EXHIBIT 3.1 CERTIFICATE OF
RESTATED ARTICLES OF INCORPORATION OF
DATAKEY, INC.  We the
undersigned William P. Flies and Thomas R. King, respectively the president and
secretary of Datakey, Inc., a corporation subject to the provisions of the
Minnesota Business Corporations Act, do hereby certify that, pursuant to action
taken by the directors of the Corporation at a regularly scheduled meeting
thereof and a majority vote of the outstanding shares of the Corporation
present in person or by proxy at an annual meeting thereof, the Corporation
effective as of May 24, 1982 elected to become governed by Minnesota Statutes
Ch. 302A and, in addition, approved and adopted the following Restated Articles
of Incorporation to supercede and take place of the existing Articles of
Incorporation. ARTICLE I The name of
the Corporation is Datakey, Inc. ARTICLE II The
registered office of this Corporation is located at 12281 Nicollet Avenue
South, Burnsville, Minnesota, 55337. ARTICLE III 3.01   The aggregate number of shares of stock
which this Corporation shall have the authority to issue is 5,000,000.  All common stock issued by the Corporation
shall have a par value of $.05 per share. 3.02.  The board of directors may from time to
time establish by resolution different classes or series of shares and may fix
the rights and preferences of said shares in any class or series. 3.03.  No shareholder of the Corporation shall
have any preemptive rights. 3.04.  No shareholder shall be entitled to any
cumulative voting rights. 3.05.  The shareholders shall take action by the
affirmative vote of the holders of a majority of the voting power of all voting
shares outstanding, except where a larger proportion is required by law, these
articles or a shareholder control agreement. ARTICLE IV The name and
address of the original incorporator of this Corporation is: William P. Flies,
12808 Woodview Lane, Burnsville, Minnesota, 55337. ARTICLE
V

The names
and addresses of the present board of directors are:

William P. Flies
  Richard A. Walter12281 Nicollet Avenue
  10101 E. Bren RoadBurnsville, MN  55337
  Minnetonka, MN  55343Thomas R. King
  Timothy P. Stepanek600 Midwest Plaza Bldg.
  1730 Midwest Plaza Bldg.Minneapolis, MN  55402
  Minneapolis, MN  55402

IN WITNESS
WHEREOF, we have hereunto set our hands this 24th day of May, 1982.


/s/ William P. FliesWilliam P. Flies, President/s/ Thomas R. KingThomas R. King, Secretary

STATE OF MINNESOTA
  )) ss.COUNTY OF HENNEPIN
  )William P.
Flies and Thomas R. King, being duly sworn on oath, depose and say that they
are, respectively, the president and secretary of Datakey, Inc., the
corporation named in the foregoing certificate; that said certificate contains
a true statement of the action of the shareholders and board of directors of
said corporation; that said certificate is executed on behalf of said
corporation by its express authority; and that they further acknowledge the
same to be their free act and deed and the free act, and deed of said
corporation.

/s/ William Flies/s/ Thomas R. KingSubscribed and sworn to before me this 24th
day of May, 1982.

/s/ Elizabeth A. ForehandNotary Public - MinnesotaHennepin CountyMy commission expires 3-13-87

OFFICERS CERTIFICATE OFDATAKEY, INC.

We, the
undersigned, John H. Underwood and Thomas R. King, the respective President and
Secretary of Datakey, Inc., a corporation subject to the provisions of
Minnesota Statutes, Chapter 302A, do hereby certify that the Minutes of Action
Without Meeting of the Board of Directors of the corporation dated December 23,
1985, a copy of which is attached hereto and incorporated herein by reference,
in which the Board of Directors authorized the issuance of Preferred Stock,
were unanimously adopted and approved by such Board of Directors.

IN WITNESS
WHEREOF, we have subscribed our names this 23rd day of December, 1985.

/s/ John H. UnderwoodJohn H. UnderwoodPresident/s/ Thomas R. KingThomas R. KingSecretary

STATE OF MINNESOTA
  )) ss.COUNTY OF HENNEPIN
  )On this 23rd
day of December, 1985, before a Notary Public within and for said County,
personally appeared John H. Underwood and Thomas R. King, to me personally
known, being by me duly sworn, and did say that they are the President and
Secretary, respectively, of the corporation named above and that the said
instrument was signed on behalf of the corporation and the persons who signed
said instrument acknowledged it to be the free act and deed of said
corporation.

/s/ Diane M. DossettoNotary Public - MinnesotaRamsey CountyMy commission expires 7-10-90MINUTES
OF ACTION WITHOUT MEETINGOF THE BOARD OF DIRECTORS OF
DATAKEY, INC.

The
undersigned, being all of the members of the Board of Directors of Datakey,
Inc., hereby adopt, by action without meeting, the following resolutions to be
effective as of December 23, 1985, to-wit:

RESOLVED: 
That the Preferred Stock authorizing resolutions, which resolutions are
attached hereto as Exhibit A and which resolutions establish a class of
Convertible Preferred Stock be and they hereby are adopted.FURTHER RESOLVED:  That the officers of the corporation be, and they hereby are,
authorized and directed to take whatever action is necessary to effect the
foregoing resolutions.

/s/ John H. UnderwoodJohn H. Underwood/s/ William P. FliesWilliam P. Flies/s/ Timothy A. StepanekTimothy A. Stepanek/s/ Thomas R. KingThomas R. King

EXHIBIT
A



MINUTES OF ACTION
WITHOUT MEETING OF THE
BOARD OF DIRECTORS OF DATAKEY, INC.



