Document:

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                                                                   EXHIBIT 10.18

                                  DATAKEY, INC.
                          2003 EXECUTIVE INCENTIVE PLAN

The Datakey, Inc. 2003 Executive Incentive Plan ("2003 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 2003
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 2003 Incentive Plan applies to the following
executives, and others if approved by the Board of Directors:

    o  President & CEO

    o  Vice President/General Manager ISS

    o  Vice President & CFO

    o  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 2003
quarter over same quarter in 2002 and achievement of the planned profit/loss in
conjunction with the following table, with the amounts as set forth by the Board
of Directors:

<Table>
<Caption>
                                            Q1            Q2           Q3           Q4
                                      <C>          <C>          <C>          <C>
2002 ISS REVENUE                         $2,493,000   $1,869,000   $1,388,000   $1,600,000
PLANNED 2003 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
</Table>

Payment amount determination begins with the calculation of actual 2003 ISS
revenue growth (Quarterly increase year-to-year) and its percentage (F) of
revenue growth as specified in the 2003 Incentive 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:

    o  F = Actual revenue growth/planned revenue growth

    o  % 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.

    o  QUARTER PAYMENT = % earned x target annual incentive payment/4

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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.

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                                                                   EXHIBIT 10.19

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement") made and entered into
effective as of March 1, 2003, by and between DATAKEY, INC., a Minnesota
corporation (the "Company" or "Datakey"), and CARL P. BOECHER ("Executive").

                                    RECITALS

         Executive joined the Company in January 1995 as Vice President of Sales
and Marketing. He was appointed President and Chief Executive Officer on
December 1, 1996 and has served in this capacity since that time. On January 1,
1999, the Company and Executive signed an employment agreement. Effective as of
March 1, 2003, Executive resigned his position and agreed to serve as the Vice
Chairman of the Board of Directors of Datakey pursuant to the terms and
conditions of this Agreement.

                                    AGREEMENT

1.       Employment

         a. Datakey agrees to employ Executive as Vice Chairman of the Board of
Directors.

         b. Executive agrees that he will, at all times, faithfully,
industriously, and, to the best of his abilities, experience and talents,
continue to perform all the duties and responsibilities that may be required of
him as an officer who will have responsibilities in the area of corporate
development. His specific duties and responsibilities will be set by the
Chairman of the Board of Directors within 30 days of the signing of this
Agreement and he will report to the Chairman of the Board.

         c. Executive will continue as a member of Datakey's Board of Directors
for at least as long as the Agreement remains in effect and shareholders have
re-elected him. Executive will submit his resignation as a member of the Board
of Directors immediately upon termination of the Agreement for any reason, and
the Board of Directors may accept or reject his resignation. If Executive's
resignation is not accepted, he will continue as a director until the next
annual meeting of shareholders following the termination of the Agreement. In
the unlikely event that Executive is not re-elected to the Board of Directors at
the next annual meeting of shareholders, all of the other terms and conditions
of the Agreement will remain in full force and effect and Executive's new title
will be Vice President of Corporate Development. During his tenure as a
director, Executive will receive no board fees or stock options related to his
service as a director.

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2. Term of Employment

         Subject to the terms and conditions hereof, Executive shall be employed
for a term ("Employment Term") commencing effective as of March 1, 2003, and
terminating on March 1, 2004. This Agreement will be extended only upon written
agreement of the parties prior to March 1, 2004.

3. Compensation

         a. As compensation for his services to Datakey, Executive shall be paid
a monthly salary of $8,333.33 payable in accordance with Datakey's periodic
payment periods.

         b. In addition to his compensation described in 3a above, Executive
will be paid $17,500 per month for a period of twelve months in lieu of any
future severance payments which may have become due to him under his employment
agreement dated January 1, 1999.

         c. All payments made to Executive under this Section 3 shall be made to
him with one payroll check.

4. Bonus

         Executive will be eligible for a one-time bonus to be paid in a lump
sum on or before April 15, 2004. The bonus will be paid based on the Company's
financial and business performance during the term of this Agreement,
Executive's performance of his duties hereunder and his contributions to the
Company's performance. The payment of a bonus and the amount of such bonus, if a
bonus is paid, will be in the discretion of the Board of Directors. Executive
will not participate in any management incentive compensation plan currently in
place or any management compensation plan which may be approved in the future.

5. Other Benefits

         a. During the term of this Agreement, Executive will be eligible to
continue participation in the 401-K plan and to receive certain other benefits
described in the attached Exhibit A, subject to such changes as Datakey may
adopt from time to time for officers of the Company and salaried employees
generally.

         b. In addition to the benefits described in Exhibit A, so long as this
Agreement remains in effect, he will have a Company paid e-mail service, Company
cell phone, a Company-paid telephone line in his home office and Company
internet connection for his home office will be continued, and he may retain a
laptop computer, docking station and business software for his use during the
term of this Agreement. Executive will be entitled to use, from time to time,
the

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designated Board Member office in the Company facilities, new business cards
reflecting his Vice Chairman title, cell phone contact number and home office
phone line number.

