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                                                                    Exhibit 10.1

                            VIRAGE LOGIC CORPORATION

                           1997 EQUITY INCENTIVE PLAN

                         AS ADOPTED AND AMENDED THROUGH
                                FEBRUARY 10, 2000

     1.   PURPOSE. The purpose of this Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent and Subsidiaries, by
offering them an opportunity to participate in the Company's future performance
through awards of Options and Restricted Stock. Capitalized terms not defined in
the text are defined in Section 22. This Plan is intended to be a written
compensatory benefit plan within the meaning of Rule 701 promulgated under the
Securities Act.

     2.   SHARES SUBJECT TO THE PLAN.

          2.1  Number of Shares Available. Subject to Sections 2.2 and 17, the
total number of Shares reserved and available for grant and issuance pursuant to
this Plan will be 7,390,281 Shares or such lesser number of Shares as permitted
under Section 260.140.45 of Title 10 of the California Code of Regulations.
Subject to Sections 2.2 and 17, Shares will again be available for grant and
issuance in connection with future Awards under this Plan that: (a) are subject
to issuance upon exercise of an Option but cease to be subject to such Option
for any reason other than exercise of such Option or (b) are subject to an Award
that otherwise terminates without Shares being issued. At all times the Company
will reserve and keep available a sufficient number of Shares as will be
required to satisfy the requirements of all Awards granted under this Plan.

          2.2  Adjustment of Shares. In the event that the number of outstanding
shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (a) the number of Shares reserved for issuance under
this Plan, (b) the Exercise Prices of and number of Shares subject to
outstanding Options, and (c) the Purchase Prices of and number of Shares subject
to other outstanding Awards will be proportionately adjusted, subject to any
required action by the Board or the shareholders of the Company and compliance
with applicable securities laws; provided, however, that fractions of a Share
will not be issued but will either be paid in cash at Fair Market Value of such
fraction of a Share or will be rounded down to the nearest whole Share, as
determined by the Committee.

     3.   ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors and consultants of the Company or any
Parent or Subsidiary of the Company; provided such consultants render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. A person may be granted more than one Award under
this Plan.

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     4.   ADMINISTRATION.

          4.1  Committee Authority. This Plan will be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:

               (a)  construe and interpret this Plan, any Award Agreement and
                    any other agreement or document executed pursuant to this
                    Plan;

               (b)  prescribe, amend and rescind rules and regulations relating
                    to this Plan;

               (c)  select persons to receive Awards;

               (d)  determine the form and terms of Awards;

               (e)  determine the number of Shares or other consideration
                    subject to Awards;

               (f)  determine whether Awards will be granted singly, in
                    combination with, in tandem with, in replacement of, or as
                    alternatives to, other Awards under this Plan or awards
                    under any other incentive or compensation plan of the
                    Company or any Parent or Subsidiary of the Company;

               (g)  grant waivers of Plan or Award conditions;

               (h)  determine the vesting, exercisability and payment of Awards;

               (i)  correct any defect, supply any omission, or reconcile any
                    inconsistency in this Plan, any Award, any Award Agreement,
                    any Exercise Agreement or any Restricted Stock Purchase
                    Agreement;

               (j)  determine whether an Award has been earned, and

               (k)  make all other determinations necessary or advisable for the
                    administration of this Plan.

          4.2  Committee Discretion. Any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, and subject to Section 5.9, at any later time, and such determination
will be final and binding on the Company and on all persons having an interest
in any Award under this Plan. The Committee may delegate to one or more officers
of the Company the authority to grant an Award under this Plan.

     5.   OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOS") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:

          5.1  Form of Option Grant. Each Option granted under this Plan will be
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.

          5.2  Date of Grant. The date of grant of an Option will be the date on
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.

