<PAGE>   1
 
                            SCHEDULE 14A INFORMATION
 
          PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
                    EXCHANGE ACT OF 1934 (AMENDMENT NO.   )
 
Filed by the Registrant [X]
 
Filed by a Party other than the Registrant [ ]
 
Check the appropriate box:
 
<TABLE>
<S>                                             <C>
[ ]  Preliminary Proxy Statement                [ ]  Confidential, for Use of the Commission
[X]  Definitive Proxy Statement                 Only (as permitted by Rule 14a-6(e)(2))
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
 
                                   DATUM INC.
--------------------------------------------------------------------------------
                (Name of Registrant as Specified In Its Charter)
 
--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
Payment of Filing Fee (Check the appropriate box):
 
[X]  Fee not 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 registration statement number,
     or the Form or Schedule and the date of its filing.
 
     (1)  Amount Previously Paid:
 
        ------------------------------------------------------------------------
 
     (2)  Form, Schedule or Registration Statement No.:
 
        ------------------------------------------------------------------------
 
     (3)  Filing Party:
 
        ------------------------------------------------------------------------
 
     (4)  Date Filed:
 
        ------------------------------------------------------------------------
<PAGE>   2

                                   DATUM INC.

                                     [LOGO]

                                  9975 TOLEDO
                            IRVINE, CALIFORNIA 92718
                                _______________

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

                            TO BE HELD JUNE 5, 1997
                                _______________

To the Stockholders of Datum Inc.:

         Please take notice that the Annual Meeting of Stockholders of Datum
Inc. (the "Company") will be held at the Company's corporate offices located at
9975 Toledo, Irvine, California, on Thursday, June 5, 1997, at 1:30 p.m. local
time, for the following purposes:

                 1.       To elect two directors to Class I of the Company's
Board of Directors to serve until the 2000 Annual Meeting of Stockholders;

                 2.       To consider and vote upon a proposal to approve and
ratify the adoption of the Company's Employee Stock Purchase Plan, which
authorizes the Company to issue, or purchase in open market transactions,
250,000 shares of Common Stock of the Company for purchase through payroll
deductions by participating employees of the Company;

                 3.       To consider and vote upon a proposal to approve and
adopt an amendment to the Company's 1994 Stock Incentive Plan to increase the
number of shares issuable thereunder by 200,000 shares and to increase the
total number of shares represented by options or rights to purchase under the
1994 Stock Incentive Plan that may be granted or offered under stock options or
rights to purchase to any one person during any calendar year by 100,000
shares; and

                 4.       To transact such other business as may properly come
before the Annual Meeting or any adjournment or postponement thereof.

         At the Annual Meeting, the Board of Directors intends to present R.
David Hoover and Edward A. Money as the nominees for election to the Board of
Directors.

         Only stockholders of record on the books of the Company at the close
of business on April 18, 1997 will be entitled to notice of and to vote at the
Annual Meeting or any adjournment or postponement thereof.

         All stockholders are cordially invited to attend the Annual Meeting in
person.  A majority of the outstanding shares must be represented at the Annual
Meeting in order to transact business.  Consequently, if you are unable to
attend in person, please execute the enclosed proxy and return it in the
enclosed addressed envelope.  Your promptness in returning the proxy will
assist in the expeditious and orderly processing of the proxies.
<PAGE>   3
         If you return your proxy, you may nevertheless attend the Annual
Meeting and, if you wish, vote your shares in person.

                                        By Order of the Board of Directors,

                                        DATUM INC.


                                        David A. Young
                                        Secretary

Irvine, California
May 2, 1997
<PAGE>   4





                                   DATUM INC.

                                     [LOGO]

                                  9975 TOLEDO
                            IRVINE, CALIFORNIA 92718

                                _______________

                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                            TO BE HELD JUNE 5, 1997

                                _______________

                                PROXY STATEMENT

                                _______________


                            SOLICITATION OF PROXIES

         The accompanying proxy is solicited by the Board of Directors of Datum
Inc. (the "Company") for use at the Company's Annual Meeting of Stockholders to
be held at the Company's executive offices located at 9975 Toledo, Irvine,
California, on Thursday, June 5, 1997 at 1:30 p.m.  local time, and at any and
all adjournments or postponements thereof.  All shares represented by each
properly executed, unrevoked proxy received in time for the Annual Meeting will
be voted in the manner specified therein.  If the manner of voting is not
specified in an executed proxy received by the Company, the proxy will be voted
FOR the election of the nominees to the Board of Directors listed in the proxy,
FOR the proposal to approve and ratify the adoption of the Company's Employee
Stock Purchase Plan, which authorizes the Company to issue, or purchase in open
market transactions, 250,000 shares of Common Stock of the Company for purchase
through payroll deductions by participating employees of the Company and FOR
the proposal to approve an amendment to the Company's 1994 Stock Incentive Plan
to increase the number of shares issuable thereunder by 200,000 shares and to
increase the total number of shares represented by options or rights to
purchase under the 1994 Stock Incentive Plan that may be granted or offered
under stock options or rights to purchase to any one person during any calendar
year by 100,000 shares.  Any stockholder has the power to revoke his proxy at
any time before it is voted.  A proxy may be revoked by delivering a written
notice of revocation to the Secretary of the Company, by presenting at the
Annual Meeting a later-dated proxy executed by the person who executed the
prior proxy, or by attendance at the Annual Meeting and voting in person by the
person who executed the proxy.

         This Proxy Statement is being mailed to the Company's stockholders on
or about May 2, 1997.  The solicitation will be by mail and the cost will be
borne by the Company.  Expenses will also include reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock.  Further solicitation of proxies may be made by
telephone or oral communication with some stockholders by the Company's regular
employees who will not receive additional compensation for the solicitation.

                      OUTSTANDING SHARES AND VOTING RIGHTS

         Only holders of record of the 5,171,130 shares of the Company's Common
Stock outstanding at the close of business on April 18, 1997 will be entitled
to notice of and to vote at the Annual Meeting





<PAGE>   5



or any adjournment or postponement thereof.  On each matter to be considered at
the Annual Meeting, stockholders will be entitled to cast one vote for each
share held of record on April 18, 1997.

         An automated system administered by the Company's transfer agent will
tabulate votes cast at the Annual Meeting.  A majority of the shares entitled
to vote, represented in person or by proxy, will constitute a quorum at the
Annual Meeting.  Abstentions and broker non-votes are each included in the
determination of the number of shares present and voting for the purpose of
determining whether a quorum is present, and each is tabulated separately.
Abstentions will be treated as shares present and entitled to vote for purposes
of any matter requiring the affirmative vote of a majority or other proportion
of the shares present and entitled to vote.  With respect to shares relating to
any proxy as to which a broker non-vote is indicated on a proposal, those
shares will not be considered present and entitled to vote with respect to any
such proposal.  Abstentions or broker non-votes or other failures to vote will
have no such effect in the election of directors, who will be elected by a
plurality of the affirmative votes cast.  With respect to any matter brought
before the Annual Meeting requiring the affirmative vote of a majority or other
proportion of the outstanding shares, an abstention or broker non-vote will
have the same effect as a vote against the matter being voted upon.





                                       2
<PAGE>   6



                         SECURITY OWNERSHIP OF CERTAIN
                        BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of April 18, 1997, (i) by
each person (or group of affiliated persons) who is known by the Company to own
beneficially more than five percent of the Company's Common Stock, (ii) by each
of the Company's directors, including the Company's Chief Executive Officer
(the "CEO") (iii) by each of the four other most highly compensated executive
officers, other than the CEO (collectively the "Named Executive Officers"), and
(iv) by all directors and executive officers as a group.  Except as indicated
in the footnotes to this table, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable.

<TABLE>
<CAPTION>
                                                                               Percent of
                                                   Outstanding                 Shares of
                                                   Common Stock               Common Stock
                                                   Beneficially               Beneficially
Name and Address (1)                                  Owned                      Owned      
--------------------                              --------------              ------------
<S>                                               <C>                             <C>
Efratom Holding, Inc.(2)                                 817,778                  15.8%
10 Longs Peak Drive
Broomfield, Colorado 80021
Heinz Badura, Vice President                        8,684 (3)(4)                    *
Robert F. Ellis, Vice President                    22,545 (3)(5)                    *
G. Tilton Gardner, Director                           22,598 (3)                    *
Donovan B. Hicks, Director                               500 (6)                    *
R. David Hoover, Director                                500 (7)                    *
Louis B. Horwitz, Chief Executive Officer,        220,319 (3)(8)                   4.2%
President and Director
Michael M. Mann, Director                          52,000 (3)(9)                   1.0%
Dan L. McGurk, Director                               41,000 (3)                    *
Edward A. Money, Director                             39,000 (3)                    *
Thomas J. O'Rourke, Director                      93,000 (3)(10)                   1.8%
John (Jack) R. Rice, Vice President               13,344 (3)(11)                    *
David A. Young, Vice President                    13,147 (3)(12)                    *
and Chief Financial Officer
All Officers and Directors                          593,199 (13)                  11.0%
 as a Group (15 persons)
</TABLE>

__________________________
*Less than 1%





                                       3
<PAGE>   7



(1)      Beneficial ownership is determined in accordance with the rules of the
         SEC.  In computing the number of shares beneficially owned by a person
         and the percentage ownership of that person, shares of Common Stock
         subject to options held by that person that are currently exercisable
         or exercisable within 60 days of April 18, 1997 are deemed
         outstanding.  Such shares, however, are not deemed outstanding for the
         purposes of computing the percentage ownership of each other person.
         To the Company's knowledge, except as set forth in the footnotes to
         this table and subject to applicable community property laws, each
         person named in the table has sole voting and investment power with
         respect to the shares set forth opposite such person's name.
         Information with respect to beneficial ownership is based upon the
         Company's stock records and data supplied to the Company by the
         holders.

(2)      Efratom Holding, Inc. is a wholly-owned subsidiary of Ball
         Corporation.

(3)      Included in the total number of shares listed are 48,750 shares for
         Mr. Horwitz, 21,000 shares for each of Messrs. McGurk, Money and
         O'Rourke, 19,000 shares for Mr. Mann, 19,688 shares for Mr. Ellis,
         13,000 shares for Mr. Gardner, 12,500 shares for Mr. Rice, 11,250
         shares for Mr. Young and 7,500 shares for Mr. Badura which may be
         acquired within sixty days of April 18, 1997 upon exercise of
         outstanding options.

(4)      Includes 684 shares held for the account of Mr. Badura in the
         Company's Savings and Retirement Plan.

(5)      Includes 2,910 shares held for the account of Mr. Ellis in the
         Company's Savings and Retirement Plan.

(6)      Does not include 817,778 shares held by Efratom Holding, Inc.  Mr.
         Hicks was designated as a nominee for election to the Company's Board
         of Directors pursuant to a Stockholder's Agreement between the Company
         and Efratom Holding, Inc., and disclaims beneficial ownership of all
         such shares.

(7)      Does not include 817,778 shares held by Efratom Holding, Inc.  Mr.
         Hoover is the Chief Financial Officer of Ball Corporation, the
         corporate parent of Efratom Holding, Inc. and disclaims beneficial
         ownership of all such shares.

(8)      Includes 4,804 shares held for the account of Mr. Horwitz in the
         Company's Savings and Retirement Plan.  Does not include 28,000 shares
         owned by adult children of Mr. Horwitz.

(9)      Includes 33,000 shares that are subject to shared voting and
         investment powers.  These shares are owned by Blue Marble Development
         Group, Inc. Defined Benefit Pension Plan and Trust, of which Mr. Mann
         and his spouse are co-trustees.

(10)     Includes 33,000 shares as to which Mr. O'Rourke has shared voting and
         investment powers.  These shares are owned by O'Rourke Investment
         Corp., of which Mr. O'Rourke is president and chairman.

(11)     Includes 844 shares held for the account of Mr. Rice in the Company's
         Savings and Retirement Plan.

(12)     Includes 849 shares held for the account of Mr. Young in the Company's
         Savings and Retirement Plan.  Also includes 548 shares to which Mr.
         Young has shared voting or investment powers.

(13)     Includes 236,920 shares which may be acquired within sixty days after
         April 18, 1997, upon exercise of outstanding options.  Also includes
         15,643 shares held for the account of officers





                                       4
<PAGE>   8



         and directors in the Company's Savings and Retirement Plan.  Excludes
         817,778 shares held by Efratom Holding, Inc. - see footnotes (6) and
         (7).





                                       5
<PAGE>   9



                                   PROPOSAL 1



                             ELECTION OF DIRECTORS

         The Company's Certificate of Incorporation provides for a classified
Board of Directors.  The Board is divided into three classes designated Class
I, Class II and Class III.  The term of each director included in Class I
expires at this Annual Meeting and, consequently, the nominees listed below
under the heading "Class I" are being presented for election as directors to
hold office until the Annual Meeting of Stockholders in 2000.  The term of
office of each director included in Class II will continue until the Annual
Meeting of Stockholders in 1998.  The term of office of each director in Class
III will continue until the Annual Meeting of Stockholders in 1999.

         Messrs. Hoover and Money are being presented by the Board for election
as directors to serve as members of Class I until the Annual Meeting of
Stockholders in 2000.  Messrs. Hoover and Money are presently serving as
directors of the Company.  Unless instructed to the contrary, the shares
represented by the proxies will be voted in favor of the election of Messrs.
Hoover and Money as directors.  Although it is anticipated that each nominee
will be able to serve as a director, should any nominee become unavailable to
serve, the proxies will be voted for such other person or persons as may be
designated by the Company's Board of Directors.  The persons receiving the
highest number of votes will be elected as directors.  Stockholders do not have
the right to cumulate votes in the election of directors.

