<PAGE>   1
                United States Securities and Exchange Commission
                             Washington, D.C. 20549

                            SCHEDULE 14A INFORMATION
 
                PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

 
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 sec 240.14a-11(c) or sec 240.14a-12

                             DATA DIMENSIONS, INC.
--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
[X]  No fee required.
 
[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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 (Set forth the amount on which the
          filing fee is calculated and state how it was determined):
 
          --------------------------------------------------------------------- 
 
     (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 registrant 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
 
                                                                            LOGO
 
                                 April 9, 1999
 
Dear Stockholder:
 
     You are cordially invited to attend the Annual Meeting of Stockholders of
Data Dimensions, Inc. which will be held at the Bellevue Club, 11200 SE 6th
Street, Bellevue, Washington, 98004 on May 18, 1999 at 10:00 a.m. Pacific
Daylight Savings Time. Details of the business to be conducted at the annual
meeting are given in the attached Notice of Annual Meeting and Proxy Statement.
 
     I am very pleased that in December 1998, Data Dimensions announced the
appointment of Peter A. Allen as the Company's President and Chief Executive
Officer. I will retain the position of Chairman of the Board.
 
     Mr. Allen was formerly Vice President and Chief Operating Officer of CSC
Pinnacle Alliance, a business unit of Computer Sciences Corporation (CSC).
During his nine years at CSC, Mr. Allen helped lead its Defense and Intelligence
business units in the implementation of complex systems integration programs,
technology investment strategies and corporate development. Mr. Allen will lead
the development and implementation of operating strategies that further enhance
the Company's value to its shareholders, clients and employees.
 
     1998 was a record year in revenues and profits for Data Dimensions. The
challenges for 1999 are for the Company to continue its growth and expand its
business focus. These are exciting and difficult challenges, but they are ones
that can be met through excellence and execution. I am extremely happy about the
Company's potential for the end of this century and into the next.
 
     As Chairman of the Board, I will continue to support the development of the
Company as a global Information Technology solutions provider.
 
                                          Sincerely,
 
                                          Larry W. Martin
<PAGE>   3
 
                             DATA DIMENSIONS, INC.
                       411 - 108TH AVENUE NE, SUITE 2100
                           BELLEVUE, WASHINGTON 98004
 
                            ------------------------
 
                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
 
                           TO BE HELD ON MAY 18, 1999
 
                            ------------------------
 
To the Stockholders of Data Dimensions, Inc.:
 
     NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of DATA
DIMENSIONS, INC. (the "Company"), a Delaware corporation, will be held at the
Bellevue Club, 11200 SE 6th Street, Bellevue, Washington 98004 on May 18, 1999
at 10:00 a.m. Pacific Daylight Savings Time. The purposes of the Annual Meeting
will be:
 
     1. To elect one director to serve as the Class III director on the
        Company's Board of Directors for a three-year term;
 
     2. To approve an amendment to the Data Dimensions, Inc. 1997 Stock Option
        Plan to increase the aggregate number of shares of the Company's Common
        Stock that may be issued thereunder from one million (1,000,000) to two
        million, five hundred thousand (2,500,000) shares; and
 
     3. To consider and act upon any other matter which may properly come before
        the meeting or any adjournment thereof.
 
     The Board of Directors has fixed the close of business on March 31, 1999 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the meeting or any adjournment thereof. Only holders of record of
Common Stock of the Company at the close of business on the record date will be
entitled to notice of, and to vote at, the meeting and any adjournment thereof.
 
     All stockholders are cordially invited to attend the Annual Meeting.
Management will present a review of the Company's operations for the year ended
December 31, 1998, as well as its direction for 1999 and beyond. The Company's
Proxy Statement is attached hereto. In addition, financial and other information
concerning the Company is contained in the enclosed Annual Report to
Stockholders for the fiscal year ended December 31, 1998. WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD, WHICH YOU MAY REVOKE AT ANY TIME PRIOR TO ITS USE. PROMPTLY SIGNING
AND RETURNING YOUR PROXY CARD WILL HELP ENSURE THE PRESENCE OF A QUORUM FOR THE
MEETING AND WILL HELP AVOID ADDITIONAL PROXY SOLICITATION EXPENSE. A prepaid,
self-addressed envelope is enclosed for your convenience. Your shares will be
voted at the meeting in accordance with your proxy. If you attend the meeting,
you may revoke your proxy and vote in person.
 
                                          By Order of the Board of Directors,
 
                                          /s/ GORDON A. GARDINER
                                          GORDON A. GARDINER
                                          Executive Vice President,
                                          Chief Financial Officer and Secretary
 
Bellevue, Washington
April 9, 1999
<PAGE>   4
 
                             DATA DIMENSIONS, INC.
                       411 - 108TH AVENUE NE, SUITE 2100
                           BELLEVUE, WASHINGTON 98004
 
                            ------------------------
 
                                PROXY STATEMENT
 
                         ANNUAL MEETING OF STOCKHOLDERS
 
                           TO BE HELD ON MAY 18, 1999
 
                            ------------------------
 
SOLICITATION AND REVOCATION OF PROXIES
 
     This Proxy Statement, the accompanying Annual Report to Stockholders, the
attached Notice of Annual Meeting and the proxy card are being furnished to the
stockholders of Data Dimensions, Inc., a Delaware corporation (the "Company"),
in connection with the solicitation of proxies by the Company's Board of
Directors for use at the Company's 1999 Annual Meeting of Stockholders (the
"Annual Meeting") to be held at the Bellevue Club, 11200 SE 6th Street,
Bellevue, Washington 98004 on May 18, 1999, at 10:00 a.m., Pacific Daylight
Savings Time, and any adjournment thereof. All expenses of the Company
associated with this solicitation will be borne by the Company. The solicitation
of proxies by mail may be followed by personal solicitation of certain
stockholders by officers, directors or regular employees of the Company, without
additional remuneration, in person or by telephone or facsimile transmission.
The Company will also request brokerage firms, banks, nominees, custodians and
fiduciaries to forward proxy materials to the beneficial owners of shares of
Common Stock as of the record date and will reimburse such persons for the cost
of forwarding the proxy materials in accordance with customary practice. The
Company has retained ChaseMellon Shareholder Services ("ChaseMellon") to aid in
the solicitation of proxies and has agreed to pay ChaseMellon approximately
$7,500 for such services.
 
     The Board of Directors has designated the two persons named on the enclosed
proxy card, Peter A. Allen and Gordon A. Gardiner, to serve as proxies in
connection with the Annual Meeting. All properly executed proxy cards will be
voted (except to the extent that authority to vote has been withheld) and where
a choice has been specified by the stockholder as provided in the proxy card, it
will be voted in accordance with the specification so made. PROXY CARDS
SUBMITTED WITHOUT SPECIFICATION WILL BE VOTED FOR PROPOSAL NO. 1 TO ELECT THE
DIRECTOR NOMINEE AS A CLASS III DIRECTOR AND FOR PROPOSAL NO. 2 TO APPROVE THE
PROPOSED AMENDMENT TO THE COMPANY'S 1997 STOCK OPTION PLAN.
 
     A stockholder may revoke a proxy prior to its execution by giving written
notice to the Secretary of the Company, by submission of another proxy bearing a
later date, or by voting in person at the Annual Meeting. Such notice or later
proxy will not affect a vote on any matter taken prior to the receipt thereof by
the Company.
 
     These proxy materials and the accompanying Annual Report to Stockholders
are being mailed on or about April 9, 1999 to holders of record of the Company's
Common Stock as of March 31, 1999. The principal executive office and mailing
address of the Company is 411-108th Avenue NE, Suite 2100, Bellevue, Washington
98004.
 
VOTING AT THE MEETING
 
     In accordance with the Company's Second Amended and Restated Bylaws, the
stock transfer records were compiled on March 31, 1999, the record date set by
the Board of Directors for determining the stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournment thereof. On March 31,
1999, there were 13,641,463 shares of the Company's common stock, par value
$.001 per share ("Common Stock"), outstanding and entitled to vote. These shares
of Common Stock constitute the only class of securities entitled to notice of,
and to vote at, the Annual Meeting.
<PAGE>   5
 
     The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Meeting. With respect to Proposal No. 1 (Election of the Director Nominee),
brokers and other "street name" nominees, holding shares for the account of the
beneficial owner of such shares, generally may vote the shares in their own
discretion. In contrast, brokers and nominees generally do not have authority to
vote for non-routine matters without securing voting instructions with respect
to such matters from the beneficial owners of such stock. A broker or nominee
who does not receive instructions from the beneficial owner with respect to such
non-routine matters, nevertheless may vote the proxy with respect to a routine
matter, such as the election of directors. Such proxies are considered to be
voted only with respect to the routine matter, but not with respect to the
non-routine matter (commonly referred to as "Broker Non-Votes"). For purposes of
determining the existence of a quorum, abstentions from voting identified as
such on the proxy card and Broker Non-Votes are treated as present at the Annual
Meeting. With respect to tabulating the vote necessary for shareholder action on
each of the Proposals at the Annual Meeting, abstentions and Broker Non-Votes
will have no effect on the votes. If a quorum is present at the Annual Meeting,
the nominee for the director position who receives the greatest number of votes
cast by the shares of Common Stock present in person or represented by proxy at
the Annual Meeting and entitled to vote shall be elected. Approval of the
proposed amendment to the Company's 1997 Stock Option Plan will require a
majority of votes cast by such shareholders to be voted in favor of Proposal No.
2.
 
                                PROPOSAL NO. 1:
 
                          ELECTION OF DIRECTOR NOMINEE
 
     In accordance with the Company's Certificate of Incorporation and Second
Amended and Restated Bylaws, the Board of Directors may consist of no less than
three and no more than 15 directors, the specific number to be determined by
resolution adopted by the Board of Directors. The size of the Board is currently
set at five persons, and the Board of Directors is divided into three classes
with staggered three-year terms. Class I and Class II each consists of two
directors, and Class III consists of one director, Mr. Thomas W. Fife, who will
be nominated for election at the Annual Meeting.
 
     The Class I directors, Peter A. Allen and Lucie J. Fjeldstad, have been
elected to a term that expires in the year 2000. The Class II directors, Larry
W. Martin and Robert T. Knight, have been elected to a term that expires in the
year 2001.
 
NOMINEE FOR DIRECTOR
 
     Certain information concerning Mr. Thomas W. Fife is set forth below. THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF MR.
FIFE. Shares represented by proxies will be voted for the election of the person
named below unless authority has been withheld in the proxy. The nominee has
consented to serve as a director and the Board of Directors has no reason to
believe that the nominee will be unable to so serve. In the event of the death
or unavailability of the nominee, the proxy holders will have discretionary
authority under the proxy to vote for a suitable substitute nominee as the Board
of Directors may recommend. Proxies may not be voted for more than one nominee.
 
     Thomas W. Fife has been a Director of the Company since June 1995. Mr. Fife
also is the co-founder and former Chief Executive Officer and Chairman of the
Board of VoiceCom Systems, Inc., a provider of enhanced voice-processing
services. Mr. Fife was Chief Executive Officer of VoiceCom Systems, Inc. from
1984 through 1993, was re-elected Chief Executive Officer in June 1996, and
served as Chairman of its Board of Directors from June 1993 until acquisition of
the company by Premiere Technologies, Inc. in September 1997.
 