The
undersigned, being all of the members of the Board of Directors of Datakey,
Inc., hereby adopt, by action without meeting, the following resolution to be
effective as of December 23, 1985, to-wit:

WHEREAS, the
Articles of Incorporation of Datakey, Inc., a Minnesota corporation, authorize
the corporation to issue an aggregate of 5,000,000 shares of capital stock and
empower the corporations Board of Directors to establish from time to time by
resolution different classes or series of shares and to fix the rights and preferences
of said shares in any class or series; and

WHEREAS,
there currently are outstanding 2,979,750 shares of Common Stock, the remaining
2,020,250 authorized shares of capital stock being undesignated; and

WHEREAS, the
corporations Board of Directors deems it to be in the best interests of the
corporation and its shareholders to establish a second class of capital stock,
Convertible Preferred Stock, having certain rights and preferences;

NOW,
THEREFORE, BE IT RESOLVED, that the 5,000,000 shares of capital stock
authorized by the Articles of Incorporation of this corporation be, and they
hereby are, designated as belonging to the following classes having the
relative rights and preferences set forth below:

Section
1.     Shares and
Classes Authorized.

Of the
5,000,000 shares which the corporation is authorized to issue, 4,000,000 shares
shall be designated Common Stock, par value $.05, 400,000 shares shall be
designated Convertible Preferred Stock and 600,000 shares shall be undesignated
capital stock.

Section 2.     Right and Preferences of Convertible
Preferred Stock.

The rights
and preferences of the 400,000 shares of Convertible Preferred Stock shall be
as set forth in Exhibit 1 which is attached hereto and made a part hereof.



/s/ William P. FliesWilliam P. Flies/s/ John H. UnderwoodJohn H. Underwood/s/ Timothy A. StepanekTimothy A. Stepanek/s/ Thomas R. KingThomas R. King



EXHIBIT 1



CERTIFICATE OF RIGHTS AND PREFERENCES
OF
CONVERTIBLE PREFERRED STOCK
OF
DATAKEY, INC.



(A).    Classification of Undesignated Shares.

Of the
1,000,000 undesignated shares which the corporation is authorized to issue
under its Articles of Incorporation, 400,000 of such shares shall all be
classified as shares of Convertible Preferred Stock of the corporation (the
Preferred Stock).  Such shares of
Preferred Stock, together with the 4,000,000 authorized shares of Common Stock
of the corporation (the Common Stock) and the balance of the undesignated shares
of the corporation, are sometimes hereinafter collectively referred to as the
capital stock.

(B).    Voting Privileges.

(a)      General.  Each holder of
Preferred Stock shall have
that number of votes on all matters submitted to the stockholders that is equal
to the number of shares of Common Stock into which such holders shares of
Preferred Stock are then convertible, as hereinafter provided.  Except as otherwise provided in subparagraph
(b) below, and except as otherwise required by agreement or law, the shares of
capital stock of the corporation shall vote as a single class on all matters
submitted to the stockholders.

(b)      Without the affirmative vote of the
holders (acting together as a class) of at least a majority (with respect to
(1) below) or at least 90% (with respect to (2) below) of the shares of
Preferred Stock at the time outstanding, the corporation shall not:

(1)
  authorize or issue any shares of stock
  having a priority over Preferred Stock or ranking on a parity therewith as to
  the payment or distribution of assets upon the liquidation or dissolution,
  voluntary or involuntary, of the corporation; or(2)
  amend the Articles of Incorporation of the
  corporation so as to alter any existing provision relating to Preferred
  Stock.(c)      No Cumulative Voting.  No
holder of shares of capital stock shall
have any cumulative voting rights.

(C).    No Preemptive Rights.

No holder of shares of any class of capital
stock shall be entitled as such, as a matter of right, to subscribe for,
purchase or receive any part of any new or additional issue of stock of any
class whatsoever, or of securities convertible into or exchangeable for any
stock of any class whatsoever, whether now or hereafter authorized and whether
issued for cash or other consideration or by way of dividend.

(D).    Cash Dividends.

Any dividend
declared must be payable with respect to all outstanding shares of capital
stock of the corporation.  In the event
any dividend is declared with respect to the capital stock, each holder of
Preferred Stock shall be paid such cash dividend on the basis of the number of
shares of Common Stock into which such holders shares of Preferred Stock are
then convertible, as hereinafter provided.

(E).    Other Terms of the Preferred Stock.

(a)      Liquidation Preference.  In
the event of either an involuntary or a
voluntary liquidation or dissolution of the corporation, the holders of shares
of Preferred Stock shall be entitled to receive out of the assets of the
corporation an amount equal to $2.50 per share.  In the event of either an involuntary or voluntary liquidation or
dissolution of the corporation, payment shall be made to the holders of the
Preferred Stock in the amounts herein fixed before any payment shall be made or
any assets distributed to the holders of the Common Stock or any other class of
shares of the corporation ranking junior to the Preferred Stock with respect to
payment of dividends or upon dissolution or liquidation of the
corporation.  If upon any such
liquidation or dissolution of the corporation the assets available for
distribution shall be insufficient to pay the holders of all outstanding
shares of Preferred Stock the full amounts to which they respectively shall be
entitled, the holders of such shares shall share pro rata in any such
distribution.

