoever
hereunder.  Notices to parties hereunder may be given to them at the
addresses and in the manner provided in the Loan Documents.  Time shall be
of the strictest essence in the performance of each and every one of the
Borrower's obligations hereunder.  If any provision of this Deferral and
Waiver Agreement is held to be invalid or unenforceable, the remaining
provisions shall remain in effect without impairment.

     IN WITNESS WHEREOF, this Deferral and Waiver Agreement has been
executed by the parties hereto in manner and form sufficient to bind them,
as of the day and year first above written.

                               BANK ONE, COLORADO, N.A., a national
                               banking association



                               By:/s/Dennis Warren
                                   -----------------------------------
                               Name:    Dennis Warren
                               Its:     First Vice President


                               VARI-L, INC., a Colorado corporation



                               By:/s/G. Peter Pappas
                                   -----------------------------------
                               Name:    G. Peter Pappas
                               Its:     President & CEO