AGREEMENT AND RELEASE

Exhibit 10.1

Agreement and Release

This Agreement and Release (“Agreement”) is made by and between James R. Bailey and Virage Logic Corporation (“Virage Logic” or “Company”).

For good and valuable consideration, Mr. Bailey and the Company agree as follows:

1. Separation from Employment. Mr. Bailey acknowledges and agrees that his employment with the Company has ended as of July 10, 2007 (the “Separation Date”).

2. Separation Benefits. Subject to the terms and considerations of this Agreement, the Company agrees to provide him with the following (“Separation Benefits”):

a) Severance Payment. The Company shall provide Mr. Bailey with a severance payment in the amount of $66,461.54, which is equivalent to 18 weeks of Mr. Bailey’s regular pay, less applicable withholding taxes, in a lump sum (“Severance Payment”). Said Severance Payment shall be delivered to Mr. Bailey within fourteen (14) calendar days following the Company’s receipt of this Agreement signed and dated by Mr. Bailey.

b) Continued Benefits. If Mr. Bailey makes a timely and accurate election and is and remains eligible to continue his current group medical insurance coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company will pay the applicable premiums for Mr. Bailey and his eligible dependents to provide coverage for the five (5) month period following the month in which the Separation Date occurs.

3. No Other Payments Due. Mr. Bailey acknowledges and agrees that he has received all salary, accrued vacation, bonuses, or other such sums due to him other than the Severance Payment to be provided by Paragraph 2 of this Agreement. Mr. Bailey acknowledges that, he is entitled to receive no additional compensation, wages, stock, options, commissions (with the exception of eligible sales commission through August 31, 2007 ), money, benefits, or bonuses other than those described herein, and that all earned wages and accrued but unused PTO will be paid no later than the last day of employment.

4. Release of Claims by Mr. Bailey. As consideration for the promises and covenants of the Company set forth in this Agreement, Mr. Bailey hereby fully and forever releases and discharges the Company and its parents, subsidiaries, affiliates and related companies, and their respective shareholders, officers, directors, agents, employee benefit plans, representatives, employees, attorneys, predecessors, successors and assigns (“Released Parties”), from all claims and causes of action, whether known or unknown, including but not limited to those arising out of or relating in any way to Mr. Bailey’s employment with the Company, including the termination of his employment, based on any acts or events occurring up until the date of Mr. Bailey’s signature below. Mr. Bailey understands and agrees that this Release is a full and complete waiver of all claims, including, but not limited to, any claims of wrongful discharge, breach of contract, breach of the covenant of good faith and fair dealing, violation of public policy, defamation, personal injury, emotional distress; any claims under Title VII of the Civil Rights Act of 1964, as amended, the Fair Labor Standards Act, the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), as related to severance benefits, the California Fair Employment and Housing Act, California Government Code § 12900 et seq., the California Labor Code, the California Business & Professions Code, the Equal Pay Act of 1963, the Americans With Disabilities Act, the Family and Medical Leave Act, the California Family Rights Act, the Civil Rights Act of 1991; and any claims under any other federal, state, and local laws and regulations. This Agreement does not release claims that cannot be released as a matter of law, including, but not limited to, claims under Division 3, Article 2 of the California Labor Code (which includes indemnification rights).

5. Outstanding Claims. As further consideration and inducement for this Agreement, Mr. Bailey represents that he has not filed or otherwise pursued any charges, complaints or claims of any nature which are in any way pending against the Company or any of the Released Parties with any court with respect to any matter covered by this Agreement and that, to the extent permitted by law, he will not do so in the future. Mr. Bailey further represents that, with respect to any charge, complaint or claim he has filed or otherwise pursued or will file or otherwise pursue in the future with any state or federal agency against the Company or any of the Released Parties, he will forgo any monetary damages, including but not limited to compensatory damages, punitive damages, and attorneys’ fees, to which he may otherwise be entitled in connection with said charge, complaint or claim. Nothing in this Agreement shall limit Mr. Bailey’s right to file a charge, complaint or claim with any state or federal agency or to participate or cooperate in such matters.

6. Civil Code 1542 Waiver. As a further consideration and indu