The merger
or consolidation of the corporation into or with another corporation or the
merger or consolidation of any other corporation into or with the corporation
(in which consolidation or merger the stockholders of the corporation receive
distribution of cash or securities or other property as a result of such
consolidation or merger), or the sale, transfer or other disposition of all or
substantially all of the assets of the corporation, shall be deemed, for
purposes of determining the amounts to be received by the holders of the
Preferred Stock in such merger, consolidation, sale, transfer or other
disposition, to be a liquidation or dissolution of the corporation for purposes
of this subparagraph (a) if the holders of a majority of the outstanding shares
of Preferred Stock so elect by giving written notice thereof to the corporation
at least two days before the effective date of such event.  If no such notice is given, the provisions
of subparagraph (c)(7) hereof shall apply.

Nothing
hereinabove set forth shall affect in any way the right of each holder of
shares of Preferred Stock to convert such shares at any time and from time to
time in accordance with subparagraph (c) below.

(b)      Redemptions.  Redemptions
of shares of Preferred Stock by
the corporation without the consent of the holders thereof are not
permitted.  Mandatory redemptions of
shares of Preferred Stock by the corporation are not required.

(c)      Conversion Right; Mandatory Conversion.  At the option of the holders thereof, the
shares of Preferred Stock shall be convertible, at the office of the
corporation (or at such other office or offices, if any, as the Board of
Directors may designate), into fully paid and nonassessable shares (calculated
as to each conversion to the nearest 1/100th of a share) of Common Stock of the
corporation, at the conversion price, determined as hereinafter provided, in
effect at the time of conversion, each share of the Preferred Stock being taken
at $2.50 for the purpose of such conversion. 
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the conversion price) shall be initially $2.50 per
share of Common Stock (i.e., at an initial conversion rate of one share of
Common Stock for each share of Preferred Stock), provided, however,
that such initial conversion price shall be subject to adjustment from time to
time in certain instances as hereinafter provided.  The following provisions shall govern such right of conversion:

