ARTISAN COMPONENTS INC
DEF 14A, 1999-01-28
SEMICONDUCTORS & RELATED DEVICES
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<PAGE>   1
                            SCHEDULE 14A INFORMATION

           PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
                      EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement      [ ] Confidential, For Use of the Commission
                                         only
                                         (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

                            ARTISAN COMPONENTS, INC.
- - --------------------------------------------------------------------------------
                (Name of Registrant as Specified in its Charter)

                            ARTISAN COMPONENTS, INC.
- - --------------------------------------------------------------------------------
                   (Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

        (1)    Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
        (2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
        (3)    Per unit price or other underlying value of transaction computed
               pursuant to Exchange Act Rule 0-11:
- - --------------------------------------------------------------------------------
        (4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
        (5) Total fee paid:
- - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- - --------------------------------------------------------------------------------
[ ]  Check box if any part of the fee is offset as provided by Exchange Act
        Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
        paid previously. Identify the previous filing by registration statement
        number, or the Form or Schedule and the date of its filing.
          (1)  Amount Previously Paid:
          ----------------------------------------------------------------------
          (2)  Form, Schedule or Registration Statement No.:
          ----------------------------------------------------------------------
          (3)  Filing Party:
          ----------------------------------------------------------------------
          (4)  Date Filed:
          ----------------------------------------------------------------------
<PAGE>   2
 
                            ARTISAN COMPONENTS, INC.
                            ------------------------
 
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                          TO BE HELD FEBRUARY 25, 1999
 
TO THE STOCKHOLDERS:
 
     NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ARTISAN
COMPONENTS, INC., a Delaware corporation ("Artisan"), will be held on Thursday,
February 25, 1999 at 10:00 a.m. local time, at Artisan's principal executive
offices located at 1195 Bordeaux Drive, Sunnyvale, California for the following
purposes:
 
     1. To elect four directors to serve until the next Annual Meeting of
        Stockholders and until their successors are elected.
 
     2. To approve amendments to the 1993 Stock Option Plan to (i) provide an
        annual increase in the number of shares of Common Stock reserved for
        issuance thereunder beginning on October 1, 1999 in an amount equal to
        the lesser of (x) 1,000,000 shares, (y) 5% of Common Stock outstanding
        as of the last day of the prior fiscal year or (z) such amount as
        determined by the Board of Directors of Artisan and (ii) establish share
        limitations for purposes of Section 162(m) of the Internal Revenue Code
        of 1986, as amended.
 
     3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
        accountants of Artisan for the fiscal year ending September 30, 1999.
 
     4. To transact such other business as may properly come before the meeting
        or any adjournment thereof.
 
     The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on December 31, 1998 are entitled to notice of and to vote at the
meeting.
 
     All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has returned a Proxy.
 
                                          Sincerely,
 
                                          Robert D. Selvi
                                          Secretary
 
Sunnyvale, California
January 28, 1999
 
                            YOUR VOTE IS IMPORTANT.
 
             IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING,
        YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
        AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE>   3
 
                            ARTISAN COMPONENTS, INC.
                            ------------------------
 
                            PROXY STATEMENT FOR 1999
                         ANNUAL MEETING OF STOCKHOLDERS
                            ------------------------
 
                 INFORMATION CONCERNING SOLICITATION AND VOTING
 
GENERAL
 
     The enclosed Proxy is solicited on behalf of the Board of Directors of
ARTISAN COMPONENTS, INC., a Delaware corporation ("Artisan"), for use at the
Annual Meeting of Stockholders to be held Thursday, February 25, 1999 at 10:00
a.m. local time, or at any adjournment thereof, for the purposes set forth
herein and in the accompanying Notice of Annual Meeting of Stockholders. The
Annual Meeting will be held at Artisan's principal executive offices located at
1195 Bordeaux Drive, Sunnyvale, California 94089. Its telephone number at that
location is (408) 734-5600.
 
     These proxy solicitation materials and the Annual Report to Stockholders
for the year ended September 30, 1998, including financial statements, were
first mailed on or about January 28, 1999 to all stockholders entitled to vote
at the meeting.
 
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
 
     Stockholders of record at the close of business on December 31, 1998 are
entitled to notice of and to vote at the meeting. Artisan has one series of
Common Shares outstanding, designated Common Stock, $0.001 par value. At the
record date, 13,387,437 shares of Artisan's Common Stock were issued and
outstanding and held of record by 163 stockholders. No shares of Artisan's
Preferred Stock were outstanding.
<PAGE>   4
 
     The following table sets forth certain information regarding the beneficial
ownership of Common Stock of Artisan as of December 31, 1998 as to (i) each
person who is known by Artisan to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director and nominee for director
of Artisan, (iii) each of the executive officers named in the Summary
Compensation Table below and (iv) all directors and executive officers as a
group.
 
<TABLE>
<CAPTION>
                                                              COMMON STOCK
            FIVE PERCENT STOCKHOLDERS, DIRECTORS              BENEFICIALLY    PERCENTAGE
               AND CERTAIN EXECUTIVE OFFICERS                   OWNED(1)       OWNED(2)
            ------------------------------------              ------------    ----------
<S>                                                           <C>             <C>
Amerindo Investment Advisors Inc.(3)........................   1,774,000         13.3%
  One Embarcadero Center, Suite 2300
  San Francisco, CA 94111
Entities Affiliated with U.S. Venture Partners(4)...........   1,164,903          8.7
  2180 Sand Hill Road, Suite 300
  Menlo Park, CA 94025
John G. Malecki.............................................     909,201          6.8
  1195 Bordeaux Drive
  Sunnyvale, CA 94089
Duane R. Hook...............................................     819,201          6.1
  1195 Bordeaux Drive
  Sunnyvale, CA 94089
Lucio L. Lanza(4)...........................................   1,181,014          8.8
Mark R. Templeton...........................................     890,354          6.6
Scott T. Becker(5)..........................................     833,361          6.2
Larry J. Fagg...............................................      42,031         *
Dhrumil Gandhi(6)...........................................     346,072          2.6
Jeffrey A. Lewis............................................     143,194          1.1
Dr. Eli Harari..............................................       9,375         *
All directors and executive officers as a group (8
  persons)..................................................   3,541,161         25.5
</TABLE>
 
- - ---------------
 *  Less than 1%
 
(1) Includes the following shares subject to options to purchase Artisan Common
    Stock that are currently exercisable or will be exercisable within 60 days
    of December 31, 1998: John G. Malecki 8,751; Duane R. Hook 8,751; Lucio L.
    Lanza 6,250; Mark R. Templeton 25,001; Scott T. Becker 12,501; Larry J. Fagg
    41,036; Dhrumil Gandhi 173,860; Jeffrey A. Lewis 127,944; Eli Harari 9,375;
    and all executive officers and directors as a group 490,352.
 
(2) Applicable percentage of ownership is based on 13,387,437 shares of Common
    Stock outstanding as of December 31, 1998 together with applicable options
    for such stockholder. Beneficial ownership is determined in accordance with
    the rules of the Securities and Exchange Commission, and includes voting and
    investment power with respect to shares. Shares of Common Stock subject to
    options currently exercisable or exercisable within 60 days after December
    31, 1998 are deemed outstanding for computing the percentage ownership of
    the person holding such options, but are not deemed outstanding for
    computing the percentage of any other person.
 