                                        2
<PAGE>   6
 
                                PROPOSAL NO. 2:
 
        APPROVAL OF THE PROPOSED AMENDMENT TO THE 1997 STOCK OPTION PLAN
 
     The Board of Directors of the Company proposes that the shareholders
approve an amendment to the 1997 Stock Option Plan (the "1997 Plan") to increase
by one million, five hundred thousand (1,500,000) the number of shares reserved
for issuance thereunder. The 1997 Plan was first adopted and approved by the
Company's Board of Directors on March 25, 1997 and subsequently approved by the
Company's stockholders on May 20, 1997. The 1997 Plan originally reserved one
million (1,000,000) shares of the Company's Common Stock for issuance
thereunder. Of these, 128,650 shares remained available for issuance as of the
Company's latest fiscal year-end. The 1997 Plan is the successor to the
Company's 1988 Incentive Stock Option Plan and the 1988 Non-Statutory Stock
Option Plan, both of which terminated on March 14, 1998. The purpose of the 1997
Plan is to enhance the Company's ability to attract and retain employees,
officers, directors and consultants by affording them the opportunity to own
stock in the Company. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF
THE PROPOSED AMENDMENT TO THE 1997 PLAN.
 
                                        3
<PAGE>   7
 
                         SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT
 
     The following table sets forth, as of March 5, 1999, certain information
furnished to the Company with respect to ownership of the Company's Common Stock
of (i) each director and the director nominee, (ii) the current and former Chief
Executive Officer, (iii) the "Named Executive Officers" (as defined herein under
"Executive Compensation") other than the current and former Chief Executive
Officer, and (iv) all executive officers and directors as a group. As of March
5, 1999 the Company knows of no person, entity or group that beneficially owns
5% or more of the Company's Common Stock except as listed below.
 
<TABLE>
<CAPTION>
                                                                    COMMON STOCK
                                                              -------------------------
                                                               AMOUNT AND
                                                               NATURE OF
                                                               BENEFICIAL    PERCENT OF
                                                              OWNERSHIP(1)    CLASS(2)
                                                              ------------   ----------
<S>                                                           <C>            <C>
            NAME AND ADDRESS OF BENEFICIAL OWNER
DIRECTORS
Larry W. Martin(3)..........................................   1,986,521       14.56%
411-108th Avenue NE, Suite 2100
Bellevue, Washington 98004
Peter A. Allen..............................................       5,000           *
Thomas W. Fife(4)...........................................       8,742           *
Lucie J. Fjeldstad(5).......................................       9,000           *
Robert T. Knight(6).........................................      18,150           *
 
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Gordon A. Gardiner(7).......................................      41,300           *
Thomas R. Clark(8)..........................................      38,500           *
Joseph Menchaca(9)..........................................      37,500           *
Eugene M. Stabile...........................................     539,892        3.96%
 
ALL DIRECTORS, EXECUTIVE OFFICERS AND THE DIRECTOR NOMINEE,
AS A GROUP (12 persons)(10).................................   2,690,855       19.54%
</TABLE>
 
---------------
 *   Less than one percent
 
 (1) According to the rules adopted by the Securities and Exchange Commission, a
     person is the "beneficial owner" of securities if (s)he has or shares the
     power to vote them or to direct their investment or has the right to
     acquire beneficial ownership of such securities within 60 days through the
     exercise of an option, warrant or otherwise. Except as otherwise indicated,
     the stockholders identified in this table have sole voting and investment
     power with regard to the shares shown as beneficially owned by them. Shares
     of Common Stock subject to options or warrants exercisable on or before May
     4, 1999 ("Vested Options") are deemed outstanding for computing the
     percentage ownership of the person holding such options or warrants, but
     are not deemed outstanding for computing the percentage of any other
     person.
 
 (2) Based on 13,641,463 shares of common stock issued and outstanding as of
     March 5, 1999.
 
 (3) Includes 9,000 shares held by Mr. Martin's spouse.
 
 (4) Includes 750 vested options.
 
 (5) Includes 4,000 Vested Options.
 
 (6) Includes 6,150 Vested Options.
 
 (7) Includes 37,500 Vested Options.
 
 (8) Includes 37,500 Vested Options; Mr. Clark ceased to be an employee of the
     Company effective March 19, 1999.
 
 (9) Includes 37,500 Vested Options; Mr. Menchaca ceased to be an employee of
     the Company effective April 9, 1999.
 
(10) Includes 129,650 Vested Options, including those held by Messrs. Clark and
     Menchaca.
 
                                        4
<PAGE>   8
 
                        DIRECTORS AND EXECUTIVE OFFICERS
 
     The following table identifies the current directors and executive officers
of the Company, the positions that they hold, and the year in which they began
serving in their respective capacities. Officers of the Company are elected by
the Board of Directors immediately following each Annual Meeting of the
Company's stockholders to hold office until their successors are elected and
qualified.
 
<TABLE>
<CAPTION>
                                                                                    POSITION HELD
       NAME         AGE               CURRENT POSITION(S) WITH COMPANY                  SINCE
       ----         ---               --------------------------------              -------------
<S>                 <C>   <C>                                                       <C>
Larry W. Martin     62    Chairman of the Board                                         1996
                          Director (Class II, expires 2001)                             1990
Thomas W. Fife      73    Director (Class III, expires 1999)                            1995
Lucie J. Fjeldstad  54    Director (Class I, expires 2000)                              1997
Robert T. Knight    61    Director (Class II, expires 2001)                             1996
Peter A. Allen      38    President, Chief Executive Officer, and Director              1998
                          (Class I, expires 2000)
Gordon A. Gardiner  42    Executive Vice President, Finance & Administration,           1997
                          Chief Financial Officer, Secretary
John W. Cramer      54    Executive Vice President, International Services              1998
Timothy P. Hicks    44    Executive Vice President, Marketing                           1998
Eugene M. Stabile   58    President, Data Dimensions Information Services, Inc.         1997
Diana K. Wong       47    Executive Vice President, Human Resources                     1998
</TABLE>
 
-------------------------
For information on the business background of Mr. Fife, see "Nominee For
Director" above.
 
     Larry W. Martin has served as Chief Executive Officer and President of the
Company since 1990 and as Chairman of the Board since 1996. Prior to joining the
Company, Mr. Martin was Vice President of Marketing for Manager Software
Products, Inc. from 1989 and, before that, served as President and Chief
Executive Officer of MicroMain Software, Inc. from 1987 to 1989.
 
     Lucie J. Fjeldstad was elected to the Board of Directors in September 1997.
Ms. Fjeldstad is President of Data Channel, a software development company, a
position she has held since October 1998. Formerly, from August 1997 until
October 1998 and from May 1993 until January 1995, Ms. Fjeldstad served as
President of Fjeldstad International, a management-consulting firm. Prior to
starting a consulting firm, Ms. Fjeldstad was a Corporate Vice President at IBM
Corporation. From January 1995 until August 1997, she was President, Video
Division, of Tektronix Incorporated. Ms. Fjeldstad also serves as a Director of
Entergy Corporation and is a member of the Board of Regents of Santa Clara
University.
 
     Robert T. Knight was elected as a director in November 1996. Mr. Knight is
President of Technology Venture Services, a consulting firm located in Santa
Barbara, California. From January 1991 until February 1995, Mr. Knight was
Chairman and Chief Executive Officer of Digital Sound Corporation, a
telecommunications software company located in Carpinteria, California. Prior to
joining Digital Sound, he was a Corporate Vice President at Computer Sciences
Corporation and Senior Vice President and corporate officer of Xerox
Corporation. Mr. Knight is a member of the Board of Directors of PictureTel
Corporation. In addition to these corporate boards, he serves as a trustee of
the University of California at Santa Barbara Foundation, and is Chairman of its
Engineering Advisory Committee.
 
     Peter A. Allen was elected Chief Executive Officer, President and Director
of the Company in December 1998. Prior to joining the Company, Mr. Allen was
Vice President and Chief Operating Officer of CSC Pinnacle Alliance, a business
unit of Computer Sciences Corporation. Since 1990, Mr. Allen also served as Vice
President, Consulting, Outsourcing, and Systems Integration with Computer
Sciences Corporation.
 
     Gordon A. Gardiner has been an officer of the Company since December 1997.
From January 1997 to November 1997, Mr. Gardiner was Chief Financial Officer of
Intermind Corporation, a Seattle-based company involved in the development of
Internet software technology. Mr. Gardiner also served as President of Intermind
Corporation from September 1997 to November 1997. From January 1996 to January
1997,
 
                                        5
<PAGE>   9
 
Mr. Gardiner served as Vice President of Burrill & Craves, a private merchant
bank headquartered in San Francisco. From 1980 to 1995, Mr. Gardiner was
employed in a variety of positions with J.P. Morgan & Company.
 
     John W. Cramer joined the Company in August 1997 to head the Company's
international services division. On March 30, 1998, Mr. Cramer was elected
Executive Vice President, International Services. From 1995 until joining the
Company, Mr. Cramer was employed by AT&T Tridom as Managing Director, Europe,
Middle East, Africa and CIS. During 1993 and 1994, Mr. Cramer was employed by
OMS, Inc. as Vice President, Worldwide Marketing and U.S. & Latin American
Sales.
 
     Timothy P. Hicks joined the Company in September 1998 as Executive Vice
President, Marketing. Prior to joining the Company, Mr. Hicks was a principal
with Pacific Asia Research from 1995 to 1998. From 1992 until 1995, Mr. Hicks
was a Director of Strategic and Business Planning for NCR Company.
 
     Eugene M. Stabile is the President of Data Dimensions Information Services,
Inc., a wholly owned subsidiary of the Company, formerly named Pyramid
Information Services, Inc. ("Pyramid"). The acquisition of Pyramid by the
Company was completed in November 1997. Mr. Stabile was the co-founder and sole
shareholder of Pyramid, a Los Angeles-based company providing computer
processing and management services. Mr. Stabile served as Vice President of
Pyramid from 1981 to 1994 and as President from 1994 until completion of the
acquisition.
 
     Diana K. Wong joined the Company as Executive Vice President of Human
Resources in November 1998. Since 1993, Ms. Wong served as Vice President of
Human Resources for AT&T Wireless Corporation (formerly McCaw Cellular, Inc.).
 
     Officers serve at the discretion of the Company's Board of Directors. No
family relationship exists among any directors or executive officers of the
Company or the nominee for election to the Company's Board of Directors.
 