(1)
  In order to convert shares of Preferred
  Stock into shares of Common Stock of the corporation, the holder thereof
  shall surrender at any office hereinabove mentioned the certificate or
  certificates therefor, duly endorsed to the corporation or in blank, and give
  written notice to the corporation at such office that such holder elects to
  convert such shares.  Shares of
  Preferred Stock shall be deemed to have been converted immediately prior to
  the close of business on the day of the surrender of such shares for
  conversion as herein provided, and the person entitled to receive the shares
  of Common Stock of the corporation issuable upon such conversion shall be
  treated for all purposes as the record holder of such shares of Common Stock
  at such time.  As promptly as
  practicable on or after the conversion date, the corporation shall issue and
  deliver or cause to be issued and delivered at such office a certificate or
  certificates for the number of shares of Common Stock of the corporation
  issuable upon such conversion.(2)
  The conversion price shall be subject to
  adjustment from time to time as hereinafter provided.  Upon each adjustment of the conversion
  price each holder of shares of Preferred Stock shall thereafter be entitled
  to receive the number of shares of Common Stock of the corporation obtained
  by multiplying the conversion price in effect immediately prior to such
  adjustment by the number of shares issuable pursuant to conversion
  immediately prior to such adjustment and dividing the product thereof by the
  conversion price resulting from such adjustment.(3)
  Except for the issuance of Conversion Stock
  and Warrant Stock (as those terms are defined in the Preferred Stock Purchase
  Agreement dated December 16, 1985 among the corporation and the Purchasers
  named therein) (a) if and whenever on or prior to June 30, 1987 the
  corporation shall issue or sell any shares of its Common Stock for a
  consideration per share less than the conversion price in effect immediately
  prior to the time of such issue or sale, then forthwith upon such issue or
  sale the conversion price shall be reduced to such lesser price, and (b) if
  and whenever after June 30, 1987 the corporation shall issue or sell any
  shares of its Common Stock for a consideration per share less than the
  conversion price in effect immediately prior to the time of such issue or
  sale, and/or the corporation shall issue or sell any shares of Common Stock
  for a consideration per share less than the market price on the date of such
  issue or sale, then forthwith upon such issue or sale the conversion price
  shall be reduced to the price (calculated to the nearest cent) determined by
  dividing (1) an amount equal to the sum of (aa) the number of shares of
  Common Stock outstanding immediately prior to such issue or sale multiplied
  by the then existing conversion price, and (bb) the consideration, if any,
  received by the corporation upon such issue or sale, by (2) an amount equal
  to the sum of (aa) the number of shares of Common Stock outstanding
  immediately prior to such issue or sale and (bb) the number of shares of
  Common Stock thus issued or sold.For the
purposes of this subparagraph (3), the following provisions (i) to (vii),
inclusive, shall also be applicable:(i)
  In case at any time the corporation shall
  grant (whether directly or by assumption in a merger or otherwise) any rights
  to subscribe for or to purchase, or any options for the purchase of, (a)
  Common Stock or (b) any obligations or any shares of stock of the corporation
  which are convertible into, or exchangeable for, Common Stock (any of such
  obligations or shares of stock being hereinafter called Convertible
  Securities) whether or not such rights or options or the right to convert or
  exchange any such Convertible Securities are immediately exercisable, and the
  price per share for which Common Stock is issuable upon the exercise of such
  rights or options or upon conversion or exchange of such Convertible
  Securities (determined by dividing (x) the total amount, if any, received or
  receivable by the corporation as consideration for the granting of such
  rights or options, plus the minimum aggregate amount of additional
  consideration payable to the, corporation upon the exercise of such rights or
  options, plus, in the case of such Convertible Securities, the minimum
  aggregate amount of additional consideration, if any, payable upon the issue
  of such Convertible Securities and upon the conversion or exchange thereof,
  by (y) the total maximum number of shares of Common Stock issuable upon the
  exercise of such rights or options or upon the conversion or exchange of all
  such Convertible Securities issuable upon the exercise of such rights or
  options) shall be less than the conversion price in effect immediately prior
  to the time of the granting of such rights or options, then the total maximum
  number of shares of Common Stock issuable upon the exercise of such rights or
  options or upon conversion or exchange of the total maximum amount of such
  Convertible Securities issuable upon the exercise of such rights or options
  shall (as of the date of granting of such rights or options) be deemed to
  have been issued for such price per share. 
  Except as provided in subparagraph (6) below, no further adjustments
  of the conversion price shall be made upon the actual issue of such Common
  Stock or of such Convertible Securities upon exercise of such rights or
  options or upon the actual issue of such Common Stock upon conversion or
  exchange of such Convertible Securities.(ii)
  In case the corporation shall issue or sell
  (whether directly or by assumption in a merger or otherwise) any Convertible
  Securities, whether or not the rights to exchange or convert thereunder are
  immediately exercisable, and the price per share for which Common Stock is
  issuable upon such conversion or exchange (determined by dividing (x) the
  total amount received or receivable by the corporation as consideration for
  the issue or sale of such Convertible Securities, plus the minimum aggregate
  amount of additional consideration, if any, payable to the corporation upon
  the conversion or exchange thereof, by (y) the total maximum number of shares
  of Common Stock issuable upon the conversion or exchange of all such
  Convertible Securities) shall be less than the conversion price in effect
  immediately prior to the time of such issue or sale, then the total maximum
  number of shares of Common Stock issuable upon conversion or exchange of all
  such Convertible Securities shall (as of the date of the issue or sale of
  such Convertible Securities) be deemed to be outstanding and to have been
  issued for such price per share, provided that (a) except as provided in
  subparagraph (6) below, no further adjustments of the conversion price shall
  be made upon the actual issue of such Common Stock upon conversion or
  exchange of such Convertible Securities, and (b) if any such issue or sale of
  such Convertible Securities is made upon exercise of any rights to subscribe
  for or to purchase or any option to purchase any such Convertible Securities
  for which adjustments of the conversion price have been or are to be made
  pursuant to other provisions of this subparagraph (3), no further adjustment
  of the conversion price shall be made by reason of such issue or sale.(iii)
  In case the corporation shall, after June
  30, 1987, declare a dividend or make any other distribution upon any capital
  stock of the corporation payable in Common Stock or Convertible Securities,
  or in any rights or options to purchase any Common Stock or Convertible
  Securities, any Common Stock or Convertible Securities, or any such rights or
  options, as the case may be, issuable in payment of such dividend or
  distribution shall be deemed to have been issued or sold without
  consideration.(iv)
  In case any shares of Common Stock or
  Convertible Securities or any rights or options to purchase any such Common
  Stock or Convertible Securities shall be issued or sold for cash, the
  consideration received therefor shall be deemed to be the amount received by
  the corporation therefor, without deducting therefrom any expenses incurred
  or any underwriting commissions or concessions paid or allowed by the
  corporation in connection therewith. 
  In case any shares of Common Stock or Convertible Securities or any
  rights or options to purchase any such Common Stock or Convertible Securities
  shall be issued or sold for a consideration other than cash, the amount of
  the consideration other than cash received by the corporation shall be deemed
  to be the fair value of such consideration as determined by the Board of
  Directors of the corporation, without deducting therefrom any expenses