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          5.3  Exercise Period. Options may be exercisable immediately (subject
to repurchase pursuant to Section 11 of this Plan) or may be exercisable within
the times or upon the events determined by the Committee as set forth in the
Stock Option Agreement governing such Option; provided, however, that no Option
will be exercisable after the expiration of ten (10) years from the date the
Option is granted, and further that no ISO granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary of
the Company ("TEN PERCENT SHAREHOLDER") will be exercisable after the expiration
of five (5) years from the date the ISO is granted. The Committee also may
provide for Options to become exercisable at one time or from time to time,
periodically or otherwise, in such number of Shares or percentage of Shares as
the Committee determines. Subject to earlier termination of the Option as
provided herein, each Participant who is not an officer, director or consultant
of the Company or of a Parent or Subsidiary of the Company and does not have
annual compensation of $60,000 or more shall have the right to exercise an
Option granted hereunder at the rate of at least twenty percent (20%) per year
over five (5) years from the date such Option is granted. Subject to earlier
termination of the Option as provided for herein, each Participant who is an
officer, director or consultant of the Company or of a Parent or Subsidiary of
the Company or has annual compensation of $60,000 or more shall have the right
to exercise an Option granted hereunder at the rate of at least 20% per year
over five (5) years from the later of (A) the date when all other Options
granted to the Participant by the Company have become exercisable in full, and
(B) the date when the Company's repurchase right has lapsed in full with regard
to all other shares of restricted stock held by Participant.

          5.4  Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
85% of the Fair Market Value of the Shares on the date of grant; provided that
(i) the Exercise Price of an ISO will not be less than 100% of the Fair Market
Value of the Shares on the date of grant and (ii) the Exercise Price of any
Option granted to a Ten Percent Shareholder Will not be less than 110% of the
Fair Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 7 of this Plan.

          5.5  Method of Exercise. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "EXERCISE
AGREEMENT") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.

          5.6  Termination. Subject to earlier termination pursuant to Sections
17 and 18 and notwithstanding the exercise periods set forth in the Stock Option
Agreement, exercise of an Option will always be subject to the following:

               (a)  If the Participant is Terminated for any reason except
                    death, Disability or for Cause, then the Participant may
                    exercise such Participant's Options only to the extent that
                    such Options are exercisable upon the Termination Date no
                    later than three (3) months after the Termination Date (or
                    within such shorter time period, not less than thirty (30)
                    days, or within such longer time period, not exceeding five
                    (5) years, after the Termination Date as may be determined
                    by the Committee, with any exercise beyond three (3) months
                    after the Termination Date deemed to be an NQSO) but in any
                    event, no later than the expiration date of the Options.

               (b)  If the Participant is Terminated because of Participant's
                    death or Disability (or the Participant dies within three
                    (3) months after a Termination other than because of
                    Participant's Disability or Cause), then Participant's
                    Options may be exercised only to the extent that such
                    Options are exercisable by Participant on the Termination
                    Date and must be exercised by Participant (or Participant's
                    legal representative or authorized assignee) no later than
                    twelve (12) months after the Termination Date (or within
                    such shorter time period, not less than six (6)

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                    months, or within such longer time period, not exceeding
                    five (5) years, after the Termination Date as may be
                    determined by the Committee, with any exercise beyond (a)
                    three (3) months after the Termination Date when the
                    Termination is for any reason other than the Participants
                    death or disability, within the meaning of Section 22(e)(3)
                    of the Code, or (b) twelve (12) months after the Termination
                    Date when the Termination is for Participant's disability,
                    within the meaning of Section 22(e)(3) of the Code, deemed
                    to be an NQSO) but in any event no later than the expiration
                    date of the Options.

               (c)  If the Participant is terminated for Cause, then
                    Participant's Options shall expire on such Participant's
                    Termination Date, or at such later time and on such
                    conditions as are determined by the Committee.

          5.7  Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.

          5.8  Limitations on ISOs. The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company or any Parent or
Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value of
Shares on the date of grant with respect to which ISOs are exercisable for the
first time by a Participant during any calendar year exceeds $100,000, then the
Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISOs and the Options for the amount in excess of $100,000
that become exercisable in that calendar year will be NQSOs. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date (as defined in Section 18 below) to provide for a different limit
on the Fair Market Value of Shares permitted to be subject to ISOs, then such
different limit will be automatically incorporated herein and will apply to any
Options granted after the effective date of such amendment.

          5.9  Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of this Plan for
Options granted on the date the action is taken to reduce the Exercise Price.

          5.10 No Disqualification. Notwithstanding any other provision in this
Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.

     6.   RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the Purchase Price, the restrictions to which the Shares
will be subject, and all other terms and conditions of the Restricted Stock
Award, subject to the following:

          6.1  Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The Restricted Stock Award will be accepted by the Participant's execution
and delivery of the Restricted Stock Purchase Agreement and full payment for the
Shares to the Company within thirty (30) days from the date the Restricted Stock
Purchase Agreement is delivered to the person. If such person does not execute
and deliver the Restricted Stock Purchase Agreement along

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with full payment for the Shares to the Company within thirty (30) days, then
the offer will terminate, unless otherwise determined by the Committee.