                                        6
<PAGE>   10
 
                             EXECUTIVE COMPENSATION
 
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
 
     The following table provides certain summary information concerning
compensation awarded to, earned by or paid to the Company's current and former
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company determined as of the end of the last fiscal
year, (hereafter referred to as the "Named Executive Officers") for the fiscal
years ended December 31, 1998, 1997 and 1996.
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                    LONG-TERM
                                                                                   COMPENSATION
                                                                                   ------------
                                               ANNUAL COMPENSATION                    AWARDS
                                  ----------------------------------------------    SECURITIES
                                                                  OTHER ANNUAL      UNDERLYING       ALL OTHER
  NAME AND PRINCIPAL POSITION     YEAR   SALARY($)   BONUS($)   COMPENSATION($)     OPTIONS(#)    COMPENSATION($)
--------------------------------  ----   ---------   --------   ----------------   ------------   ----------------
<S>                               <C>    <C>         <C>        <C>                <C>            <C>
Larry W. Martin                   1998   $297,187    $118,584       $     0                0                0
  Chairman of the Board(1)        1997    200,000     400,000        12,281                0                0
                                  1996    406,057     207,000         4,976                0                0
Peter A. Allen                    1998     18,846      92,000             0          400,000                0
  Chief Executive Officer,        1997         --          --            --               --               --
  President(2)                    1996         --          --            --               --               --
Gordon A. Gardiner                1998    200,000      28,125             0                0                0
  Executive Vice President,       1997     17,692           0             0          150,000                0
  Chief Financial Officer(3)      1996         --          --            --               --               --
Joseph Menchaca                   1998    164,423      37,188             0          150,000                0
  Executive Vice President,       1997         --          --            --               --               --
  Knowledge Consulting(4)         1996         --          --            --               --               --
Thomas R. Clark                   1998    190,000           0             0                0           $1,250
  Executive Vice President,       1997     16,808           0             0          150,000                0
  Knowledge Transfer(5)           1996         --          --            --               --               --
Eugene M. Stabile                 1998    160,000           0             0                0                0
  President, Data Dimensions      1997     22,770           0             0                0                0
  Information Services, Inc.(6)   1996         --          --            --               --               --
</TABLE>
 
---------------
(1) Mr. Martin served as Chairman of the Board, Chief Executive Officer and
    President of the Company until December 1998, at which time he relinquished
    the offices of President and Chief Executive Officer. The amounts reflected
    in the Summary Compensation Table for Mr. Martin reflect sums paid to him in
    1998 for services rendered in all capacities. Effective March 26, 1998, Mr.
    Martin's base compensation as Chief Executive Officer and President was set
    by the Board at $300,000 per year.
 
(2) Mr. Allen was elected Chief Executive Officer and President of the Company
    effective December 7, 1998. His annualized salary is $350,000. Pursuant to
    his employment agreement, Mr. Allen received a one-time signing bonus of
    $92,000, payable in 1999.
 
(3) Mr. Gardiner's employment with the Company commenced in December 1997. His
    annualized salary is $200,000.
 
(4) Mr. Menchaca's employment with the Company commenced in March 1998 and
    terminated April 9, 1999. His annualized salary was $225,000.
 
(5) Mr. Clark's employment with the Company commenced in December 1997 and
    terminated in March 1999. His annualized salary was $190,000. Compensation
    reported under "All Other Compensation" for 1998 represents a one-time
    referral bonus awarded to Mr. Clark.
 
(6) Mr. Stabile's employment with the Company commenced in November 1997 when
    the Company acquired as a wholly owned subsidiary Data Dimensions
    Information Services, Inc. of which Mr. Stabile serves as President. Mr.
    Stabile's annualized compensation is $160,000.
 
                                        7
<PAGE>   11
 
     The following table sets forth all individual grants of stock options made
by the Company during the fiscal year ended December 31, 1998 to each of the
Named Executive Officers.
 
                       OPTION GRANTS IN LAST FISCAL YEAR
 
<TABLE>
<CAPTION>
                                                                                                     POTENTIAL REALIZABLE
                                                                                                       VALUE AT ASSUMED
                                                       INDIVIDUAL GRANTS                             ANNUAL RATES OF STOCK
                              -------------------------------------------------------------------   PRICE APPRECIATION FOR
                                                     PERCENT OF TOTAL                                  FIVE YEAR OPTION
                              NUMBER OF SECURITIES    OPTIONS GRANTED    EXERCISE OR                        TERM(3)
                               UNDERLYING OPTIONS      TO EMPLOYEES      BASE PRICE    EXPIRATION   -----------------------
            NAME                   GRANTED(1)        IN FISCAL YEAR(2)    ($/SHARE)       DATE         5%           10%
            ----              --------------------   -----------------   -----------   ----------   ---------   -----------
<S>                           <C>                    <C>                 <C>           <C>          <C>         <C>
Larry W. Martin.............             --                   --                --            --          --            --
Peter A. Allen(4)...........        137,500                13.98%          $ 13.25      12/07/04    $619,612    $1,405,688
                                     87,500                 8.90%          $ 13.25      12/07/05    $471,982    $1,099,919
                                     87,500                 8.90%          $ 13.25      12/07/06    $553,550    $1,325,848
                                     87,500                 8.90%          $ 13.25      12/07/07    $639,196    $1,574,371
Gordon A. Gardiner..........             --                   --                --            --          --            --
Joseph Menchaca.............         37,500                 3.81%          $13.125       3/30/04    $167,391    $  379,753
                                     37,500                 3.81%          $13.125       3/30/05    $200,370    $  466,947
                                     37,500                 3.81%          $13.125       3/30/06    $234,998    $  562,860
                                     37,500                 3.81%          $13.125       3/30/07    $271,357    $  668,365
Thomas R. Clark.............             --                   --                --            --          --            --
Eugene M. Stabile...........             --                   --                --            --          --            --
</TABLE>
 
---------------
(1) Generally, options granted pursuant to the Company's 1997 Stock Option Plan
    vest in equal installments over the four-year period following the option
    grant. Upon the occurrence of certain "Corporate Transactions" (as defined
    in the 1997 Plan Summary contained in this Proxy Statement), all options
    granted under the 1997 Plan will become immediately exercisable without
    regard to any contingent vesting provision.
 
(2) Based on stock options representing an aggregate of 990,065 shares of Common
    Stock granted to employees during the fiscal year ended December 31, 1998 of
    which 400,000 were granted outside of the Company's 1997 Stock Option Plan
    as a one-time grant to Mr. Allen incident to his employment with the
    Company.
 
(3) These assumed rates of appreciation are provided in order to comply with the
    requirements of the Securities and Exchange Commission and do not represent
    the Company's expectation as to the actual rate of appreciation of the
    Common Stock. These gains are based on assumed rates of annual compound
    stock price appreciation of 5% and 10% from the date the options were
    granted over the full option term. The actual value of the options will
    depend on the performance of the Common Stock and may be greater or less
    than the amounts shown.
 
(4) Mr. Allen was granted an option to acquire 350,000 shares of the Company's
    Common Stock which vests in equal installments over the four-year period
    following the option grant. In addition, Mr. Allen received an option to
    acquire 50,000 shares of the Company's Common Stock that fully vests upon
    the first anniversary of the option grant. Notwithstanding such contingent
    vesting provisions, Mr. Allen's options are subject to the same acceleration
    provisions upon the occurrence of certain "Corporate Transactions" (as
    defined in the 1997 Plan Summary contained in this Proxy Statement) as
    option grants under the 1997 Plan.
 
                                        8
<PAGE>   12
 
     The following table sets forth information, on an aggregated basis,
concerning each exercise of stock options during the fiscal year ended December
31, 1998 by each of the Named Executive Officers and the fiscal year-end value
of unexercised options.
 
   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
                                     VALUES
 
<TABLE>
<CAPTION>
                                                                    NUMBER OF
                                                                   SECURITIES                   VALUE OF
                                                                   UNDERLYING                  UNEXERCISED
                                                                   UNEXERCISED                IN-THE-MONEY
                                                 VALUE             OPTIONS AT                  OPTIONS AT
                             SHARES ACQUIRED    REALIZED           FY-END (#)                 FY-END ($)(2)
           NAME              ON EXERCISE (#)     ($)(1)     EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE
           ----              ---------------   ----------   -------------------------   -------------------------
<S>                          <C>               <C>          <C>                         <C>
Larry W. Martin............    260,000         $3,653,814                  0 / 0                 $0 / $0
Peter A. Allen.............      --                --                0 / 400,000                 $0 / $0
Gordon A. Gardiner.........      --                --           37,500 / 112,500                 $0 / $0
Thomas R. Clark............      --                --           37,500 / 112,500                 $0 / $0
Joseph Menchaca............      --                --           37,500 / 112,500                 $0 / $0
Eugene M. Stabile..........      --                --                      0 / 0                 $0 / $0
</TABLE>
 
---------------
(1) Market value of the underlying securities at exercise date minus exercise
    price of the options.
 
(2) The closing price of the Company's stock as of its fiscal year-end was
    $8.563. The exercise price of all options held by the Named Executive
    Officers set forth in the table exceeds the market value of the underlying
    shares.
 
               EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
                       AND CHANGE OF CONTROL ARRANGEMENTS
 
     As an incentive to Mr. Martin to remain an employee of the Company
throughout 1999 and to remain available to consult with and advise the Chief
Executive Officer and other members of Management, the Board has approved a
compensation package pursuant to which Mr. Martin received in January 1999 a
bonus of $150,000, subject to repayment if Mr. Martin resigns as an employee
prior to December 31, 1999. In addition, Mr. Martin will receive $350,000
compensation payable according to the Company's normal payroll schedule in
fiscal year 1999.
 
     In connection with Mr. Allen's employment in December 1998 as Chief
Executive Officer and President, the Company entered into an agreement with Mr.
Allen pursuant to which he is entitled to base salary and certain bonuses, as
reported in the Executive Compensation Table. In addition, pursuant to the terms
of the Agreement, Mr. Allen was granted options as disclosed in the Option Grant
Table. Under the terms of his agreement, Mr. Allen is entitled to use a leased
automobile for the duration of his employment. The agreement also provides that,
if Mr. Allen is terminated without cause, he is entitled to twelve months
severance pay.
 
     In connection with Mr. Gardiner's employment in December 1997 as Chief
Financial Officer and Executive Vice President, the Company entered into an
agreement with Mr. Gardiner under which he is entitled to severance pay equal to
six months salary in the event the Company terminates his employment other than
for cause. The agreement also provides that Mr. Gardiner's stock options will
remain exercisable for six months in the event of such termination other than
for cause. In the event of a change of control of the Company, Mr. Gardiner's
salary and benefits will continue for six months and his stock options will
fully vest.
 
     In connection with Mr. Clark's employment in December 1997 as Executive
Vice President, Knowledge Transfer, the Company entered into an agreement with
Mr. Clark under which he was entitled to severance pay equal to six months
salary in the event the Company terminated his employment other than for cause.
The agreement also provided that Mr. Clark's stock options would fully vest and
remain exercisable for six months in the event of such termination other than
for cause. Mr. Clark ceased to be an employee of the Company on March 19, 1999.
 
                                        9
<PAGE>   13
 
     In connection with Mr. Menchaca's employment in March 1998 as Executive
Vice President, Knowledge Consulting, the Company entered into an agreement with
Mr. Menchaca pursuant to which he was entitled to receive a base salary and
bonuses based on the achievement of annual performance targets. Under this
agreement, Mr. Menchaca was also granted options as disclosed in the Option
Grant Table. Mr. Menchaca ceased to be an employee of the Company on April 9,
1999.
 
     In connection with the acquisition of Pyramid Information Services, Inc. in
November 1997, Data Dimensions Information Services, Inc. entered into an
Employment and Non-Competition Agreement with Mr. Stabile under which he is
entitled to severance benefits available to similarly situated employees in the
event his employment is terminated.
 
               MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
 
     The Board of Directors held ten meetings and took action pursuant to three
unanimous written consents during the year-ended December 31, 1998.
 