         Certain information as of April 18, 1997 with respect to the two
nominees for election as directors and with respect to each director whose term
of office continues is set forth below.



<TABLE>
<CAPTION>
Name of Individual                    Age            Positions Held
------------------                    ---            --------------
<S>                                   <C>            <C>
CLASS I
R. David Hoover                       51             Director
Edward A. Money                       66             Director

CLASS II
Louis B. Horwitz                      69             President and Chairman of the Board of Directors
Dan L. McGurk                         70             Director

CLASS III
G. Tilton Gardner                     61             Director
Donovan B. Hicks                      59             Director
Michael M. Mann                       57             Director
</TABLE>

         R. David Hoover has been a director of the Company since March 1995.
Mr. Hoover is currently Executive Vice President and Chief Financial Officer of
Ball Corporation.  From 1988 to 1992, he was Vice President and Treasurer of
Ball Corporation.  Mr. Hoover is currently a director of American National
Bank, a national banking association.  Mr. Hoover was appointed to the Board of
Directors of the Company in connection with the Company's acquisition of
Efratom Time and Frequency Products, Inc. and Efratom Elektronik GmbH from
Efratom Holding, Inc., a wholly owned subsidiary of Ball Corporation, pursuant
to the terms of the Stockholder's Agreement, dated March 1995, between the
Company and Efratom Holding, Inc.

         Edward A. Money has been a director of the Company since May 1980.  He
has been the President of The Edward A. Money Corporation, a company supplying
specialty automotive parts, since February 1982.  He was Vice
President-Finance, Treasurer and Secretary of the Company from February 1977 to
February 1982.





                                       6
<PAGE>   10



         Louis B. Horwitz has been the President and Chairman of the Board of
Directors of the Company since October 1976 and a director of the Company since
May 1975.  Prior to joining the Company, Mr. Horwitz was an independent
management consultant, and an Executive Vice President of Xerox Data Systems, a
manufacturer of computers.  Mr. Horwitz is currently a director of Newport
Corporation, a manufacturer of electro-optical components.  It is anticipated
that Mr. Horwitz will retire as Chief Executive Officer and President in the
near future and continue for a period as Chairman of the Board.

         Dan L. McGurk has been a director of the Company since May 1977.  He
has been a private investor and consultant since 1970.  Mr. McGurk is Treasurer
and Chairman of the Board of Southland Title Corporation.  Prior to 1970, he
was President of Xerox Data Systems, a manufacturer of computers, and from May
1976 to January 1977 he served as Associate Director of the Office of
Management and Budget, Executive Office of the President of the United States.
He is currently a director of Bowmar Instruments Corporation, a manufacturer of
electrical and electro-mechanical parts and Newport Corporation, a manufacturer
of electro-optical components.

         G. Tilton Gardner has been a director of the Company since 1976.  Mr.
Gardner is currently Executive Vice President of Van Kasper & Company, an
investment banking firm that is acting as a representative of the underwriters
in this offering.  From 1965 until 1988 he was associated with Morgan,
Olmstead, Kennedy & Gardner Incorporated, an investment banking firm, serving
as Chief Executive Officer and Chairman of the Board from 1976.  In 1988, that
company was combined with Wedbush Securities to form Wedbush Morgan Securities,
of which Mr. Gardner served as Executive Vice President until February 1993.

         Donovan B. Hicks has been a director of the Company since March 1995.
Mr. Hicks was Group Vice President of the Ball Aerospace and Communications
Group of Ball Corporation from 1981 to 1996.  Mr. Hicks was appointed to the
Board of Directors of the Company in connection with the Company's acquisition
of Efratom Time and Frequency Products, Inc. and Efratom Elektronik GmbH from
Efratom Holding, Inc., a wholly- owned subsidiary of Ball Corporation, pursuant
to the terms of a Stockholder's Agreement, dated March 17, 1995, between the
Company and Efratom Holding, Inc.  Mr. Hicks is currently the Managing Partner
of Cygnus Enterprise Development LLC.

         Michael M. Mann has been a director of the Company since May 1989.  He
has been a director and President of the Blue Marble Development Group, Inc.,
an international corporate development and consulting group, since its
formation in 1988.  Mr. Mann is also currently serving as Chairman of the Board
of Management Technology, Inc., a developer of management systems software and
as a director of Safeguard Health Enterprises, a corporation engaged in
providing dental and vision plans.  Mr. Mann also provides consulting services
to state and federal governmental agencies and multi-national corporations and
has served as a member of the Army Science Board.  From mid-1987 to 1988 Mr.
Mann was a senior consultant and director of Aerospace Industries Centre with
Arthur D. Little Inc., an international consulting firm.

         The Board of Directors held four meetings during the fiscal year ended
December 31, 1996. Each director attended at least 75% of all meetings of the
Board of Directors and each committee on which that director served.  Each
member of the Board of Directors received $1,000 per month during the fiscal
year ended December 31, 1996 for his services as a director.  In addition, each
nonemployee member of the Board of Directors received $500 for each meeting of
the Board of Directors attended by that director and $250 for each meeting of a
committee of the Board attended by that director, other than committee meetings
held in conjunction with meetings of the Board of Directors.  In addition,
under the Company's 1994 Stock Incentive Plan, each incumbent director who is
not an employee of the Company is automatically granted a non-qualified option
to purchase 2,000 shares of the Company's Common Stock on the first business
day of each calendar year.  Such options (i) have an exercise price equal to
the fair market value of the Common Stock on the date of grant, (ii) vest in
full





                                       7
<PAGE>   11



one year from the date of grant and (iii) have a ten year term.  Mr. Hoover and
Mr. Hicks, who were appointed to the Board of Directors pursuant to the
Stockholder's Agreement between the Company and Efratom Holding, Inc., have
agreed to waive their fees and options as directors.

         The Board of Directors has an Audit Committee and a Compensation
Committee.  The Board of Directors does not have a standing nominating
committee.

         The principal duties of the Audit Committee are (i) to recommend to
the Board of Directors the selection of the Company's independent accountants,
(ii) to discuss and review with the Company's independent accountants the audit
plan, the auditors' report and management letter and the Company's accounting
policies and (iii) to review the accounting procedures and internal control
procedures recommended by the Company's independent accountants.  The Audit
Committee held two meetings during the year ended December 31, 1996.  The Audit
Committee is comprised of Messrs. Gardner, McGurk, Money and Mann.

         The principal duties of the Compensation Committee are (i) to
administer and approve the annual compensation rates of all officers and key
employees of the Company, (ii) to administer the incentive compensation, stock
award, stock option and other compensation plans of the Company and (iii) to
make recommendations to the Board in connection with such plans.  The
Compensation Committee held two meetings during the year ended December 31,
1996.  The Compensation Committee is comprised of Messrs. O'Rourke, McGurk,
Gardner and Hicks.





                                       8
<PAGE>   12



EXECUTIVE COMPENSATION

         The following table sets forth summary information concerning
compensation of the CEO and the Named Executive Officers for services rendered
to the Company in all capacities during the three fiscal years ended December
31, 1996, 1995 and 1994.

                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                                          LONG-TERM
                                                                         COMPENSATION
                                                                            AWARDS
                                                      ANNUAL                ------
                                                   COMPENSATION           SECURITIES              
                                                   ------------           UNDERLYING       ALL OTHER
NAME AND PRINCIPAL POSITION           YEAR      SALARY($)   BONUS($)       OPTION(#)   COMPENSATION($)(2)
---------------------------           ----      ---------   ---------     ----------   ------------------
<S>                                   <C>        <C>         <C>            <C>              <C>
Louis B. Horwitz(1)                   1996       247,000     203,000        40,000           4,043
  President and Chairman              1995       222,000      75,000           -0-           5,006
  of the Board                        1994       210,848     110,000        25,000           5,005

Heinz Badura                          1996       150,000      45,000        15,000           3,811
  Vice President of Datum Inc.        1995        90,000      50,000         5,000           2,247
  and President of Efratom Time       1994           ---         ---           ---            ---
  and Frequency, Inc.

Robert F. Ellis                       1996       140,000      25,000           -0-           3,490
  Vice President of Datum Inc.        1995       130,535      20,000         3,750           3,263
                                      1994       117,910     100,000         8,750           2,948

John (Jack) R. Rice                   1996       150,000     100,000         5,000           2,792
  Vice President of Datum Inc.        1995       151,419      30,000           -0-           2,452
  and President of Austron, Inc.      1994        81,979      20,000        15,000           1,477

David A. Young                        1996       130,000      50,000         5,000           4,017
  Vice President of Datum Inc.        1995       120,000      30,000           -0-           3,490
  and Chief Financial Officer         1994        48,654      20,000        15,000             423
</TABLE>


__________________________

(1)   Salary amounts for Mr. Horwitz include director's fees of $12,000,
      $12,000 and $10,667 for the years 1996, 1995 and 1994, respectively.

(2)   Amounts shown represent Company contributions under the Company's Savings
      and Retirement Plan for the listed executives.





                                       9
<PAGE>   13



OPTION MATTERS

         Option Grants.  The following table sets forth certain information
concerning grants of options to each of the Company's Named Executive Officers
during the fiscal year ended December 31, 1996.  In addition, in accordance
with the rules and regulations of the Securities and Exchange Commission, the
following table sets forth the hypothetical gains or "option spreads" that
would exist for the options.  Such gains are based on assumed rates of annual
compound stock appreciation of 5% and 10% from the date on which the options
were granted over the full term of the options.  The rates do not represent the
Company's estimate or projection of future Common Stock prices and no assurance
can be given that the rates of annual compound stock appreciation assumed for
the purposes of the following table will be achieved.

                       OPTION GRANTS IN LAST FISCAL YEAR


<TABLE>
<CAPTION>
                                                                                       POTENTIAL REALIZABLE
                                              INDIVIDUAL GRANTS                         VALUE AT ASSUMED
                                              -----------------                          ANNUAL RATES OF
                          NUMBER OF      % OF TOTAL                                        STOCK PRICE
                          SECURITIES       OPTIONS                                       APPRECIATION FOR
                          UNDERLYING     GRANTED TO                                        OPTION TERM
                           OPTIONS      EMPLOYEES IN       EXERCISE      EXPIRATION        -----------
NAME                      GRANTED(#)   FISCAL YEAR(1)     PRICE($/SH)     DATE(2)       5%($)      10%($)
----                      ----------   --------------     -----------     -------       -----      -------
<S>                         <C>            <C>              <C>            <C>         <C>         <C>
Louis B. Horwitz            40,000         30.2%            10.125         3/1/06      254,705     645,466
Heinz Badura                 5,000         3.8%             10.125         3/1/06       31,839      80,685
Robert F. Ellis                ---         ---                 ---            ---          ---         ---
John (Jack) R. Rice          5,000         3.8%             10.125         3/1/06       31,839      80,685
David A. Young               5,000         3.8%             10.125         3/1/06       31,839      80,685
</TABLE>


__________________________

(1) Options to purchase an aggregate of 132,500 shares of Common Stock were
    granted to employees, including the Named Executive Officers during the
    fiscal year ended December 31, 1996.

(2) Options granted have a term of 10 years, subject to earlier termination in
    certain events related to termination of employment.  Options become
    exercisable with respect to 25% of the shares on March 1, 1997, and the
    balance becomes exercisable in three equal annual installments thereafter.





                                       10
<PAGE>   14



         Option Exercises.  The following table sets forth certain information
concerning the exercise of options by each of the Company's Named Executive
Officers during the fiscal year ended December 31, 1996, including the
aggregate value of gains on the date of exercise.  In addition, the table
includes the number of shares covered by both exercisable and unexercisable
stock options as of December 31, 1996.  Also reported are the values for "in
the money" options which represent the positive spread between the exercise
prices of any such existing stock options and the fiscal year end price of the
Company's Common Stock ($16.875 per share).

                 AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
                       AND FISCAL YEAR-END OPTION VALUES


<TABLE>
<CAPTION>
                                         NUMBER OF SECURITIES
                                        UNDERLYING UNEXERCISED         VALUE OF UNEXERCISED
                                          OPTIONS AT FISCAL            IN-THE-MONEY OPTIONS
                                            YEAR-END(#)                AT FISCAL YEAR-END($)
                                            -----------                ---------------------
NAME                                 EXERCISABLE    UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                                 -----------    -------------   -----------   -------------
<S>                                    <C>             <C>            <C>            <C>
Louis B. Horwitz                       32,500          52,500         405,000        420,000
Heinz Badura                            3,750          16,250          21,875         99,375
Robert F. Ellis                        16,563           7,187         214,339         69,724
John (Jack) R. Rice                     7,500          12,500          94,688        128,438
David A. Young                         10,000          10,000         118,750         93,125
</TABLE>


BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The Compensation Committee of the Board of Directors has the responsibility for
administering and approving compensation programs involving the Company's
senior executives, including the Named Executive Officers.  Compensation may
include a base salary, a variable incentive bonus, stock options and/or stock
grants.  The Committee is composed of four independent, nonemployee directors.