(3) Reflects information filed with the Securities and Exchange Commission on
    Schedule 13G on April 27, 1998 by Amerindo Investment Advisors, Inc.
    ("Amerindo"), a California corporation and a registered investment advisor.
    Amerindo filed on behalf of itself, Amerindo Investment Advisors, Inc., a
    Panama corporation ("Panama"), Alberto W. Vilar and Gary A. Tanaka. Messrs.
    Vilar and Tanaka are the only directors and executive officers of Panama and
    are each directors and executive officers of Amerindo. Although the Schedule
    13G was filed jointly, each of Messrs. Vilar and Tanaka, Amerindo and Panama
    expressly disclaim direct membership in any group. Amerindo has shared
    voting and dispositive power over 1,331,500 shares of Artisan's Common
    Stock. Panama has shared voting and dispositive power over 442,600 shares of
    Artisan's Common Stock. Messrs. Vilar and Tanaka have shared voting and
    dispositive power over 1,774,000 shares of Artisan's Common Stock.
 
                                        2
<PAGE>   5
 
(4) Includes 1,057,572 shares held by U.S. Venture Partners IV L.P., 71,480
    shares held by Second Ventures II, L.P. and 35,851 shares held by USVP
    Entrepreneur Partners II, L.P. Mr. Lanza, a director of Artisan, is a
    general partner of these entities. Mr. Lanza disclaims beneficial ownership
    of the shares held by the limited partnerships except to the extent of his
    respective proportionate partnership interests therein. The other general
    partners of each of U.S. Venture Partners IV, L.P., Second Ventures II, L.P.
    and USVP Entrepreneur Partners II, L.P. are William K. Bowes Jr., Irwin B.
    Federman, Steven M. Krausz, Dale J. Vogel and Philip M. Young.
 
(5) Includes 20,400 shares held in trust for Mr. Becker's children over which
    Mr. Becker may be deemed to share voting and investment powers.
 
(6) Includes 12,300 shares held in trust for Mr. Gandhi's children and 159,912
    shares held in trust for the Gandhi Family Trust. Mr. Gandhi may be deemed
    to share voting and investment power over each of these trusts.
 
REVOCABILITY OF PROXIES
 
     Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of Artisan a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person. Deliveries to Artisan should be
addressed to Mr. Robert D. Selvi, Secretary, 1195 Bordeaux Drive, Sunnyvale,
California 94089.
 
VOTING AND SOLICITATION
 
     Every stockholder voting for the election of directors (Proposal One) may
cumulate such stockholder's votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of shares that
such stockholder is entitled to vote, or distribute such stockholder's votes on
the same principle among as many candidates as the stockholder may select,
provided that votes cannot be cast for more than four candidates. However, no
stockholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting. On all other matters, each share
of Common Stock has one vote. A quorum comprising the holders of the majority of
the outstanding shares of Common Stock on the record date must be present or
represented for the transaction of business at the Annual Meeting. Abstentions
and broker non-votes will be counted in establishing the quorum.
 
     This solicitation of proxies is made by Artisan, and all related costs will
be borne by Artisan. In addition, Artisan may reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of Artisan's directors, officers and regular employees,
without additional compensation, personally or by telephone or telegram.
 
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
 
     Stockholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy roles promulgated by
the Securities and Exchange Commission. Proposals of stockholders of Artisan
that are intended to be presented by such stockholders at Artisan's 2000 Annual
Meeting of Stockholders must be received by Artisan no later than September 30,
1999 in order that they may be considered for inclusion in the proxy statement
and form of proxy relating to that meeting. The attached proxy card grants the
proxy holders discretionary authority to vote on any matter properly raised at
the Annual Meeting. If a stockholder intends to submit a proposal at the 2000
Annual Meeting, which is not eligible for inclusion in the proxy statement and
form of proxy relating to that meeting, the stockholder must do so no later than
December 14, 1999. If such stockholder fails to comply with the foregoing notice
provision, the proxy holders will be allowed to use their discretionary voting
authority when the proposal is raised at the 2000 Annual Meeting.
 
                                        3
<PAGE>   6
 
                                  PROPOSAL ONE
 
                             ELECTION OF DIRECTORS
 
NOMINEES
 
     A board of four directors is to be elected at the Annual Meeting of
Stockholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for Artisan's four nominees named below, all of whom
are presently directors of Artisan. In the event that any nominee of Artisan is
unable or declines to serve as a director at the time of the Annual Meeting of
Stockholders, the proxies will be voted for any nominee who shall be designated
by the present Board of Directors to fill the vacancy. Artisan is not aware of
any nominee who will be unable or will decline to serve as a director. In the
event that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner (in
accordance with cumulative voting) as will assure the election of as many of the
nominees listed below as possible, and, in such event, the specific nominees to
be voted for will be determined by the proxy holders. The term of office for
each person elected as a director will continue until the next Annual Meeting of
Stockholders or until a successor has been duly elected and qualified.
 
VOTE REQUIRED
 
     If a quorum is present and voting, the four nominees receiving the highest
number of votes will be elected to the Board of Directors. Abstentions and
"broker non-votes" are not counted in the election of directors.
 
NOMINEES
 
     The names of the nominees and certain information about them are set forth
below:
 
<TABLE>
<CAPTION>
                                                                                             DIRECTOR
         NAME OF NOMINEE           AGE                 POSITION WITH ARTISAN                  SINCE
         ---------------           ---                 ---------------------                 --------
<S>                                <C>    <C>                                                <C>
Mark R. Templeton................  40     President, Chief Executive Officer and Director      1991
Scott T. Becker..................  38     Chief Technology Officer and Director                1991
Lucio L. Lanza(1)(2).............  55     Chairman of the Board                                1996
Dr. Eli Harari(1)(2).............  53     Director                                             1997
</TABLE>
 
- - ---------------
(1) Member of the Compensation Committee.
 
(2) Member of the Audit Committee.
 
     There is no family relationship between any director or executive officer
of Artisan.
 
     Mark R. Templeton has served as President, Chief Executive Officer and a
director of Artisan since April 1991 when he co-founded Artisan. From April 1990
to March 1991, Mr. Templeton was director of the Custom IC Design Group at
Mentor Graphics Corporation ("Mentor Graphics"), an EDA company. From October
1984 to March 1990, he held a variety of positions with Silicon Compilers
Systems Corporation ("Silicon Compilers"), an EDA company, with the last
position being Director of the Custom IC Design Group.
 
     Scott T. Becker has served as Chief Technical Officer and a director of
Artisan since April 1991 when he co-founded Artisan. From April 1990 to April
1991, he was the manager of the library development group at the IC Division of
Mentor Graphics. From May 1985 to April 1990, he was responsible for library
development at Silicon Compilers.
 
     Lucio L. Lanza has served as a director of Artisan since March 1996 and was
named Chairman of the Board of Directors in November 1997. Mr. Lanza joined U.S.
Venture Partners, a venture capital firm, as a partner in 1990 and became a
general partner in 1996. From 1990 to 1995, Mr. Lanza also served as an
independent consultant to companies in the semiconductor, communications and
computer-aided design industries. From 1986 to 1989, he served as Chief
Executive Officer of EDA Systems, Inc., a design
 
                                        4
<PAGE>   7
 
automation software company. Mr. Lanza also serves on the boards of directors of
Raster Graphics, Inc. and several private companies including CAD.LAB, Inc., PDF
Solutions, Inc. and Veridicom, Inc.
 
