Cautionary Tale: Company Receives NASDAQ Rreprimand for Equity Exchange - 23 July 2009

http://investors.viragelogic.com/releasedetail.cfm?ReleaseID=397571

FREMONT, Calif., Jul 20, 2009 (BUSINESS WIRE) ----Virage Logic Corporation (NASDAQ:VIRL) today announced that it received
a letter of reprimand from the NASDAQ Listing Qualifications Department
of the NASDAQ Stock Market LLC for failing to comply with the
stockholder approval requirements set forth in NASDAQ Listing Rule 5635.
The department determined that the Company should have obtained
stockholder approval prior to implementing the Company's exchange offer
completed in June 2008, under which employees were offered the right to
exchange options and stock-settled appreciation rights ("SSARs") for
newly granted restricted stock units ("RSUs"). The Company had earlier
undertook the exchange offer without seeking prior stockholder approval
after having been advised by external counsel that such approval was not
required under Rule 5635 because the language of the Company's 2002
Equity Incentive Plan permitted the exchange offer without such
approval. In reaching its decision to issue the letter of reprimand, the
department concluded that the plan's language did not constitute
sufficiently specific authority for the exchange offer under Rule 5635
and that, therefore, the Company should have obtained stockholder
approval before conducting the exchange offer.

J. Daniel McCranie, the Company's executive chairman, noted "We accept
NASDAQ's determination that we should have obtained stockholder approval
before proceeding with the exchange offer. As the department noted in
its letter, our management and our Board of Directors proceeded in good
faith reliance upon advice from external corporate counsel that
stockholder approval was not required. Furthermore, the department noted
that the Company has no prior history of non-compliance with the listing
rules and that the department believed the Company's failure to comply
with Rule 5635 had been inadvertent. Management and the Board have
always been fully committed to good governance practices, and the
Company certainly would have sought stockholder approval of the exchange
if we had believed it was required. We plan to amend the plan to require
explicit stockholder approval prior to any future exchange, repricing or
similar action.

When we designed the exchange offer, we wanted to achieve a program that
was in the best interests of our stockholders. Accordingly, the exchange
incorporated the following features:

--
The ratio at which options were exchanged for RSUs varied from 3
options or stock-settled appreciation rights per RSU (for options
priced at $9.00 or less) to 6 options/SSARs per RSU (for options
priced at $14.00 or more);

--
Virage Logic set the exchange ratio so that the Black-Scholes value of
the restricted stock units issued under the Program was less than or
equal to the aggregate value of the options and SSARs being traded in;

--
The Company's directors and its CEO, COO and CFO were excluded from
the offer;

--
The RSUs were subjected to a new vesting schedule over two years from
the date of the exchange, which enhanced the retention value of the
equity award; and

--
The exchange resulted in a reduction of more than 1 million shares
subject to equity awards.

In the exchange, employees exchanged 997,799 options and 380,961 stock
appreciation rights for 335,060 RSUs."

The issuance of the letter without additional action completed the
department's review of this matter, and does not affect the listing or
trading status of the Company's common stock on The NASDAQ Global Market.

SOURCE: Virage Logic Corporation

   Virage Logic Corporation 
   Brian Sereda, 510-360-8017 
   Chief Financial Officer 
   brian.sereda@viragelogic.com