The Company's executive compensation program is based upon the following
principles:

         o   Compensation in all forms must be related to both the Company's
             overall results and the individual's performance in the execution
             of his or her responsibilities.

         o   There must be an appropriate correlation that provides a direct
             tie between each executive's compensation and long-term
             stockholder value.

         o   There must be a balance between fixed incentive and equity
             compensation.

         o   Compensation is designed to fall in the median to high range of
             that paid to comparable executives in other similarly-sized
             corporations, with particular dependence placed upon salaries
             listed in the surveys annually published by the American
             Electronics Association (the "Surveys").  Some, but not all of the
             Companies included in the Surveys are included in the Performance
             Graph on Page 14 of this Proxy Statement.

         o   Each compensation package must be designed to attract, retain and
             motivate appropriate executives.

In applying the above principles to its review of an executive officer's
compensation, the Committee subjectively reviews the principles but does not
assign relative weights to any of the principles.





                                       11
<PAGE>   15



The Company has not, and does not expect to, pay any compensation for which an
expense deduction would be disallowed under Section 162(m) of the Internal
Revenue Code of 1986, as amended, relating to the limitation of the deduction
of compensation in excess of $1,000,000 to certain executive officers of
publicly held companies.  Any award under the Company's 1994 Stock Incentive
Plan should be deemed performance-based compensation and, accordingly, should
not be included in the calculation of an executive officer's compensation in
determining the applicability of Section 162(m).

On August 8, 1996, the Compensation Committee met at the request of the
Chairman to consider several matters among which was the approval of a
Consulting Agreement for Robert F. Ellis, Vice President of Telecommunications
Sales.  It was deemed appropriate that Mr. Ellis, having served the Company for
21 years at the time, be deserving of such an agreement.  Upon discussion and
consideration of the terms, the Committee approved the adoption of the
Consulting Agreement.  See "-- Severance and Consulting Agreements."

For the 1996 year, the Committee took into consideration two matters that had a
significant impact upon the long-term strategic position of the Company.  The
first was the aftermath of the Company's acquisition of Efratom Time and
Frequency Products, Inc., which took place on March 17, 1995.  Throughout the
1996 year, there has been extensive activities integrating this new company
into Datum by the Chief Executive Officer, the Chief Financial Officer, and
certain other officers and executives of the Company.  Also, during 1996, the
Company refinanced a portion of its debt commitments, expanding the available
credit line and restructuring its prior debt.

The process of determining executive officer compensation for 1996, including
the Chief Executive Officer's compensation, was based upon the Company's 1996
results after consideration of the factors described above, and may be
summarized as follows:

         o   In February 1997, the Company's Chief Executive Officer prepared a
             detailed written analysis of the Company's performance for 1996
             including a review of each of the operating divisions, and an
             analysis of each executive officer's performance in affecting the
             overall results.  Consideration was given to net operating income,
             return on assets, growth, and development of new products.  In
             addition, actual operating results, for each executive, were
             compared to specific assigned objectives which had been provided
             to them in written form early in 1996.

         o   Using this information as a basis of performance, and considering
             the available comparable compensation information in the Surveys,
             the Chief Executive Officer prepared recommendations for
             modification to each subordinate executive officer's compensation
             package.

         o   On February 27, 1997, the Compensation Committee met to analyze
             the information prepared for its review and considered the
             recommendations of the Chief Executive Officer with regard to all
             executive officer salaries, except that of the Chief Executive
             Officer.

         o   After in-depth discussion and consideration of the information,
             the Committee examined three aspects of each executive officer's
             compensation:


                 -  Base pay and modification, if any.
                 -  Incentive consideration, if any.
                 -  Stock options and stock awards, if any.

         o   After review of the available data and comparable incentive
             packages, the Compensation Committee awarded salary increases to
             each of the Company's officers, a bonus based upon individual
             performance to each of the officers, and additional stock options
             to each of





                                       12
<PAGE>   16



             the officers, consistent with the Company's desire to provide a
             balance of current income and long-term performance-based
             incentive.

         o   The Committee then considered these matters for the Chief
             Executive Officer (in his absence) and after discussion and
             consideration of the Company's performance, awarded an increase in
             salary and a bonus.

         o   The Committee then discussed the requirement to again establish
             clear and defined objectives for 1997 for each of the Company's
             officers.  The Chairman indicated that it was his intent to
             establish these objectives in written form for review by the
             Compensation Committee.

The members of the Compensation Committee believe the Company's compensation
programs are consistent with the Company goals and have been applied in a fair
and even-handed manner in the best interests of the Company and its
stockholders.

                 Members of the Compensation Committee:

                          Dan L. McGurk, Chairman
                          G. Tilton Gardner
                          Donovan B. Hicks
                          Thomas J. O'Rourke





                                       13
<PAGE>   17


PERFORMANCE GRAPH

          This graph compares the Company's cumulative total return to
stockholders during the past five years with that of the NASDAQ Market Index,
the S&P Communications Equipment Index (the "S&P Group Index") and the SIC Code
3679 Index (electronic components, not elsewhere classified) (the "Peer Group
Index") published by Media General Financial Services, Inc (a list of the
companies comprising the S&P Group Index or the Peer Group Index will be sent to
any shareholder upon request).  In past years, such comparison has been made
with only the NASDAQ Market Index and the Peer Group Index.  In the future the
S&P Group Index will replace the Peer Group Index, as the Company's continually
expanding role in the telecommunications industry makes the S&P Group Index the
more relevant index for comparison purposes.


                     COMPARE 5 YEAR CUMULATIVE RETURN AMONG
               DATUM, INC., NASDAQ MARKET INDEX, S&P GROUP INDEX
                              AND PEER GROUP INDEX


<TABLE>
<CAPTION>
                                                  FISCAL YEAR ENDING
                                ---------------------------------------------------------
COMPANY                         1991     1992       1993       1994       1995       1996
-------                         ----     ----       ----       ----       ----       ----
<S>                             <C>     <C>        <C>        <C>        <C>        <C>
DATUM INC                       100      89.29     117.86     292.86     292.86     482.14
S&P GROUP INDEX                 100     107.86     103.76     118.37     117.15     207.47
PEER GROUP INDEX                100     112.40      94.03     106.98     139.60     167.22
BROAD MARKET INDEX              100     100.98     121.13     127.17     164.96     204.98
</TABLE>


         Assumes $100 invested on January 1, 1992 and assumes dividends
reinvested.

SEVERANCE AND CONSULTING AGREEMENTS

         Effective as of March 7, 1986, the Company entered into an executive
agreement with Louis B. Horwitz (the "Horwitz Executive Agreement").  The
Horwitz Executive Agreement provides for the payment of benefits in the event
that Mr. Horwitz's employment is terminated within three years subsequent to a
"change in control" of the Company (as defined in the Horwitz Executive
Agreement) under certain circumstances.  A "change in control" includes the
ownership by any person of 30% or more of the combined voting power of the
Company's outstanding securities and certain changes in the composition of the
Company's Board of Directors.  The benefits payable under the Horwitz Executive
Agreement are (i) an amount equal to three times the average of the aggregate
annual compensation paid by the Company to Mr. Horwitz during the five calendar
years preceding the change in control of the Company, (ii) the right for a
period of three months following the employment termination to exercise all
unexercised stock options, whether or not they have vested, and (iii) the
automatic vesting of all restricted stock awarded to Mr. Horwitz.  The
foregoing benefits are to be reduced to the extent necessary so that no portion
thereof shall be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended.  The benefits are payable on the
date of termination of





                                       14
<PAGE>   18



Mr. Horwitz's employment.  Under the Horwitz Executive Agreement, if such
termination had occurred at the end of the fiscal year ended December 31, 1996,
Mr. Horwitz would have received $761,080.

         On October 9, 1992, the Company entered into a consulting agreement
with Mr. Horwitz (the "Horwitz Consulting Agreement").  The Horwitz Consulting
Agreement provides for consulting services to be provided commencing on the
retirement of Mr. Horwitz as an officer and employee of the Company.  The
Horwitz Consulting Agreement commences on Mr. Horwitz' retirement and continues
for twelve months thereafter and may be renewed at the Company's option for
successive additional twelve month periods or any portion thereof.  In the
event of a "change of control" of the Company (as defined in the Horwitz
Consulting Agreement) while the Horwitz Consulting Agreement is in force, the
term will be extended for a period of ten years from commencement.  Under the
Horwitz Consulting Agreement, Mr. Horwitz is to provide such advice and
consultation as the Company requests, including with respect to strategic
planning, management, financial analysis, product planning and other corporate
matters.  As compensation, Mr. Horwitz will be paid $8,333.33 per day, plus
travel expenses, and will be guaranteed a minimum of twelve days of service per
year.  In the event of death or disability prior to the end of the term of the
Horwitz Consulting Agreement, or any renewal term, and prior to a change of
control of the Company, Mr. Horwitz, or his estate, shall be entitled to an
amount equal to the fee for twelve days of consulting.  In the event of death
or disability after a change of control which results in an extension of the
term, Mr. Horwitz, or his estate, will be entitled to the minimum annual
payments for the balance of the term.  The Horwitz Consulting Agreement
provides that it will be binding on successors on the Company's business.

         On September 26, 1996, the Company entered into a consulting agreement
with Robert F. Ellis (the "Ellis Consulting Agreement"), the Company's Vice
President, Telecommunications Sales Division.  Under the terms of the
Consulting Agreement, Mr. Ellis is to provide consulting services to the
Company, for an initial 12 month period, commencing on his retirement which is
scheduled to occur in July 1999.  The Ellis Consulting Agreement becomes null
and void, unless reaffirmed by both parties, in the event that Mr. Ellis'
service with the Company is severed, for any reason, prior to July 1999.  Upon
a "change in control" of the Company (as defined in the Ellis Consulting
Agreement) while the Ellis Consulting Agreement is in force, the term will be
extended for a period of five years commencing on Mr. Ellis's termination of
employment.  Under the Ellis Consulting Agreement, Mr. Ellis is to provide such
advice and consultation as requested by the Company, including with respect to
business planning, management, financial analysis and other corporate matters.
As compensation, Mr. Ellis will be paid $2,500 per day plus travel expenses,
for a guaranteed a minimum of twelve days of service per year.  In the event of
death or disability prior to the end of the term of the Ellis Consulting
Agreement, or any renewal term, and prior to a change in control of the
Company, Mr. Ellis, or his estate, shall be entitled to an amount equal to the
fee for twelve days of consulting.  In the event of death or disability after a
change in control which results in an extension of the term, Mr. Ellis, or his
estate, will be entitled to the minimum annual payments for the balance of the
term.  The Ellis Consulting Agreement provides that it will be binding on
successor's of the Company's business.

                                   PROPOSAL 2

                           APPROVAL OF THE COMPANY'S
                          EMPLOYEE STOCK PURCHASE PLAN

         At the Meeting, the Company's stockholders will be asked to approve
and ratify the adoption of the Company's Employee Stock Purchase Plan (the
"Purchase Plan").  Subject to approval by the Company's stockholders at the
Annual Meeting, the Purchase Plan was adopted by the Board of Directors on
February 28, 1997 to be effective on July 1, 1997 (the "Effective Date").  The
primary purpose of the Purchase Plan is to provide employees of the Company and
its subsidiaries with an





                                       15
<PAGE>   19



opportunity to purchase Common Stock through payroll deductions and to increase
their proprietary interest in the Company.

         The following description of the Purchase Plan is qualified by
reference to the complete text of the Purchase Plan.  A copy of the Purchase
Plan is attached hereto as Exhibit A.

                               THE PURCHASE PLAN

GENERAL NATURE AND PURPOSE

         The Purchase Plan authorizes the Company to issue and reserve for the
Purchase Plan, or purchase up to an aggregate of 250,000 shares of Common Stock
in open market transactions for the benefit of participating employees
("Participants") during the term of the Purchase Plan.

         The Purchase Plan is not a qualified plan under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code").  The Purchase Plan is
designed to be an employee stock purchase plan under Section 423 of the Code,
providing the Participants the benefits afforded under Section 421 of the Code.
See "Summary of Federal Income Tax Consequences" below.

         The primary purpose of the Purchase Plan is to provide employees of
the Company, and of such of the Company's subsidiaries as the Board of
Directors may from time to time designate (each a "Designated Subsidiary" and
collectively, "Designated Subsidiaries"), with an opportunity to purchase
Common Stock through payroll deductions and to increase their proprietary
interest in the Company.  Shares of Common Stock covered by the Purchase Plan
will either be issued by the Company pursuant to the Purchase Plan or purchased
in open market transactions.

         The Purchase Plan has been designed in a manner so that the Purchase
Plan is exempt from the provisions of the Employment Retirement Income Security
Act of 1974 ("ERISA").

ADMINISTRATION

         The Purchase Plan will be administered by the Board of Directors, or
by a committee thereof (the "Committee").  All questions of interpretation of
the Purchase Plan are to be determined by the Board of Directors or the
Committee and its decisions are to be final and binding on all Participants.
The Board of Directors or the Committee has the authority to designate agents
to carry out responsibilities relating to the Purchase Plan.

ELIGIBILITY

         Each employee of the Company or any of its Designated Subsidiaries
("Employee" or collectively, the "Employees") who, on the Grant Date (as
defined below), is customarily engaged on a regularly-scheduled basis of more
than twenty (20) hours per week and who has been employed for at least ninety
(90) days (or, for the initial Offering Period (as defined below) only, such
Employees who are employed on the Effective Date) in the rendition of personal
services to the Company may become a Participant in the Plan on the Grant Date
coincident with or next following his satisfaction of such requirements of
employment with the Company or any Designated Subsidiary.