     Dr. Eli Harari has served as a director of Artisan since November 1997. Dr.
Harari is the founder of SanDisk Corporation ("SanDisk"), a flash memory data
storage product company, and has served as the President, Chief Executive
Officer and a director of SanDisk since June 1988. Dr. Harari founded Wafer
Scale Integration, a privately held semiconductor company, in 1983 and was its
President and Chief Executive Officer from 1983 to 1986, and Chairman and Chief
Technical Officer from 1986 to 1988. From 1973 to 1983, Dr. Harari held various
management positions with Honeywell Inc., Intel Corporation and Hughes Aircraft
Microelectronics. Dr. Harari is also a director of United Silicon Incorporated.
 
BOARD MEETINGS AND COMMITTEES
 
     The Board of Directors of Artisan held a total of 6 meetings during fiscal
1998. No director attended fewer than 75% of the meetings of the Board of
Directors and committees thereof, if any, upon which such director served. The
Board of Directors has an Audit Committee and a Compensation Committee. The
Board of Directors has no nominating committee or any committee performing such
functions.
 
     The Audit Committee, which consisted of Messrs. Lanza and Harari during
fiscal 1998, is responsible for overseeing actions taken by Artisan's
independent accountants and reviews Artisan's internal financial controls. The
Audit Committee did not meet during fiscal 1998.
 
     The Compensation Committee, which consisted of Messrs. Lanza and Harari
during fiscal 1998, did not meet during fiscal 1998, but acted by unanimous
written consent 5 times. The Compensation Committee is responsible for
determining salaries, incentives and other forms of compensation for executive
officers and other employees of Artisan and administers various incentive
compensation and benefit plans.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Compensation Committee consists of Messrs. Lanza and Harari. Mr.
Templeton, who is President, Chief Executive Officer and a Director of Artisan,
participates in all discussions regarding salaries and incentive compensation
for all employees and consultants to Artisan, except that Mr. Templeton is
excluded from discussions regarding his own salary and incentive compensation.
 
                                  PROPOSAL TWO
 
                      AMENDMENT TO 1993 STOCK OPTION PLAN
 
     At the Annual Meeting, the stockholders are being asked to approve
amendments of Artisan's 1993 Stock Option Plan (the "Plan") to provide for an
automatic annual increase in the number of shares reserved for issuance
thereunder commencing on October 1, 1999 in an amount equal to the lesser of (i)
1,000,000 shares, (ii) 5% of the outstanding shares on such date, or (iii) such
amount as determined by the Board of Directors of Artisan. In addition, the
stockholders are being asked to approve amendments to certain provisions of the
Plan to establish share limitations for purposes of Section 162(m) of the
Internal Revenue Code. See "Performance-Based Compensation Limitations" below
for additional information.
 
     The amendments to the Plan were approved by the Board of Directors in
December 1998. As of December 31, 1998, options to purchase an aggregate of
2,334,551 shares of Artisan's Common Stock were outstanding under the Plan with
a weighted average exercise price of $4.86 per share, options to purchase an
aggregate of 1,013,911 shares of Artisan's Common Stock had been exercised and
942,934 shares were available for future grant. The Plan authorizes the Board of
Directors to grant incentive and nonstatutory stock options to eligible
employees, directors and consultants of Artisan.
 
     The Plan is structured to allow the Board of Directors broad discretion in
creating equity incentives in order to assist Artisan in attracting, retaining
and motivating the best available personnel for the successful conduct of
Artisan's business. Since inception of the Plan, Artisan has provided stock
options as an incentive to its employees as a means to promote increased
stockholder value. Management believes stock options are
                                        5
<PAGE>   8
 
one of the prime methods of attracting and retaining personnel responsible for
the continued development and growth of Artisan's business. In addition, stock
options are considered a competitive necessity in the high technology industry.
 
VOTE REQUIRED
 
     The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Plan. For this purpose, the "Votes Cast" are
defined to be the shares of Artisan's Common Stock represented and voting at the
Annual Meeting. In addition, the affirmative votes must constitute at least a
majority of the required quorum, which quorum is a majority of the shares
outstanding at the Record Date. Votes that are cast against the proposal will be
counted for purposes of determining both the presence or absence of a quorum and
the total number of Votes Cast with respect to the proposal. Abstentions will be
counted for purposes of determining both the presence or absence of a quorum and
the total number of Votes Cast with respect to the proposal. Accordingly,
abstentions will have the same effect as a vote against the proposal. Broker
non-votes, if any, will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business, but will not be counted for
purposes of determining the number of Votes Cast with respect to this proposal.
 
     THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENT TO THE PLAN.
 
SUMMARY OF THE PLAN
 
     The essential terms of the Plan are summarized as follows:
 
  Purpose
 
     The purposes of the Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, directors and consultants of Artisan and to promote the
success of Artisan's business.
 
  Administration
 
     The Plan provides for administration by the Board of Directors of Artisan
or by a Committee of the Board. The Board or the committee appointed to
administer the Plan are referred to in this description as the "Administrator."
The Administrator determines the terms of options granted, including the
exercise price, number of shares subject to the option and the exercisability
thereof. All questions of interpretation are determined by the Administrator and
its decisions are final and binding upon all participants. Members of the Board
receive no additional compensation for their services in connection with the
administration of the Plan.
 
  Eligibility
 
     The Plan provides that either incentive or nonstatutory stock options may
be granted to employees (including officers and employee directors) of Artisan
or any of its designated subsidiaries. In addition, the Plan provides that
nonstatutory stock options may be granted to directors and consultants of
Artisan or any of its designated subsidiaries. The Administrator selects the
optionees and determines the number of shares to be subject to each option. In
making such determination, the Administrator takes into account the duties and
responsibilities of the optionee, the value of the optionee's services, the
optionee's present and potential contribution to the success of Artisan and
other relevant factors. The Plan provides a limit of $100,000 on the aggregate
fair market value of shares subject to all incentive options which are
exercisable for the first time in any one calendar year.
 
                                        6
<PAGE>   9
 
  Terms of Options
 
     Each option is evidenced by a stock option agreement between Artisan and
the optionee to whom such option is granted and is subject to the following
additional terms and conditions:
 
          (1) Exercise of the Option: The Administrator determines when options
     granted under the Plan may be exercised. An option is exercised by giving
     written notice of exercise to Artisan, specifying the number of shares of
     Common Stock to be purchased and tendering payment to Artisan of the
     purchase price. Payment for shares issued upon exercise of an option may
     consist of cash, check, promissory note, delivery of already-owned shares
     of Artisan's Common Stock, subject to certain conditions, pursuant to a
     cashless exercise procedure under which the optionee provides irrevocable
     instructions to a brokerage firm to sell the purchased shares and to remit
     to Artisan, out of the sale proceeds, an amount equal to the exercise price
     plus all applicable withholding taxes, a reduction in the amount of any
     company liability to the individual, or such other consideration as
     determined by the Administrator and as permitted by applicable laws.
 
          Options may be exercised at any time on or following the date the
     options are first exercisable. An option may not be exercised for a
     fraction of a share.
 
          (2) Option Price: The option price of all incentive stock options and
     nonstatutory stock options under the Plan may not be less than the fair
     market value of the Common Stock on the date the option is granted. For
     purposes of the Plan, fair market value is defined as the closing sale
     price per share of the Common Stock on the date of grant as reported on the
     Nasdaq National Market. In the case of an option granted to an optionee who
     at the time of grant owns stock representing more than 10% of the voting
     power of all classes of stock of Artisan, the option price must be not less
     than 110% of the fair market value on the date of grant. The closing sale
     price of Artisan's Common Stock on December 31, 1998 was $5.31.
 