     During 1998, the members of the Compensation Committee were Mr. Fife, Ms.
Fjeldstad and Mr. Knight. The Compensation Committee is responsible for setting
the compensation of the Chief Executive Officer and Chairman of the Board and
consults with the Chief Executive Officer regarding the compensation of other
corporate officers. The Compensation Committee, which also serves as the
Administrative Committee for the Company's 1988 and 1997 Stock Option Plans,
held four meetings and took action pursuant to five unanimous written consents
during 1998. During 1998 the members of the Audit Committee were Ms. Fjeldstad,
Mr. Fife and Mr. Knight. The Audit Committee met once during 1998. The Board of
Directors does not have a nominating committee. All directors attended all
meetings of the Board and the respective Committees on which they serve.
 
                             DIRECTOR COMPENSATION
 
     The Company pays no additional remuneration to employees of the Company who
serve as directors. All directors are entitled to reimbursement for expenses
incurred in traveling to and from meetings of the Company's Board of Directors.
Effective May 20, 1997, the Board of Directors adopted the following
compensation plan for non-employee directors ("Eligible Directors"): (a) upon
first joining the Board, the Eligible Director is granted a stock option
exercisable for 10,000 shares of the Company's Common Stock at an exercise price
equal to the fair market value of the stock on the date of grant; (b) on each
anniversary of an Eligible Director's election to the Board, the Director is
granted a stock option exercisable for 3,000 shares of the Company's Common
Stock at an exercise price equal to the fair market value of the stock on the
date of grant; such options are exercisable as to twenty-five percent (25%) of
the shares one year after the date of grant and as to an additional twenty-five
percent (25%) on each of the second, third and fourth anniversaries of the date
of grant; such options are exercisable until the earlier of ten (10) years from
the date of grant or ninety (90) days after the date on which the grantee is no
longer serving as a Director of the Company; (c) Eligible Directors receive an
annual cash retainer in the amount of $15,000 for service as a Director, and
$1,000 for each board meeting and committee meeting attended for which an agenda
has been prepared and which has a duration of one hour or more.
 
                                       10
<PAGE>   14
 
  REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
                                 COMPENSATION*
 
     The Board of Directors of the Company (the "Board") has delegated to the
Compensation Committee of the Board (the "Committee") the authority to establish
and administer the Company's compensation programs. The Compensation Committee
is comprised of three non-employee directors: Thomas W. Fife, Robert T. Knight
and Lucie J. Fjeldstad. The Committee is responsible for: 1) determining the
most effective overall executive compensation strategy based upon the business
needs of the Company and consistent with shareholders' interests; 2)
administering the Company's executive compensation programs and policies; 3)
monitoring corporate performance and its relationship to compensation of
executive officers; and 4) reviewing and making appropriate changes to executive
officers' compensation as recommended by the Company's Chief Executive Officer.
 
COMPENSATION PHILOSOPHY
 
     The policies of the Committee with respect to executive officers, including
the Chief Executive Officer, are to enable it to attract and retain talented
executives and to reward them appropriately. The Committee attempts to determine
the total level of compensation, as well as the appropriate mix of base salary,
annual incentives and long-term incentives. In determining compensation,
consideration is given both to overall Company performance and to individual
performance, taking into account the contributions made by the executive toward
improving Company performance. Consideration is also given to the executive's
position, location, and level of responsibility in the structure of the Company
and the job performance of the executive in planning, providing direction for,
and implementing the Company's strategy. There is no singular objective formula
by which compensation is determined and the decisions are ultimately largely
subjective.
 
     These policies are implemented using a mix of the following key elements:
1) the Company pays base salaries that are generally competitive with other
leading information technology ("IT") services companies with which the Company
competes for talent. To ensure that its salaries are sufficient to attract and
retain highly qualified executives and other key employees, the Company
regularly compares its salaries with those of its competitors and sets salary
parameters based on this review; 2) the Company pays cash bonuses based on the
achievement of specific operating goals and high levels of performance; and 3)
the Company provides significant equity-based incentives pursuant to the
Company's 1997 Stock Option Plan (the "1997 Plan") to ensure that the Company's
executive officers and key employees are motivated to achieve the Company's
long-term goals. Stock incentive awards under the 1997 Plan produce value to
executives only if the price of the Company's stock appreciates, thereby
directly aligning the interests of executives with those of shareholders.
 
CHIEF EXECUTIVE OFFICER COMPENSATION
 
     The same procedures, as described above, that are used in reviewing and
approving executive officers' compensation are also applied in establishing the
base salary, bonus and equity incentive awards for the Company's Chief Executive
Officer.
 
     Larry W. Martin served as President, Chief Executive Officer and Chairman
of the Company until December 1998, at which time Peter A. Allen was named as
President and Chief Executive Officer. Mr. Martin remains Chairman.
 
     Mr. Martin received a base salary of $300,000 during 1998 with an
opportunity to earn $300,000 of annual incentive bonus. Payments under the
annual incentive bonus plan amounted to $118,584 during 1998.
 
---------------
 
* The report of the Compensation Committee shall not be deemed incorporated by
  reference by any general statement incorporating by reference this Proxy
  Statement into any filing under either the Securities Act of 1933, as amended,
  or the Exchange Act of 1934 (together, the "Acts"), except to the extent that
  the Company specifically incorporates such report by reference; and further,
  such report shall not otherwise be deemed filed under the Acts.
                                       11
<PAGE>   15
 
     Mr. Allen joined the Company on December 7, 1998 under terms of an
employment agreement that provides an annual base salary of $350,000. In 1999,
Mr. Allen is entitled to an annual incentive bonus up to a maximum of 100% of
his annual base salary based on achieving certain operating goals. In 1998, no
payments were made to Mr. Allen under the annual incentive bonus. Under the
Company's executive compensation program, total compensation mix for senior
executives emphasizes long-term rewards in the form of stock options. As part of
Mr. Allen's employment with the Company, the Committee approved the grant to Mr.
Allen of options to purchase 350,000 shares of Common Stock at an exercise price
of $13.25 per share. These options vest over four years. In addition, Mr. Allen
received a one-time option grant to purchase 50,000 shares of Common Stock at an
exercise price of $13.25 per share that vests on the first anniversary of the
grant. In determining the grant to Mr. Allen, the Committee reviewed the stock
option grants to chief executive officers of other comparable IT services
companies in connection with their employment services.
 
                                          Respectfully submitted,
 
                                          Thomas W. Fife
                                          Lucie J. Fjeldstad
                                          Robert T. Knight
 
                                       12
<PAGE>   16
 
                               PERFORMANCE GRAPH
 
     The following graph compares the performance of the Company's Common Stock
for the periods indicated with the performance of the Russell 2000 Index and the
NASDAQ Computer Programming, Data Processing and Other Computer Related Services
Index (SIC Codes 7370-7379). The comparison assumes $100 was invested on
December 31, 1993 in the Company's Common Stock and in each of the foregoing
indices and the reinvestment of any dividends.
 
                COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
 
<TABLE>
<CAPTION>
                                                                                                             NASDAQ COMPUTER
                                                     DATA DIMENSIONS              RUSSELL 2000                   RELATED
                                                     ---------------              ------------               ---------------
<S>                                             <C>                         <C>                         <C>
'1993'                                                    100.00                     100.00                      100.00
'1994'                                                    480.65                      98.18                      123.57
'1995'                                                   1250.00                     126.10                      186.91
'1996'                                                   7634.41                     146.90                      233.49
'1997'                                                  11129.00                     179.75                      284.81
'1998'                                                   5524.19                     175.17                      524.36
</TABLE>
 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     During 1998, Mr. Martin's son, who is employed by the Company in a sales
management position, earned salary and commissions in the amount of $88,027.
 
            SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
     Section 16(a) of the 1934 Act requires the Company's directors and
executive officers and persons who own more than ten percent of the outstanding
shares of the Company's Common Stock ("ten percent stockholders"), to file with
the Securities and Exchange Commission initial reports of beneficial ownership
and reports of changes in beneficial ownership of shares of Common Stock and
other equity securities of the Company. To the Company's knowledge, based solely
on its review of the copies of such reports furnished to the Company or
otherwise in its files and on written representations from its directors,
executive officers and ten percent shareholders that no other reports were
required, during the fiscal year ended December 31, 1998, the Company's
officers, directors and ten percent stockholders complied with all applicable
Section 16(a) filing requirements, except as follows: (1) due to clerical error,
Mr. Gordon A. Gardiner and Mr. Thomas R. Clark each filed one Form 4 late, even
though such filing was timely prepared and delivered to the Company by the
respective officer; (2) Ms. Lucie J. Fjeldstad reported an open market
acquisition at year end on her annual Form 5 filing instead of concurrently at
the time of the purchase; (3) the Company filed one late Form 4 on behalf of Mr.
Fife reporting the exercise of certain options, even though Mr. Fife timely
notified the Company of his intent to exercise such options. All late reports
have been currently filed.
 
                                       13
<PAGE>   17
 
                       SUMMARY OF 1997 STOCK OPTION PLAN
 
     The following description of the 1997 Stock Option Plan (the "1997 Plan")
does not purport to be complete and is qualified in its entirety by reference to
the 1997 Plan, a copy of which has been filed as an exhibit to the Company's
1996 Annual Report on Form 10-KSB, as filed with the Securities and Exchange
Commission on March 27, 1997. A copy of the 1997 Plan may be obtained by sending
a written request to the Company's Investor Relations Department at the address
shown on the last page of this Proxy Statement.
 
     GENERAL. The principal purposes of the 1997 Plan are to secure for the
Company the advantages of the incentive inherent in stock ownership on the part
of employees, officers, directors, and consultants responsible for the continued
success of the Company and to create in such individuals a proprietary interest
in, and a greater concern for, the welfare of the Company through the grant of
options to acquire shares of the common stock of the Company. The 1997 Plan is
intended to benefit stockholders by enabling the Company to attract and retain
personnel of the highest caliber by offering to them an opportunity to share in
any increase in the value of the common stock to which such personnel have
contributed.
 
     STOCK SUBJECT TO THE PLAN. Subject to adjustment from time to time as
provided in the Plan, up to one million (1,000,000) shares of the Company's
Common Stock are currently authorized for issuance pursuant to option grants
under the Plan, of which 128,650 shares remain available for future option
grants as of the Company's latest fiscal year-end. If the proposed amendment is
approved by the stockholders, the number of shares of Common Stock available for
issuance under the Plan will be increased by one million five hundred thousand
(1,500,000) shares for a total aggregate of two million five hundred thousand
(2,500,000) shares. Shares issued pursuant to the Plan will be drawn from
authorized but unissued shares.
 
     Subject to adjustment from time to time as provided in the Plan, not more
than 100,000 shares of Company Common Stock may be made subject to grants under
the Plan to any one individual in the aggregate in any one year, except that the
Company may make additional one-time grants of up to 50,000 shares to any newly
hired individual, such limitation to be applied consistently with the
requirements of, and only to the extent required for compliance with, certain
provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code").
 
     Shares of Company Common Stock that cease to be subject to an option award,
including, without limitation, in connection with the cancellation of an option
and the grant of a replacement option, will be available for issuance in
connection with future grants of options under the Plan.
 
     ELIGIBILITY TO RECEIVE OPTIONS. Awards of options may be granted under the
1997 Plan to those officers, directors and employees of the Company and its
subsidiaries as the Plan Administrator from time to time selects. Awards of
non-qualified stock options may also be made to consultants who provide services
to the Company and its subsidiaries.
 