         "Grant Date" means the first day of each Offering Period (January 1,
April 1, July 1 and October 1) under the Plan.  However, for the first Offering
Period, the Grant Date shall be the Effective Date.  "Offering Period" means
the quarterly periods from January 1 through March 31, April 1 through June 30,
July 1 through September 30 and October 1 through December 31 of each calendar
year.  However, the first Offering Period shall commence on the Effective Date
and end September 30, 1997 regardless of whether such initial Offering Period
is more or less than three months.





                                       16
<PAGE>   20



         Under the Purchase Plan, no Employee will be granted a right to
purchase any Common Stock under the Purchase Plan if immediately after the
purchase of any Common Stock under the Purchase Plan the Employee would own
stock or hold outstanding options to purchase stock possessing in the aggregate
5% or more of the total combined voting power of all classes of stock of the
Company, or if the grant would permit the Employee to purchase stock which,
when aggregated with purchases under all other employee stock purchase plans of
the Company, would exceed $15,000 worth of Common Stock of the Company
(determined using the fair market value of such stock at the time such right is
granted) for any calendar year in which the right is outstanding at any time.
In addition, the number of shares of Common Stock of the Company purchasable by
a participant on any Purchase Date shall not exceed 2,000 shares, subject to
periodic adjustments.

         The approximate number of persons who currently are eligible to be
Participants is 650.

PARTICIPATION

         On each Grant Date, the Company grants to each eligible Employee who
has elected in writing to participate in the Purchase Plan a right to purchase,
at the Purchase Price described below, that number of shares and partial shares
of Common Stock that can be purchased by the Company at the Purchase Price with
the amounts held in such employee's payroll deduction account.  The Common
Stock will be purchased on the next Purchase Date.  "Purchase Date" means the
last day of each Offering Period (March 31, June 30, September 30 or December
31).  After the initial Offering Period, the Purchase Plan provides for
consecutive three-month Offering Periods commencing on each Grant Date and
ending on the next following Purchase Date.

         An Employee who has satisfied the eligibility requirements of the
Purchase Plan may become a Participant upon his or her completion and delivery
to the Company of a Subscription Agreement authorizing payroll deductions.
Subject to the other limitations contained in the Purchase Plan, a Participant
may elect to defer only whole dollar amounts of his or her compensation up to
an aggregate maximum of 15% of his or her total compensation in any calendar
year.  A Participant may terminate participation in the Purchase Plan at any
time but will forfeit the ability to participate in at least one future
Offering Period.  See "Payment of Purchase Price; Payroll Deductions" below.

BENEFITS OR AMOUNTS RECEIVABLE UNDER THE PURCHASE PLAN

         The Company believes that the benefits or amounts that will be
received by any Participant or group of Participants under the Purchase Plan
cannot be determined.  The Company also believes that the benefits or amounts
that would have been received by any person or group of persons under the
Purchase Plan in fiscal 1996 if the Purchase Plan had been in effect during
that period cannot be determined.

AMENDMENT AND TERMINATION OF THE PURCHASE PLAN

         The Purchase Plan will terminate on June 30, 2007.  The Board of
Directors or the Committee at any time may amend or terminate the Purchase
Plan, except that termination of the Purchase Plan will not affect a
Participant's right to purchase Common Stock at a Purchase Price for any
current Offering Period, nor may any amendment to the Purchase Plan make any
change in a right to purchase Common Stock that adversely affects the rights of
any Participant.  No amendment may be made to the Purchase Plan without prior
approval of the stockholders of the Company if such amendment would increase
the number of shares reserved under the Purchase Plan, materially modify the
eligibility requirements of the Purchase Plan or materially increase the
benefits that may accrue to Participants under the Purchase Plan.





                                       17
<PAGE>   21



PURCHASE PRICE

         The purchase price per share (the "Purchase Price") for which shares
of Common Stock will be sold in an Offering Period under the Purchase Plan is
the lesser of 90% of the Fair Market Value of a share of Common Stock on the
Grant Date or 90% of the Fair Market Value of a share of Common Stock on the
Purchase Date.

         "Fair Market Value" shall mean the value of one share of Company
Stock, determined as follows:

                 (a)      If the Company Stock is then listed or admitted to
trading on the Nasdaq National Market System or a stock exchange which reports
closing sale prices, the Fair Market Value shall be the closing sale price on
the date of valuation on the Nasdaq National Market System or principal stock
exchange on which the Company Stock is then listed or admitted to trading, or,
if no closing sale price is quoted or no sale takes place on such day, then the
Fair Market Value shall be the closing sale price of the Company Stock on the
Nasdaq National Market System or such exchange on the next preceding day on
which a sale occurred.

                 (b)      If the Company Stock is not then listed or admitted
to trading on the Nasdaq National Market System or a stock exchange which
reports closing sale prices, the Fair Market Value shall be the average of the
closing bid and asked prices of the Company Stock in the over-the-counter
market on the date of valuation.

                 (c)      If neither (a) nor (b) is applicable as of the date
of valuation, then the Fair Market Value shall be determined by the
Administrator in good faith using any reasonable method of valuation, which
determination shall be conclusive and binding on all interested parties.

         The fair market value of the Common Stock on the Record Date was
$17.00 per share.

PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS

         The Purchase Price of shares is paid by means of payroll deductions
accumulated on behalf of a Participant during an Offering Period.  For the
purposes of the Purchase Plan, a Participant's compensation is the amount
indicated on the Form W-2 issued to the Participant by the Company.  A
Participant may either (i) terminate participation in the Purchase Plan, (ii)
discontinue deductions and have accumulated deductions for the Offering Period
applied to the Purchase of Common Stock as of the next Purchase Date or (iii)
decrease the rate of payroll deductions once during each Offering Period.  If a
Participant terminates participation in the Purchase Plan, however, such
Participant will be precluded from participating in the Purchase Plan from the
date of termination through the remainder of the Offering Period within which
the termination occurred and the next succeeding Offering Period.  See
"Withdrawal".

         Transactions under the Purchase Plan are exempt from Section 16(b) of
the Exchange Act, as the Purchase Plan is a tax conditioned plan within the
meaning of Rule 16b-3 promulgated thereunder.

         Payroll deductions for a Participant commence on the Grant Date
coincident with or next following the date on which a Participant's payroll
deduction authorization is properly filed and continue thereafter unless such
rate is changed or the Participant's participation is terminated.

         The Company will establish and maintain a separate account for each
Participant.  All payroll deductions that are credited to a Participant's
account under the Purchase Plan do not accrue any interest or earnings and are
deposited with the general funds of the Company.  All payroll deductions





                                       18
<PAGE>   22



received or held by the Company may be used by the Company for any corporate
purpose.  The Company is not obligated to segregate such deductions.

PURCHASE OF STOCK

         Absent an election by the Participant to terminate and have his or her
account returned, on each Purchase Date, the Plan shall purchase on behalf of
each Participant the maximum number of whole shares of Company Stock at the
Purchase Price as can be purchased with the amounts held in each Participant's
account.  In the event that there are amounts held in a Participant's account
that are not used to purchase Company Stock, all such amounts shall be held in
the Participant's account and carried forward to the next Offering Period.

WITHDRAWAL

         A Participant may terminate his or her participation in the Purchase
Plan by signing and delivering to the Company a notice of withdrawal.  Such
withdrawal may be elected at any time before the end of the applicable Offering
Period.  As soon as practicable after such withdrawal, the payroll deductions
credited to the Participant's account will be returned to the Participant,
without interest.  A Participant who has withdrawn from the Purchase Plan will
be excluded from participation for the remainder of the Offering Period in
which the withdrawal occurred and the next succeeding Offering Period, but may
be reinstated as a Participant thereafter by executing and delivering a new
Stock Purchase Agreement to the Human Resources Department of the Company.

TERMINATION OF EMPLOYMENT

         Termination of a Participant's employment for any reason, including
retirement, death or discharge, immediately cancels his or her participation in
the Purchase Plan.  In such event, the payroll deductions credited to the
Participant's account will be returned to such Participant or, in the case of
death, to the Participant's beneficiary, without interest.

ADJUSTMENT UPON CHANGES IN CAPITALIZATION; MERGER, CONSOLIDATION OR
REORGANIZATION

         In the event of any change in the capitalization of the Company, such
as a stock split or stock dividend, or in the event of any merger, sale or
other reorganization, appropriate adjustments will be made by the Company in
the shares subject to purchase under the Purchase Plan and in the Purchase
Price per share.

         In the event that the Company at any time proposes to merge into,
consolidate with or to enter into any other reorganization (including the sale
of substantially all of its assets or a "reverse" merger in which the Company
is the surviving entity), the Purchase Plan will terminate, unless provision is
made in writing in connection with such transaction for the continuance of the
Purchase Plan, with appropriate adjustments made as to the number and kind of
shares and prices. If upon any of such events provision is not made for the
continuance of the Purchase Plan, the Board of Directors or the Committee is
obligated to cause written notice of the proposed transaction to be given to
the Participants not less than ten days before the anticipated effective date
of the proposed transaction, and all Participant accounts will purchase Common
Stock as if the day before the effective date of the proposed transaction were
a Purchase Date.

NONASSIGNABILITY

         Benefits under the Purchase Plan may not be pledged, assigned or
transferred for any reason (other than upon the death of a Participant), and
any such attempt may be treated by the Company as an election to withdraw from
the Purchase Plan.





                                       19
<PAGE>   23



RESALES OF COMMON STOCK

         Subject to certain limitations set forth below that pertain to
affiliates of the Company, as defined in Rule 405 promulgated by the Securities
and Exchange Commission under the Securities Act, shares of Common Stock
purchased under the Purchase Plan generally may be resold from time to time in
the over-the-counter market or otherwise.  Persons who are affiliates of the
Company may resell shares purchased under the Purchase Plan only (i) in
accordance with the provisions of Rule 144 promulgated under the Securities Act
(exclusive of the one-year holding period) or some other available exemption
from registration under the Securities Act or (ii) pursuant to an effective
registration statement.  An affiliate usually includes officers, directors and
principal stockholders of the Company.

SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES

         The following is a summary of certain federal income tax consequences
of participation in the Purchase Plan.  The summary should not be relied upon
as being a complete statement.  Federal tax laws are complex and subject to
change.  Moreover, participation in the Purchase Plan also may have
consequences under state and local tax laws that may vary from the federal tax
consequences described below.  For such reasons, the Company recommends that
each Participant consult his or her personal tax advisor in order to determine
the specific tax consequences applicable to him or her.

         The Purchase Plan and the right of Participants to make purchases
thereunder are intended to qualify under the provisions of Sections 421 and 423
of the Code.  Under these provisions, no income will be taxable to a
Participant at the time of grant or purchase of shares.  However, a Participant
may become liable for tax upon disposition of shares acquired under the
Purchase Plan, and the tax consequences will depend upon how long a Participant
has held the shares before disposition.

         If the shares are disposed of at least two years after the Grant Date
and at least one year after the Purchase Date, or in the event of a
Participant's death (whenever occurring) while owning such shares, then the
lesser of (i) the excess of the fair market value of the shares at the time of
such disposition over the Purchase Price of the shares or (ii) ten percent of
the fair market value of the shares on the Grant Date, will be treated as
ordinary income to the Participant.  Any further gain upon such disposition
will be taxed as long-term capital gain.  Any long-term capital gain will be
taxed as capital gain at the rates then in effect.  If the shares are sold and
the sale price is less than the Purchase Price, there is no ordinary income and
the Participant will have a capital loss equal to the difference between the
sale price and the Purchase Price.  The ability of a Participant to utilize
such a capital loss will depend upon the Participant's other tax attributes and
the statutory limitation on capital loss deductions not discussed herein.

         If the shares are sold or disposed of (including any disposition by
way of gift) before the expiration of the two-year holding period described
above or within one year after the shares are transferred to the Participant,
then the excess of the fair market value of the shares on the Purchase Date
over the Purchase Price will be treated as ordinary income to the Participant.
This excess will constitute ordinary income for the year of sale or other
disposition even if no gain is realized on the sale or a gratuitous transfer of
shares is made.  The balance of the gain will be taxed as capital gain at the
rates then in effect.  If the shares are sold for less than their fair market
value on the Purchase Date, the same amount of ordinary income will be
attributed to the Participant and a capital loss is recognized equal to the
difference between the sale price and the value of the shares on such Purchase
Date.  As indicated above, the ability of the Participant to utilize such a
capital loss will depend upon the Participant's other tax attributes and the
statutory limitation on capital losses not discussed herein.

         The ordinary income reported under the rules described above, added to
the actual Purchase Price of the shares, determines the tax basis of the shares
for the purpose of determining gain or loss on the sale or exchange of the
shares.





                                       20
<PAGE>   24



         The Company is entitled to a deduction for amounts taxed as ordinary
income to a Participant only to the extent that ordinary income must be
reported upon disposition of shares by the Participant before the expiration of
the holding periods described above.

VOTE REQUIRED; BOARD OF DIRECTORS' RECOMMENDATION

         Approval and ratification of the Purchase Plan will require the
affirmative vote of the holders of a majority of the outstanding shares of the
Company's Common Stock present or represented and voting at the Annual Meeting.

  THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND RATIFY THE COMPANY'S EMPLOYEE
STOCK PURCHASE PLAN.