6. Termination

         a. Notwithstanding Section 2 above, the Employment Term or any
extension thereof shall terminate upon the happening of any of the following
events:

                  (i) Mutual written agreement between the Board of Directors of
                  Datakey and Executive to terminate his employment;

                  (ii) Executive's death;

                  (iii) Executive's disability, defined as physically or
                  mentally unable to perform his duties as an officer of the
                  Company for a period of six consecutive months; or

                  (iv) For cause (as defined below) upon written notice from the
                  Board of Directors specifying the nature of the cause.

                  (v) Termination by the Company or voluntary resignation by the
                  Executive for any reason.

         b. For purposes of this Agreement, "cause" shall include the commission
of any felony, misdemeanor, or any act of fraud or dishonesty in connection with
the affairs of Datakey.

7. Payment Upon Termination of Employment for Cause or Voluntary Resignation

         If Executive is terminated for cause or voluntarily resigns, Executive
shall not be eligible to receive any compensation, severance or other benefits
except as specifically agreed to at time of termination or as set forth in this
Section 7 below. The date of termination under this Section 7 shall be on the
day the notice of termination for cause is given or the day the notice of
resignation is given. Executive shall be entitled to the balance of any payments
due to him under Section 3b above if he voluntarily resigns but not if he is
terminated for cause.

8. Payment Upon Termination of Employment Without Cause

         a. If during the term of this Agreement Executive is terminated without
cause, and without cause shall include death, disability or mutual agreement,
Executive shall be entitled to receive his agreed compensation under Sections 3a
and 3b for the balance of the term of this Agreement.

         b. The payments provided for under this Section 8 shall, in the event
of Executive's death, be payable to his wife if she survives or, if not, to his
estate.

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         c. The Company will continue to provide medical and health coverage,
under its plans as they currently exist or may hereafter be amended, at
customary employee rates during the term of this Agreement. Thereafter,
Executive and his covered dependents will be entitled to elect to continue
coverage under COBRA to the extent it is available. For the first twelve months
after termination, the COBRA medical and health coverage will be extended to
Executive at customary employee rates. Coverage by the Company or under COBRA
will end on the earlier of Executive's obtaining new employment, which gives him
the ability to provide medical and health insurance coverage for himself and his
family through his new employer, or the failure to pay any premium when due.

9. Nondisclosure

         Except by written permission from Datakey, Executive shall never
disclose or use any trade secrets, sales projections, formulations, customer
lists or information, product specifications or information, credit information,
production know-how, research and development plans or other information not
generally known to the public ("Confidential Information") acquired or learned
by Executive during the course, and on account, of his employment, whether or
not developed by Executive, except as such disclosure or use may be required by
his duties to Datakey, and then only in strict accordance with his obligations
of service and loyalty thereto. Upon termination of employment, Executive agrees
to deliver to Datakey all Confidential Information.

10. Inventions

         Any invention, discovery, improvement, or idea, whether patentable or
copyrightable or not, and whether or not shown or described in writing or
reduced to practice ("Invention") shall be promptly and fully disclosed by
Executive to the Company, and the Company will hold in trust for its sole right
and benefit, any Invention that Executive, during the period of employment, and
for one year thereafter, make, conceive, or reduce to practice or cause to be
made, conceived, or reduced to practice, either alone or in conjunction with
others, that:

         a. Relates to any subject matter pertaining to Executive's employment
with the Company;

         b. Relates to or is directly or indirectly connected with the Company's
business, products, projects, or Confidential Information; or

         c. Involves the use of any time, material, or facility of the
Company's.

         Executive hereby assigns to the Company all of his right, title, and
interest in and to all such Inventions and, upon the Company's request, shall
execute, verify, and deliver to the Company such documents including, without
limitation, assignments and applications for Letters

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Patent, and shall perform such other acts, including, without limitation,
appearing as a witness in any action brought in connection with this Employment
Agreement that is necessary to enable the Company to obtain the sole right,
title, and benefit to all such Inventions.

11. Specific Performance

         Executive acknowledges that a breach of this Employment Agreement would
cause Datakey irreparable injury and damage which could not be remedied or
adequately compensated by damages at law; therefore, Executive expressly agrees
that Datakey shall be entitled, in addition to any other remedies legally
available, to injunctive and/or other equitable relief to prevent a breach of
this Employment Agreement.