  incurred or any underwriting commissions or concessions paid or allowed by
  the corporation in connection therewith. 
  In case any shares of Common Stock or Convertible Securities or any
  rights or options to purchase such Common Stock or Convertible Securities
  shall be issued in connection with any merger or consolidation in which the
  corporation is the surviving corporation, the amount of consideration
  therefor shall be deemed to be the fair value as determined by the Board of
  Directors of the corporation of such portion of the assets and business of
  the non-surviving corporation or corporations as such Board shall determine
  to be attributable to such Common Stock, Convertible Securities, rights or
  options, as the case may be.  In the event
  of any consolidation or merger of the corporation in which the corporation is
  not the surviving corporation or in the event of any sale of all or
  substantially all of the assets of the corporation for stock or other
  securities of any other corporation, the corporation shall be deemed to have
  issued a number of shares of its Common Stock for stock or securities of the
  other corporation computed on the basis of the actual exchange ratio on which
  the transaction was predicated and for a consideration equal to the fair
  market value on the date of such transaction of such stock or securities of
  the other corporation, and if any such calculation results in adjustment of
  the conversion price, the determination of the number of shares of Common
  Stock issuable upon conversion immediately prior to such merger, conversion
  or sale, for purposes of subparagraph (7) below, shall be made after giving
  effect to such adjustment of the conversion price.(v)
  In case the corporation shall take a record
  of the holders of its Common Stock for the purpose of entitling them (a) to
  receive a dividend or other distribution payable in Common Stock or in
  Convertible Securities, or in any rights or options to purchase any Common
  Stock or Convertible Securities, or (b) to subscribe for or purchase Common
  Stock or Convertible Securities, then the date of such record shall be deemed
  to be the date of the issue or sale of the shares of Common Stock deemed to
  have been issued or sold upon the declaration of such dividend or the making
  of such other distribution or the date of the granting of such rights of
  subscription or purchase, as the case may be.(vi)
  The number of shares of Common Stock
  outstanding at any given time shall not include shares owned or held by or
  for the account of the corporation, and the disposition of any such shares
  shall be considered an issue or sale of Common Stock for the purpose of this
  subparagraph (3).(vii)
  Market price shall mean the average of
  the high and low prices of the Common Stock sales on all exchanges on which
  the Common Stock may at the time be listed, or, if there shall have been no
  sales on any such exchange on any such day, the average of the bid and asked
  prices at the end of such day, or, if the Common Stock shall not be so
  listed, the average of the bid and asked prices at the end of the day in the
  over-the-counter market, in each case averaged over a period of 20
  consecutive business days prior to the date as of which market price is
  being determined.  If at any time the
  Common Stock is not listed on any exchange or quoted in the over-the-counter
  market, the market price shall be deemed to be the higher of (i) the book
  value thereof as determined by any firm of independent public accountants of
  recognized standing selected by the Board of Directors of the corporation as
  of the last day of any month ending within 60 days preceding the date as of
  which the determination is to be made, or (ii) the fair value thereof
  determined in good faith by the Board of Directors of the corporation as of a
  date which is within 15 days of the date as of which the determination is to
  be made.(4)
  In case the corporation shall declare a
  dividend or make a distribution upon the Common Stock payable otherwise than
  out of earnings or earned surplus (including dividends or distributions in Common
  Stock or Convertible Securities, or in any rights or options to purchase any
  Common Stock or Convertible Securities), then thereafter each holder of
  shares of Preferred Stock upon the conversion thereof will be entitled to
  receive the number of shares of Common Stock into which such shares of
  Preferred Stock have been converted, and, in addition and without payment
  therefor, the cash, stock or other securities and other property which such
  holder would have received by way of dividends (otherwise than out of such
  earnings or surplus) if continuously since such holder became the record
  holder of such shares of Preferred Stock such holder (i) had been the record
  holder of the number of shares of Common Stock then received, and (ii) had
  retained all dividends or distributions in stock or securities (including
  Common Stock or Convertible Securities, or in any rights or options to
  purchase any Common Stock or Convertible Securities) payable in respect of
  such Common Stock or in respect of any stock or securities paid as dividends
  or distributions and originating directly or indirectly from such Common
  Stock.  For the purposes of the
  foregoing a dividend or distribution other than in cash shall be considered
  payable out of earnings or earned surplus only to the extent that such
  earnings or surplus are charged an amount equal to the fair value of such
  dividend or distribution as determined by the Board of Directors of the
  corporation.(5)
  In case the corporation shall at any time
  subdivide its outstanding shares of Common Stock into a greater number of
  shares, the conversion price in effect immediately prior to such subdivision
  shall be proportionately reduced, and conversely, in case the outstanding
  shares of Common Stock of the corporation shall be combined into a smaller
  number of shares, the conversion price in effect immediately prior to such
  combination shall be proportionately increased.(6)
  If (i) the purchase price provided for in
  any right or option referred to in clause (i) of subparagraph (3), or (ii)
  the additional consideration, if any, payable upon the conversion or exchange
  of Convertible Securities referred to in clause (i) or clause (ii) of
  subparagraph (3), or (iii) the rate at which any Convertible Securities
  referred to in clause (i) or clause (ii) of subparagraph (3) are convertible
  into or exchangeable for Common Stock, shall change at any time (other than
  under or by reason of provisions designed to protect against dilution), the
  conversion price then in effect hereunder shall forthwith be increased or
  decreased to such conversion price as would have obtained had the adjustments
  made upon the issuance of such rights, options or Convertible Securities been
  made upon the basis of (a) the issuance of the number of shares of Common
  Stock theretofore actually delivered upon the exercise of such options or
  rights or upon the conversion or exchange of such Convertible Securities, and
  the total consideration received therefor, and (b) the issuance at the time
  of such change of any such options, rights, or Convertible Securities then
  still outstanding for the consideration, if any, received by the corporation
  therefor and to be received on the basis of such changed price; and on the
  expiration of any such option or right or the termination of any such right
  to convert or exchange such Convertible Securities, the conversion price then
  in effect hereunder shall forthwith be increased to such conversion price as
  would have obtained had the adjustments made upon the issuance of such rights
  or options or Convertible Securities been made upon the basis of the issuance
  o the shares of Common Stock theretofore actually delivered (and the total
  consideration received therefor) upon the exercise of such rights or options
  or upon the conversion or exchange of such Convertible Securities.  If the purchase price provided for in any
  right or option referred to in clause (i) of subparagraph (3), or the rate at
  which any Convertible Securities referred to in clause (i) or clause (ii) of
  subparagraph (3) are convertible into or exchangeable for Common Stock, shall
  decrease at any time under or by reason of provisions with respect thereto
  designed to protect against dilution, then in case of the delivery of Common
  Stock upon the exercise of any such right or option or upon conversion or
  exchange of any such Convertible Security, the conversion price then in
  effect hereunder shall forthwith be decreased to such conversion price as
  would have obtained had the adjustments made upon the issuance of such right,