          6.2  Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee and will be at least
85% of the Fair Market Value of the Shares on the date the Restricted Stock
Award is granted or at the time the purchase is consummated, except in the case
of a sale to a Ten Percent Shareholder, in which case the Purchase Price will be
100% of the Fair Market Value on the date the Restricted Stock Award is granted
or at the time the purchase is consummated. Payment of the Purchase Price must
be made in accordance with Section 7 of this Plan.

          6.3  Restrictions. Restricted Stock Awards may be subject to the
restrictions set forth in Section 11 of this Plan or such other restrictions not
inconsistent with the California Corporations Code.

     7.   PAYMENT FOR SHARE PURCHASES.

          7.1  Payment. Payment for Shares purchased pursuant to this Plan may
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:

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

               (b)  by surrender of shares that either: (1) have been owned by
                    Participant 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 Participant in the public market;

               (c)  by tender of a full recourse promissory note having such
                    term as may be approved by the Committee and bearing
                    interest at a rate sufficient to avoid imputation of income
                    under Sections 483 and 1274 of the Code; provided, however,
                    that Participants who are not employees or directors of the
                    Company will not be entitled to purchase Shares with a
                    promissory note unless the note is adequately secured by
                    collateral other than the Shares;

               (d)  by waiver of compensation due or accrued to the Participant
                    for services rendered;

               (e)  with respect only to purchases upon exercise of an Option,
                    and provided that a public market for the Company's stock
                    exists:

                    (1)  through a "same day sale" commitment from the
                         Participant and a broker-dealer that is a member of the
                         National Association of Securities Dealers (an "NASD
                         DEALER") whereby the Participant irrevocably elects to
                         exercise the 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 the Participant and
                         an NASD Dealer whereby the Participant irrevocably
                         elects to exercise the 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

               (f)  by any combination of the foregoing.

          7.2  Loan Guarantees. The Committee may help the Participant pay for
Shares purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.

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     8.   WITHHOLDING TAXES.

          8.1  Withholding Generally . Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.

          8.2  Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Committee may in its sole
discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee for such elections and be in writing in a form
acceptable to the Committee.

     9.   PRIVILEGES OF STOCK OWNERSHIP.

          9.1  Voting and Dividends. No Participant will have any of the rights
of a shareholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be
a shareholder and have all the rights of a shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock, provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Unvested
Shares that are repurchased pursuant to Section 11. The Company will comply with
Section 260.140.1 of Title 10 of the California Code of Regulations with respect
to the voting rights of Common Stock.

          9.2  Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding, or as otherwise required or permitted under
Section 260.140.46 of Title 10 of the California Code of Regulations.
Notwithstanding the foregoing, the Company will not be required to provide such
financial statements to key employees whose services in connection with the
Company assure them access to equivalent information.

     10.  TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Award will be exercisable only by the Participant or Participants
legal representative and any elections with respect to an Award, may be made
only by the Participant or Participants legal representative.

     11.  RESTRICTIONS ON SHARES.

          11.1 Right of First Refusal. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by the California Corporations Code, provided, that such
right of that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant an effective registration statement
filed under the Securities Act.

          11.2 Right of Repurchase. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness following such Participant's
Termination at any time within the later of ninety (90) days after the
Participant's Termination Date and the date the Participant purchases Shares
under the Plan at the Participant's Exercise Price or Purchase Price, as the
case may be, provided, that unless

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the Participant is an officer, director or consultant of the Company or of a
Parent or Subsidiary of the Company, or has annual compensation of $60,000 or
more, such right of repurchase lapses at the rate of at least twenty percent
(20%) per year over five (5) years from: (A) the date of grant of the Option or
(B) in the case of Restricted Stock, the date the Participant purchases the
Shares, and provided further, that if Participant is an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company or has
annual compensation of $60,000 or more, such right of repurchase shall lapse at
the rate of at least twenty percent (20%) per year over five (5) years from the
later of (A) the date when all other Options granted to the Participant by the
Company have become exercisable in full, and (B) the date when the Company's
repurchase right has lapsed in full with regard to all other shares of
restricted stock held by Participant.