     TERMS AND CONDITIONS OF STOCK OPTION GRANTS. Options granted under the 1997
Plan may be Incentive Stock Options (ISO's) or Non-Qualified Stock Options
(NSO's). The per share option price for each option granted under the 1997 Plan
is determined by the Plan Administrator, but may not be less than 100% of the
fair market value of a share of Company Common Stock on the date of grant. For
purposes of the 1997 Plan, so long as the stock is traded on the NASDAQ National
Market System, "fair market value" means the closing price as reported by the
NASDAQ National Market System as of the last trading day for which prices are
available prior to the date of grant.
 
     The exercise price for shares purchased under options may be paid in cash
or by check or, in the Plan Administrator's discretion, a combination of cash,
check, shares of Company Common Stock which have been held for at least six
months, a promissory note, delivery of a properly executed exercise notice,
together with irrevocable instructions to a broker, or such other consideration
as the Plan Administrator may permit. The Company may require the optionee to
pay any applicable withholding taxes that the Company is required to withhold
with respect to the grant or exercise of any option. The withholding tax may be
paid in cash or, subject to applicable law, the Plan Administrator may permit
the optionee to satisfy such obligations by the withholding or delivery of
Company Common Stock.
 
                                       14
<PAGE>   18
 
     The Plan Administrator will fix the option term, and each option will be
exercisable pursuant to a vesting schedule determined by the Plan Administrator.
If not otherwise established by the Plan Administrator, options generally will
be exercisable for one year after termination of services as a result of
retirement, early retirement at the Company's request, disability or death and
for three months after all other terminations.
 
     TRANSFERABILITY. The 1997 Plan allows the Plan Administrator in its
discretion to allow the optionee the right to transfer NSO's to certain family
members, family trusts and family partnerships. Except as expressly provided in
the 1997 Plan, options are not transferable.
 
     ADJUSTMENT OF AWARDS. In the event of a recapitalization, stock split,
stock dividend or other material alteration in the capital structure of the
Company, the Plan Administrator has the discretion to take such further action
as it deems appropriate and equitable which may include (without limitation)
changing the number or kind of shares covered by options, or changing the option
price per share provided that the aggregate price applicable to the unexercised
portion of existing options shall not be altered. In the event appropriate
adjustments are not determined to be feasible, the material alteration in
capitalization shall be deemed a terminating event as described below.
 
     CORPORATE TRANSACTIONS. In the event of a material change in capital
structure that is not deemed subject to adjustment as set forth above, or in the
event of a liquidation or dissolution of the Company or a sale or transfer of
all or substantially all of its assets, or a merger or consolidation which
results in the shareholders holding less than a majority of stock in the
surviving corporation, all options will become immediately exercisable without
regard to any contingent vesting provision.
 
     ADMINISTRATION. The 1997 Plan may be administered by the Company's Board of
Directors or a committee or committees appointed by, and consisting of one or
more members of, the Company's Board of Directors. The Board of Directors may
delegate the responsibility for administering the 1997 Plan with respect to
designated classes of eligible participants to different committees, subject to
such limitations as the Board deems appropriate. Committee members will serve
for such terms as the Board may determine, subject to removal by the Board at
any time. The composition of any committee responsible for administering the
1997 Plan with respect to officers and directors of the Company who are subject
to Section 16 of the Exchange Act will comply with the requirements of Rule
16b-3 under the Exchange Act, or any successor provision. and Section 162(m) of
the Code.
 
     AMENDMENT AND TERMINATION. The 1997 Plan may be suspended or terminated by
the Board of Directors or by the stockholders at any time. The Board of
Directors may amend the 1997 Plan, as it deems advisable; however, to the extent
required for compliance with Section 422 of the Code, stockholder approval is
required for any amendment that will (a) increase the total number of shares as
to which options may be granted under the 1997 Plan, (b) modify the class of
persons eligible to receive options, or (c) otherwise require shareholder
approval under applicable law or regulation. No ISO's may be granted under the
1997 Plan more than ten (10) years after the date the 1997 Plan is adopted by
the Board of Directors.
 
    BENEFITS TO BE AWARDED IN 1999 UNDER THE PROPOSED AMENDMENT OF THE PLAN
 
     Non-employee directors receive an automatic option grant for 10,000 shares
of the Company's Common Stock upon their election to the Board and 3,000 shares
on each anniversary thereafter. In 1998, the Company's three non-employee
directors were awarded, in the aggregate, a total of 9,000 option shares. If the
stockholders approve the proposed amendment, it is anticipated that they will
receive a total of 9,000 option shares under the 1997 Plan during fiscal year
1999. Other than these non-employee director awards, option grants under the
1997 Plan to employees and consultants are discretionary, and therefore awards
under the 1997 Plan during fiscal 1999 are not presently determinable. For
purposes of comparison with options awarded in 1998, see "Executive
Compensation -- Option Grants in Last Fiscal Year" which presents information
about awards made under the 1997 Plan to the Named Executive Officers (as
defined under "Executive Compensation"). In addition to the Named Executive
Officers, approximately 122 non-executive employees received awards under the
1997 Plan in 1998 totaling 294,400 shares. Executive officers as a group (9
persons) received option awards in 1998 totaling 280,000 shares under the 1997
Plan and 400,000 shares outside of any
 
                                       15
<PAGE>   19
 
plan. As of February 28, 1999, the Company employed 843 full-time employees.
Subject to approval by the stockholders of the proposed amendment to the 1997
Plan, it is anticipated that the total number of persons receiving awards in
1999 under the 1997 Plan may be greater as the result of the continued growth of
the Company's workforce. On March 31, 1999, the closing price of the Company
Common Stock as reported by the NASDAQ National Market System was $4.625 per
share.
 
           FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE 1997 PLAN
 
     The following is a summary of the U.S. federal income tax consequences to
the Company and optionees of options awarded under the 1997 Plan based on the
federal income tax laws in effect on the date of the filing of this Proxy
Statement. This summary is not intended to be exhaustive and does not discuss
the tax consequences of a participant's death or the provision of any income tax
laws of any municipality, state or foreign country in which an optionee may
reside.
 
     Non-Statutory Stock Options. With respect to NSO's: (i) no income is
recognized by the optionee at the time the option is granted; (ii) generally, at
exercise, ordinary income is recognized by the optionee in an amount equal to
the difference between the fair market value of the shares on the date of
exercise and the option exercise price paid for the shares and the Company is
entitled to a tax deduction in the same amount; and (iii) upon disposition of
the shares, any subsequent appreciation or depreciation in the value of the
shares is treated as long-term or short-term capital gain or loss. In the case
of an optionee who is also an employee at the time of grant, any income
recognized upon exercise of an NSO will constitute wages for which withholding
will be required.
 
     Incentive Stock Options. No income is recognized by the optionee upon the
grant or exercise of an ISO (unless the alternative minimum tax rules apply). If
the optionee holds the shares acquired upon exercise of an ISO ("ISO Shares")
for more than one year after the date the option was exercised and for more than
two years after the date the option was granted, then (i) upon the resale of
such shares, the difference between the amount realized on sale and the option
exercise price will be long-term or short-term capital gain or loss, and (ii) no
deduction will be allowed to the Company for federal income tax purposes.
 
     If the ISO Shares is disposed of before the expiration of either holding
period described above (a "disqualifying disposition"), generally (i) the
optionee will recognize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares on the date
of exercise (or, if less, the amount realized on the disposition of the shares)
over the option exercise price paid for such shares, and (ii) the Company will
be entitled to a tax deduction in the same amount.
 
     Alternative Minimum Tax. The exercise of an ISO granted under the 1997 Plan
might subject the optionee to the alternative minimum tax ("AMT") under Section
55 of the Code. In computing alternative minimum taxable income, shares acquired
upon exercise of an ISO ("ISO Shares") are treated as if they had been acquired
by the optionee pursuant to an NSO. See "Non-Statutory Stock Options," above.
 
     If a disqualifying disposition of ISO Shares occurs in the same calendar
year as exercise of the ISO, there is no AMT adjustment with respect to those
shares. Also, upon a sale of ISO Shares that is not a disqualifying disposition,
alternative minimum taxable income is reduced in the year of sale by the excess
of the fair market value of the ISO Shares on the date of exercise over the
amount paid for the ISO Shares.
 
     If an optionee pays AMT in excess of his or her regular tax liability, the
amount of such AMT relating to ISO Shares may be carried forward as a credit
against any subsequent years' regular tax in excess of the AMT.
 
  MISCELLANEOUS
 
     The maximum tax rate applicable to ordinary income is 39.6%. Long-term
capital gain will be taxed at a maximum rate of 20%. In order to receive
long-term capital gain treatment, the stock must be held for more than one year.
Capital gains may be offset by capital losses and up to $3,000 of capital losses
may be offset annually against ordinary income.
 
                                       16
<PAGE>   20
 
     Payment for option shares may in some cases be made by delivering shares of
the Company's Common Stock or by certain other methods if at the time of grant
the optionee's agreement so provides. If an optionee makes payment of the option
price other than by cash or check, special rules would apply.
 
     Section 162(m) of the Code limits the deductibility (under certain
circumstances) of compensation that exceeds $1,000,000 annually that is paid by
the Company to its president and to its four most highly compensated officers
(other than the president) as determined at the end of the Company's tax year.
Section 162(m) and the regulations thereunder provide certain exclusions from
the amounts included in the $1,000,000 limitation, including compensation that
is "qualified performance-based compensation" within the meaning of the
regulations. The 1997 Plan generally is intended to satisfy the requirements set
forth in the regulations with respect to "qualified performance-based
compensation" with respect to options awarded under the 1997 Plan.
 
     A transfer of an NSO option to a family member generally will be treated as
a completed gift on the later of (i) the transfer or (ii) the time the option
vests. The exercise of the option by the family member will result in the
recognition of ordinary income by the optionee (and not the family member) as
described under "Non-Statutory Stock Options," above. The family member's basis
in the shares acquired upon exercise will be the fair market value of the shares
on the date of exercise.
 
     The 1997 Plan is not qualified under Section 401 of the Code. In addition,
the 1997 Plan is not subject to any of the provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
 
                             STOCKHOLDER PROPOSALS
 
     Stockholders who intend to have a proposal considered for inclusion in the
Company's proxy materials for presentation at the year 2000 Annual Meeting of
Stockholders must submit the proposal to the Company no later than December 10,
1999. Stockholders who intend to present a proposal at the year 2000 Annual
Meeting of Stockholders without inclusion of such proposal in the Company's
proxy materials must deliver or cause to be delivered notice to the Company, at
its principal executive offices, no later than 75 days nor more than 90 days
prior to the year 2000 Annual Meeting; provided, however, that in the event less
than 90 days notice or prior public disclosure of the date of the Annual Meeting
is given or made to shareholders, notice by the shareholder to be timely must be
so received not later than the close of business on the 15th day following the
day on which such notice of Annual Meeting was mailed or such public disclosure
made, whichever first occurs.
 
                         INDEPENDENT PUBLIC ACCOUNTANTS
 
     On March 26, 1998, the Company notified BDO Seidman, LLP that it intended
to engage another accounting firm as the Company's independent accountants for
the fiscal year ending December 31, 1998. The decision to change independent
accountants was approved by the Company's Board of Directors on March 26, 1998.
 
     The report of BDO Seidman, LLP on the Company's consolidated financial
statements for the years ended December 31, 1995, 1996 and 1997 contained no
adverse opinion and was unmodified, except for the inclusion of a disclosure
that the consolidated financial statements give retroactive effect to the merger
of Data Dimensions, Inc. and Pyramid Information Services, Inc., which merger
has been accounted for as a pooling of interests.
 