                                   PROPOSAL 3

                 AMENDMENT TO THE 1994 STOCK INCENTIVE PLAN TO
            INCREASE THE TOTAL NUMBER OF SHARES ISSUABLE THEREUNDER
  AND TO INCREASE THE LIMIT ON GRANTS TO INDIVIDUALS DURING ANY CALENDAR YEAR

         Subject to approval by the Company's stockholders, the Board of
Directors has amended the 1994 Stock Incentive Plan to (i) increase the number
of shares of Common Stock issuable thereunder by 200,000 shares of Common
Stock, bringing the total number of shares of Common Stock subject to the 1994
Stock Incentive Plan to 800,000 as of the date of the Annual Meeting, subject
to the annual 50,000 share increase thereafter as provided in the 1994 Stock
Incentive Plan, and (ii) increase the total number of shares represented by
options or rights to purchase under the 1994 Stock Incentive Plan that may be
granted or offered under stock options or rights to purchase to any one person
during any calendar year by 100,000 shares, bringing such limit to 150,000.
All employees of the Company are currently eligible to participate in the 1994
Stock Incentive Plan.  The additional shares available for issuance under the
1994 Stock Incentive Plan and the increased limit on grants to individuals
during any calendar year will give the Company increased flexibility in its
continued use of equity incentives to attract, retain and motivate its
officers, directors and key employees.

         The essential features of the 1994 Stock Incentive Plan are summarized
below.  The summary does not purport to be a complete description of the 1994
Stock Incentive Plan.  The Company's stockholders may obtain a copy of the 1994
Stock Incentive Plan upon written request to the Secretary of the Company.

GENERAL NATURE AND PURPOSES

         The 1994 Stock Incentive Plan provides for the grant of options or
restricted shares of the Company's Common Stock.  Such grant may be made by the
Company to its officers, directors and employees, and also to consultants,
business associates and others with important business relationships with the
Company.  The number of shares available under the 1994 Stock Incentive Plan
for issuance was initially 250,000 and is increased on the last day of each
calendar year by 50,000 shares.  In addition, on March 16, 1995, the Company's
stockholders approved an additional increase of 200,000 shares.  As a result,
as of the date of the Annual Meeting there will be 600,000 shares authorized
for issuance under the 1994 Stock Incentive Plan.  No individual in any
calendar year may  presently receive options or restricted shares representing,
in the aggregate, more than 50,000 shares





                                       21
<PAGE>   25



(such number of shares shall increase to 150,000 upon approval of this
proposal).  As of April 18, 1997, an aggregate of 488,300 shares of Common
Stock were committed for issuance upon exercise of granted options under the
1994 Stock Incentive Plan, leaving 111,700 remaining available for grant.  In
addition, options for an additional 208,625 shares of Common Stock remain
outstanding under the Company's 1984 Stock Option Plan, which has terminated.


         The purposes of the 1994 Stock Incentive Plan are to ensure the
retention of the services of existing executive personnel, key employees and
nonemployee directors of the Company or its affiliates, to attract and retain
competent new executive personnel and key employees, to provide incentive to
all such personnel, employees and nonemployee directors to devote their utmost
effort and skill to the advancement and betterment of the Company by permitting
them to participate in the ownership of the Company and thereby in the success
and increased value of the Company and to allow consultants, business
associates and others with important business relationships with the Company
the opportunity to participate in the ownership of the Company and thereby have
an interest in the success and increased value of the Company.

         As discussed in more detail below, in general, the granting of future
stock options or rights to purchase shares under the 1994 Stock Incentive Plan
are not determinable at this time.  However, the 1994 Stock Incentive Plan does
provide that nonemployee directors shall be granted, on the first day of each
calendar year commencing in 1995, options to purchase 2,000 shares of Common
Stock.  Therefore, Messrs.  McGurk, Gardner, Mann, Money and O'Rourke received
on January 1 of 1995, 1996 and 1997, options to purchase 2,000 shares of
Common Stock.  Mr.  O'Rourke's term as a director will expire at the Annual
Meeting, and his vacancy will not be filled at such time.  In addition, as
previously stated, Messrs. Hoover and Hicks have agreed to waive their fees and
options as directors.

         The 1994 Stock Incentive Plan is not subject to any of the provisions
of ERISA and is not a qualified deferred compensation plan under Section 401(a)
of the Code.

ADMINISTRATION

         The 1994 Stock Incentive Plan may be administered by the Board of
Directors or by a Committee, at least two persons of which shall be directors
of the Company who shall be appointed by, and serve at the pleasure of, the
Board of Directors.

         Subject to the limitations on eligibility discussed below and the
specific provisions of the 1994 Stock Incentive Plan, the Board of Directors or
the Committee, as the case may be (hereinafter the administering body is
referred to as the "Administrator"), has the full and final authority to
determine the persons to whom, and the time or times at which, incentive
options or nonqualified options shall be granted and restricted shares issued,
the number of shares to be represented by each incentive option or nonqualified
option and the number of restricted shares and the consideration to be received
by the Company upon the exercise or issuance thereof; to interpret the 1994
Stock Incentive Plan; to amend and rescind rules and regulations relating to
the 1994 Stock Incentive Plan; to determine the form and content of the
incentive options or nonqualified options to be issued and terms and conditions
of restricted shares to be offered under the 1994 Stock Incentive Plan; to
determine the identity or capacity of any persons who may be entitled to
exercise a participant's rights under any incentive option, nonqualified option
or restricted share agreement under the 1994 Stock Incentive Plan; to correct
any defect or supply any omission or reconcile any inconsistency in the 1994
Stock Incentive Plan or in any incentive option, nonqualified option or
restricted share agreement in the manner and to the extent the Administrator
deems desirable to carry the 1994 Stock Incentive Plan, incentive option,
nonqualified option or restricted share agreement into effect; to accelerate
the exercise date of any incentive option, nonqualified option or release
and/or waive any repurchase rights of the Company contained in any restricted
share agreement; to provide for an option to the Company to repurchase any





                                       22
<PAGE>   26



shares issued upon exercise of an option upon termination of employment; and to
make all other determinations necessary or advisable for the administration of
the 1994 Stock Incentive Plan, but only to the extent not contrary to the
express provisions of the 1994 Stock Incentive Plan.  Determinations of the
Administrator as to all matters of interpretation of the 1994 Stock Incentive
Plan are final and binding upon all participants and prospective participants
of the 1994 Stock Incentive Plan.

AMENDMENT AND TERMINATION OF THE 1994 STOCK INCENTIVE PLAN

         The Board of Directors may from time to time alter, amend, suspend or
terminate the 1994 Stock Incentive Plan in such respects as the Board of
Directors may deem advisable; provided, however, that no such alteration,
amendment, suspension or termination shall be made that would substantially
affect or impair the rights of any person under any incentive option,
nonqualified option or restricted share theretofore granted to such person
without his or her consent.

         Unless previously terminated by the Board of Directors, the 1994 Stock
Incentive Plan will terminate on March 10, 2004.

ELIGIBILITY

         Incentive Options.  Officers and other key employees of the Company
(including directors if they also are employees of the Company), as may be
determined by the Administrator, who qualify for incentive stock options under
the applicable provisions of the Code, will be eligible for selection to
receive incentive options under the 1994 Stock Incentive Plan.  An employee who
has been granted an incentive option may, if otherwise eligible, be granted an
additional incentive option or options and receive nonqualified options or
restricted shares if the Administrator so determines.

         Nonqualified Options or Restricted Shares.  Officers and other key
employees of the Company, any member of the Board of Directors, whether or not
he or she is employed by the Company, or consultants, business associates or
others with important business relationships with the Company will be eligible
to receive nonqualified options or restricted shares.  An individual who has
been granted a nonqualified option or who has received restricted shares may,
if otherwise eligible, be granted an incentive option or an additional
nonqualified option or options or restricted shares if the Administrator so
determines.

TERMS AND CONDITIONS OF OPTIONS AND RESTRICTED SHARES

         Exercise and Purchase Price.  The exercise price of the shares of
Common Stock covered by each nonqualified option granted and the purchase price
of restricted shares under the 1994 Stock Incentive Plan shall be determined by
the Administrator; provided, that the exercise price of the shares of Common
Stock covered by each incentive option granted under the 1994 Stock Incentive
Plan shall not be less than the fair market value of such shares on the date on
which the incentive option is granted; and provided further, that the exercise
price with respect to incentive options shall not be less than 110% of the fair
market value if the person to whom shares are granted owns 10% or more of the
outstanding stock of the Company.  Such fair market value shall, if the Common
Stock is not listed or admitted to trading on a stock exchange or the Nasdaq
National Market, be the average of the closing bid price and asked price of the
Common Stock in the over-the-counter market on the date the incentive option or
nonqualified option is granted or restricted share is offered, or if the Common
Stock is then listed or admitted to trading on any stock exchange or on the
Nasdaq National Market, the closing sale price on such date on the principal
stock exchange or national market system on which the Common Stock is then
listed or admitted to trading, or, if no sale takes place on such day on such
principal exchange or national market system, then the closing sale price of
the Common Stock on such exchange or national market system on the next
preceding day on which a sale occurred.  During such times as no market price
is available, the fair market value of the Common Stock shall be determined





                                       23
<PAGE>   27



by the Administrator, which shall consider, among other facts that it considers
to be relevant, the book value of the Common Stock and the earnings of the
Company.  The exercise price or the purchase price, as the case may be, shall
be subject to the anti-dilution provisions of the 1994 Stock Incentive Plan.

         Payment.  Payment for shares upon exercise of an option or upon
issuance of restricted shares must be made in full at the time of exercise, or
issuance with respect to restricted shares.  The consideration payable upon
exercise of an option shall, at the discretion of the Administrator, be paid:
(i) in United States dollars payable in cash, check, or bank draft; (ii)
subject to any legal restrictions on the acquisition or purchase of its shares
by the Company, by the delivery of shares of Common Stock which shall be deemed
to have a value to the Company equal to the aggregate fair market value of such
shares determined at the date of such exercise; (iii) by the issuance of a
promissory note in a form acceptable to the Administrator; (iv) by cancellation
of indebtedness of the Company to the optionee; (v) by waiver of compensation
due or accrued to the optionee for services rendered; (vi) provided that a
public market for the Company's stock exists, through a "same day sale"
commitment from the optionee and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD Dealer") whereby the
optionee irrevocably elects to exercise his option and to sell a portion of the
shares so purchased to pay for the exercise price and whereby the NASD Dealer
irrevocably commits upon receipt of such shares to forward the exercise price
directly to the Company; (vii) provided that a public market for the Company's
stock exists, through a "margin" commitment from the optionee and a NASD Dealer
whereby the optionee irrevocably elects to exercise his option and to pledge
the shares so purchased to the NASD Dealer in a margin account as security for
a loan from the NASD Dealer in the amount of the exercise price, and whereby
the NASD Dealer irrevocably commits upon receipt of such shares to forward the
exercise price directly to the Company; or (viii) by any combination of the
foregoing methods of payment or any other consideration or method of payment as
shall be permitted by applicable corporate law, all as the Administrator shall
in its discretion determine.  The consideration payable upon purchase of
restricted shares shall, at the discretion of the Administrator, be paid by any
of the methods set forth in clauses (i), (iii), (iv) or (v) above or any
combination of such methods of payment or any other consideration or method of
payment as shall be permitted by applicable corporate law.

         Term of Options.  The term of each option granted under the 1994 Stock
Incentive Plan is determined by the Administrator at the time the option is
granted; provided, however, that no option granted under the 1994 Stock
Incentive Plan may have a term in excess of ten years; and provided further,
that incentive options shall expire within a period of not more than five years
if granted to a person who is the beneficial owner of 10% or more of the
outstanding stock of the Company.

         Termination of Employment.  In the event that an optionee who is an
employee of the Company shall cease to be employed by the Company for any
reason, including, without limitation, as a result of his or her death or
disability, (i) all incentive and nonqualified options granted to any such
optionee pursuant to the 1994 Stock Incentive Plan which are not exercisable at
the date of such cessation shall terminate immediately and become void and of
no effect, (ii) all incentive options granted to any such optionee pursuant to
the 1994 Stock Incentive Plan which are exercisable at the date of such
cessation may be exercised at any time within such period to be determined by
the Administrator at the time of grant (which in the case of death or a
disability may be a different period), but in any event no later than the date
of expiration of the incentive option period, and if not so exercised within
such time shall become void and of no effect at the end of such time; provided,
however, that if any such incentive option is in fact exercised at any time
after three (3) months following the date of such cessation (or one year in the
case of death or disability), such option shall be a nonqualified option and
not an incentive option and (iii) all nonqualified options granted to any such
optionee pursuant to the 1994 Stock Incentive Plan which are exercisable at the
date of such cessation may be exercised at any time within such period to be
determined by the Administrator at the time of





                                       24
<PAGE>   28



grant, but in any event no later than the date of expiration of the
nonqualified option period, and if not so exercised within such time shall
become void and of no effect at the end of such time.

         Limitation on Incentive Options.  To the extent the aggregate fair
market value of the shares of Common Stock with respect to which incentive
stock options are exercisable for the first time by the optionee during any
calendar year exceeds $100,000, such stock options representing such excess
shall be nonqualified stock options.

         Continuance of Employment.  Neither the 1994 Stock Incentive Plan nor
the granting of any incentive option, nonqualified option or restricted share
under the 1994 Stock Incentive Plan imposes any obligation on the Company to
continue the employment of any optionee or offeree.

