Document:

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                                                                   EXHIBIT 10.18

                                                                         NO. ___

                             TRANSMETA CORPORATION
                           2000 EQUITY INCENTIVE PLAN
                             STOCK OPTION AGREEMENT
                          (For Non-Employee Directors)

     This Stock Option Agreement (this "AGREEMENT") is made and entered into as
of the Date of Grant set forth below (the "DATE OF GRANT") by and between
Transmeta Corporation, a Delaware corporation (the "Company"), and the Optionee
named below ("OPTIONEE"). Capitalized terms not defined herein shall have the
meanings ascribed to them in the Company's 2000 Equity Incentive Plan (the
"PLAN").

OPTIONEE:
                              --------------------------------------------------
SOCIAL SECURITY NUMBER:
                              --------------------------------------------------
OPTIONEE'S ADDRESS:
                              --------------------------------------------------
TOTAL OPTION SHARES:
                              --------------------------------------------------
EXERCISE PRICE PER SHARE:
                              --------------------------------------------------
DATE OF GRANT:
                              --------------------------------------------------
EXPIRATION DATE:
                              --------------------------------------------------
                              (unless earlier terminated under Section 3 hereof)

TYPE OF STOCK OPTION:             Nonqualified Stock Option
                              --------------------------------------------------

     1.   GRANT OF OPTION. The Company hereby grants to Optionee an option (this
"OPTION") to purchase up to the total number of shares of Common Stock of the
Company set forth above as Total Option Shares (collectively, the "SHARES") at
the Exercise Price Per Share set forth above (the "EXERCISE PRICE"), subject to
all of the terms and conditions of this Agreement and the Plan.

     2.   VESTING; EXERCISE PERIOD.

          2.1  Vesting of Shares. Subject to the terms and conditions of the
Plan and this Agreement, this Option shall be exercisable as it vests. Subject
to the terms and conditions of the Plan and this Agreement, this Option shall
vest as to 33% of the Shares on the first anniversary of the Date of Grant, and
as to 2.77778% of the Shares monthly thereafter until all of the Shares are
fully vested, so long as the Optionee continuously remains a director of the
Company.

          2.2  Expiration. This Option shall expire on the Expiration Date set
forth above and must be exercised, if at all, on or before the earlier of the
Expiration Date or the date on which this Option is earlier terminated in
accordance with the provisions of Section 3 hereof.

<PAGE>   2

     3.   TERMINATION. Except as provided below in this Section, this Option
shall terminate and may not be exercised if Optionee ceases to be a member of
the Board of Directors of the Company ("BOARD MEMBER"). The date on which
Optionee ceases to be a Board Member shall be referred to as the "TERMINATION
DATE."

          3.1  Termination for Any Reason Except Death, Disability or Cause. If
Optionee ceases to be a Board Member for any reason except death, Disability or
Cause, then this Option may be exercised by Optionee no later than three (3)
months after the Termination Date, but in any event no later than the Expiration
Date.

          3.2  Termination Because of Death or Disability. If Optionee ceases to
be a Board Member due to Optionee's death or Disability (or dies within 3 months
after Termination other than for Cause or because of Disability), then this
Option may be exercised by Optionee (or Optionee's legal representative or
authorized assignee) no later than twelve (12) months after the Termination
Date, but in any event no later than the Expiration Date.

          3.3  Termination for Cause. If Optionee is Terminated for Cause, this
Option will expire on the Optionee's date of Termination.

     4.   MANNER OF EXERCISE.

          4.1  Stock Option Exercise Agreement. To exercise this Option,
Optionee (or in the case of exercise after Optionee's death, Optionee's
executor, administrator, heir or legatee, as the case may be) must deliver to
the Company an executed stock option exercise agreement in the form attached
hereto as Exhibit A, or in such other form as may be approved by the Company
from time to time (the "EXERCISE AGREEMENT"), which shall set forth, inter alia,
Optionee's election to exercise this Option, the number of shares being
purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Optionee's investment intent and access to
information as may be required by the Company to comply with applicable
securities laws. If someone other than Optionee exercises this Option, then such
person must submit documentation reasonably acceptable to the Company that such
person has the right to exercise this Option.

          4.2  Limitations on Exercise. This Option may not be exercised unless
such exercise is in compliance with all applicable federal and state securities
laws, as they are in effect on the date of exercise. This Option may not be
exercised as to fewer than 100 Shares unless it is exercised as to all Shares as
to which this Option is then exercisable.

          4.3  Payment. The Exercise Agreement shall be accompanied by full
payment of the Exercise Price for the Shares being purchased in cash (by check),
or where permitted by law:

               (a)  by cancellation of indebtedness of the Company to the
Optionee;

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               (b)  by surrender of shares of the Company's Common Stock that
either: (1) have been owned by Optionee for more than six (6) months and have
been paid for within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note has been fully
paid with respect to such shares); or (2) were obtained by Optionee in the open
public market; and (3) are clear of all liens, claims, encumbrances or security
interests;

               (c)  by waiver of compensation due or accrued to Optionee for
services rendered;

               (d)  provided that a public market for the Company's stock
exists: (1) through a "same day sale" commitment from Optionee and a
broker-dealer that is a member of the National Association of Securities Dealers
(an "NASD DEALER") whereby Optionee irrevocably elects to exercise this Option
and to sell a portion of the Shares so purchased to pay for the Exercise Price
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the exercise price directly to the Company; or (2) through a "margin"
commitment from Optionee and an NASD Dealer whereby Optionee irrevocably elects
to exercise this Option and to pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD Dealer in the amount of
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price directly to the Company; or

               (e)  by any combination of the foregoing.