          (3) Termination of Employment or Consulting Relationship: The Plan
     provides that if the optionee's employment or consulting relationship with
     Artisan is terminated for any reason, other than death or disability, the
     period of time during which an option may be exercised following such
     termination is such period as is determined by the Administrator, however
     the options may be exercised only to the extent the options were
     exercisable on the date of termination and in no event later than the
     expiration of the term of the option. In the absence of a specified time in
     the option agreement, the option shall remain exercisable for three months
     after the optionee's termination.
 
          (4) Death: If an optionee should die while an employee or a consultant
     of Artisan (or during such period of time not exceeding three months, as
     determined by the Administrator following termination of the optionee's
     employment or consultancy), options may be exercised at any time within six
     months following the date of death and prior to the expiration of the term
     of such option as set forth in the Notice of Grant but only to the extent
     that the options were exercisable on a date as of six months after the date
     of death or termination of employment.
 
          (5) Disability: If an optionee's employment is terminated due to a
     disability, options may be exercised at any time within six months from the
     date of such termination, but only to the extent that the options were
     exercisable on a date as of six months after the date of termination of
     employment and in no event later than the expiration of the term of such
     option as set forth in the Notice of Grant.
 
          (6) Termination of Options: The term of each option is fixed by the
     Administrator and may not exceed ten years from the date of grant in the
     case of incentive stock options. However, incentive stock options granted
     to an optionee who, immediately before the grant of such option, owned more
     than 10% of the total combined voting power of all classes of stock of
     Artisan or a parent or subsidiary corporation, may not have a term of more
     than five years. No option may be exercised by any person after such
     expiration.
 
          (7) Nontransferability of Options: Unless determined otherwise by the
     Administrator, an option is nontransferable by the optionee, other than by
     will or the laws of descent and distribution, and is
 
                                        7
<PAGE>   10
 
     exercisable only by the optionee during his or her lifetime or, in the
     event of death, by a person who acquires the right to exercise the option
     by bequest or inheritance or by reason of the death of the optionee.
 
  Adjustment Upon Changes in Capitalization
 
     In the event any change, such as a stock split or dividend, is made in
Artisan's capitalization which results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by
Artisan, an appropriate adjustment shall be made in the option price and in the
number of shares subject to each option. In the event of a merger of Artisan
with or into another corporation, all outstanding options may either be assumed
or an equivalent option may be substituted by the surviving entity or, if such
options are not assumed or substituted, such options shall become exercisable as
to all of the shares subject to the options, including shares as to which would
not otherwise be exercisable. In the event that options become exercisable in
lieu of assumption or substitution, the Administrator shall notify optionees
that all options shall be fully exercisable for a period of 15 days, after which
such options shall terminate.
 
  Performance-Based Compensation Limitations
 
     No employee will be granted in any fiscal year of Artisan, options to
purchase more than 250,000 shares of Common Stock, except that in connection
with an employee's initial employment, he or she may be granted options to
purchase up to an additional 750,000 shares. The foregoing limitation, which
will be adjusted proportionately in connection with any change in Artisan's
capitalization, is intended to satisfy the requirements applicable to options
intended to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code. In the event that the Administrator determines that
such limitation is not required to qualify options as performance-based
compensation, the Administrator may modify or eliminate such limitation.
 
  Amendment and Termination
 
     The Board of Directors may amend the Plan at any time or from time to time
or may terminate it without approval of the stockholders. However, no action by
the Board of Directors or stockholders may alter or impair any option previously
granted under the Plan without the consent of the optionee. In any event, the
Plan will terminate in October 2003.
 
TAX INFORMATION
 
     Options granted under the Plan may be either "incentive stock options," as
defined in Section 422 of the Code, or nonstatutory options.
 
     An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as mid-term or long-term capital gain or loss. If these holding periods
are not satisfied, the optionee will recognize ordinary income at the time of
sale or exchange equal to the difference between the exercise price and the
lower of (i) the fair market value of the shares at the date of the option
exercise or (ii) the sale price of the shares. A different rule for measuring
ordinary income upon such a premature disposition may apply if the optionee is
also an officer, director, or 10% stockholder of Artisan. Generally, Artisan
will be entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Any gain or loss recognized on such a premature
disposition of the shares in excess of the amount treated as ordinary income
will be characterized as long-term, mid-term or short-term capital gain or loss,
depending on the holding period.
 
     All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize ordinary income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection
                                        8
<PAGE>   11
 
with an option exercise by an optionee who is also an employee of Artisan will
be subject to tax withholding by Artisan. Upon resale of such shares by the
optionee, any difference between the sales price and the optionee's purchase
price, to the extent not recognized as taxable income as described above, will
be treated as long-term, mid-term or short-term capital gain or loss, depending
on the holding period. Generally, Artisan will be entitled to a tax deduction in
the same amount as the ordinary income recognized by the optionee with respect
to shares acquired upon exercise of a nonstatutory option.
 
     The foregoing is only a summary of the effect of federal income taxation
upon the optionee and Artisan with respect to the grant and exercise of options
under the Plan, does not purport to be complete, and does not discuss the tax
consequences of the optionee's death or the income tax laws of any municipality,
state or foreign country in which an optionee may reside.
 
PARTICIPATION IN THE PLAN
 
     The grant of options under the Plan to executive officers, including the
officers named in the Summary Compensation Table below, is subject to the
discretion of the Administrator. As of the date of this proxy statement, there
has been no determination by the Administrator with respect to future awards
under the Plan. Accordingly, future awards are not determinable. The table of
option grants under "Executive Compensation and Other Matters -- Option Grants
in Last Fiscal Year" provides information with respect to the grant of options
to the Named Executive Officers (identified in that table) during fiscal 1998.
Information regarding options granted to non-employee Directors during fiscal
1998 is set forth under the heading "Executive Compensation and Other
Matters -- Compensation of Directors." During fiscal 1998, all current executive
officers as a group and all other employees as a group were granted options to
purchase 235,000 shares and 870,700 shares, respectively, pursuant to the Plan.
 
                                 PROPOSAL THREE
 
             RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
 
     The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants to audit the consolidated financial statements of Artisan for the
fiscal period ending September 30, 1999, and recommends that stockholders vote
for ratification of such appointment. In the event of a negative vote on
ratification, the Board of Directors will reconsider its selection.
 
     PricewaterhouseCoopers LLP had audited Artisan's financial statements
annually since 1997. Representatives of PricewaterhouseCoopers LLP are expected
to be present at the meeting with the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
 
     THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS.
 