     12.  CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.

     13.  ESCROW, PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.

     14.  EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including restricted stock) or other consideration, based
on such terms and conditions as the Committee and the Participant may agree.

     15.  SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.

     16.  NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
Cause.

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     17.  CORPORATE TRANSACTIONS.

          17.1 Assumption or Replacement of Awards by Successor. In the event of
(a) a dissolution or liquidation of the Company, (b) a merger or consolidation
in which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the shareholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption, conversion or
replacement will be binding on all Participants), (c) a merger in which the
Company is the surviving corporation but after which the shareholders of the
Company immediately prior to such merger (other than any shareholder which
merges with the Company in such merger, or which owns or controls another
corporation which merges, with the Company in such merger) cease to own their
shares or other equity interests in the Company, or (d) the sale of all or
substantially all of the assets of the Company, any or all outstanding Awards
may be assumed, converted or replaced by the successor corporation (if any),
which assumption, conversion or replacement will be binding on all Participants.
In the alternative, the successor corporation may substitute equivalent Awards
or provide substantially similar consideration to Participants as was provided
to shareholders (after taking into account the existing provisions of the
Awards). The successor corporation may also issue, in place of outstanding
Shares of the Company held by the Participant, substantially similar shares or
other property subject to repurchase restrictions and other provisions no less
favorable to the Participant than those which applied to such outstanding Shares
immediately prior to such transaction described in this Subsection 17.1. In the
event such successor corporation (if any) refuses to assume or substitute
Awards, as provided above, pursuant to a transaction described in this
Subsection 17.1, then notwithstanding any other provision in this Plan to the
contrary, such Awards will expire on such transaction at such time and on such
conditions as the Board will determine.

          17.2 Other Treatment of Awards. Subject to any greater rights granted
to Participants under the foregoing provisions of this Section 17, in the event
of the occurrence of any transaction described in Section 17.1, any outstanding
Awards will be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation or sale of assets.

          17.3 Assumption of Awards by the Company. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under this Plan in substitution of
such other company's award or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

          18.  ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become
effective on the date that it is adopted by the Board (the "EFFECTIVE DATE").
This Plan will be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the Effective Date. Upon the Effective Date, the
Board may grant Awards pursuant to this Plan; provided, however, that: (a) no
Option may be exercised prior to initial shareholder approval of this Plan; (b)
no Option granted pursuant to an increase in the number of Shares approved by
the Board shall be exercised prior to the time such increase has been approved
by the shareholders of the Company; (c) in the event that initial shareholder
approval is not obtained within the time period provided herein, all Awards
granted hereunder shall be canceled, any Shares issued pursuant to any Award
shall be canceled and any purchase of Shares issued hereunder shall be
rescinded; and (d) Awards granted pursuant to an increase in the number of
Shares approved by the Board which increase is not timely approved by
shareholders shall be canceled, any Shares issued pursuant to any such Awards
shall be canceled, and any purchase of Shares subject to any such Award shall be
rescinded. In the event that initial shareholder approval is not obtained within
twelve (12) months before or after the date this Plan is adopted by the Board,
all Awards granted hereunder will be canceled, any Shares issued pursuant to any
Award will be canceled and any purchase of Shares hereunder will be rescinded.

                                       8
<PAGE>   9

     19.  TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the Effective Date or, if
earlier, the date of shareholder approval. This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of the
State of California.

     20.  AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9, the Board
may at any time terminate or amend this Plan in any respect, including without
limitation amendment of any form of Award Agreement or instrument to be executed
pursuant to this Plan; provided, however, that the Board will not, without the
approval of the shareholders of the Company, amend this Plan in any manner that
requires such shareholder approval pursuant to the California Corporations Code
or the Code or the regulations promulgated thereunder as such provisions apply
to ISO plans.

     21.  NONEXCLUSIVE OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.

     22.  DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:

          "AWARD" means any award under this Plan, including any Option or
Restricted Stock Award.

          "AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.

          "BOARD" means the Board of Directors of the Company.

