1997 MANAGEMENT INCENTIVE PLAN
                        February 27, 1997
                     Amended March 10, 1997

SECTION I:  LONG TERM INCENTIVE PLAN (LTIP) OPTION GRANTS

1.   The LTIP applies to the Management team and other recommended
     employees who are key contributors including sales personnel. 
     Options will be granted on an annual basis.
2.   The LTIP is based on corporate revenue growth and RONAEBIT
     (the metrics).  RONAEBIT is defined as: earnings before
     interest and taxes/average net assets employed, and is
     calculated using the financial results from the two fiscal
     years ending just prior to the grants.
3.   The individual's target participation units are based on
     his/her contribution to these metrics.
4.   The Company will grant LTIP benefits in the form of Datakey
     incentive stock options under the Company's 1997 Stock Option
     Plan.  The number of shares underlying the options for each
     participant and the exercise price will be defined at the
     beginning of a fiscal year, using the Company's financial
     performance figures from the previous two years.  The actual
     vesting schedule will depend on the Company's financial
     results during the two fiscal years.
5.   The LTIP option grants will be made based on the following
     formula: Individual target participation units x LTIP
     performance factor (from table below).
6.   RONAEBIT is calculated after all incentives are paid.

<TABLE>
<CAPTION>
                                            LTIP PERFORMANCE FACTOR TABLE
                                          Revenue Growth for 2 Year Period

RONAEBIT       <25%      25%       50%       75%       100%      125% or >
<S>            <C>       <C>       <C>       <C>       <C>       <C>
<15%           0         0         0         0         0         0
15%            0         0         0.25      0.5       .75       1
25%            0         0.25      0.5       1         1.5       2
35% or >       0         0.5       0.75      1.5       2.25      3

</TABLE>

This table may be interpolated for incentive payout calculation.

SECTION 2:  LTIP NOTES AND ASSUMPTIONS

The RONAEBIT calculation for the previous two-year period is
determined using operating income after deductive the short-term
bonus accrual expense.  Since the stock options will be granted at
the fair market value on the date of grant with a fixed number of
options and fixed term, no compensation expense will be recorded
during the operating periods.  The only accounting transactions
that will take place during the two-year period after the grant
include (i) the footnote disclosure for FAS123 and (ii) the common
stock equivalent calculation that is taken into account in
determining primary and fully diluted shares for EPS calculations.

Early in each fiscal year, each manager will be granted an option
to purchase such number of shares equal to three times the "LTIP
financial performance figure" for such person.  Based on year-end
financial results of the following two years, if the company's
performance during such two-year period qualifies for a "1 times
payout," the first set of options will vest immediately.  If the
performance qualifies for "2 times payout," the second set will
vest, and if it qualifies for "3 times payout," the third set of
options will vest.  In the event none of the performance criteria
are met for such two-year period, all the options will vest at the
end of 5 years.
<PAGE>
Since the number of shares and the price must be determined at the
time the option is granted in order for compensation expense to be
avoided, there is no provision for interpolation of the number of
shares.  In other words, if the base number of shares (the LTIP
financial performance figure) is 5,000, then the individual gets
early vesting of 5,000, 10,000 or 15,000 shares and no intervals in
between.  If the minimum level is not reached, all 15,000 shares
will vest at the end of five years.  To accommodate the same result
as interpolation of shares, the vesting schedule will reflect the
financial performance level.  For example, at a performance level
of .25 in the above LTIP table (50% revenue growth and 15% RONAEBIT
or 25% revenue growth and 25% RONAEBIT), the number of shares in
this example will be as follows: 
(At .50 the first set is vested in 3.50 years and at .75 level the
first set is vested at 2.75 years).

     5,000 shares vested in 4.25 years first set
     5,000 shares vested in 5.00 years second set
     5,000 shares vested in 5.00 years third set
     -----
     15,000 Total

At performance level of 1, the number of shares and the vesting is
as follows:

     5,000 shares vested in 2.00 years first set
     5,000 shares vested in 5.00 years second set
     5,000 shares vested in 5.00 years third set
     -----
     15,000 Total

At performance level of 2, the number of shares and the vesting is
as follows:

     5,000 shares vested in 2.00 years first set
     5,000 shares vested in 2.00 years second set
     5,000 shares vested in 5.00 years third set
     -----
     15,000 Total

At performance level of 3, the number of shares and the vesting is
as follows:

     5,000 shares vested in 2.00 years first set
     5,000 shares vested in 2.00 years second set
     5,000 shares vested in 2.00 years third set
     -----
     15,000 Total

To determine the vesting if performance falls in between levels 1,
2 and 3, the number of years for vesting is determined by using the
following vesting schedule for the fractional performance and
adding that to the shares with full performance:

     .25  4.25 years
     .50  3.50 years
     .75  2.75 years

At a performance level of 2.25, for example, the vesting is as
follows:

     5,000 shares vested in 2.00 years first set
     5,000 shares vested in 2.00 years second set
     5,000 shares vested in 4.25 years third set
     -----
     15,000 Total
<PAGE>
SECTION 3:  ANNUAL INCENTIVE PLAN (AIP)

1.   The AIP applies to the Management team (as selected by the
     Company's Board of Directors) and other key contributors
     except sales personnel (who participate under a separate
     plan).
2.   The AIP rewards corporate revenue growth and reduced operating
     losses before tax.  (See table below).
3.   Participation level (target bonus percentage) is based on the
     individual's planned contribution to these metrics.
4.   The Individual Performance Coefficient is a numerical rating
     of 0.5-1.0 recommended by the President and approved by the
     Compensation Committee on the individual's actual contribution
     to the measurement metrics.
5.   The Plan formula is: Base compensation x financial performance
     coefficient x target bonus percentage x individual performance
     coefficient.
6.   Pre-tax operating loss for calculation purposes is defined as
     the loss before incentive payout.

<TABLE>
                                       Financial Performance Coefficient Table

REVENUE                                         PRETAX OPERATING LOSS

                              110% plan      plan to        75% plan to
               >110% plan     to plan        75% plan       50% plan       <50% plan
<S>            <C>            <C>            <C>            <C>            <C>  
<90% plan           0              0              0              0              0

90% plan to
100% plan           0              .25            .5             .75            1
100% plan to
120% plan           0              .5             1              1.2            1.4
120% plan to
140% plan           0              .75            1.2            1.5            1.8

>140% plan          0              1              1.4            1.8            2.2

</TABLE>
This table may not be interpolated for incentive payout
calculation.