12. Noncompetition

         a. For a period of one year after termination of this Agreement for any
reason, Executive will not, directly or indirectly, alone or in any capacity
with another legal entity, (i) engage in any activity that competes in any
respect with Datakey, (ii) contact or in any way interfere or attempt to
interfere with the relationship of Datakey with any current or potential
customers of Datakey, or (iii) employ or attempt to employ any employee of
Datakey (other than a former employee thereof after such employee has terminated
employment with the Datakey).

         b. Executive acknowledges that Datakey markets products throughout the
United States and that Datakey would be harmed if Executive conducted any of the
activities described in this Section 12 anywhere in the United States.
Therefore, Executive agrees that the covenants contained in this Section 12
shall apply to all portions of, and throughout, the United States.

         c. Executive acknowledges that if he fails to fulfill his obligations
under this Section 12, the damages to Datakey would be very difficult to
determine. Therefore, in addition to any other rights or remedies available to
Datakey at law, in equity, or by statute, Executive hereby consents to the
specific enforcement of the provisions of this Section 12 by Datakey through an
injunction or restraining order issued by the appropriate court.

         d. To the extent any provision of this Section 12 shall be invalid or
unenforceable, it shall be considered deleted herefrom and the remainder of such
provision and this Section 12 shall be unaffected and shall continue in full
force and effect. In furtherance to and not in limitation of the foregoing,
should the duration or geographical extent of, or business activities covered
by, any provision of this Section 12 be in excess of that which is valid and
enforceable under applicable law, then such provision shall be construed to
cover only that duration, extent or activities which are validly and enforceably
covered. Executive acknowledges the uncertainty of the law in this respect and
expressly stipulates that this Section 12 be given the construction which
renders its provisions valid and enforceable to the maximum extent (not
exceeding its expressed terms) possible under applicable laws.

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13. Release of Claims

         a. In consideration of the new Employment Agreement entered into with
Executive, and the compensation and benefits provided therein, by signing this
Agreement, Executive releases and forever discharges Datakey from any and all
manner of claims, demands, actions, liability, damages Executive may have
against Datakey or any affiliates of Datakey, whether known or unknown in
connection with law or equity, contract, or tort, arising out of or in
connection with Executive's employment through March 1, 2003, and his Employment
Agreement dated January 1, 1999, including specifically Executive's resignation
as President and Chief Executive Officer of Datakey.

         b. This release includes, without limiting the generality of the
foregoing, any claims you may have for wages, bonuses, commissions, penalties,
deferred compensation, vacation pay, separation benefits, defamation, invasion
of privacy, negligence, improper discharge (based on contract, common law, or
statute, including any federal, state or local statute or ordinance prohibiting
discrimination or retaliation in employment), alleged violation of the United
States Constitution, the Minnesota Constitution, the Age Discrimination in
Employment Act, 29 U.S.C. Section 621 et seq., the Minnesota Human Rights Act,
Minn. Stat. Section 363.01 et seq., Title VII of the Civil Rights Act, 42 U.S.C.
Section 2000e et seq., the Americans with Disabilities Act, 42 U.S.C. Section
12101 et seq., the Employment Retirement Income Security Act of 1976, 29 U.S.C.
Section 1001 et seq., the Family and Medical Leave Act, 29 U.S.C. Section 2601
et seq., any claim arising under Minn. Stat. Chapters 177 and 181, any claim for
retaliation arising under Minn. Stat. Chapter 176, and any claim for
discrimination or retaliation based on sex, race, color, creed, religion, age,
national origin, marital status, sexual orientation, disability, status with
regard to public assistance, sexual harassment, or any other protected class
status.

14 Miscellaneous

         a. Waiver by Datakey of a breach of any provision of this Agreement by
Executive shall not operate or be construed as a waiver of any subsequent breach
by Executive.

         b. This Agreement shall be binding upon and inure to the benefit of
Datakey, its successors and assigns, and as to Executive, his heirs, personal
representatives, estate, legatees, and assigns.

         c. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements whether written or oral relating hereto.

         d. This Agreement shall be governed by and construed under the laws of
the State of Minnesota.

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         IN WITNESS WHEREOF, the parties have hereto executed this Employment
Agreement effective as of the day and year first above written.

                                      DATAKEY, INC.

                                      /s/ Gary R. Holland
                                      By:  Gary Holland, Chairman of the Board

                                      /s/ Carl P. Boecher
                                      Carl P. Boecher, Executive

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                                    EXHIBIT A
                                       TO
            EMPLOYMENT AGREEMENT DATED EFFECTIVE AS OF MARCH 1, 2003

                               EXECUTIVE BENEFITS

--       Group health, dental, life and disability insurance, 401K plan, 125
         plan and other benefits as provided to all employees

--       Supplemental life insurance in the amount of $300,000, based upon
         standard rates and underwriting decisions regarding medical history,
         paid 100% by the Company

--       Supplemental long-term disability insurance paying $5,000 per month
         based upon standard rates and underwriting decisions regarding medical
         history, paid 90% by the Company

--       Auto allowance of $600 per month

--       Vacation as required

--       Sick leave as needed, up to a maximum of 90 days at the discretion of
         the Chairman of the Board

--       Comprehensive annual physical examination at Park Nicollet Executive
         Health Center paid by the Company

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