  option or Convertible Security been made upon the basis of the issuance of
  (and the total consideration received for) the shares of Common Stock
  delivered as aforesaid.(7)
  If any capital reorganization or
  reclassification of the capital stock of the corporation, or consolidation or
  merger of the corporation with another corporation, or the sale of all or
  substantially all of its assets to another corporation shall be effected in
  such a way that holders of Common Stock shall be entitled to receive stock,
  securities or assets with respect to or in exchange for Common Stock, then,
  as a condition of such reorganization, reclassification, consolidation,
  merger or sale, and subject to subparagraph (a) above, lawful and adequate
  provision shall be made whereby the holders of Preferred Stock shall
  thereafter have the right to receive upon the basis and upon the terms and
  conditions specified herein and in lieu of the shares of the Common Stock of
  the corporation immediately theretofore receivable upon the conversion of
  Preferred Stock, such shares of stock, securities or assets as may be issued
  or payable with respect to or in exchange for a number of outstanding shares
  of such Common Stock equal to the number of shares of such stock immediately
  theretofore receivable upon the conversion of Preferred Stock had such
  reorganization, reclassification, consolidation, merger or sale not taken
  place, plus all dividends unpaid and accumulated or accrued thereon to the
  date of such reorganization, reclassification, consolidation, merger or sale,
  and in any such case appropriate provision shall be made with respect to the
  rights and interests of the holders of Preferred Stock to the end that the
  provisions hereof (including without limitation provisions for adjustments of
  the conversion price and of the number of shares receivable upon the
  conversion of Preferred Stock) shall thereafter be applicable, as nearly as
  may be in relation to any shares of stock, securities or assets thereafter
  receivable upon the conversion of Preferred Stock.  The corporation shall not effect any such consolidation, merger
  or sale, unless prior to the consummation thereof the successor corporation
  (if other than the corporation) resulting from such consolidation or merger
  or the corporation purchasing such assets shall assume by written instrument
  executed and mailed to the holders of Preferred Stock, at the last addresses
  of such holders appearing on the books of the corporation, the obligation to
  deliver to such holder such shares of stock, securities or assets as, in
  accordance with the foregoing provisions, such holder may be entitled to
  receive.(8)
  Upon any adjustment of the conversion
  price, then and in each case the corporation shall give written notice
  thereof, by first-class mail, postage prepaid, addressed to the holders of
  Preferred Stock, at the addresses of such holders as shown on the books of
  the corporation, which notice shall state the conversion price resulting from
  such adjustment and the increase or decrease, if any, in the number of shares
  receivable at such price upon the conversion of Preferred Stock, setting
  forth in reasonable detail the method of calculation and the facts upon which
  such calculation is based.(9)
  In case at any time:(i)
  the corporation shall declare any cash dividend
  on its Common Stock at a rate in excess of the rate of the last cash dividend
  theretofore paid;(ii)
  the corporation shall pay any dividend
  payable in stock upon its Common Stock or make any distribution (other than
  regular cash dividends) to the holders of its Common Stock;(iii)
  the corporation shall offer for
  subscription pro rata to the holders of its Common Stock any additional
  shares of stock of any class or other rights;(iv)
  there shall be any capital reorganization,
  or reclassification of the capital stock of the corporation, or consolidation
  or merger of the corporation with, or sales of all or substantially all of
  its assets to, another corporation; or(v)
  there shall be a voluntary or involuntary
  dissolution, liquidation or winding up of the corporation;then, in any one or more of said cases, the corporation shall give
written notice, by first-class mail, postage prepaid, addressed to the holders
of Preferred Stock at the addresses of such holders as shown on the books of
the corporation, of the date on which (a) the books of the corporation shall
close or a record shall be taken for such dividend, distribution or
subscription rights, or (b) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up shall take
place, as the case may be.  Such notice
shall also specify the date as of which the holders of Common Stock of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up, as the case may be.  Such written notice shall be given at least
20 days prior to the action in question and not less than 20 days prior to the
record date or the date on which the corporations transfer books are closed in
respect thereto.(10)
  If any event occurs as to which in the
  opinion of the Board of Directors of the corporation the other provisions of
  this paragraph (c) are not strictly applicable or if strictly applicable
  would not fairly protect the rights of the holders of Preferred Stock in
  accordance with the essential intent and principles of such provisions, then
  the Board of Directors shall make an adjustment in the application of such
  provisions, in accordance with such essential intent and principles, so as to
  protect such rights as aforesaid.(11)
  As used in this paragraph (c) the term
  Common Stock shall mean and include the corporations presently authorized
  Common Stock and shall also include any capital stock of any class of the
  corporation hereafter authorized which shall not be limited to a fixed sum or
  percentage in respect of the rights of the holders thereof to participate in
  dividends or in the distribution of assets upon the voluntary or involuntary
  liquidation, dissolution or winding up of the corporation; provided that the
  shares receivable pursuant to conversion of shares of Preferred Stock shall include
  shares designated as Common Stock of the corporation as of the date of
  issuance of such shares of Preferred Stock, or, in case of any
  reclassification of the outstanding shares thereof, the stock, securities or
  assets provided for in subparagraph (7) above.(12)
  No fractional shares of Common Stock shall
  be issued upon conversion, but, instead of any fraction of a share which
  would otherwise be issuable, the corporation shall pay a cash adjustment in
  respect of such fraction in an amount equal to the same fraction of the
  market price per share of Common Stock, determined pursuant to subparagraph
  (3)(vii) above, as of the close of business on the day of conversion.Mandatory Conversion.  Preferred Stock shall automatically be
converted into shares of Common Stock of the corporation, without any act by
the corporation or the holders of Preferred Stock, concurrently with the
closing of the first public offering by the corporation of shares of Common
Stock of the corporation registered under the Securities Act of 1933, as
amended, in which (1) the offering is underwritten on a firm commitment basis
by an underwriter, or a group of underwriters represented by an underwriter or
underwriters, and (2) the aggregate public offering price of the securities sold
for cash by the corporation in the offering, net of expenses payable by the
corporation in connection with such offering, is at least $5,000,000, and (3)
the public offering price per share of Common Stock is at least $5 (as adjusted
from time to time to reflect stock splits, dividends, recapitalizations,
combinations or the like).  As used
herein, the term closing shall mean the delivery by the corporation to the
underwriters of certificates representing the shares of Common Stock of the
corporation offered to the public against delivery to the corporation by such
underwriters of payment therefor.  The
term firm commitment basis with respect to the underwriting of such public
offering shall mean a commitment pursuant to a written underwriting agreement
under which the nature of the underwriters commitment is such that all
securities will be purchased by such underwriters if any securities are
purchased by such underwriters.  Each
holder of a share of Preferred Stock so converted shall be entitled to receive
the full number of shares of Common Stock into which such share of Preferred
Stock held by such holder could be converted if such holder had exercised its
conversion right at the time of closing of such public offering.  Upon such conversion, each holder of a share
of Preferred Stock shall immediately surrender such share in exchange for
appropriate stock certificates representing a share or shares of Common Stock
of the corporation.