          4.4  Tax Withholding. Prior to the issuance of the Shares upon
exercise of this Option, Optionee must pay or provide for any applicable federal
or state withholding obligations of the Company. If the Committee permits,
Optionee may provide for payment of withholding taxes upon exercise of this
Option by requesting that the Company retain Shares with a Fair Market Value
equal to the minimum amount of taxes required to be withheld. In such case, the
Company shall issue the net number of Shares to the Optionee by deducting the
Shares retained from the Shares issuable upon exercise.

          4.5  Issuance of Shares. Provided that the Exercise Agreement and
payment are in form and substance satisfactory to counsel for the Company, the
Company shall issue the Shares registered in the name of Optionee, Optionee's
authorized assignee, or Optionee's legal representative, and shall deliver
certificates representing the Shares with the appropriate legends affixed
thereto.

     5.   COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Optionee with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company's Common Stock may be listed at the time of such issuance or
transfer. Optionee understands that the Company is under no obligation

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to register or qualify the Shares with the SEC, any state securities commission
or any stock exchange to effect such compliance.

     6.   NONTRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner other than under the terms and conditions of the Plan or by will or
by the laws of descent and distribution and may be exercised during the lifetime
of Optionee only by Optionee. The terms of this Option shall be binding upon the
executors, administrators, successors and assigns of Optionee.

     7.   TAX CONSEQUENCES. Set forth below is a brief summary as of the date
the Board adopted the Plan of some of the federal tax consequences of exercise
of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.

          7.1  Exercise of Nonqualified Stock Option. There may be a regular
federal income tax liability upon the exercise of this Option. Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price. The Company may be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.

          7.2  Disposition of Shares. If the Shares are held for more than
twelve (12) months after the date of the transfer of the Shares pursuant to the
exercise of an NQSO, any gain realized on disposition of the Shares will be
treated as long-term capital gain.

     8.   PRIVILEGES OF STOCK OWNERSHIP. Optionee shall not have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to Optionee.

     9.   INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Optionee.

     10.  ENTIRE AGREEMENT. The Plan is incorporated herein by reference. This
Agreement and the Plan and the Exercise Agreement constitute the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersede all prior understandings and agreements with respect
to such subject matter.

     11.  NOTICES. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Optionee shall be in writing and
addressed to Optionee at the address indicated above or to such

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other address as such party may designate in writing from time to time to the
Company. All notices shall be deemed to have been given or delivered upon:
personal delivery; three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); one (1) business day
after deposit with any return receipt express courier (prepaid); or one (1)
business day after transmission by facsimile.

     12.  SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon Optionee and
Optionee's heirs, executors, administrators, legal representatives, successors
and assigns.

     13.  GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California, without regard to
that body of law pertaining to choice of law or conflict of law.

     14.  ACCEPTANCE. Optionee hereby acknowledges receipt of a copy of the Plan
and this Agreement. Optionee has read and understands the terms and provisions
thereof, and accepts this Option subject to all the terms and conditions of the
Plan and this Agreement. Optionee acknowledges that there may be adverse tax
consequences upon exercise of this Option or disposition of the Shares and that
the Company has advised Optionee to consult a tax advisor prior to such exercise
or disposition.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by its duly authorized representative and Optionee has executed this
Agreement in duplicate as of the Date of Grant.

TRANSMETA CORPORATION                  OPTIONEE

By:
     ---------------------------       --------------------------------
                                       (Signature)

--------------------------------       --------------------------------
(Please print name)                    (Please print name)

--------------------------------
(Please print title)

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                                    EXHIBIT A

                         STOCK OPTION EXERCISE AGREEMENT

                                       6
<PAGE>   7

                                    EXHIBIT A

                              TRANSMETA CORPORATION
                     2000 EQUITY INCENTIVE PLAN (THE "PLAN")
                         STOCK OPTION EXERCISE AGREEMENT
                          (For Non-Employee Directors)

     I hereby elect to purchase the number of shares of Common Stock of
Transmeta Corporation (the "Company") as set forth below:

<TABLE>
<S>                                                             <C>
Optionee                                                        Number of Shares Purchased:
        --------------------------------------------------                                  ----------------------------------------
Social Security Number:                                         Purchase Price per Share:
                       -----------------------------------                                ------------------------------------------
Address:                                                        Aggregate Purchase Price:
        --------------------------------------------------                                ------------------------------------------
                                                                Date of Option Agreement:
        --------------------------------------------------                                ------------------------------------------