          "CAUSE" means Termination because of (i) any willful material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, any willful perpetration by the Participant of a common law fraud,
(ii) the Participant's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the Company, (iii) any material breach by
the Participant of any provision of any agreement or understanding between the
Company or any Parent or Subsidiary of the Company and the Participant regarding
the terms of the Participant's service as an employee, director or consultant to
the Company or a Parent or Subsidiary of the Company, including without
limitation, the willful and continued failure or refusal of the Participant to
perform the material duties required of such Participant as an employee,
director or consultant of the Company or a Parent or Subsidiary of the Company,
other than as a result of having a Disability, or a breach of any applicable
invention assignment and confidentiality agreement or similar agreement between
the Company and the Participant, (iv) Participant's disregard of the policies of
the Company or any Parent or Subsidiary of the Company so as to cause loss,
damage or injury to the property, reputation or employees of the Company or a
Parent or Subsidiary of the Company, or (v) any other misconduct by the
Participant which is materially injurious to the financial condition or business
reputation of, or is otherwise materially injurious to, the Company or a Parent
or Subsidiary of the Company.

          "CODE" means the Internal Revenue Code of 1986, as amended.

          "COMMITTEE" means the committee appointed by the Board to administer
this Plan, or if no committee is appointed, the Board.

          "COMPANY" means Virage Logic Corporation, or any successor
corporation.

          "DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.

                                       9
<PAGE>   10

          "EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.

          "FAIR MARKET VALUE" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:

          (a)  if such Common Stock is then quoted on the Nasdaq National
               Market, its closing price on the Nasdaq National Market on the
               date of determination as reported in The Wall Street Journal;

          (b)  if such Common Stock is publicly traded and is then listed on a
               national securities exchange, its closing price on the date of
               determination on the principal national securities exchange on
               which the Common Stock is listed or admitted to trading as
               reported in The Wall Street Journal;

          (c)  if such Common Stock is publicly traded but is not quoted on the
               Nasdaq National Market nor listed or admitted to trading on a
               national securities exchange, the average of the closing bid and
               asked prices on the date of determination as reported by The Wall
               Street Journal (or, if not so reported, as otherwise reported by
               any newspaper or other source as the Board may determine); or

          (d)  if none of the foregoing is applicable, by the Committee in good
               faith.

          "OPTION" means an award of an option to purchase Shares pursuant to
Section 5.

          "PARENT" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

          "PARTICIPANT" means a person who receives an Award under this Plan.

          "PLAN" means this Virage Logic Corporation 1997 Equity Incentive Plan,
as amended from time to time.

          "PURCHASE PRICE" the price at which a Participant may purchase
Restricted Stock.

          "RESTRICTED STOCK" means Shares purchased pursuant to a Restricted
Stock Award.

          "RESTRICTED STOCK AWARD" means an award of Shares pursuant to Section
6.

          "SEC" means the Securities and Exchange Commission.

          "SECURITIES ACT" means the Securities Act of 1933, as amended.

          "SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 17, and any
successor security.

          "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

          "TERMINATION" or "TERMINATED" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. A Participant will not be deemed to
have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the

                                       10
<PAGE>   11

Committee, provided that such leave is for a period of not more than ninety (90)
days unless reinstatement (or, in the case of an employee with an ISO,
reemployment) upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to formal policy adopted from
time to time by the Company and issued and promulgated in writing. In the case
of any Participant on (i) sick leave, (ii) military leave or (iii) an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the Company or a Parent or
Subsidiary of the Company as it may deem appropriate, except that in no event
may an Option be exercised after the expiration of the term set forth in the
Stock Option Agreement. The Committee will have sole discretion to determine
whether a Participant has ceased to provide services and the effective date on
which the Participant ceased to provide services (the "TERMINATION DATE").

          "UNVESTED SHARES" means `Unvested Shares' as defined in the Award
Agreement.

          "VESTED SHARES" means `Vested Shares' as defined in the Award
Agreement.

                                       11<PAGE>   1
                                                                    EXHIBIT 10.2

                                                                 NO.
                                                                    ------------

                            VIRAGE LOGIC CORPORATION

                           1997 EQUITY INCENTIVE PLAN

                             STOCK OPTION AGREEMENT

               This Stock Option Agreement (the "AGREEMENT") is made and entered
into as of the date of grant set forth below (the "DATE OF GRANT") by and
between Virage Logic Corporation, a California corporation (the "COMPANY"), and
the participant named below (the "PARTICIPANT"). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company's 1997 Equity
Incentive Plan (the "PLAN").