     There have been no disagreements with BDO Seidman, LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which, if not resolved to the satisfaction of BDO Seidman,
LLP, would have caused BDO Seidman, LLP to make reference to the matter in their
report.
 
     On March 26, 1998, the Company appointed PricewaterhouseCoopers LLP as its
independent accountants for the fiscal year ending December 31, 1998, pursuant
to the approval of the Company's Board of Directors.
                                       17
<PAGE>   21
 
     Representatives of both BDO Seidman, LLP and PricewaterhouseCoopers LLP are
expected to be present at the Annual Meeting. Each representative will be given
the opportunity to make a statement on behalf of their firm if such
representative so desires, and each representative will be available to respond
to appropriate stockholder questions.
 
                         TRANSACTION OF OTHER BUSINESS
 
     As of the date of this Proxy Statement, the Board of Directors is not aware
of any other matters that may come before the Annual Meeting. It is the
intention of the persons named in the enclosed proxy card to vote the proxy in
accordance with their best judgment if any other matters do properly come before
the Annual Meeting.
 
     Please return the enclosed proxy card as soon as possible. Unless a quorum
consisting of a majority of the outstanding shares entitled to vote is
represented at the Annual Meeting, no business can be transacted. Therefore,
please be sure to date and sign your proxy card exactly as your name appears on
your stock certificate and return it in the enclosed postage prepaid return
envelope. Please act promptly to insure that you will be represented at this
important meeting. THE COMPANY WILL PROVIDE, WITHOUT CHARGE, ON THE WRITTEN
REQUEST OF ANY BENEFICIAL OWNER OF SHARES OF THE COMPANY'S COMMON STOCK ENTITLED
TO VOTE AT THE ANNUAL MEETING, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION FOR THE COMPANY'S
FISCAL YEAR ENDED DECEMBER 31, 1998. WRITTEN REQUESTS SHOULD BE MAILED TO:
 
                               INVESTOR RELATIONS
                             DATA DIMENSIONS, INC.
                        411-108TH AVENUE NE, SUITE 2100
                           BELLEVUE, WASHINGTON 98004
 
                                          By the Order of the Board of
                                          Directors:
 
                                          /s/ GORDON A. GARDINER
                                          Gordon A. Gardiner
                                          Executive Vice President,
                                          Chief Financial Officer & Secretary
 
                                          Dated: April 9, 1999
 
                                       18
<PAGE>   22
 
                                    APPENDIX
                                       TO
                                PROXY STATEMENT
 
                             DATA DIMENSIONS, INC.
 
                             1997 STOCK OPTION PLAN
 
 1. STATEMENT OF PURPOSE.
 
     The principal purposes of this Stock Option Plan ("Plan") are to secure to
Data Dimensions, Inc. (the "Company") the advantages of the incentive inherent
in stock ownership on the part of employees, officers, directors, and
consultants responsible for the continued success of the Company and to create
in such individuals a proprietary interest in, and a greater concern for, the
welfare of the Company through the grant of options to acquire shares of the
common stock of the Company ("Common Stock"). Each incentive stock option
("ISO") granted hereunder is intended to constitute an "incentive stock option,"
as such term is defined in Section 422 of the Internal Revenue Code of 1986, as
the same may be amended from time to time (the "Code"), and this Plan and each
such ISO is intended to comply with all of the requirements of said Section 422
and of all other provisions of the Code applicable to incentive stock options
and to plans issuing the same. Each nonstatutory stock option ("Non-ISO")
granted hereunder is intended to constitute a nonstatutory stock option that
does not comply with the requirements of Section 422 of the Code. ISO's and
Non-ISO's shall sometimes hereinafter be referred to collectively as "Options".
This Plan is expected to benefit shareholders by enabling the Company to attract
and retain personnel of the highest caliber by offering to them an opportunity
to share in any increase in the value of the Common Stock to which such
personnel have contributed.
 
 2. ADMINISTRATION.
 
     2.1  The Plan shall be administered by the Board of Directors of the
Company ("Board") or a committee or committees (which term includes
subcommittees) appointed by, and consisting of two or more members of, the Board
(hereinafter, "Plan Administrator"). If and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), the Board shall consider in selecting the Plan
Administrator and the membership of any committee acting as Plan Administrator
of the Plan with respect to any persons subject or likely to become subject to
Section 16 under the Exchange Act the provisions regarding (a) "outside
directors," as contemplated by Section 162(m) of the Code, and (b) "nonemployee
directors," as contemplated by Rule 16b-3 under the Exchange Act. The Board may
delegate the responsibility for administering the Plan with respect to
designated classes of eligible persons to different committees, subject to such
limitations as the Board deems appropriate. Committee members shall serve for
such term as the Board may determine, subject to removal by the Board at any
time.
 
     2.2  Except for the terms and conditions explicitly set forth in the Plan,
the Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to awards under the Plan, including the selection
of individuals to be granted awards of options, the type of options, the number
of shares of Common Stock subject to an Option, all terms, conditions,
restrictions and limitations, if any, of an Option, and the terms of any
instrument that evidences the Option. The Plan Administrator shall also have
exclusive authority to interpret the Plan and may from time to time adopt, and
change, rules and regulations of general application for the Plan's
administration. The Plan Administrator's interpretation of the Plan and its
rules and regulations, and all actions taken and determinations made by the Plan
Administrator pursuant to the Plan, shall be conclusive and binding on all
parties involved or affected. The Plan Administrator may delegate administrative
duties to such of the Company's officers as it so determines.
 
 3. ELIGIBILITY.
 
     3.1  ISO's may be granted to any employee of the Company or of an Affiliate
of the Company, as defined in Section 3.2 below. Non-ISO's may be granted to any
employee, officer or director (whether or not also an employee), or consultant
of the Company or of an Affiliate of the Company. Each employee, officer,
                                       19
<PAGE>   23
 
director, or consultant selected by the Plan Administrator to receive an Option
shall sometimes hereinafter be referred to as an "Optionee".
 
     3.2  As used in this Plan, an "Affiliate" of a corporation shall refer to a
"parent corporation" of such corporation as described in Section 424(e) of the
Code or a "subsidiary corporation" of such corporation as described in Section
424(f) of the Code.
 
     3.3  An Optionee who is not an employee of the Company or of an Affiliate
of the Company shall not be eligible to receive an ISO hereunder and no ISO's
shall be granted to any such non-employee Optionee.
 
     3.4  No Option shall be granted hereunder to any Optionee unless the Plan
Administrator shall have determined, based on the advice of counsel, that the
grant of such option (and the exercise thereof by the Optionee) will not violate
the securities law of the state where the Optionee resides.
 
 4. SHARES SUBJECT TO THE PLAN.
 
     4.1  The Plan Administrator, from time to time, may provide for the option
and sale in the aggregate of up to One Million (1,000,000) shares of Common
Stock. The number of such shares shall be adjusted to take account of the events
referred to in Section 10 hereof.
 
     4.2  Upon exercise of an Option, the number of shares of Common Stock
thereafter available hereunder and under the Option shall decrease by the number
of shares of Common Stock as to which such Option was exercised; provided that
if such shares are pledged to secure a promissory note given in payment of the
Option Price for such shares and, as a result of a default on such note, the
pledged shares are returned to the Company, then such shares shall again be
available for the purposes of this Plan.
 
     4.3  If any Option granted hereunder shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for the purposes of this Plan.
 
     4.4  The Company shall at all times during the term of this Plan reserve
and keep available such number of shares as shall be sufficient to satisfy the
requirements of the Plan.
 
     4.5  Subject to any adjustment as provided in Section 10, if and so long as
the Common Stock is registered under Section 12 of the Exchange Act, not more
than One Hundred Thousand (100,000) shares of Common Stock may be made subject
to grants under the Plan to any one individual in the aggregate in any one
fiscal year of the Company, except the Company may make additional one-time
grants of up to Fifty Thousand (50,000) shares to a newly hired individual, such
limitation to be applied in a manner consistent with the requirements of, and
only to the extent required for compliance with, the exclusion from the
limitation on deductibility of compensation under Section 162(m) of the Code.
 
 5. OPTION TERMS.
 
     5.1  The Plan Administrator shall specify the following terms to be
contained in each Option granted to an Optionee hereunder, which Option shall be
executed by the Company and such Optionee:
 
          5.1.1  Whether such Option is an ISO or a Non-ISO;
 
          5.1.2  The number of shares of Common Stock subject to purchase
     pursuant to such Option;
 
          5.1.3  The date on which the grant of such Option shall be effective
     (the "Date of Grant");
 
          5.1.4  The period of time during which such Option shall be
     exercisable, which shall in no event be more than ten (10) years following
     its Date of Grant for ISO's; provided, however, that if an ISO is granted
     to an Optionee who on the Date of Grant owns, either directly or indirectly
     within the meaning of Section 424(d) of the Code, more than ten percent
     (10%) of the total combined voting power of all classes of stock of the
     Company or an Affiliate of the Company, the period of time during which
     such Option shall be exercisable shall in no event be more than five (5)
     years following its Date of Grant;
 
          5.1.5  The price at which such Option shall be exercisable by the
     Optionee (the "Option Price"); provided, however, that the Option Price
     shall in no event be less than the fair market value, as defined in
                                       20
<PAGE>   24
 
     Section 5.2 below, on the Date of Grant, of the shares of Common Stock
     subject thereto; and provided further that, if such Option is granted to an
     Optionee who on the Date of Grant owns, either directly or indirectly
     within the meaning of Section 424(d) of the Code, more than ten percent
     (10%) of the total combined voting power of all classes of stock of the
     Company or an Affiliate of the Company, then the Option Price specified in
     such Option shall be at least one hundred ten percent (110%) of the fair
     market value, on the Date of Grant, of the Common Stock subject thereto;
 
          5.1.6  Any vesting schedule upon which the exercise of an Option is
     contingent; provided that the Plan Administrator shall have complete
     discretion with respect to the terms of any vesting schedule upon which the
     exercise of an Option is contingent, including, without limitation,
     discretion (a) to allow full and immediate vesting upon grant of such
     Option, (b) to permit partial vesting in stated percentage amounts based on
     the length of the holding period of such Option, or (c) to permit full
     vesting after a stated holding period has passed; and
 
          5.1.7  Such other terms and conditions as the Plan Administrator deems
     advisable and as are consistent with the purpose of this Plan.
 
     5.2  Fair market value shall be determined as follows:
 
          5.2.1  If the Company's Common Stock is publicly traded at the time an
     Option is granted hereunder, fair market value shall be determined as of
     the last business day for which the prices or quotes discussed in this
     Section 5.2.1 are available prior to the date such Option is granted and
     shall mean:
 
             (a) The average (on that date) of the high and low prices of the
        Common Stock on the principal national securities exchange on which the
        Common Stock is traded, if the Common Stock is then traded on a national
        securities exchange; or
 
             (b) The last reported sale price (on that date) of the Common Stock
        on the NASDAQ National Market System, if the Common Stock is not then
        traded on a national securities exchange; or
 
             (c) The closing bid price (or average of bid prices) last quoted on
        such date by an established quotation service for over-the-counter
        securities, if the Common Stock is not reported on the NASDAQ National
        Market System.
 