ARTICLES
OF AMENDMENT OF ARTICLES OF INCORPORATION

OF
DATAKEY, INC.

Pursuant to
the provisions of Minnesota Statutes, Section 302A.135, the following Amendment
of Section 3.01 of the Articles of Incorporation of Datakey, Inc. was adopted
at a meeting of the shareholders of the corporation duly convened and held on
the 6th day of May, 1986, by a vote of 84% of the voting power of
all shares entitled to vote:

3.01  The aggregate number of shares of stock
which this corporation shall have authority to issue is 12,500,000 shares,
consisting of 10,000,000 shares of Common Stock, par value $.05, 400,000 shares
of Preferred Stock and 2,100,000 undesignated shares.I swear that
the foregoing is true and accurate and that I have the authority to sign this
document on behalf of the corporation.

/s/ John H. UnderwoodJohn H. Underwood, President

STATE OF MINNESOTA
  )) ss.COUNTY OF Dakota
  )

The
foregoing instrument was acknowledged before me this 25th day of June,
1986, by John H. Underwood, President of Datakey, Inc., a Minnesota
corporation, on behalf of the corporation.

/s/ Bette F. FeahrNotary Public - MinnesotaDakota CountyMy commission expires 8-20-91(Notarial Seal)

ARTICLES
OF AMENDMENT OF ARTICLES OF INCORPORAT10NOF
DATAKEY, INC.



Pursuant to
the provisions of Minnesota Statutes, Section 302A.135, the following Amendment
of the Articles of Incorporation of Datakey, Inc., adding Article VI, was
adopted at a meeting of the shareholders of the corporation duly convened and
held on the May 12, 1987, by a majority vote of the voting power of all shares
entitled to vote:

ARTICLE VI - LIMITATION OF DIRECTOR LIABILITY6.1)    To the fullest extent permitted by the
Minnesota Business Corporation Act as the same exists or may hereafter be
amended, a director of this corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director.I swear that
the foregoing is true and accurate and that I have the authority to sign this
document on behalf of the corporation.



/s/ John H. UnderwoodJohn H. Underwood, President

STATE OF MINNESOTA
  )) ss.COUNTY OF DAKOTA
  )The
foregoing instrument was acknowledged before me this 27 day of May,
1987, by John H. Underwood, President of Datakey, Inc., a Minnesota
corporation, on behalf of the corporation.

/s/ Bette F. FeahrNotary Public - MinnesotaDakota CountyMy commission expires 8-20-91

(Notarial Seal)



Notice of Change of Registered Office
by
DATAKEY, INC.

Pursuant
to Minnesota Statutes, Section 302A.123, the undersigned hereby certifies that
the Board of Directors of the above named Minnesota Corporation has resolved to
change the corporations registered office or agent:

FROM:
  Datakey, Inc.12281 Nicollet Avenue SouthBurnsville, MN  55337TO:
  Datakey, Inc.407 West Travelers TrailBurnsville, MN  55337-2554The
new address may not be a post office box. 
It must be a street address, pursuant to Minnesota Statutes, Section
302A.011, Subd. 3.

The
effective date of the change will be the 1st day of July, 1987 or the day of
filing of this certificate with the Secretary of State, whichever is later.

I
swear that the foregoing is true and accurate and that I have the authority to
sign this document on behalf of the corporation.



/s/ George H. M. RountreeGeorge H. M. RountreeVice President FinanceJuly
11, 1988

STATE OF MINNESOTA
  )) ss.COUNTY OF Dakota
  )The
foregoing instrument was acknowledged before me on this 11th day of July, 1988.