PARTICIPANT:
                              --------------------------------------------------
SOCIAL SECURITY NUMBER:
                              --------------------------------------------------
ADDRESS:
                              --------------------------------------------------
TOTAL OPTION SHARES:
                              --------------------------------------------------
EXERCISE PRICE PER SHARE:
                              --------------------------------------------------
DATE OF GRANT:
                              --------------------------------------------------
FIRST VESTING DATE:
                              --------------------------------------------------
EXPIRATION DATE:
                              --------------------------------------------------
                             (unless earlier terminated under Section 5.6 of the
                              Plan)

TYPE OF STOCK OPTION

(CHECK ONE):                        [ ] INCENTIVE STOCK OPTION
                                    [ ] NONQUALIFIED STOCK OPTION

               1. GRANT OF OPTION. The Company hereby grants to Participant an
option (this "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above as Total Option Shares (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. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an "incentive
stock option" (the "ISO") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "CODE").

               2. EXERCISE PERIOD AND VESTING SCHEDULE.

<PAGE>   2

                      2.1 Exercise Period and Vesting Schedule of Option. This
Option is immediately exercisable although the Shares issued upon exercise of
the Option will be subject to the restrictions on transfer and Repurchase Option
set forth in Section 8 and 9 below. Provided Participant continues to provide
services to the Company or any Subsidiary or Parent of the Company, the Shares
issuable upon exercise of this Option shall not vest with respect to any of the
Shares until _____________ (the "First Vesting Date"); (b) on the First Vesting
Date the Option shall vest as to ______________ percent (_ %) of the Shares; and
(c) thereafter each year on the anniversary of the First Vesting Date the Option
shall vest as to an additional ____ percent (_%) of the Shares until this Option
is vested with respect to 100% of the Shares. If application of the vesting
percentage causes a fractional share, such share shall be rounded down to the
nearest whole share. Notwithstanding any provision in the Plan or this Agreement
to the contrary, Options for Unvested Shares (as defined in Section 2.2 of this
Agreement will not be exercisable on or after Participant's Termination Date.

                    [ALTERNATIVE #2: MONTHLY VESTING SCHEDULE

                      2.2 Exercise Period and Vesting Schedule of Option. This
Option is immediately exercisable although the Shares issued upon exercise of
the Option will be subject to the restrictions on transfer and Repurchase Option
set forth in Section 8 and 9 below. Provided Participant continues to provide
services to the Company or any Subsidiary or Parent of the Company, the Shares
issuable upon exercise of this Option shall not vest with respect to any of the
Shares until _________________ (the "First Vesting Date"); (b) on the First
Vesting Date the Option shall vest as to ______ percent (_ %) of the Shares; and
(c) thereafter at the end of each full succeeding month the Option will become
vested and as to an additional ____ percent (_%) of the Shares until the Shares
are vested with respect to one hundred percent (100%) of the Shares. If
application of the vesting percentage causes a fractional share, such share
shall be rounded down to the nearest whole share for each month except for the
last month in such vesting period, at the end of which last month this Option
shall become exercisable for the full remainder of the Shares.]

                       [ALTERNATIVE #3: VESTING SCHEDULE]

                      2.3 Exercise Period and Vesting Schedule of Option. This
Option is immediately exercisable although the Shares issued upon exercise of
the Option will be subject to the restrictions on transfer and Repurchase Option
set forth in Section 8 and 9 below. Provided Participant continues to provide
services to the Company or any Subsidiary or Parent of the Company, the Shares
issuable upon exercise of this Option shall not vest with respect to any of the
Shares until _________________ (the "First Vesting Date"); (b) on the First
Vesting Date the Option shall vest as to _____ percent (__ %) of the Shares; and
(c) thereafter the Option shall become vested as to additional portions of the
Shares as follows:

                                       2
<PAGE>   3

                                                            Cumulative
On or after:                    But before:                   Number
-----------                     ----------                of vested shares:
                                                          ----------------

____________, 20__           ___________, 20___            _____________

____________, 20__           ___________, 20___            _____________

____________, 20__           ___________, 20___            _____________

____________, 20__           ___________, 20___            _____________

____________, 20__           ___________, 20___            _____________

                              Total Option Shares:         _____________

                      2.4 Vesting of Options. Shares that are vested pursuant to
the schedule set forth in Section 2.1 are "VESTED SHARES." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "UNVESTED SHARES."