Type of Option:        Nonqualified Stock Option                Exact Name of Title to Shares:
                                                                                               -------------------------------------

                                                                                               -------------------------------------
</TABLE>

1.   DELIVERY OF PURCHASE PRICE. Optionee hereby delivers to the Company the
Aggregate Purchase Price, to the extent permitted in the Option Agreement (the
"Option Agreement") as follows (check as applicable and complete):

[ ]  in cash (by check) in the amount of $_____________________, receipt of
     which is acknowledged by the Company;

[ ]  by cancellation of indebtedness of the Company to Optionee in the amount
     of $___________________________________;

[ ]  by delivery of ______________________________ fully-paid, nonassessable
     and vested shares of the Common Stock of the Company owned by Optionee for
     at least six (6) months prior to the date hereof (and which have been paid
     for within the meaning of SEC Rule 144), or obtained by Optionee in the
     open public market, and owned free and clear of all liens, claims,
     encumbrances or security interests, valued at the current Fair Market Value
     of $____________________ per share;

[ ]  by the waiver hereby of compensation due or accrued to Optionee for
     services rendered in the amount of $____________________________________ ;

[ ]  through a "same-day-sale" commitment, delivered herewith, from Optionee
     and the NASD Dealer named therein, in the amount of
     $_______________________________; or

[ ]  through a "margin" commitment, delivered herewith from Optionee and the
     NASD Dealer named therein, in the amount of
     $_________________________________________.

2.   MARKET STANDOFF AGREEMENT. Optionee, if requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by Optionee during the period requested by the managing
underwriter following the effective date of a registration statement of the
Company filed under the Securities Act, provided that all officers and directors
of the Company are required to enter into similar agreements. Such agreement
shall be in writing in a form satisfactory to the Company and such underwriter.
The Company may impose stop-transfer instructions with respect to the shares (or
other securities) subject to the foregoing restriction until the end of such
period.

3.   TAX CONSEQUENCES. OPTIONEE UNDERSTANDS THAT OPTIONEE MAY SUFFER ADVERSE TAX
CONSEQUENCES AS A RESULT OF OPTIONEE'S PURCHASE OR DISPOSITION OF THE SHARES.
OPTIONEE REPRESENTS THAT OPTIONEE HAS CONSULTED WITH ANY TAX CONSULTANT(S)
OPTIONEE DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE
SHARES AND THAT OPTIONEE IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.

4.   ENTIRE AGREEMENT. The Plan and Option Agreement are incorporated herein by
reference. This Exercise Agreement, the Plan and the Option Agreement constitute
the entire agreement and understanding of the parties and supersede in their
entirety all prior understandings and agreements of the Company and Optionee
with respect to the subject matter hereof, and are governed by California law
except for that body of law pertaining to choice of law or conflict of law.

Date:
      ----------------                 -----------------------------------------
                                       SIGNATURE OF OPTIONEE

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                                 SPOUSAL CONSENT

     I acknowledge that I have read the foregoing Stock Option Exercise
Agreement (the "AGREEMENT") and that I know its contents. I hereby consent to
and approve all of the provisions of the Agreement, and agree that the shares of
the Common Stock of Transmeta Corporation purchased thereunder (the "SHARES")
and any interest I may have in such Shares are subject to all the provisions of
the Agreement. I will take no action at any time to hinder operation of the
Agreement on these Shares or any interest I may have in or to them.

                                               Date:
     -----------------------------------             -------------------
     SIGNATURE OF OPTIONEE'S SPOUSE

     -----------------------------------
     SPOUSE'S NAME - TYPED OR PRINTED

     -----------------------------------
     OPTIONEE'S NAME - TYPED OR PRINTED

                                       8DEFERRAL AND WAIVER AGREEMENT

     THIS DEFERRAL AND WAIVER AGREEMENT is made and entered into this 28th
day of September, 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.

     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 December 15, 2000 (the "DEFERRAL PERIOD").  Principal payments
together with accrued interest (as calculated pursuant to paragraph 4
below) plus a fee of $24,750.00 shall be due and payable on the Effective
Date.

     4.   INTEREST RATE ON REVOLVING LOAN.  From and after July 20, 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 one and one-half 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 $1,600,000 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
$9,900,000 as calculated based on the following criteria:

          a.   raw materials                        30%
          b.   work in progress                      0%
          c.   finished goods                       60%
          d.   accounts receivable (aged            80%
               less than 90 days)
          e.   fixed assets (exclusive of           30%
               leasehold improvements)

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; (b) accounts receivable shall be valued
at the amount set forth in the Borrower's books and records, net of
reserves and credits; (c) fixed assets shall be valued on an original cost
basis.  Fixed assets 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 $9,900,000, Borrower
shall immediately pay to Lender an amount equal to any shortfall between
the Borrowing Base and $9,900,000 (the "Shortfall Payment").  With the
exception of a Shortfall Payment that may result from the December 15,
2000 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 $9,900,000, 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
$9,900,000, 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 $9,900,000 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 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 December 15,
2000.

     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/William C. Andrews
                              Name: William C. Andrews
                              Its: Interim Chief Financial Officer

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