                                        9
<PAGE>   12
 
                    EXECUTIVE COMPENSATION AND OTHER MATTERS
 
EXECUTIVE COMPENSATION
 
     The following table sets forth total compensation for the fiscal years
ended September 30, 1997 and 1998 for the Chief Executive Officer and each of
the next four most highly compensated executive officers (the "Named Executive
Officers"):
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                              LONG-TERM
                                                                             COMPENSATION
                                                                                AWARDS
                                                                             ------------
                                              ANNUAL COMPENSATION(1)          NUMBER OF
                                         ---------------------------------    SECURITIES
                                FISCAL                        OTHER ANNUAL    UNDERLYING       ALL OTHER
 NAME AND PRINCIPAL POSITION     YEAR     SALARY     BONUS    COMPENSATION    OPTIONS(2)    COMPENSATION(3)
 ---------------------------    ------   --------   -------   ------------   ------------   ---------------
<S>                             <C>      <C>        <C>       <C>            <C>            <C>
Mark R. Templeton.............   1998    $172,800   $    --        $--         100,000          $1,105
  President and Chief            1997     172,800     2,500        --               --           4,474
  Executive Officer
Scott T. Becker...............   1998     172,800        --        --           50,000           1,728
  Chief Technical Officer        1997     172,800     2,500        --               --           1,728
Larry J. Fagg(4)..............   1998     140,000    84,208        --               --              --
  Vice President, Worldwide      1997      11,671     9,375        --          109,432              --
  Sales
Dhrumil Gandhi................   1998     172,800        --        --           50,000           2,500
  Vice President, Engineering    1997     172,800     2,500        --               --           2,376
Jeffrey A. Lewis..............   1998     140,000    21,667        --           35,000           2,400
  Vice President, Marketing      1997     140,000    22,500        --          253,705           2,375
</TABLE>
 
- - ---------------
(1) Other than salary and bonus described herein, Artisan did not pay the
    persons name in the Summary Compensation Table any compensation, including
    incidental personal benefits, in excess of 10% of such executive officer's
    salary.
 
(2) These shares are subject to stock options granted under the 1993 Stock
    Option Plan.
 
(3) Represents matching contributions under Artisan's 401(k) plan.
 
(4) Mr. Fagg joined Artisan in August 1997. The entire amount of Mr. Fagg's 1998
    bonus represents sales commissions.
 
                                       10
<PAGE>   13
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 
     The following table provides information concerning each grant of options
to purchase Artisan's Common Stock made during the fiscal year ended September
30, 1998 to the Named Executive Officers, except for Larry J. Fagg, Vice
President Worldwide Sales, who did not receive any option grants in fiscal 1998:
 
<TABLE>
<CAPTION>
                                                INDIVIDUAL GRANTS                    POTENTIAL REALIZABLE VALUE
                               ---------------------------------------------------    MINUS EXERCISE PRICE AT
                               NUMBER OF     PERCENT OF                               ASSUMED ANNUAL RATES OF
                               SECURITIES   TOTAL OPTIONS   EXERCISE                  STOCK PRICE APPRECIATION
                               UNDERLYING    GRANTED TO       PRICE                      FOR OPTION TERM(1)
                                OPTIONS     EMPLOYEES IN    PER SHARE   EXPIRATION   --------------------------
            NAME                GRANTED      FISCAL YEAR    (2)(3)(4)      DATE          5%             10%
            ----               ----------   -------------   ---------   ----------   -----------    -----------
<S>                            <C>          <C>             <C>         <C>          <C>            <C>
Mark R. Templeton............   100,000          9.2%         $7.70     01/12/2003    $123,397       $357,357
  President and Chief
  Executive Officer
Scott T. Becker..............    50,000          4.6           7.70     01/12/2003      61,699        178,679
  Chief Technical Officer
Dhrumil Gandhi...............    50,000          4.6           7.00     01/12/2008     220,113        557,810
  Vice President, Engineering
Jeffrey A. Lewis.............    35,000          3.2           7.00     01/12/2008     154,079        390,467
  Vice President, Marketing
</TABLE>
 
- - ---------------
(1) Potential realizable value is based on the assumption that the Common Stock
    of Artisan appreciates at the annual rate shown (compounded annually) from
    the date of grant until the expiration of the 10 year option term, with the
    exception of options granted to Messrs. Templeton and Becker whose options
    expire five years after the date of grant. These numbers are calculated
    based on the requirements promulgated by the Securities and Exchange
    Commission and do not reflect Artisan's estimate of future stock price
    growth.
 
(2) All options shown granted in fiscal 1998 become exercisable as to 25% of the
    shares subject to the option exercisable starting one year after the date of
    grant and an additional 6.25% of such shares subject to the option becoming
    exercisable quarterly thereafter.
 
(3) Options were granted at an exercise price equal to the fair market value of
    Artisan's Common Stock, as determined by reference to the closing sale price
    of the Common Stock on the Nasdaq National Market on the date of grant, with
    the exception of options granted to Messrs. Templeton and Becker, whose
    exercise price is equal to 110% of the fair market value on the date of
    grant.
 
(4) Exercise price may be paid in cash, promissory note, by delivery of
    already-owned shares subject to certain conditions, or pursuant to a
    cashless exercise procedure under which the optionee provides irrevocable
    instructions to a brokerage firm to sell the purchased shares and to remit
    to Artisan, out of the sale proceeds, an amount equal to the exercise price
    plus all applicable withholding taxes.
 
                                       11
<PAGE>   14
 
                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES
 
     The following table shows stock options exercised by Named Executive
Officers during fiscal year 1998, including the aggregate value of gains on the
date of exercise. In addition, this table includes the number of shares covered
by both exercisable and non-exercisable stock options as of fiscal year-end.
Also reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the year-end price of Artisan's Common Stock.
 
<TABLE>
<CAPTION>
                                                            NUMBER OF SECURITIES
                                                           UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                              NUMBER OF                          OPTIONS AT              IN-THE-MONEY OPTIONS AT
                               SHARES                        SEPTEMBER 30, 1998           SEPTEMBER 30, 1998(2)
                             ACQUIRED ON      VALUE      ---------------------------   ---------------------------
           NAME               EXERCISE     REALIZED(1)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
           ----              -----------   -----------   -----------   -------------   -----------   -------------
<S>                          <C>           <C>           <C>           <C>             <C>           <C>
Mark R. Templeton..........        --             --            --        100,000              --            --
  President and Chief
  Executive Officer
Scott T. Becker............        --             --            --         50,000              --            --
  Chief Technical Officer
Larry J. Fagg..............        --             --        27,358         82,074      $   64,975      $194,926
  Vice President, Worldwide
     Sales
Dhrumil Gandhi.............    18,750       $131,063       145,992         73,052       1,054,792        66,551
  Vice President,
     Engineering
Jeffrey A. Lewis...........    23,514        252,306       103,338        161,853         746,617       846,513
  Vice President, Marketing
</TABLE>
 
- - ---------------
(1) Fair market value of the Common Stock as of the date of exercise minus the
    exercise price.
 
(2) Fair market value of the Common Stock as of September 30, 1998 minus the
    exercise price.
 
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
 
     Pursuant to the terms of a September 5, 1996 amendment to his offer letter,
Jeffrey A. Lewis, Vice President, Marketing of Artisan, is also entitled, under
specified conditions, to partial acceleration of vesting of an option to
purchase 253,705 shares of Artisan's Common Stock. In the event Mr. Lewis's
employment is terminated other than for cause following the sale or merger of
Artisan with another entity, 25% of Mr. Lewis's original option grant will vest
and become immediately exercisable.
 