                      2.5 Expiration. The Option shall expire on the Expiration
Date set forth above or earlier as provided in Section 3 below or pursuant to
Section 5.6 of the Plan.

               3. TERMINATION

                      3.1 Termination for Any Reason Except Death, Disability or
Cause. If Participant is Terminated for any reason, except death, Disability or
for Cause, the Option, to the extent (and only to the extent) that it would have
been exercisable by Participant on the Termination Date, may be exercised by
Participant 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
Participant is Terminated because of death or Disability of Participant (or
Participant dies within three (3) months of Termination when Termination is for
any reason other than Participant's Disability or for Cause), the Option, to the
extent that it is exercisable by Participant on the Termination Date, may be
exercised by Participant (or Participant's legal representative) no later than
twelve (12) months after the Termination Date, but in any event no later than
the Expiration Date. Any exercise beyond (i) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of Section 22(e)(3) of the
Code; or (ii) twelve (12) months after the Termination Date when the termination
is for Participant's disability, within the meaning of Section 22(e)(3) of the
Code, is deemed to be an NQSO.

                                       3
<PAGE>   4

                      3.3 Termination for Cause. If Participant is Terminated
for Cause, then the Option will expire on Participant's Termination Date, or at
such later time and on such conditions as are determined by the Committee.

                      3.4 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the Company,
or limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant's employment or other relationship at any time,
with or without Cause.

               4. MANNER OF EXERCISE.

                      4.1 Stock Option Exercise Agreement. To exercise this
Option, Participant (or in the case of exercise after Participant's death or
incapacity, Participant'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 Committee from time to time (the "EXERCISE AGREEMENT"), which
shall set forth, inter alia, (i) Participant's election to exercise the Option,
(ii) the number of Shares being purchased, (iii) any restrictions imposed on the
Shares and (iv) any representations, warranties and agreements regarding
Participant's investment intent and access to information as may be required by
the Company to comply with applicable securities laws. If someone other than
Participant exercises the Option, then such person must submit documentation
reasonably acceptable to the Company verifying that such person has the legal
right to exercise the Option.

                      4.2 Limitations on Exercise. The 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. The Option
may not be exercised as to fewer than one hundred (100) Shares unless it is
exercised as to all Shares as to which the 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
                      Participant;

             (b)      by surrender of shares of the Company's Common Stock
                      that (i) either (A) have been owned by Participant
                      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 (B) were obtained by
                      Participant in the open public

                                       4
<PAGE>   5

                    market; and (ii) are clear of all liens, claims,
                    encumbrances or security interests;

            (c)     by tender of a full recourse promissory note having such
                    terms as may be approved by the Committee and bearing
                    interest at a rate sufficient to avoid imputation of
                    income under Sections 483 and 1274 of the Code;
                    provided, however, that Participants who are not
                    employees or directors of the Company shall not be
                    entitled to purchase Shares with a promissory note
                    unless the note is adequately secured by collateral
                    other than the Shares;

            (d)     by waiver of compensation due or accrued to Participant
                    for services rendered;

            (e)     provided that a public market for the Company's stock
                    exists: (i) through a "same day sale" commitment from
                    Participant and a broker-dealer that is a member of the
                    National Association of Securities Dealers (an "NASD
                    DEALER") whereby Participant irrevocably elects to
                    exercise the Option and to sell a portion of the Shares
                    so purchased sufficient to pay for the total Exercise
                    Price and whereby the NASD Dealer irrevocably commits
                    upon receipt of such Shares to forward the total
                    Exercise Price directly to the Company, or (ii) through
                    a "margin" commitment from Participant and an NASD
                    Dealer whereby Participant irrevocably elects to
                    exercise the 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 total Exercise Price, and whereby the NASD Dealer
                    irrevocably commits upon receipt of such Shares to
                    forward the total Exercise Price directly to the
                    Company; or

            (f)     by any combination of the foregoing.

                    4.4 Tax Withholding. Prior to the issuance of the Shares
upon exercise of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of the 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 Participant
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
Participant, Participant's

                                       5
<PAGE>   6

authorized assignee, or Participant's legal representative, and shall deliver
certificates representing the Shares with the appropriate legends affixed
thereto.

               5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (i) the date two
(2) years after the Date of Grant, and (ii) the date one (1) year after transfer
of such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.