         No Obligation to Exercise Option or Issue Restricted Share.  Neither
the granting of an incentive option or nonqualified option nor the offer of a
restricted share under the 1994 Stock Incentive Plan shall impose any
obligation upon the optionee to exercise such an incentive option or
nonqualified option or upon the offeree to purchase such restricted shares.

         Withholding.  The Company has the power to withhold, or require an
optionee or offeree to remit to the Company, an amount sufficient to satisfy
Federal, state and local withholding tax requirements with respect to any
incentive option or nonqualified option exercised or restricted shares issued
under the 1994 Stock Incentive Plan.  To the extent permissible under
applicable tax, securities and other laws, the Administrator may permit the
optionee or offeree to satisfy an obligation to pay any such tax, up to an
amount determined on the basis of the highest marginal tax rate applicable to
such optionee or offeree, in whole or in part, by (i) directing the Company to
apply shares of Common Stock to which the optionee or offeree is entitled as a
result of the exercise of an incentive option or nonqualified option or as a
result of the lapse of restrictions on restricted shares or (ii) delivering to
the Company shares of Common Stock owned by the optionee or offeree.

AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS

         In addition, under the 1994 Stock Incentive Plan, each incumbent
director of the Company who is not an employee of the Company (a "non-employee
director") shall automatically be granted nonqualified options to purchase
2,000 shares of Common Stock on the first business day of each calendar year,
commencing in 1995.  The options to be granted to non-employee directors of the
Company shall (i) have an exercise price equal to the fair market value of the
Common Stock on the date the options are granted; (ii) have a term of ten (10)
years; (iii) vest in full one year from the date of grant; and (iv) otherwise
be subject to the terms and provisions of the 1994 Stock Incentive Plan.
Notwithstanding any other term or provision contained in the 1994 Stock
Incentive Plan, neither the Board of Directors nor the Committee may amend the
amount, price or timing of the options granted under this provision more
frequently than every six (6) months, except to comport with changes in the
Code or ERISA, or the rules thereunder, or Rule 16b-3 promulgated under the
Securities Exchange Act.

ADJUSTMENTS UPON CHANGES OF CAPITALIZATION AND REORGANIZATIONS

         In the event that the outstanding shares of Common Stock are increased
or decreased or changed into or exchanged for a different number or kind of
shares or other securities of the Company by reason of merger, consolidation or
reorganization in which the Company is the surviving corporation, or of a
recapitalization, stock split, combination of shares, reclassification,
reincorporation, stock dividend (in excess of 2%) or other change in the
corporate structure of the Company while the 1994 Stock Incentive Plan is in
effect, appropriate adjustments shall be made by the Board of Directors to the
aggregate number and kind of shares subject to the 1994 Stock Incentive Plan,
and the number and kind of shares and the price per share subject to
outstanding incentive options, nonqualified options





                                       25
<PAGE>   29



and restricted shares in order to preserve, but not to increase, the benefits
to persons then holding incentive options, nonqualified options or restricted
shares.

         In the event that the Company at any time proposes to sell
substantially all of its assets, merge into, consolidate with or to enter into
any other reorganization in which the Company is not the surviving corporation,
or if the Company is the surviving corporation and the ownership of the
outstanding capital stock of the Company following the transaction changes by
50% or more as a result of such transaction, the 1994 Stock Incentive Plan and
all unexercised incentive options or nonqualified options granted thereunder
and all offers to purchase restricted shares shall terminate, unless provision
is made in writing in connection with such transaction for (i) the continuance
of the 1994 Stock Incentive Plan and for the assumption of incentive options
and nonqualified options theretofore granted, and all outstanding offers to
purchase restricted shares, or the substitution for such incentive options,
nonqualified options and offers to purchase restricted shares of new options
covering, and new offers to purchase, shares of a successor corporation, with
appropriate adjustments as to number and kind of shares and prices, in which
event the 1994 Stock Incentive Plan and the incentive options, nonqualified
options and offers to purchase restricted shares theretofore granted or the new
incentive options, nonqualified options and new offers to purchase restricted
shares substituted therefor, shall continue in the manner and under the terms
so provided or (ii) the substitution for the 1994 Stock Incentive Plan and all
outstanding incentive options and nonqualified options of a program or plan to
provide rights to the holders of such options to receive on exercise of such
rights, the type and amount of consideration they would have received had they
exercised all options prior to such transaction and less the aggregate exercise
price of such options (which rights shall vest and be generally subject to the
terms of such options in the case of unvested options).  If such provision is
not made in such transaction, then the Administrator shall cause written notice
of the proposed transaction to be given to the persons holding incentive
options, nonqualified options or rights of purchase not less than thirty (30)
days prior to the anticipated effective date of the proposed transaction, and
all incentive options, nonqualified options and rights of purchase shall be
accelerated and, concurrent with the effective date of the proposed
transaction, such persons shall have the right to exercise incentive options,
nonqualified options and accept rights of purchase with respect to any or all
shares then subject thereto.  The Administrator shall have the right, with
respect to any specific incentive option, nonqualified option or rights of
purchase granted under the 1994 Stock Incentive Plan, to provide that all
incentive options, nonqualified options, or rights of purchase shall be
accelerated in any event upon the effective date of the proposed transaction.

SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES

         The following is a summary of certain federal income tax consequences
of participation in the 1994 Stock Incentive Plan.  Such summary should not be
relied upon as being a complete statement.  Federal tax laws are complex and
subject to change.  Moreover, participation in the 1994 Stock Incentive Plan
may also have consequences under state and local tax laws which may vary from
the federal tax consequences described below.  For such reasons, the Company
recommends that each participant consult his or her personal tax advisor to
determine the specific tax consequences applicable to him or her.

INCENTIVE OPTIONS.

         No taxable income will be recognized by an optionee under the 1994
Stock Incentive Plan upon either the grant or the exercise of an incentive
option.  Instead, a taxable event will occur upon the sale or other disposition
of the shares acquired upon exercise of an incentive option, and the tax
treatment of the gain or loss realized will depend upon how long the shares
were held before their sale or disposition.  As is discussed below, the
exercise of an incentive option and the subsequent disposition of the shares
acquired also may result in items of "tax preference" for purposes of the
"alternative minimum tax."





                                       26
<PAGE>   30



         If a sale or other disposition of the shares received upon the
exercise of an incentive option occurs more than (i) one year after the date of
exercise of the option and (ii) two years after the date of grant of the
option, the holder will recognize long-term capital gain or loss at such time
equal to the full amount of the difference between the proceeds realized and
the exercise price paid.  However, a sale, exchange, gift or other transfer of
legal title of such stock before the expiration of either the one-year or
two-year period described above will constitute a "disqualifying disposition."
A disqualifying disposition involving a sale or exchange will result in
ordinary income to the optionee in an amount equal to the lesser of (i) the
fair market value of the stock on the date of exercise minus the exercise
price, or (ii) the amount realized on disposition minus the exercise price.  If
the amount realized in a disqualifying disposition exceeds the fair market
value of the stock on the date of exercise, the gain realized, in excess of
that taxed as ordinary income as indicated above, will be taxed as capital
gain.  A disqualifying disposition as a result of a gift will result in
ordinary income to the optionee in an amount equal to the difference between
the exercise price and the fair market value of the stock on the date of
exercise.  Any loss realized upon a disqualifying disposition will be treated
as a capital loss.  Capital gains and losses resulting from disqualifying
dispositions will be treated as long-term or short-term depending upon whether
the shares were held for more or less than the applicable statutory holding
period (which currently is one year).  The Company will be entitled to a tax
deduction in an amount equal to the ordinary income recognized by the optionee
as a result of the disqualifying disposition.

         If legal title to any shares acquired upon exercise of an incentive
option is transferred by sale, gift or exchange, such transfer will be treated
as a disposition for purposes of determining whether a "disqualifying
disposition" has occurred.  However, certain transfers will not be treated as
dispositions for such purposes, such as transfers to an estate or by
inheritance upon an optionee's death, a mere pledge or hypothecation, or a
transfer into the name of the optionee and another person as joint tenants.

         Section 55 of the Code imposes an "alternative minimum tax" on an
individual's income to the extent the amount of the alternative minimum tax
exceeds the individual's regular tax for the year.  For purposes of computing
the alternative minimum tax, the excess of the fair market value (on the date
of exercise) of the shares received upon the exercise of an incentive option
over the exercise price paid is included in alternative minimum taxable income
in the year the option is exercised.  If the shares are sold in the same year
that the option is exercised, the regular tax treatment and the alternative tax
treatment will be the same.  If the shares are sold during a year subsequent to
that in which the option was exercised, the basis of the stock acquired will
equal its fair market value on the date of exercise for purposes of computing
alternative minimum taxable income in the year of sale.  For example, assume
that an individual pays an exercise price of $10 to purchase stock having a
fair market value of $15 on the date of exercise.  The amount included in
alternative minimum taxable income is $5, and the stock has a basis of $10 for
regular tax purposes and $15 for alternative minimum tax purposes.  If the
individual sells the stock in a subsequent year for $20, the gain recognized is
$10 for regular tax purposes and $5 for alternative minimum tax purposes.

         Under the 1994 Stock Incentive Plan the Committee may permit an
optionee to pay the exercise price of an incentive option by delivering shares
of Common Stock of the Company already owned by the optionee, valued at their
fair market value on the date of exercise.  Generally, if the exercise price of
an incentive option is paid with already-owned shares or by a combination of
cash and already-owned shares, there will be no current taxable gain or loss
recognized by the optionee on the already-owned shares exchanged.  A special
rule applies, however, if the shares exchanged were previously acquired through
the exercise of an incentive option and the applicable holding period
requirements for favorable tax treatment of such shares have not been met at
the time of the exchange.  In such event, the exchange will be treated as a
disqualifying disposition of such shares and will result in the recognition of
income to the optionee, in accordance with the rules described above for
disqualifying dispositions.  If this special rule does not apply, then the new
shares received by the optionee upon the exercise of the option equal in number
to the old shares exchanged will have the same tax basis and holding period for
long-term capital gain purposes as the optionee's basis and





                                       27
<PAGE>   31



holding period in the old shares.  The balance of the shares received by the
optionee upon exercise of the option will have a tax basis equal to any cash
paid by the optionee, and if no cash was paid, the tax basis of such shares
will be zero.  The holding period of the additional shares for long-term
capital gain purposes will commence on the date of exercise.  The holding
period for purposes of the one-year and two-year periods described above will
commence on the date of exercise as to all of the shares received upon the
exercise of an incentive option.  If any of the shares subject to the basis
allocation rules described above are subsequently transferred in a
disqualifying disposition, the shares with the lowest tax basis will be treated
as being transferred first.

         NONQUALIFIED OPTIONS.

         No taxable income is recognized by an optionee upon the grant of a
nonqualified option.  Upon exercise, however, the optionee will recognize
ordinary income in the amount by which the fair market value of the shares
purchased exceeds, on the date of exercise, the exercise price paid for such
shares.  The income recognized by the optionee will be subject to income tax
withholding by the Company out of the optionee's current compensation.  If such
compensation is insufficient to pay the taxes due, the optionee will be
required to make a direct payment to the Company for the balance of the tax
withholding obligation.  The Company will be entitled to a tax deduction equal
to the amount of ordinary income recognized by the optionee, provided certain
reporting requirements are satisfied.

         If the exercise price of a nonqualified option is paid by the optionee
in cash, the tax basis of the shares acquired will be equal to the cash paid
plus the amount of income recognized by the optionee as a result of such
exercise.  If the exercise price is paid by delivering shares of Common Stock
of the Company already owned by the optionee or by a combination of cash and
already-owned shares, there will be no current taxable gain or loss recognized
by the optionee on the already-owned shares exchanged (however, the optionee
will nevertheless recognize ordinary income to the extent that the fair market
value of the shares purchased on the date of exercise exceeds the price paid,
as described above).  The new shares received by the optionee equal in number
to the old shares exchanged will have the same tax basis and holding period as
the optionee's basis and holding period in the old shares.  The balance of the
shares received will have a tax basis equal to any cash paid by the optionee
plus the amount of income recognized by the optionee as a result of such
exercise, and will have a holding period commencing with the date of exercise.

         Upon the sale or disposition of shares acquired pursuant to the
exercise of a nonqualified option, the difference between the proceeds realized
and the optionee's basis in the shares will be a capital gain or loss and will
qualify for long-term capital gain or loss treatment if the shares have been
held for more than the applicable statutory holding period.

         RESTRICTED STOCK.

         The receipt of restricted stock will not result in a taxable event to
the Participant until the expiration of any repurchase rights retained by the
Company with respect to such stock, unless the participant makes an election
under Section 83(b) of the Code to be taxed as of the date of purchase.  If no
repurchase rights are retained, or if a Section 83(b) election is made, the
participant will recognize ordinary income in an amount equal to the excess of
the fair market value of such shares on the date of purchase over the purchase
price paid for such shares.  Even if the purchase price and the fair market
value of the shares are the same (in which case there would be no ordinary
income), a Section 83(b) election must be made to avoid deferral of the date
ordinary income is recognized.  The election must be filed with the Internal
Revenue Service not later than thirty (30) days after the date of transfer.

         If no Section 83(b) election is made or if no repurchase rights are
retained, a taxable event will occur on each date the participant's ownership
rights vest (e.g., when the Company's repurchase rights expire) as to the
number of shares that vest on that date, and the holding period for long-term
capital





                                       28
<PAGE>   32



gain purposes will not commence until the date the shares vest.  The
participant will recognize ordinary income on each date shares vest in an
amount equal to the excess of the fair market value of such shares on that date
over the amount paid for such shares.

