EXHIBIT 10.18

                                  DATAKEY, INC.
                          2002 EXECUTIVE INCENTIVE PLAN

The Datakey, Inc. 2002 Executive Incentive Plan is designed to pay for
performance to revenue growth and profitability objectives set forth at the
beginning of the year as defined in the Board approved 2002 Financial Plan. This
plan provides for quarterly payments of cash and Datakey stock options issued at
the closing price of the last day of the quarter and vesting in six months. The
2002 Executive Incentive Plan applies to the following executives, and others if
approved by the Board of Directors:

         -     President & CEO
         -     Vice President/General Manager ISS
         -     Vice President & CFO
         -     Vice President of Corporate Marketing

In the event of a change in control, bonus amounts will be computed and paid
throughout the year as if the approved business plan revenue and profitability
goals have been met.

CASH INCENTIVE
Each executive is assigned a target annual incentive cash payment as determined
by the Board of Directors.

Payment of the cash incentive is based on achievement of revenue growth 2002
quarter over same quarter in 2001 and achievement of the planned profit/loss in
conjunction with the following table, with the amounts as set forth by the Board
of Directors:



                                                            Q1              Q2              Q3              Q4
                                                                                              
2001 ISS REVENUE                                         $1,297,000     $1,055,000      $2,714,000        $2,647,000
PLANNED 2002 ISS REVENUE
PLANNED ISS REVENUE GROWTH
% PLANNED REVENUE GROWTH
ACTUAL ISS REVENUE
ACTUAL ISS REVENUE GROWTH
% = ACTUAL REVENUE GROWTH/
  PLANNED REVENUE GROWTH (F)
MEETS PROFIT PLAN? (0=NO, .5=YES) (PP)
ISS PROFITABLE? (0=NO, .5=YES) (PR)
% EARNED


Payment amount determination begins with the calculation of actual 2002 ISS
revenue growth (Quarterly increase year-to-year) and its percentage (F) of
revenue growth as specified in the 2002 plan. (F) is further modified by
consideration for meeting profit/loss planned for the quarter (PP) and quarter
profitability (PR), all of which are taken after bonus payments have been
applied, and according to the following formula:

         -     F = Actual revenue growth/planned revenue growth
         -     % EARNED = F x (1+PP+PR)/2 where PP is .5 if profit/loss in the
               plan is met and PR are .5 if the quarter is profitable.
         -     QUARTER PAYMENT = % earned x target annual incentive payment/4


                                       1

STOCK OPTION INCENTIVE
Each executive is assigned a target stock option incentive payment as determined
by the Board of Directors.

Calculations for F, % EARNED, AND QUARTER PAYMENT are the same as for the cash
incentive above.






                                       2