               6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the
Option and the issuance and transfer of Shares shall be subject to compliance by
the Company and Participant 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. Participant understands that the Company is under no obligation to
register or qualify the Shares with the SEC, any state securities commission or
any stock exchange to effect such compliance.

               7. NONTRANSFERABILITY OF OPTION. The Option may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of Participant only by
Participant or in the event of Participant's incapacity, by Participant's legal
representative. The terms of the Option shall be binding upon the executors,
administrators, successors and assigns of Participant.

               8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company,
or its assignee, shall have the option to repurchase Participant's Unvested
Shares (as defined in Section 2.2 of this Agreement) on the terms and conditions
set forth in the Exercise Agreement (the "REPURCHASE OPTION") if Participant is
Terminated (as defined in the Plan) for any reason, or no reason, including
without limitation Participant's death, Disability (as defined in the Plan),
voluntary resignation or termination by the Company with or without Cause.
Notwithstanding the foregoing, the Company shall retain the Repurchase Option
for Unvested Shares only as to that number of Unvested Shares (whether or not
exercised) that exceeds the number of shares which remain unexercised.

               9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be
sold or otherwise transferred by Participant without the Company's prior written
consent. Before any Vested Shares held by Participant or any transferee of such
Vested Shares may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of

                                       6
<PAGE>   7

first refusal to purchase the Vested Shares to be sold or transferred on the
terms and conditions set forth in the Exercise Agreement (the "RIGHT OF FIRST
REFUSAL"). The Company's Right of First Refusal will terminate when the
Company's securities become publicly traded.

               10. TAX CONSEQUENCES. Set forth below is a brief summary as of
the Effective Date of the Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.

                      10.1 Exercise of ISO. If the Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of the Option, although the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price will be treated as a
tax preference item for federal alternative minimum tax purposes and may subject
the Participant to the alternative minimum tax in the year of exercise.

                      10.2 Exercise of Nonqualified Stock Option. If the Option
does not qualify as an ISO, there may be a regular federal and California income
tax liability upon the exercise of the Option. Participant 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. If Participant is a current or former employee
of the Company, the Company may be required to withhold from Participant's
compensation or collect from Participant and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.

                      10.3 Disposition of Shares. The following tax consequences
may apply upon disposition of the Shares.

                          (a) Incentive Stock Options. 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 ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on disposition of the Shares will be
treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.

                          (b) Nonqualified Stock Options. If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the

                                       7
<PAGE>   8

exercise of an NQSO, any gain realized on disposition of the Shares will be
treated as long term capital gain.

                          (c) Withholding. The Company may be required to
withhold from the Participant's compensation or collect from the Participant and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income.

                      10.4 Section 83(b) Election for Unvested Shares. With
respect to Unvested Shares, which are subject to the Repurchase Option, unless
an election is filed by the Participant with the Internal Revenue Service (and,
if necessary, the proper state taxing authorities), within 30 days of the
purchase of the Unvested Shares, electing pursuant to Section 83(b) of the Code
(and similar state tax provisions, if applicable) to be taxed currently on any
difference between the Exercise Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income (including, where applicable, alternative minimum taxable income) to the
Participant, measured by the excess, if any, of the Fair Market Value of the
Unvested Shares at the time they cease to be Unvested Shares, over the Exercise
Price of the Unvested Shares.

               11. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any
of the rights of a shareholder with respect to any Shares until the Shares are
issued to Participant.

               12. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant 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 Participant.

               13. ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan constitute the entire agreement of the
parties and supersede all prior undertakings and agreements with respect to the
subject matter hereof

               14. 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 Participant shall be in writing and
addressed to Participant at the address indicated above or to such 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: (i) personal
delivery; (ii) three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.

                                       8
<PAGE>   9

               15. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement, including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal. 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 Participant and Participant's heirs, executors,
administrators, legal representatives, successors and assigns.

               16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California as such laws
are applied to agreements between California residents entered into and to be
performed entirely within California. If any provision of this Agreement is
determined by a court of law to be illegal or unenforceable, then such provision
will be enforced to the maximum extent possible and the other provisions will
remain fully effective and enforceable.

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

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

VIRAGE LOGIC CORPORATION            PARTICIPANT

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

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

----------------------------        ---------------------------------
(Please print tile)

                                       9

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