          5.2.2  If the Common Stock is not publicly traded at the time an
     Option is granted hereunder, fair market value shall be deemed to be the
     fair value of the Common Stock as determined by the Plan Administrator
     after taking into consideration all factors that it deems appropriate,
     including, without limitation, recent sale and offer prices of the Common
     Stock in private transactions negotiated at arm's length.
 
     5.3  No Option shall be granted hereunder during the suspension of this
Plan or after the termination of this Plan pursuant to Section 11.2. Except as
expressly provided herein, nothing contained in this Plan shall require that the
terms and conditions of Options granted hereunder be uniform.
 
     5.4  Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Options under the Plan in substitution for options
issued under other plans, or assume under the Plan awards issued under other
plans, if the other plans are or were plans of other acquired entities
("Acquired Entities") (or the parent of the Acquired Entity) and the new Option
is substituted, or the old option is assumed, by reason of a merger,
consolidation, acquisition of property or of stock, reorganization or
liquidation (the "Acquisition Transaction"). In the event that a written
agreement pursuant to which the Acquisition Transaction is completed is approved
by the Board and said agreement sets forth the terms and conditions of the
substitution for or assumption of outstanding awards of the Acquired Entity,
said terms and conditions shall be deemed to be the action of the Plan
Administrator without any further action by the Plan Administrator, and the
persons holding such Options shall be deemed to be Optionees.
 
                                       21
<PAGE>   25
 
 6. LIMITATION ON GRANTS OF ISO'S.
 
     In the event that the aggregate fair market value of Common Stock and other
stock with respect to which ISO's granted to an Optionee hereunder or incentive
stock options granted to such Optionee under any other plan of the Company or
any of its Affiliates are exercisable for the first time during any calendar
year, exceeds the maximum permitted under Section 422(d) of the Code, then to
the extent of such excess, such ISO's shall be treated as Non-ISO's.
 
 7. EXERCISE OF OPTION.
 
     7.1  Subject to any limitations or conditions imposed upon an Option
pursuant to Section 5 above, an Optionee may exercise an Option or any part
thereof (unless partial exercise is specifically prohibited by the terms of the
Option), by giving written notice thereof to the Company at its principal place
of business accompanied by payment as described in Section 7.2.
 
     7.2  The exercise price for shares purchased under an Option shall be paid
in full to the Company by delivery of consideration equal to the Option Price
for the whole number of shares as to which it is exercised. Such consideration
must be paid in cash or by check, or, in the Plan Administrator's discretion, a
combination of cash and/or check and/or one or both of the following alternative
forms: (a) tendering (either actually or, if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, by attestation)
Common Stock already owned by the Optionee for at least six (6) months (or any
shorter period necessary to avoid a charge to the Company's earnings for
financial reporting purposes) having a fair market value on the day prior to the
exercise date equal to the aggregate Option Price or (b) if and so long as the
Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act,
delivery of a properly executed exercise notice, together with irrevocable
instructions, to (i) a brokerage firm, that may from time to time be designated
by the Company in its discretion, to deliver to the Company the aggregate amount
of sale or loan proceeds to pay the Option Price and any withholding tax
obligations that may arise in connection with the exercise and (ii) the Company,
to deliver the certificates for such purchased shares directly to such brokerage
firm, all in accordance with the regulations of the Federal Reserve Board. In
addition, the exercise price for shares purchased under an Option may be paid,
either singly or in combination with one or more of the alternative forms of
payment authorized by this Section 7.2, by (y) a promissory note; or (z) such
other consideration as the Plan Administrator may permit. Any promissory note
delivered in connection with exercise of an Option shall bear interest at a rate
specified by the Plan Administrator but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions) for federal
income tax purposes.
 
     7.3  As soon as practicable after exercise of an option in accordance with
Sections 7.1 and 7.2 above, the Company shall issue a stock certificate
evidencing the Common Stock with respect to which the Option has been exercised.
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 such stock
certificate, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to such Common Stock, notwithstanding the
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 10 below.
 
     7.4  The amount to be paid by the Optionee upon exercise shall be the full
Option Price together with the amount of any taxes required to be withheld with
respect to the grant or exercise of the Option. Subject to the Plan and to
applicable law, the Plan Administrator, in its sole discretion, may permit such
withholding obligations to be paid, in whole or in part, by electing to have the
Company withhold shares of Common Stock or by transferring shares of Common
Stock to the Company, in such amounts as are equivalent to the fair market value
of the withholding obligation.
 
 8. TRANSFERABILITY AND POST-TERMINATION EXERCISES.
 
     8.1  Except as provided otherwise in this Section 8, no Option shall be
transferable or exercisable by any person other than the Optionee to whom such
Option was originally granted.
 
                                       22
<PAGE>   26
 
     8.2  The Plan Administrator shall establish and set forth in each
instrument that evidences an Option whether the Option will continue to be
exercisable and the terms and conditions of such exercise, if the Optionee
ceases to be employed by or provide services to the Company or its Affiliates,
which may be waived or modified by the Plan Administrator. If not so established
and subject to Section 8.3, the Option will be exercisable in accordance with
the following terms, which may be waived or modified by the Plan Administrator:
 
          8.2.1  In case of termination of Optionee's employment or services
     other than by reason of death, the Option shall be exercisable, to the
     extent of the number of shares purchasable at the date of termination,
     only:
 
             (a) Except as set forth in Section 8.3 with regard to ISO's, within
        one year if termination is coincident with normal retirement (as defined
        by the Plan Administrator), early retirement at the Company's request,
        or disability; or
 
             (b) Within three months after the date the Optionee ceases to be an
        employee or consultant of the Company or Affiliate, if termination is
        for reason other than as specified in (a), but, in either case, no later
        than the remaining term of the Option.
 
          8.2.2  Any Option exercisable at the time of the Optionee's death may
     be exercised to the extent of the number of shares purchasable at the date
     of death, by the personal representative of the Optionee's estate or the
     person(s) to whom the Optionee's rights under the Option have passed by
     will or applicable laws of descent and distribution at any time or from
     time to time within one year after the date of death, but in no event later
     than the remaining term of the Option.
 
          8.2.3  Any portion of an Option not exercisable on the date of
     termination of the Optionee's employment or services shall terminate on
     such date, unless the Plan Administrator determines otherwise.
 
          8.2.4  Subject to Section 8.3, the effect of a Company-approved leave
     of absence on terms and conditions of an Option shall be determined by the
     Plan Administrator in its sole discretion. A transfer of services or
     employment between or among the Company and subsidiaries shall not be
     considered a termination of employment or services.
 
     8.3  To the extent required by Section 422 of the Code, ISO's shall be
subject to the following additional terms and conditions: To qualify for ISO tax
treatment, an Option designated as an ISO must be exercised within three months
after termination of employment for reasons other than death, except that in the
case of termination of employment due to total disability, such Option must be
exercised within one year after such termination. Employment shall not be deemed
to continue beyond the first 90 days of a leave of absence unless the Optionee's
reemployment rights are guaranteed by statute or contract. For purposes of this
Section 8.3, "total disability" shall mean a mental or physical impairment
expected to result in death or that has lasted or is expected to last for a
continuous period of 12 months or more and that causes the Optionee to be
unable, in the opinion of the Company and two independent physicians, to perform
his or her duties for the Company and to be engaged in any substantial gainful
activity. Total disability shall be deemed to have occurred on the first day
after the Company and two independent physicians furnish their opinion of total
disability to the Plan Administrator.
 
     8.4  In the event that a qualified domestic relations order, as defined by
Section 414(p) of the Code or Title I of the Employee Retirement Income Security
Act or the rules thereunder, mandates the transfer of any Option that could have
been exercised immediately prior to the issuance of such order, such Option
shall pass to the person or persons entitled thereto pursuant to the order and
shall be exercisable by such person or persons in accordance with the terms
thereof. In addition, a Non-ISO may be exercised during the Optionee's lifetime,
by the Optionee's guardian or legal representative.
 
     8.5  The Plan Administrator may, in its discretion, authorize all or a
portion of the Non-ISO's granted to an Optionee to be on terms which permit
transfer by such Optionee to (i) the spouse, children or grandchildren of the
Optionee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive
benefit
 
                                       23
<PAGE>   27
 
of such Immediate Family Members, or (iii) a partnership in which such Immediate
Family Members are the only partners, provided that (x) there may be no
consideration for any such transfer, (y) the stock option agreement pursuant to
which such Options are granted must be approved by the Plan Administrator and
must expressly provide for transferability in a manner consistent with this
Section, and (z) subsequent transfers of transferred Options are prohibited
except those in accordance with Section 8 of the Plan. The Plan Administrator
may, in its discretion, in permitting transferability, impose additional
conditions in the Option Agreement consistent with this section, including
without limitation imposition of a post-exercise holding period on transferees.
Following transfer, any such Options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer; provided,
the events of termination of employment of Sections 8 and 9 hereof shall
continue to be applied with respect to the original Optionee, following which
the Options shall be exercisable by the transferee only to the extent and for
the periods specified. The Company disclaims any obligation to provide notice to
a transferee of early termination of the Option due to termination of employment
or otherwise. Notwithstanding a transfer pursuant to the foregoing, the original
Optionee will remain subject to applicable withholding taxes upon exercise. No
transfer will be effective until written notice of transfer is delivered to the
Company. The Company reserves the right to approve transfers hereunder.
 
 9. TERMINATION OF OPTIONS.
 
     To the extent not earlier exercised, an Option shall terminate at the
earliest of the following dates:
 
     9.1  The termination date specified for such Option in the respective
Option Agreement;
 
     9.2  As specified in Section 8 above:
 
     9.3  The date of any sale, transfer, or hypothecation, or any attempted
sale, transfer or hypothecation, of such Option in violation of Section 8 above;
or
 
     9.4  The date specified in Section 10.2 below for such termination in the
event of a Terminating Event.
 
10. ADJUSTMENTS TO OPTIONS.
 
     10.1  In the event of a material alteration in the capital structure of the
Company on account of a recapitalization, stock split, reverse stock split,
stock dividend, or otherwise, then the Plan Administrator shall make such
adjustments to this Plan and to the Options then outstanding and thereafter
granted hereunder as the Plan Administrator determines to be appropriate and
equitable under the circumstances, so that the proportionate interest of each
holder of any such Option shall, to the extent practicable, be maintained as
before the occurrence of such event. Such adjustments may include, without
limitation (a) a change in the number or kind of shares of stock of the Company
covered by such Options, and (b) a change in the Option Price payable per share;
provided, however, that the aggregate Option Price applicable to the unexercised
portion of existing Options shall not be altered, it being intended that any
adjustments made with respect to such Options shall apply only to the price per
share and the number of shares subject thereto. For purposes of this Section
10.1, neither (i) the issuance of additional shares of stock of the Company in
exchange for adequate consideration (including services), nor (ii) the
conversion of outstanding preferred shares of the Company into Common Stock
shall be deemed material alterations of the capital structure of the Company. In
the event the Plan Administrator shall determine that the nature of a material
alteration in the capital structure of the Company is such that it is not
practical or feasible to make appropriate adjustments to this Plan or to the
Options granted hereunder, such event shall be deemed a Terminating Event as
defined in Section 10.2 below.
 
     10.2  Subject to Section 10.3, all Options granted hereunder shall
terminate upon the occurrence of any of the following events ("Terminating
Events"): (a) the dissolution or liquidation of the Company; or (b) a material
change in the capital structure of the Company that is subject to this Section
10.2 by virtue of the last sentence of Section 10.1 above.
 