VOTE REQUIRED; BOARD OF DIRECTORS' RECOMMENDATION

         Approval of the proposed amendment to the 1994 Stock Incentive Plan to
increase the total number of shares issuable thereunder and to increase the
limit on grants to individuals during any calendar year will require the
affirmative vote of the holders of a majority of the outstanding shares of the
Company's Common Stock present or represented and voting at the Annual Meeting.

         THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE PROPOSAL TO AMEND THE 1994 STOCK INCENTIVE PLAN TO
INCREASE THE TOTAL NUMBER OF SHARES ISSUABLE THEREUNDER AND TO INCREASE THE
LIMIT ON GRANTS TO INDIVIDUALS DURING ANY CALENDAR YEAR

                        COMPLIANCE WITH SECTION 16(A) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

         To the Company's knowledge, based solely on review of copies of
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were satisfied.

                     APPOINTMENT OF INDEPENDENT ACCOUNTANTS

         The firm of Price Waterhouse LLP, the Company's independent
accountants for the fiscal year ended December 31, 1996, was selected by the
Board of Directors, upon recommendation of the Audit Committee of the Board of
Directors, to act in the same capacity for the fiscal year ending December 31,
1997.

         Representatives of Price Waterhouse LLP are expected to be present at
the Annual Meeting and they will be given an opportunity to make a statement if
they so desire and respond to appropriate questions.

                 STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

         All proposals of stockholders intended to be presented at the
Company's 1998 Annual Meeting of Stockholders must be directed to the attention
of the Secretary of the Company, at the address of the Company set forth on the
first page of this Proxy Statement before January 2, 1998, if they are to be
considered for possible inclusion in the Proxy Statement and form of proxy used
in connection with the meeting.





                                       29
<PAGE>   33



                                 ANNUAL REPORT

         The Company's Annual Report to Stockholders containing audited balance
sheets as of the years ended December 31, 1996, 1995, and 1994 and audited
statements of operations and changes of cash flows for the three years ended
December 31, 1996, accompanies this Proxy Statement.  The Annual Report is not
to be regarded as proxy soliciting material or as a communication by means of
which any solicitation is to be made.

                                 OTHER MATTERS

         At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matter which will be acted upon at the Annual
Meeting.  If any other matters are properly presented properly for action at
the Annual Meeting or at any adjournment or postponement thereof, the persons
named in the enclosed form of proxy will have discretion to vote on such
matters in accordance with their best judgment.

                                          By Order of the Board of Directors,

                                          DATUM INC.


                                          David A. Young
                                          Secretary

Irvine, California
May 2, 1997


         COPIES OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 WILL BE PROVIDED
TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO THE SECRETARY, DATUM
INC., 9975 TOLEDO WAY, IRVINE, CALIFORNIA  92718.





                                       30
<PAGE>   34

                                   EXHIBIT A

                                   DATUM INC.
                          EMPLOYEE STOCK PURCHASE PLAN


         This EMPLOYEE STOCK PURCHASE PLAN (the "Plan") is hereby established
by DATUM INC., a Delaware corporation (the "Company") effective July 1, 1997
(the "Effective Date").


                                   ARTICLE 1
                              PURPOSE OF THE PLAN

         1.1     PURPOSE.  The Company has determined that it is in its best
interest to provide incentives to attract and retain employees and to increase
employee morale by providing a program through which employees of the Company,
and of such of the Company's subsidiaries as the Company's Board of Directors
(the "Board of Directors") may from time to time designate (each a "Designated
Subsidiary", and collectively, "Designated Subsidiaries"), may acquire a
proprietary interest in the Company through the purchase of shares of the
common stock of the Company ("Company Stock").  The Plan is hereby established
by the Company to permit employees to subscribe for and purchase directly from
the Company shares of the Company Stock at a discount from the market price,
and to pay the purchase price in installments by payroll deductions.  The Plan
is intended to qualify as an "employee stock purchase plan" under Section 423
of the Internal Revenue Code of 1986, as amended from time to time (the
"Code").  The provisions of the Plan are to be construed in a matter consistent
with the requirements of Section 423 of the Code.  The Plan is not intended to
be an employee benefit plan under the Employee Retirement Income Security Act
of 1974, and therefore is not required to comply with that Act.


                                   ARTICLE 2
                                  DEFINITIONS

         2.1     COMPENSATION.  "Compensation" means the amount indicated on
the Form W-2, including any elective deferrals with respect to a plan of the
Company qualified under either Section 125 or Section 401(a) of the Code,
issued to an employee by the Company.

         2.2     EMPLOYEE.  "Employee" means each person currently employed by
the Company or any of its Designated Subsidiaries, any portion of whose income
is subject to withholding of income tax or for whom Social Security retirement
contributions are made by the Company or any Designated Subsidiary.
<PAGE>   35
         2.3     EFFECTIVE DATE.  "Effective Date" means the effective date of
the Plan set forth above.

         2.4     5% OWNER.  "5% Owner" means an Employee who, immediately after
the grant of any rights under the Plan, would own Company Stock or hold
outstanding options to purchase Company Stock possessing 5% or more of the
total combined voting power of all classes of stock of the Company.  For
purposes of this Section, the ownership attribution rules of Code Section
425(d) shall apply.

         2.5     GRANT DATE.  "Grant Date" means the first day of each Offering
Period (January 1, April 1, July 1 and October 1) under the Plan.  However, for
the first Offering Period, the Grant Date shall be the Effective Date.

         2.6     PARTICIPANT.  "Participant" means an Employee who has
satisfied the eligibility requirements of Section 3.1 and has become a
participant in the Plan in accordance with Section 3.2.

         2.7     OFFERING PERIOD.  "Offering Period" means the quarterly
periods from January 1 through March 31, April 1 through June 30, July 1
through September 30 and October 1 through December 31 of each calendar year.
However, the first Offering Period shall commence on the Effective Date and end
September 30, 1997 regardless of whether such initial Offering Period is more
or less than three months.

         2.8     PURCHASE DATE.  "Purchase Date" means the last day of each
Offering Period (March 31, June 30, September 30 or December 31).


                                   ARTICLE 3
                         ELIGIBILITY AND PARTICIPATION

         3.1     ELIGIBILITY.  Each Employee of the Company, or any Designated
Subsidiary, who, on the Grant Date, is customarily engaged on a
regularly-scheduled basis of more than twenty (20) hours per week and who has
been employed for at least ninety (90) days (or, for the initial Offering
Period only, such Employees who are employed on the Effective Date) in the
rendition of personal services to the Company, or any Designated Subsidiary,
may become a Participant in the Plan on the Grant Date coincident with or next
following his satisfaction of such requirements of employment with the Company
or any Designated Subsidiary.





                                      -2-
<PAGE>   36



         3.2     PARTICIPATION.  An Employee who has satisfied the eligibility
requirements of Section 3.1 may become a Participant in the Plan upon his
completion and delivery to the Human Resources Department of the Company of a
stock purchase agreement provided by the Company (the "Stock Purchase
Agreement") authorizing payroll deductions.  Payroll deductions for a
Participant shall commence on the Grant Date coincident with or next following
the filing of the Participant's Stock Purchase Agreement and shall remain in
effect until revoked by the Participant by the filing of a notice of withdrawal
from the Plan under Article VIII or by the filing of a new Stock Purchase
Agreement providing for a change in the Participant's payroll deduction rate
under Section 5.2.

         3.3     SPECIAL RULES.  Under no circumstances shall:

                 (a)      A 5% Owner be granted a right to purchase Company
Stock under the Plan;

                 (b)      A Participant be entitled to purchase Company Stock
under the Plan which, when aggregated with all other employee stock purchase
plans of the Company, exceed an amount equal to the Aggregate Maximum.
"Aggregate Maximum" means an amount equal to $15,000 worth of Company Stock
(determined using the fair market value of such Company Stock at each
applicable Grant Date) during each calendar year; or

                 (c)      The number of shares of Company Stock purchasable by
a Participant on any Purchase Date shall not exceed 2,000 shares, subject to
periodic adjustments under Section 10.4.


                                   ARTICLE 4
                                OFFERING PERIODS

         4.1     OFFERING PERIODS.  The initial grant of the right to purchase
Company Stock under the Plan shall occur on the Effective Date and terminate on
September 30, 1997.  Thereafter, the Plan shall provide for Offering Periods
commencing on each Grant Date and terminating on the next following Purchase
Date.


                                   ARTICLE 5
                               PAYROLL DEDUCTIONS

         5.1     PARTICIPANT ELECTION.  Upon completion of the Stock Purchase
Agreement, each Participant shall designate the amount of payroll deductions to
be made from his or her paycheck to





                                      -3-
<PAGE>   37



purchase Company Stock under the Plan.  The amount of payroll deductions shall
be designated in whole percentages of Compensation, not to exceed 15%.  The
amount so designated upon the Stock Purchase Agreement shall be effective as of
the next Grant Date and shall continue until terminated or altered in
accordance with Section 5.2 below.

         5.2     CHANGES IN ELECTION.  A Participant may terminate
participation in the Plan at any time prior to the close of an Offering Period
as provided in Article VIII.  A Participant may decrease the rate of payroll
deductions once during each Offering Period by completing and delivering to the
Human Resources Department of the Company a new Stock Purchase Agreement
setting forth the desired change.  A Participant may also terminate payroll
deductions and have accumulated deductions for the Offering Period applied to
the purchase of Company Stock as of the next Purchase Date by completing and
delivering to the Human Resources Department a new Stock Purchase Agreement
setting forth the desired change.  Any change under this Section shall become
effective on the next payroll period (to the extent practical under the
Company's payroll practices) following the delivery of the new Stock Purchase
Agreement.

         5.3     PARTICIPANT ACCOUNTS.  The Company shall establish and
maintain a separate account ("Account") for each Participant.  The amount of
each Participant's payroll deductions shall be credited to his Account.  No
interest will be paid or allowed on amounts credited to a Participant's
Account.  All payroll deductions received by the Company under the Plan are
general corporate assets of the Company and may be used by the Company for any
corporate purpose.  The Company is not obligated to segregate such payroll
deductions.


                                   ARTICLE 6
                            GRANT OF PURCHASE RIGHTS

         6.1     RIGHT TO PURCHASE SHARES.  On each Grant Date, each
Participant shall be granted a right to purchase at the price determined under
Section 6.2 that number of shares and partial shares of Company Stock that can
be purchased or issued by the Company based upon that price with the amounts
held in his Account, subject to the limits set forth in Section 3.3.  In the
event that there are amounts held in a Participant's Account that are not used
to purchase Company Stock, such amounts shall remain in the Participant's
Account and shall be eligible to purchase Company Stock in any subsequent
Offering Period.

         6.2     PURCHASE PRICE.  The purchase price for any Offering Period
shall be the lesser of:

                 (a)      90% of the Fair Market Value of Company Stock on the
Grant Date; or

                 (b)      90% of the Fair Market Value of Company Stock on the
Purchase Date.





                                      -4-
<PAGE>   38




         6.3     FAIR MARKET VALUE.  "Fair Market Value" means for the initial
Grant Date (which is the Effective Date), the price per share at which the
Common Stock is to be sold to the public in the initial public offering of the
Common Stock.  For any subsequent date thereafter, "Fair Market Value" shall
mean the value of one share of Company Stock, determined as follows:

                 (a)      If the Company Stock is then listed or admitted to
trading on the Nasdaq National Market System or a stock exchange which reports
closing sale prices, the Fair Market Value shall be the closing sale price on
the date of valuation on the Nasdaq National Market System or principal stock
exchange on which the Company Stock is then listed or admitted to trading, or,
if no closing sale price is quoted or no sale takes place on such day, then the
Fair Market Value shall be the closing sale price of the Company Stock on the
Nasdaq National Market System or such exchange on the next preceding day on
which a sale occurred.

                 (b)      If the Company Stock is not then listed or admitted
to trading on the Nasdaq National Market System or a stock exchange which
reports closing sale prices, the Fair Market Value shall be the average of the
closing bid and asked prices of the Company Stock in the over-the-counter
market on the date of valuation.

                 (c)      If neither (a) nor (b) is applicable as of the date
of valuation, then the Fair Market Value shall be determined by the
Administrator in good faith using any reasonable method of valuation, which
determination shall be conclusive and binding on all interested parties.


                                   ARTICLE 7
                               PURCHASE OF STOCK

         7.1     PURCHASE OF COMPANY STOCK.  Absent an election by the
Participant to terminate and have his or her Account returned, on each Purchase
Date, the Plan shall purchase on behalf of each Participant the maximum number
of whole shares of Company Stock at the purchase price determined under Section
6.2 above as can be purchased with the amounts held in each Participant's
Account.  In the event that there are amounts held in a Participant's Account
that are not used to purchase Company Stock, all such amounts shall be held in
the Participant's Account and carried forward to the next Offering Period.

         7.2     DELIVERY OF COMPANY STOCK.

                 (a)      Company Stock acquired under the Plan shall be issued
directly to a contract administrator ("Administrator") engaged by the Company
to administer the Plan under Article IX.  All Company Stock so issued ("Plan
Held Stock") shall be held in the name of the Administrator





                                      -5-
<PAGE>   39



for the benefit of the Plan.  The Administrator shall maintain accounts for the
benefit of the Participants which shall reflect each Participant's interest in
the Plan Held Stock.  Such accounts shall reflect the number of whole and
partial shares of Company Stock that are being held by the Administrator for
the benefit of each Participant.

