AMENDMENTS TO THE
                      DATAKEY, INC. 1987 STOCK OPTION PLAN



ADOPTED BY BOARD OF DIRECTORS ON JULY 1, 1995:

1.       A new sentence shall be added at the end of subsection (e) of Section 1
         Definitions to read as follows:

                  "For purposes of Section 19, the  "Optionee" is a Non-Employee
                  Director to whom a nonqualified option has been granted."

2.       A new subsection (h) shall be added to Section 1 Definitions to read as
         follows:

                  "(h) 'Non-Employee  Directors' shall mean members of the Board
                  who are not employees of the Company or any Subsidiary."

3.       Section 17 Amendment of the Plan shall be amended to add a new sentence
         at the end of such Section 17 as follows:

                  "In  addition  to  and  notwithstanding  the  foregoing,   the
                  provisions  of Section 19 shall not be amended  more than once
                  every six months,  other than to comport  with  changes in the
                  Internal Revenue Code, the Employee Retirement Income Security
                  Act, or the rules thereunder."

4.       A new Section 19 Granting of Options to Non-Employee Directors shall be
         added to read as follows:

                                  "SECTION 19.

                  GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS

         (a) Upon Joining Board. Each Non-Employee  Director of the Company who,
         on or after July 1, 1995,  the date of approval  of this  Section 19 by
         the Board, is initially elected as a director, shall, as of the date of
         such election,  automatically  be granted an option to purchase  15,000
         shares of the Common  Stock at an option  price per share equal to 100%
         of the fair  market  value of the Common  Stock on such  date.  Options
         granted   pursuant  to  this   subsection   (a)  shall  be  immediately
         exercisable to the extent of 3,000 shares subject to such option and to
         the extent of an additional 3,000 shares on each of the first,  second,
         third and fourth anniversaries of the date of grant; provided, however,
         that options granted before  approval by the Company's  shareholders of
         an  amendment  to the  Company's  1987 Stock  Option  Plan  adding this
         Section 19 to the Plan shall not be exercisable before such approval.

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         (b) Upon Re-election to Board. Each  Non-Employee  Director who, on and
         after  July 1, 1995,  the date of  approval  of this  Section 19 by the
         Board,  is  re-elected  as a director  of the  Company or whose term of
         office continues after a meeting of shareholders at which directors are
         elected  shall,  as of the  date of  such  re-election  or  shareholder
         meeting, automatically be granted an option to purchase 2,500 shares of
         the Common Stock at an option price per share equal to 100% of the fair
         market  value of the Common  Stock on the date of such  re-election  or
         shareholder  meeting.  Options granted  pursuant to this subsection (b)
         shall be immediately exercisable in full.

         (c) General. No director shall receive more than one option pursuant to
         subsection  (b) of this Section 19 in any one fiscal year.  All options
         granted pursuant to this Section 19 shall be designated as nonqualified
         options  and shall be subject to the same terms and  provisions  as are
         then in effect  with  respect to granting  of  nonqualified  options to
         officers  and  employees  of the Company  except that the option  shall
         expire on the earlier of (i) three months after the Optionee  ceases to
         be a director  (except by death) and (ii) ten (10) years after the date
         of grant. Notwithstanding the foregoing, in the event of the death of a
         Non-Employee Director, any option granted to such Non-Employee Director
         pursuant  to this  Section 19 may be  exercised  at any time within six
         months of the  death of such  Non-Employee  Director  or on the date on
         which the option, by its terms expires, whichever is earlier."



ADOPTED BY BOARD OF DIRECTORS ON MARCH 19, 1996:


         Increase of Shares Reserved Under 1987 Stock Option Plan

                  RESOLVED, that, subject to shareholder approval which shall be
         requested  at the Annual  Meeting,  the number of shares  reserved  for
         issuance pursuant to the Company's 1987 Stock Option Plan be and hereby
         is increased from 550,000 to 800,000 shares.


AMENDMENTS APPROVED BY SHAREHOLDERS ON JUNE 5, 1996


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