     10.3  The Plan Administrator shall give notice to Optionees not less than
thirty (30) days prior to the consummation of (a) a Terminating Event as defined
in Section 10.2 above; (b) a merger or consolidation of
                                       24
<PAGE>   28
 
the Company with one or more corporations as a result of which, immediately
following such merger or consolidation, the shareholders of the Company as a
group will hold less than a majority of the outstanding capital stock of the
surviving corporation; or (c) the sale or other disposition of all or
substantially all of the assets of the Company. Upon the giving of such notice,
all Options granted hereunder shall become immediately exercisable, without
regard to any contingent vesting provision to which such Options may have
otherwise been subject.
 
     10.4  All Options granted hereunder shall become immediately exercisable,
without regard to any contingent vesting provision to which such Options may
have otherwise been subject, upon the occurrence of an event whereby any person
or entity, including any "person" as such term is used in Section 13(d)(3) of
the Exchange Act, becomes the "beneficial owner", as defined in the Exchange
Act, of Common Stock representing fifty percent (50%) or more of the combined
voting power of the voting securities of the Company.
 
     10.5  In the event of a reorganization as defined in this Section 10.5 in
which the Company is not the surviving or acquiring company, or in which the
Company is or becomes a wholly-owned subsidiary of another company after the
effective date of the reorganization, then the plan or agreement respecting the
reorganization shall include appropriate terms providing for the assumption of
each Option granted hereunder, or the substitution of an option therefor, such
that no "modification" of any such Option occurs under Section 424 of the Code.
For purposes of this Section 10.5, reorganization shall mean any statutory
merger, statutory consolidation, sale of all or substantially all of the assets
of the Company, or sale, pursuant to an agreement with the Company, of
securities of the Company pursuant to which the Company is or becomes a wholly-
owned subsidiary of another corporation after the effective date of the
reorganization.
 
     10.6  The Plan Administrator shall have the right to accelerate the date of
exercise of any installment of any option; provided, however, that, without the
consent of the Optionee with respect to any Option, the Plan Administrator shall
not accelerate the date of any installment of any Option granted to an employee
as an ISO (and not previously converted into a Non-ISO pursuant to Section 12
below) if such acceleration would violate the annual vesting limitation
contained in Section 422(d) of the Code, as described in Section 6 above.
 
     10.7  Adjustments and determinations under this Section 10 shall be made by
the Plan Administrator (upon the advice of counsel), whose decisions as to what
adjustments or determination shall be made, and the extent thereof, shall be
final, binding, and conclusive.
 
11. TERMINATION AND AMENDMENT OF PLAN.
 
     11.1  The Plan may be amended only by the Board as it shall deem advisable;
however, to the extent required for compliance with Section 422 of the Code or
any applicable law or regulation, shareholder approval will be required for any
amendment that will (a) increase the total number of shares as to which Options
may be granted under the Plan, (b) modify the class of persons eligible to
receive Options, or (c) otherwise require shareholder approval under any
applicable law or regulation.
 
     11.2  The Company's shareholders or the Board may suspend or terminate the
Plan at any time. The Plan will have no fixed expiration date; provided,
however, that no ISO may be granted more than ten (10) years after the earlier
of the Plan's adoption by the Board and approval by the shareholders.
 
     11.3  The amendment or termination of the Plan shall not, without the
consent of the Optionee under the Plan, impair or diminish any rights or
obligations under any Option theretofore granted under the Plan. Any change or
adjustment to an outstanding ISO shall not, without the consent of the holder,
be made in a manner so as to constitute a "modification" that would cause such
ISO to fail to continue to qualify as an incentive stock option.
 
12. CONVERSION OF ISO'S INTO NON-ISO'S.
 
     At the written request of any ISO Optionee, the Plan Administrator may in
its discretion take such actions as may be necessary to convert such Optionee's
ISO's (or any installments or portions of installments thereof) that have not
been exercised on the date of conversion into Non-ISO's at any time prior to the
                                       25
<PAGE>   29
 
expiration of such ISO's, regardless of whether the Optionee is an employee of
the Company or of an Affiliate of the Company at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period or reducing the exercise price of the appropriate installments of such
ISO's. At the time of such conversion, the Plan Administrator, with the consent
of the Optionee, may impose such conditions on the exercise of the resulting
Non-ISO's as the Plan Administrator in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in this
Plan shall be deemed to give any Optionee the right to have such Optionee's
ISO's converted into Non-ISO's, and no such conversion shall occur until and
unless the Plan Administrator takes appropriate action. The Plan Administrator,
with the consent of the Optionee, may also terminate any portion of any ISO that
has not been exercised at the time of such conversion.
 
13. CONDITIONS UPON ISSUANCE OF SHARES.
 
     13.1  Shares shall not be issued pursuant to the exercise of any Option
unless the exercise of such Option and the issuance and delivery of such shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended ("Securities Act"),
the Exchange Act, any applicable state securities law, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed or otherwise traded, and such compliance has been
confirmed by counsel for the Company. The Company shall be under no obligation
to any participants to register for offering or resale or to qualify for an
exemption under the Securities Act, or to register or qualify under state
securities laws, any shares of Company's stock issued under the Plan or to
continue in effect any registrations or qualifications if made. The Company may
issue certificates for shares with such legends and subject to such restrictions
on transfer as counsel for the Company deems necessary or desirable for
compliance with federal and state securities laws.
 
     13.2  As a condition to the exercise of any Option, the Company may require
the participant 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 representations and warranties are
required by any relevant provision of law.
 
     13.3  The Company's inability to obtain authority from any regulatory body
having jurisdiction, which authority the Company's counsel has determined to be
necessary to the lawful issuance and sale of any shares hereunder, shall relieve
the Company of any liability with respect to the failure to issue or sell such
shares.
 
14. USE OF PROCEEDS.
 
     Proceeds from the sale of Common Stock pursuant to the exercise of Options
granted hereunder shall constitute general funds of the Company and shall be
used for general corporate purposes.
 
15. NOTICES.
 
     All notices, requests, demands and other communications required or
permitted to be given under this Plan and the Options granted hereunder shall be
in writing and shall be either served personally on the party to whom notice is
to be given (in which case notice shall be deemed to have been duly given on the
date of such service), or mailed to the party to whom notice is to be given, by
first class mail, registered or certified, return receipt requested, postage
prepaid, and addressed to the party at his or its most recent known address, in
which case such notice shall be deemed to have been duly given on the third
(3rd) postal delivery day following the date of such mailing.
 
16. MISCELLANEOUS PROVISIONS.
 
     16.1  Optionees shall be under no obligation to exercise Options granted
hereunder.
 
     16.2  Nothing contained in this Plan shall obligate the Company to retain
an Optionee as an employee, officer, director, or consultant for any period, nor
shall this Plan interfere in any way with the right of the Company to reduce
such Optionee's compensation.
 
                                       26
<PAGE>   30
 
     16.3  The provisions of this Plan and each Option issued to an Optionee
hereunder shall be binding upon such Optionee, the Qualified Successor or
Guardian of such Optionee, and the heirs, successors, and assigns of such
Optionee.
 
     16.4  This Plan is intended to constitute an "unfunded" plan and nothing
herein shall require the Company to segregate any monies or other property or
shares of Common Stock or create any trusts or deposits, and no Optionee shall
have rights greater than a general unsecured creditor of the Company.
 
     16.5  It is the Company's intention that, if and so long as any of the
Company's equity securities are registered pursuant to Section 12(b) or 12(g) of
the Exchange Act, the Plan shall comply in all respects with Rule 16b-3 under
the Exchange Act and, if any Plan provision is later found not to be in
compliance with such Rule 16b-3, the provision shall be deemed null and void,
and in all events the Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3. Notwithstanding anything in the Plan to the
contrary, the Board, in its sole discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to Optionees
who are officers or directors subject to Section 16 of the Exchange Act without
so restricting, limiting or conditioning the Plan with respect to other
Optionees. Additionally, in interpreting and applying the provisions of the
Plan, any Option granted as an ISO pursuant to the Plan shall, to be extent
permitted by law, be construed as an "incentive stock option" within the meaning
of Section 422 of the Code.
 
     16.6  Where the context so requires, references herein to the singular
shall include the plural, and vice versa, and references to a particular gender
shall include either or both genders.
 
17. EFFECTIVE DATE OF PLAN AND AMENDMENTS.
 
     This Plan was initially adopted by the Board of Directors on March 25, 1997
and approved by the shareholders on                .
 
                                       27
<PAGE>   31


                             DATA DIMENSIONS, INC.

        Proxy for Annual Meeting of Shareholders to be Held May 18, 1999

        The undersigned hereby names, constitutes and appoints Peter A. Allen
and Gordon A. Gardiner, or either of them acting in the absence of the other,
with full power of substitution, my true and lawful attorneys and proxies for me
and in my place and stead to attend the Annual Meeting of the Shareholders of
Data Dimensions, Inc. (the "Company") to be held at the Bellevue Club, 11200 SE
6th Street, Bellevue, Washington 98004 on May 18, 1999 at 10:00 a.m. Pacific
Daylight Savings Time, and at any adjournment thereof, and to vote all the
shares of Common Stock held of record in the name of the undersigned on March
31, 1999, with all the powers that the undersigned would possess if (s)he were
personally present.

1.     PROPOSAL 1 -- Election of Class III Director

[ ] FOR nominee named below      [ ] WITHHOLD AUTHORITY for nominee named below

                                     Mr. Thomas W. Fife

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
NOMINEE NAMED ABOVE.

2.     PROPOSAL 2 -- Amendment of the Data Dimensions, Inc.
                     1997 Stock Option Plan

       To approve an amendment to the Data Dimensions, Inc. 1997 Stock Option
       Plan to increase the aggregate number of shares of the Company's Common
       Stock that may be issued thereunder from one million (1,000,000) to
       two million, five hundred thousand (2,500,000) shares.

[ ] FOR                     [ ] AGAINST                 [ ] ABSTAIN

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2.

3.     Upon such other matters as may properly come before, or incident to the
       conduct of, the Annual Meeting, the Proxy holders shall vote in such
       manner as they determine to be in best interests of the Company.
       Management is not presently aware of any such matters to be presented for
       action at the meeting.
<PAGE>   32
THE MANAGEMENT OF THE COMPANY SOLICITS THIS PROXY. IF NO SPECIFIC DIRECTION IS 
GIVEN AS TO THE ABOVE ITEMS, THIS PROXY WILL BE VOTED FOR THE NOMINEE NAMED IN 
PROPOSAL 1 AND FOR THE PROPOSED AMENDMENT TO THE 1997 STOCK OPTION PLAN.


                         Dated ____________________________________________


                         __________________________________________________
                         Shareholder (PRINT NAME)


                         __________________________________________________
                         Shareholder (SIGN NAME)

                         I DO [ ]  DO NOT [ ]  PLAN TO ATTEND THE MEETING.

                         The shareholder signed above reserves the right to 
                         revoke this Proxy at any time prior to its exercise by 
                         written notice delivered to the Company's Secretary at 
                         the Company's corporate offices at 411 - 108th  
                         Avenue NE, Suite 2100, Bellevue, Washington 98004, 
                         prior to the Annual Meeting. The power of the Proxy 
                         holders shall also be suspended if the shareholder 
                         signed above appears at the Annual Meeting and elects 
                         in writing to vote in person.