     In June 1997, Artisan granted to Robert D. Selvi, Vice President Finance
and Chief Financial Officer, a stock option to purchase 251, 693 shares of
Common Stock at $4.50 per share, subject to the vesting provisions under the
1993 Plan. Pursuant to a severance agreement entered into with Mr. Selvi, in the
event that Mr. Selvi is terminated other than voluntarily or for cause, he shall
(i) be entitled to receive his base salary as then in effect for a period of six
months ($86,400 based on Mr. Selvi's current salary) plus any targeted bonus
amount pro rated for such six months period as determined by the Board of
Directors and (ii) the option granted to him for 251,693 shares of Common Stock
will continue to vest for an additional 18 months following such termination.
Termination other than for cause includes constructive termination resulting
from (i) the reduction of rate of compensation, (ii) the reduction of the scope
of Mr. Selvi's engagement, (iii) the requirement that Mr. Selvi provide services
at a location more than 25 miles form Artisan's current principal office
location or from Mr. Selvi's residence or (iv) subjection of Mr. Selvi to
unreasonable working conditions. In addition, if there is a change of control of
Artisan and Mr. Selvi is terminated other than for cause within six months
following the effective date of such change of control, Mr. Selvi will be
entitled to a cash payment of an amount equal to six months of his base salary
as then in effect plus any targeted bonus amount pro rated for such six month
period and the option granted to him for 251,693 shares will become 100% vested
and exercisable. For purposes of Mr. Selvi's severance agreement, a change in
control is defined as (i) any person becoming the beneficial owner of 50% or
more of the total voting power of Artisan's then outstanding voting securities,
(ii) a change in the composition of the Board of Directors within a two year
 
                                       12
<PAGE>   15
 
period such that a majority of the then current directors are not directors as
of the date of Mr. Selvi's agreement or nominated or elected by a majority of
such directors at the time of such nomination or (iii) a merger or consolidation
of Artisan with any other corporation, other than a merger or consolidation
which would result in the voting securities of Artisan outstanding immediately
prior thereto continuing to represent at least 50% of the total voting power
represented by the voting securities of Artisan or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of Artisan approve a plan of complete liquidation of Artisan or an agreement for
the sale or disposition by Artisan of all or substantially all of Artisan's
assets.
 
     Pursuant to the terms of his July 31, 1997 offer letter, Larry J. Fagg,
Vice President, Worldwide Sales of Artisan is entitled, under specified
conditions, to partial acceleration of vesting of options to purchase 109,432
shares of Artisan's Common Stock and certain severance and benefit payments. In
the event Mr. Fagg's employment is terminated other than for cause following a
change of control of Artisan, 50% of the remaining unvested shares of Mr. Fagg's
original option grant will vest and become immediately exercisable, Mr. Fagg
will be entitled to receive a severance payment equal to six month's base salary
and commissions at target and he will be entitled to continue to participate in
Artisan's benefit programs for a period of six months after the effective date
of his termination at no cost to him. For purposes of Mr. Fagg's employment, a
change in control of Artisan is defined as the acceptance by Artisan of any
offer that would result in the acquiror owning more than 50% of Artisan's assets
or voting stock then outstanding.
 
COMPENSATION OF DIRECTORS
 
     Directors currently receive no cash fees for serving as directors.
Artisan's 1997 Director Option Plan provides for the non-discretionary automatic
grant of options to each non-employee director of Artisan ("Outside Director").
Each Outside Director was automatically granted an option to purchase 25,000
shares upon the effective date of Artisan's initial public offering which vests
at a rate of 25% on the first anniversary of the date of grant and at a rate of
1/48 of the shares per month thereafter. Each new Outside Director is
automatically granted an option to purchase 25,000 shares upon the date on which
such person first becomes a director which vests at a rate of 25% on the first
anniversary of the date of grant and at a rate of 1/48 of the shares per month
thereafter. Subsequently, each Outside Director is granted an additional option
to purchase 5,000 shares of Common Stock at the next meeting of the Board of
Directors following the Annual Meeting of Stockholders if, on such date, he or
she has served as a director for at least six months, which vests at a rate of
1/48 of the shares per month following the date of grant. The exercise price of
options granted to Outside Directors must be 100% of the fair market value of
Artisan's Common Stock on the date of grant. On February 2, 1998, Messrs. Lanza
and Harari were each granted an option to purchase 25,000 shares of Artisan's
Common Stock at an exercise price of $10.00 per share. In addition, in
connection with consulting services provided to Artisan by Dr. Harari, Dr.
Harari was granted an option to purchase 10,000 shares of Artisan's Common Stock
at an exercise price of $16.44 per share under the 1993 Stock Option Plan.
 
CERTAIN TRANSACTIONS
 
     Under the terms of a consulting agreement with Artisan, Dr. Harari, a
director of Artisan provides consulting services to Artisan for which Artisan
pays an hourly fee. Under the consulting agreement, Dr. Harari was granted an
option to purchase 10,000 shares of Artisan's Common Stock at an exercise price
of $16.44 per share under the 1993 Stock Option Plan. In fiscal 1998, no fee
payments were made to Dr. Harari.
 
     Artisan believes that the transaction set forth above was made on terms no
less favorable to Artisan than could have been obtained from an unaffiliated
third party. All future transactions, including loans, between Artisan and its
officers, directors, principal stockholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors, and will continue to be on
terms no less favorable to Artisan than could be obtained from unaffiliated
third parties.
 
                                       13
<PAGE>   16
 
         REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
 
     The Compensation Committee of the Board of Directors reviews and approves
Artisan's executive compensation policies. The following is the report of the
Compensation Committee describing the compensation policies and rationales
applicable to Artisan's executive officers with respect to the compensation paid
to such executive officers for the fiscal year ended September 30, 1998.
 
  Compensation Philosophy
 
     Artisan's philosophy in setting its compensation policies for executive
officers is to maximize stockholder value over time. The primary goal of
Artisan's executive compensation program is therefore to closely align the
interests of the executive officers with those of Artisan's stockholders. To
achieve this goal, Artisan attempts to offer compensation opportunities that
attract and retain executives whose abilities are critical to the long-term
success of Artisan, motivate individuals to perform at their highest level and
reward outstanding achievement. In addition, Artisan attempts to maintain a
portion of the executive's total compensation at risk, tied to achievement of
financial, organizational and management performance goals, and encourage
executives to manage from the perspective of owners with an equity stake in
Artisan. To achieve these goals, the Compensation Committee has established an
executive compensation program primarily consisting of cash compensation and
stock options.
 
     The cash compensation component of total compensation, which consists
primarily of base salary, is designed to compensate executives competitively
within the industry and marketplace. The Compensation Committee reviewed and
approved fiscal 1998 base salaries for the Chief Executive Officer and other
executives at the beginning of the calendar year. Generally, executive officer
salaries are targeted at or above the average rates paid by competitors so as to
enable Artisan to attract, motivate and retain highly skilled executives. Base
salaries in fiscal 1998 were established by the Compensation Committee based
upon an executive's job responsibilities, level of experience, individual
performance and contribution to the business.
 
     In addition to base salary, Artisan occasionally pays bonuses to its
executive officers, although Artisan does not have a formal bonus plan. Sales
and marketing executives are also eligible for additional cash payments above
their base salaries for achieving specific performance goals or in connection
with sales commissions.
 
     Artisan provides long-term incentives through its 1993 Stock Option Plan
(the "Plan"). The purpose of the Plan is to attract and retain its best employee
talent available and to create a direct link between compensation and the
long-term performance of Artisan. The Compensation Committee believes that stock
options directly motivate an executive to maximize long-term stockholder value.
The options also utilize vesting periods that encourage key executives to
continue in the employ of Artisan. All options granted to executive officers to
date have been granted at the fair market value of Artisan's Common Stock on the
date of grant except in the case of executive officers who hold more than 10% of
the outstanding voting stock, in which case the exercise price equals 110% of
the fair market value on the date of grant. The Board considers the grant of
each option subjectively, considering factors such as the individual performance
of the executive officer and the anticipated contribution of the executive
officer to the attainment of Artisan's long-term strategic performance goals.
 