                 (b)      Where Company Stock is issued under this paragraph,
only full shares of stock will be issued to a Participant.  The time of
issuance and delivery of shares may be postponed for such period as may be
necessary to comply with the registration requirements under the Securities Act
of 1933, as amended, the listing requirements of any securities exchange on
which the Company Stock may then be listed, or the requirements under other
laws or regulations applicable to the issuance or sale of such shares.

                                   ARTICLE 8
                                   WITHDRAWAL

         8.1     IN SERVICE WITHDRAWALS.  At any time prior to the Purchase
Date of an Offering Period, any Participant may withdraw the amounts held in
his Account by executing and delivering to the Human Resources Department for
the Company written notice of withdrawal on the form provided by the Company.
In such a case, the entire balance of the Participant's Account shall be paid
to the Participant, without interest, as soon as is practicable.  Upon such
notification, the Participant shall cease to participate in the Plan for the
remainder of the Offering Period in which the notice is given.  Any Employee
who has withdrawn under this Section shall be excluded from participation in
the Plan for the remainder of the Offering Period in which the withdrawal
occurred and the next succeeding Offering Period, but may then be reinstated as
a Participant thereafter by executing and delivering a new Stock Purchase
Agreement to the Human Resources Department of the Company.

         8.2     TERMINATION OF EMPLOYMENT.

                 (a)      In the event that a Participant's employment with the
Company terminates for any reason, the Participant shall cease to participate
in the Plan on the date of termination.  As soon as is practical following the
date of termination, the entire balance of the Participant's Account shall be
paid to the Participant or his beneficiary, without interest.

                 (b)      A Participant may file a written designation of a
beneficiary who is to receive any shares of Company Stock purchased under the
Plan or any cash from the Participant's Account in the event of his or her
death subsequent to a Purchase Date, but prior to delivery of such shares and
cash.  In addition, a Participant may file a written designation of a
beneficiary who is to receive any cash from the Participant's Account under the
Plan in the event of his death prior to a Purchase Date under paragraph (a)
above.





                                      -6-
<PAGE>   40



                 (c)      Any beneficiary designation under paragraph (b) above
may be changed by the Participant at any time by written notice.  In the event
of the death of a Participant, the Committee may rely upon the most recent
beneficiary designation it has on file as being the appropriate beneficiary.
In the event of the death of a Participant where no valid beneficiary
designation exists or the beneficiary has predeceased the Participant, the
Committee shall deliver any cash or shares of Company Stock to the executor or
administrator of the estate of the Participant, or if no such executor or
administrator has been appointed to the knowledge of the Committee, the
Committee, in its sole discretion, may deliver such shares of Company Stock or
cash to the spouse or any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to the Committee,
then to such other person as the Committee may designate.


                                   ARTICLE 9
                              PLAN ADMINISTRATION

         9.1     PLAN ADMINISTRATION.

                 (a)      Authority to control and manage the operation and
administration of the Plan shall be vested in the Board of Directors (the
"Board") for the Company, or a committee ("Committee") thereof.  The Board or
Committee shall have all powers necessary to supervise the administration of
the Plan and control its operations.

                 (b)      In addition to any powers and authority conferred on
the Board or Committee elsewhere in the Plan or by law, the Board or the
Committee shall have the following powers and authority:

                          (i)     To designate agents to carry out
         responsibilities relating to the Plan;

                          (ii)    To administer, interpret, construe and apply
         this Plan and to answer all questions which may arise or which may be
         raised under this Plan by a Participant, his beneficiary or any other
         person whatsoever;

                          (iii)   To establish rules and procedures from time
         to time for the conduct of its business and for the administration and
         effectuation of its responsibilities under the Plan; and





                                      -7-
<PAGE>   41



                          (iv)    To perform or cause to be performed such
         further acts as it may deem to be necessary, appropriate, or
         convenient for the operation of the Plan.

                 (c)      Any action taken in good faith by the Board or
Committee in the exercise of authority conferred upon it by this Plan shall be
conclusive and binding upon a Participant and his beneficiaries.  All
discretionary powers conferred upon the Board shall be absolute.

         9.2     LIMITATION ON LIABILITY.  No Employee of the Company nor
member of the Board or Committee shall be subject to any liability with respect
to his duties under the Plan unless the person acts fraudulently or in bad
faith.  To the extent permitted by law, the Company shall indemnify each member
of the Board or Committee, and any other Employee of the Company with duties
under the Plan who was or is a party, or is threatened to be made a party, to
any threatened, pending or completed proceeding, whether civil, criminal,
administrative, or investigative, by reason of the person's conduct in the
performance of his duties under the Plan.


                                   ARTICLE 10
                                 COMPANY STOCK

         10.1    LIMITATIONS ON PURCHASE OF SHARES.  The maximum number of
shares of Company Stock that shall be made available for sale under the Plan
shall be 250,000 shares, subject to adjustment under Section 10.4 below.  The
shares of Company Stock to be sold to Participants under the Plan will be
issued by the Company.  If the total number of shares of Company Stock that
would otherwise be issuable pursuant to rights granted pursuant to Section 6.1
of the Plan at the Purchase Date exceeds the number of shares then available
under the Plan, the Company shall make a pro rata allocation of the shares
remaining available in as uniform and equitable manner as is practicable.  In
such event, the Company shall give written notice of such reduction of the
number of shares to each participant affected thereby and any unused payroll
deductions shall be returned to such participant if necessary.

         10.2    VOTING COMPANY STOCK.  The Participant will have no interest
or voting right in shares to be purchased under Section 6.1 of the Plan until
such shares have been purchased.

         10.3    REGISTRATION OF COMPANY STOCK.  Shares to be delivered to a
Participant under the Plan will be registered in the name of the Participant
unless designated otherwise by the Participant.

         10.4    CHANGES IN CAPITALIZATION OF THE COMPANY.  Subject to any
required action by the stockholders of the Company, the number of shares of
Company Stock covered by each right under the Plan which has not yet been
exercised and the number of shares of Company Stock which have been authorized
for issuance under the Plan but have not yet been placed under rights or which
have been returned to the Plan upon the cancellation of a right, as well as the
Purchase Price per





                                      -8-
<PAGE>   42



share of Company Stock covered by each right under the Plan which has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Company Stock resulting from a stock split,
stock dividend, spin-off, reorganization, recapitalization, merger,
consolidation, exchange of shares or the like.  Such adjustment shall be made
by the Board of Directors for the Company, whose determination in that respect
shall be final, binding and conclusive.  Except as expressly provided herein,
no issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Company Stock subject to any right granted hereunder.

         10.5    MERGER OF COMPANY.  In the event that the Company at any time
proposes to merge into, consolidate with or enter into any other reorganization
pursuant to which the Company is not the surviving entity (including the sale
of substantially all of its assets or a "reverse" merger in which the Company
is the surviving entity), the Plan shall terminate, unless provision is made in
writing in connection with such transaction for the continuance of the Plan and
for the assumption of rights theretofore granted, or the substitution for such
rights of new rights covering the shares of a successor corporation, with
appropriate adjustments as to number and kind of shares and prices, in which
event the Plan and the rights theretofore granted or the new rights substituted
therefor, shall continue in the manner and under the terms so provided.  If
such provision is not made in such transaction for the continuance of the Plan
and the assumption of rights theretofore granted or the substitution for such
rights of new rights covering the shares of a successor corporation, then the
Board of Directors or its committee shall cause written notice of the proposed
transaction to be given to the persons holding rights not less than 10 days
prior to the anticipated effective date of the proposed transaction, and,
concurrent with the effective date of the proposed transaction, such rights
shall be exercised automatically in accordance with Section 7.1 as if such
effective date were a Purchase Date of the applicable Offering Period unless a
Participant withdraws from the Plan as provided in Section 8.1.


                                   ARTICLE 11
                             MISCELLANEOUS MATTERS

         11.1    AMENDMENT AND TERMINATION.  The Plan shall terminate on June
30, 2007.  Since future conditions affecting the Company cannot be anticipated
or foreseen, the Company reserves the right to amend, modify, or terminate the
Plan at any time.  Upon termination of the Plan, all benefits shall become
payable immediately.  Notwithstanding the foregoing, no such amendment or
termination shall affect rights previously granted, nor may an amendment make
any change in any right previously granted which adversely affects the rights
of any Participant.  In addition, no amendment may be made without prior
approval of the stockholders of the Company if such amendment would:

                 (a)      Increase the number of shares of Company Stock that
may be issued under the Plan;





                                      -9-
<PAGE>   43



                 (b)      Materially modify the requirements as to eligibility
for participation in the Plan; or

                 (c)      Materially increase the benefits which accrue to
Participants under the Plan.

         11.2    STOCKHOLDER APPROVAL.  Continuance of the Plan and the
effectiveness of any right granted hereunder shall be subject to approval by
the stockholders of the Company, within twelve months before or after the date
the Plan is adopted by the Board.

         11.3    BENEFITS NOT ALIENABLE.  Benefits under the Plan may not be
assigned or alienated, whether voluntarily or involuntarily.  Any attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Article VIII.

         11.4    NO ENLARGEMENT OF EMPLOYEE RIGHTS.  This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Employee or to be
consideration for, or an inducement to, or a condition of, the employment of
any Employee.  Nothing contained in the Plan shall be deemed to give the right
to any Employee to be retained in the employ of the Company or to interfere
with the right of the Company to discharge any Employee at any time.

         11.5    GOVERNING LAW.  To the extent not preempted by Federal law,
all legal questions pertaining to the Plan shall be determined in accordance
with the laws of the State of Delaware.

         11.6    NON-BUSINESS DAYS.  When any act under the Plan is required to
be performed on a day that falls on a Saturday, Sunday or legal holiday, that
act shall be performed on the next succeeding day which is not a Saturday,
Sunday or legal holiday.  Notwithstanding the above, Fair Market Value shall be
determined in accordance with Section 6.3.

         11.7    COMPLIANCE WITH SECURITIES LAWS.  Notwithstanding any
provision of the Plan, the Committee shall administer the Plan in such a way to
ensure that the Plan at all times complies with any requirements of Federal
Securities Laws.  For example, affiliates may be required to make irrevocable
elections in accordance with the rules set forth under Section 16b-3 of the
Securities Exchange Act of 1934.





                                      -10-
<PAGE>   44
PROXY

                                   DATUM INC.

                               [DATUM INC. LOGO]

                                9975 TOLEDO WAY
                            IRVINE, CALIFORNIA 92618

          THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

        The undersigned hereby appoints Louis B. Horwitz and David A. Young as
Proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote, as designated on the reverse side, all
the shares of Common Stock of Datum Inc. held of record by the undersigned on
April 18, 1997, at the Annual Meeting of Stockholders to be held on June 5,
1997 and at any adjournment or postponement thereof.

                 (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)


--------------------------------------------------------------------------------
                            - FOLD AND DETACH HERE -


<PAGE>   45
                                                             Please mark
                                                            your votes as   [X]
                                                             indicated in
                                                            this example.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER INDICATED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE (1) ELECTION OF ALL NOMINEES LISTED BELOW (2) FOR THE PROPOSAL TO
APPROVE THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN, AND (3) FOR THE PROPOSAL TO
APPROVE THE AMENDMENT TO THE 1994 STOCK INCENTIVE PLAN TO INCREASE THE TOTAL
NUMBER OF SHARES ISSUABLE THEREUNDER AND TO INCREASE THE LIMIT ON GRANTS TO
INDIVIDUALS DURING ANY CALENDAR YEAR.

                                            FOR ALL
                                         nominees listed
                                           (except as             WITHHOLD
                                          indicated to           AUTHORITY
(1)  Election of Directors to Class I:    the contrary        to vote for all
                                            herein)           nominees listed

     R. David Hoover and Edward A. Money      [ ]                    [ ]

INSTRUCTION: To withhold authority to vote for an individual nominee, write
that nominee's name in the space provided below:

               _________________________________________________

(2)  Approval and ratification of the Company's Employee Stock Purchase Plan:

                     FOR          AGAINST          ABSTAIN
                     [ ]            [ ]              [ ]

(3)  Approval of the Amendment to the 1994 Stock Incentive Plan to increase the
total number of shares issuable thereunder and to increase the limit on grants
to individuals during any calendar year:

                     FOR          AGAINST          ABSTAIN
                     [ ]            [ ]              [ ]

(4)  In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.

All other proxies heretofore given by the undersigned to vote shares of stock of
Datum Inc., which the undersigned would be entitled to vote if personally
present at the Annual Meeting or any adjournment or postponement thereof, are
hereby expressly revoked.

                     PLEASE MARK, SIGN, DATE AND RETURN THE
                     PROXY CARD PROMPTLY USING THE ENCLOSED
                    ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY
                          SHOWN, PLEASE PRINT CHANGES.


Signature(s)_________________________________________ Dated: _____________, 1997

Please date this Proxy and sign it exactly as your name or names appear above.
When shares are held by joint tenants, both should sign. When signing as an
attorney, executor, administrator, trustee or guardian, please give full title
as such. If shares are held by a corporation, please sign in full corporate name
by the President or other authorized director. If shares are held by a
partnership, please sign in partnership name by an authorized person.

--------------------------------------------------------------------------------

                              FOLD AND DETACH HERE