     During fiscal 1998, the compensation of Mark R. Templeton, Artisan's
President and Chief Executive Officer, consisted of base salary and stock
options. Mr. Templeton's base salary for fiscal 1998 was $172,800. In addition,
Mr. Templeton was granted an option to purchase 100,000 shares of Common Stock
at an exercise price of $7.70, which was 110% of the fair market value of
Artisan's Common Stock at the date of grant. Mr. Templeton was not paid a cash
bonus for fiscal 1998. The Compensation Committee reviews the Chief Executive
Officer's salary at the beginning of the calendar year using the same criteria
and policies as are employed for the other executive officers.
 
                                       14
<PAGE>   17
 
  Impact of Section 162(m) of the Internal Revenue Code
 
     The Compensation Committee has considered the potential impact of Section
162(m) of the Internal Revenue Code on the compensation paid to Artisan's
executive officers. Section 162(m) generally disallows a tax deduction for any
publicly held corporation for individual compensation exceeding $1.0 million in
any taxable year for any of the executive officers named in the proxy statement,
unless compensation is performance-based. In general, it is Artisan's policy to
qualify, to the maximum extent possible, its executives' compensation for
deductibility under applicable tax laws. As a result, at a Special Meeting of
Stockholders in November 1997, the stockholders approved certain amendments to
the Plan intended to preserve Artisan's ability to deduct the compensation
expense relating to stock options granted under the Plan, and are being asked to
affirm such amendment at the 1999 Annual Meeting of Stockholders. In approving
the amount and form of compensation for Artisan's executive officers, the
Compensation Committee will continue to consider all elements of the cost to
Artisan of providing such compensation, including the potential impact of
Section 162(m).
 
                                          Respectfully submitted by:
 
                                          COMPENSATION COMMITTEE
 
                                          Lucio L. Lanza
                                          Dr. Eli Harari
 
                                       15
<PAGE>   18
 
PERFORMANCE GRAPH
 
     Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the stockholders of Artisan's Common Stock with the
cumulative return of the Nasdaq Electronic Components Stock Index and the Nasdaq
Stock Market (U.S.) Index for the period commencing February 3, 1998 (the first
trading date following Artisan's initial public offering) and ending on
September 30, 1998. Note that historic stock price performance is not
necessarily indicative of future stock price performance.
 
            COMPARISON OF 11 MONTH CUMULATIVE TOTAL RETURN(1) AMONG
         ARTISAN COMPONENTS, INC., NASDAQ ELECTRONIC COMPONENTS INDEX,
                      THE NASDAQ STOCK MARKET (U.S.) INDEX
 
<TABLE>
<CAPTION>
                                                                                NASDAQ ELECTRONIC          NASDAQ STOCK MARKET
                                                ARTISAN COMPONENTS, INC.        COMPONENTS INDEX                 (U.S.)
                                                ------------------------        -----------------          -------------------
<S>                                             <C>                         <C>                         <C>
'02/03/98'                                               100.00                      100.00                      100.00
'03/31/98'                                               180.00                      110.23                       92.89
'06/30/98'                                               135.00                      113.41                       86.41
'09/30/98'                                                73.75                      102.69                       89.88
</TABLE>
 
- - ---------------
(1) The graph assumes that $100 was invested on February 3, 1998 (the first
    trading date following Artisan's initial public offering) in Artisan's
    Common Stock and in the Nasdaq Electronic Components Index and in NASDAQ
    Stock Market (U.S.) and that all dividends were reinvested. No dividends
    have been declared or paid on Artisan's Common Stock. Stockholder returns
    over the indicated period should not be considered indicative of future
    stockholder returns.
 
     The information contained above under the captions "Report of the
Compensation Committee of the Board of Directors" and "Performance Graph" shall
not be deemed to be "soliciting material" or to be "filed" with the Securities
and Exchange Commission, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended or
Securities Exchange Act of 1934, as amended, except to the extent that Artisan
specifically incorporates it by reference into such filing.
 
                                       16
<PAGE>   19
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
     Section 16(a) of the Exchange Act requires Artisan's executive officers and
directors, and persons who own more than ten percent of a registered class of
Artisan's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC") and the National
Association of Securities Dealers, Inc. Executive officers, directors and
greater than ten percent stockholders are required by SEC regulation to furnish
Artisan with copies of all Section 16(a) forms they file. Based solely in its
review of the copies of such forms received by it, or written representations
from certain reporting persons, Artisan believes that, during the period from
February 3, 1998 to September 30, 1998 all executive officers and directors of
Artisan complied with all applicable filing requirements, except that persons
associated with U.S. Venture Partners, L.P., of which Mr. Lanza is a general
partner, were late in filing Forms 4 for the month of April 1998.
 
                                 OTHER MATTERS
 
     Artisan knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
 
                                          THE BOARD OF DIRECTORS
 
Dated: January 28, 1999
 
                                       17
<PAGE>   20
                            ARTISAN COMPONENTS, INC.
                             1993 STOCK OPTION PLAN
                           (AS AMENDED DECEMBER, 1998)


       1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.

       2. Definitions. As used herein, the following definitions shall apply:

          (a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.

          (b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.

          (c) "Board" means the Board of Directors of the Company.

          (d) "Code" means the Internal Revenue Code of 1986, as amended.

          (e) "Committee" means a Committee appointed by the Board in accordance
with Section 4 of the Plan.

          (f) "Common Stock" means the Common Stock of the Company.

          (g) "Company" means Artisan Components, Inc., a Delaware corporation.

          (h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services and who is compensated
for such services. The term "Consultant" shall also include directors who are
not Employees.

          (i) "Continuous Status as an Employee or Consultant" means any person,
including an advisor, who is engaged by the Company or any Parent or Subsidiary
to render services and is compensated for such services, and any director of the
Company whether compensated for such services or not provided that if and in the
event the Company registers any class of any equity security pursuant to the
Exchange Act, the term Consultant shall thereafter not include directors who are
not compensated for their services or are paid only a director's fee by the
Company.

<PAGE>   21

          (j) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.

          (k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

          (l) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:

              (i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such exchange or system for the last market trading day prior to the time of
determination) as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

              (ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
or;

              (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

          (n) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

          (o) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

          (p) "Option" means a stock option granted pursuant to the Plan.

          (q) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise price.

          (r) "Optioned Stock" means the Common Stock subject to an Option.

          (s) "Optionee" means an Employee or Consultant who receives an Option.

                                      -2-
<PAGE>   22

          (t) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.

          (u) "Plan" means this 1993 Stock Option Plan.

          (v) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.

          (w) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.

       3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 4,291,396 Shares (after giving effect to the one-for-two stock
split approved by the shareholders of the Company on November 24, 1997;
hereinafter, "post-split"), together with an annual increase to the number of
shares reserved thereunder to take effect each October 1 (beginning on October
1, 1999) equal to the lesser of (i) 1,000,000 shares, (ii) 5% of the Common
Stock outstanding as of the last day of the prior fiscal year or (iii) such
amount as determined by the Board of Directors. The Shares may be authorized,
but unissued, or reacquired Common Stock.

          If an Option should expire or become unexercisable for any reason
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall,
unless the Plan has terminated, become available for future grant or sale under
the Plan.

       4. Administration of the Plan.

          (a) Procedure.

              (i) Multiple Administrative Bodies. The Plan may be administered
by different Committees with respect to different groups of Employees and
Consultants.

              (ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.

              (iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.


                                      -3-
<PAGE>   23

              (iv)  Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.

          (b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

              (i)   to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;

              (ii)  to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;

              (iii) to determine whether and to what extent Options are granted
hereunder;

              (iv)  to approve forms of agreement for use under the Plan;

              (v)   to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option of the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

              (vi)  to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;

              (vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;

              (viii) to institute an Option Exchange Program;

              (ix)  to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;

              (x)   to prescribe, amend and rescind rules and regulations 
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;


                                      -4-
<PAGE>   24

              (xi)  to modify or amend each Option (subject to Section 13 of the
Plan), including the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided for in the
Plan;

              (xii) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by an Optionee to have Shares withheld for
this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;

              (xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.

          (c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.

       5. Eligibility.

          (a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.

          (b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

          (c) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's employment or consulting
relationship with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.

          (d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act, or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options to
Employees:


                                      -5-
<PAGE>   25

              (i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 250,000 Shares (post-split).

              (ii) In connection with his or her initial employment, an Employee
may be granted Options to purchase up to an additional 750,000 Shares
(post-split) which shall not count against the limit set forth in subsection (i)
above.

              (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 11.

              (iv) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the canceled Option will be counted against the limits
set forth in subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.

       6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.

       7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.

       8. Option Exercise Price and Consideration.

          (a) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be such price as is determined by
the Administrator, but shall be subject to the following:

              (i) In the case of an Incentive Stock Option

                  (A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.


                                      -6-
<PAGE>   26

                   (B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.

              (ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

          (b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.

          (c) Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case
of Shares acquired upon exercise of an Option either have been owned by the
Optionee for more than six months on the date of surrender or were not acquired,
directly or indirectly, from the Company, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, (6) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement, (7) any
combination of the foregoing methods of payment, or (8) such other consideration
and method of payment for the issuance of Shares to the extent permitted by
Applicable Laws. In making its determination as to the type of consideration to
accept, the Administrator shall consider if acceptance of such consideration may
be reasonably expected to benefit the Company.

       9. Exercise of Option.

          (a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.

              An Option may not be exercised for a fraction of a Share.

              An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration 


                                      -7-
<PAGE>   27

and method of payment allowable under Section 8(c) of the Plan. Until the
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.

                  Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

              (b) Termination of Employment or Consulting Relationship. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of a change of status from
Employee to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the ninety-first (91st)
day following such change of status) or from Consultant to Employee), such
Optionee may, but only within such period of time as is determined by the
Administrator, of at least thirty (30) days, with such determination in the case
of an Incentive Stock Option not exceeding three (3) months after the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise his or her Option to
the extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, the Shares covered by the unexercisable portion
of the Option shall revert to the Plan, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate and the Shares covered by such Option shall revert to the Plan.

              (c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within six (6) months from the date of such termination (but in no event later
than the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
as of six (6) months after the date of such termination. To the extent that
Optionee was not entitled to exercise the Option as of six (6) months after the
date of such termination, the Shares covered by the unexercisable portion of the
Option shall revert to the Plan, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate and the Shares covered by such Option shall revert to the Plan.

              (d) Death of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of the
death of an Optionee (i) during the term of the Option and while an Employee of
the Company having been in Continuous Status as an Employee since the date of
grant of the Option, or (ii) within three (3) months after the termination of
Optionee's Continuous Status as an Employee for any reason other than for cause
or a voluntary termination initiated by the 


                                      -8-
<PAGE>   28

Optionee, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee would have been entitled to
exercise the Option as of six (6) months after the date of death. To the extent
that Optionee was not entitled to exercise the Option as of six (6) months after
the date of death, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate
and the Shares covered by such Option shall revert to the Plan.

          (e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

       10. Non-Transferability of Options. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.

       11. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.

           (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

           (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Board. The Board may, in the exercise of its sole discretion in such instances,
declare that any Option shall terminate as of a date 


                                      -9-
<PAGE>   29

fixed by the Board and give each Optionee the right to exercise his Option as to
all or any part of the Optioned Stock, including shares as to which the Option
would not otherwise be exercisable.

           (c) Merger. In the event of a merger of the Company with or into
another corporation, the Option shall be assumed or an equivalent option shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that the successor corporation does not
agree to assume the Option or to substitute an equivalent option, the
Administrator shall, in lieu of such assumption or substitution, provide for the
Optionee to have the right to exercise the Option as to all or a portion of the
Optioned Stock, including Shares as to which it would not otherwise be
exercisable. If the Administrator makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger, the Administrator shall
notify the Optionee that the Option shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option will terminate
upon the expiration of such period. For the purposes of this paragraph, the
Option shall be considered assumed if, following the merger, the option confers
the right to purchase, for each Share of Optioned Stock subject to the Option
immediately prior to the merger, the consideration (whether stock, cash, or
other securities or property) received in the merger by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon the
exercise of the Option, for each Share of Optioned Stock subject to the Option,
to be solely common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by holders of Common
Stock in the merger.

       12. Date of Grant. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.

       13. Amendment and Termination of the Plan.

           (a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.

           (b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.


                                      -10-
<PAGE>   30

       14. Conditions Upon Issuance of Shares.

           (a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

           (b) Investment Representations. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.


       15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

       16. Agreements. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.

       17. Inability to Obtain Authority. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

       18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.



                                      -11-
<PAGE>   31
           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

                            ARTISAN COMPONENTS, INC.
                       1999 ANNUAL MEETING OF STOCKHOLDERS
                                FEBRUARY 25, 1999

        The undersigned stockholder of ARTISAN COMPONENTS, INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated January 28, 1999, and hereby
appoints Mark R. Templeton and Robert D. Selvi, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1999 Annual Meeting
of Stockholders of ARTISAN COMPONENTS, INC. to be held on February 25, 1999 at
10:00 a.m. local time, at 1195 Bordeaux Drive, Sunnyvale, California and at any
adjournment or adjournments thereof, and to vote all shares of Common Stock
which the undersigned would be entitled to vote if then and there personally
present, on the matters set forth below:

        1. ELECTION OF DIRECTORS:

           [ ]    FOR all nominees listed below          [ ]    WITHHOLD
                  (except as indicated)

           IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
           NOMINEE, STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST
           BELOW:

           Mark R. Templeton, Scott T. Becker, Lucio L. Lanza and Dr. Eli Harari

        2. PROPOSAL TO APPROVE AMENDMENTS TO THE 1993 STOCK OPTION PLAN TO (i)
           PROVIDE AN ANNUAL INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK
           RESERVED FOR ISSUANCE THEREUNDER BEGINNING ON OCTOBER 1, 1999 IN AN
           AMOUNT EQUAL TO THE LESSER OF (x) 1,000,000 SHARES, (y) 5% OF COMMON
           STOCK OUTSTANDING AS OF THE LAST DAY OF THE PRIOR FISCAL YEAR OR (z)
           SUCH AMOUNT AS DETERMINED BY THE BOARD OF DIRECTORS OF ARTISAN AND
           (ii) ESTABLISH SHARE LIMITATIONS FOR PURPOSES OF SECTION 162(m) OF
           THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.

           [ ]   FOR      [ ]   AGAINST      [ ]   ABSTAIN

        3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
           THE INDEPENDENT ACCOUNTANTS OF ARTISAN FOR THE FISCAL PERIOD ENDING
           SEPTEMBER 30, 1999:

           [ ]   FOR      [ ]   AGAINST      [ ]   ABSTAIN

and, in their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof.

THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENTS TO THE 1993
STOCK OPTION PLAN, FOR THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT ACCOUNTANTS AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.

                                  Dated: __________________, 1999


                                  --------------------------------------------
                                  Signature
                  

                                  --------------------------------------------
                                  Signature

(This Proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)



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