/s/ Bette F. FeahrNotary Public - MinnesotaDakota CountyMy commission expires 8-20-91

State
of Minnesota
Department of State

Filed: August 10, 1988



STATEMENT OF DESIGNATION OF SHARES
OF
DATAKEY, INC.



The
undersigned hereby certifies that the resolutions set forth on Exhibit A
attached hereto were duly adopted by the Board of Directors of Datakey, Inc. on
May 11, 1998.

I swear that
the foregoing is true and accurate and that I have the authority to sign this
document on behalf of the corporation.



May
14, 1998

DATAKEY, INC./s/ Alan G. ShulerAlan G. ShulerVice President and Chief Financial Officer



EXHIBIT A



DESIGNATION OF SERIES A CONVERTIBLE CUMULATIVE PREFERRED STOCK



WHEREAS,
pursuant to the Articles of Incorporation of this corporation, the Board of
Directors has authority to establish, from the 2,100,000 undesignated shares of
capital stock, one or more classes or series of shares, to designate each such
class or series, and to fix the relative rights and preferences of each such
class or series; and

WHEREAS, the
Board of Directors deem it advisable to designate shares of Series A
Convertible Cumulative Preferred Stock;

NOW,
THEREFORE, RESOLVED, that of the 2,100,000 undesignated shares currently
authorized, 150,000 shares are hereby designated as shares of Series A
Convertible Cumulative Preferred Stock, which shares shall have the terms as
set forth on Exhibit A hereto.





EXHIBIT A



RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK



The rights,
preferences, restrictions and other matters relating to the Series A
Convertible Cumulative Preferred Stock (the Series A Preferred Stock)
are as follows:

1.       Dividend Provisions.  Upon issuance, dividends shall accrue on
each share of outstanding Series A Preferred Stock at an annual rate equal to
$1.264 per share per annum (8% of the Original Issue Price, as defined
herein).  Such dividends shall be
cumulative and shall be payable upon any conversion of the Series A Preferred
Stock pursuant to Section 3 hereof. 
Such dividends shall only be paid out of legally available funds of the
Company.  Such dividends shall be
payable by the Company, in its sole discretion, all in cash or all by the
issuance of a number of shares of the Companys unrestricted, freely tradable
common stock equal to the dividends owing on the Series A Preferred Stock;
provided, however, that prior to the payment of any such dividend by the
issuance of shares of the Companys common stock, the Company shall deliver to
the Investors an opinion of its counsel stating that all such shares have been
validly registered, and that they are duly authorized, validly issued and
nonassessable.  For the purposes hereof,
the number of shares of the Companys common stock issuable in lieu of any cash
dividend payment shall equal the total dividend payment then due divided by the
per share price of such stock.  The per
share price of the Companys common stock shall be determined based on the
average closing bid price of such stock quoted on The Nasdaq Stock Market for
the ten consecutive trading days prior to the payment of such dividends.  Dividends on shares of the Series A
Preferred Stock shall accrue beginning on the date of issuance of the shares of
Series A Preferred Stock, shall compound on an annual basis and shall be
payable upon conversion of the Series A Preferred Stock (a Payment
Date).  All accrued and unpaid
dividends on the Series A Preferred Stock must be paid before any
dividends may be declared or paid on any other junior series of preferred or
common stock issued by the Company.

2.       Liquidation Preference.

(a)      In the event of any liquidation,
dissolution or winding up of the Company, either voluntary or involuntary, the
holders of the previously issued Convertible Preferred Stock (the Convertible
Preferred Stock) and the Series A Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of
the Company to the holders of common stock by reason of their ownership
thereof, an amount per share equal to $2.50 for the Convertible Preferred
Stock, and for the Series A Preferred Stock the sum of (i) $15.80, as
adjusted pursuant to Section 4(c) hereof (the Original Issue Price), and (ii)
an amount equal to cumulative unpaid dividends on such shares (respectively, a
Liquidation Amount).  If upon the
occurrence of such an event, the assets and funds thus distributed among the
holders of the Convertible Preferred Stock and the Series A Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then, the entire assets and funds of the
Company legally available for distribution shall be distributed ratably among
the holders of the Convertible Preferred Stock and the Series A Preferred
Stock in proportion to the amount of such stock owned by each such holder
multiplied by the appropriate Liquidation Amount.

(b)      Upon the completion of the distribution
required by subparagraph (a) of this Section 2, if assets remain in the
Company, the remaining assets of the Company shall be distributed ratably among
the holders of the Companys common stock and the Series A Preferred Stock
in proportion to the number of shares of common stock held by each (assuming
full conversion of all shares of Series A Preferred Stock).

(c)      (i)       For
purposes of this Section 2, a liquidation, dissolution or winding up of the
Company shall be deemed to be occasioned by, or to include, (A) the acquisition
of the Company by another entity by means of any transaction or series of
related transactions (including any reorganization, merger or consolidation but
excluding any merger effected exclusively for the purpose of changing the
domicile of the Company); or (B) a sale of all or substantially all of the
assets of the Company, unless the Companys shareholders as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
Companys acquisition or sale or otherwise) hold at least 50% of the voting
power of the surviving or acquiring entity.

(ii)     
 In any of such events, if the
consideration received by the Company is other than cash, its value will be
deemed its fair market value.

(iii)    
In the event the requirements of this
Section 2 are not complied with, the Company shall forthwith either:

(A)     cause such closing to be postponed until
such time as the requirements of this Section 2 have been complied with, or

(B)     cancel such transaction, in which event
the rights, preferences and privileges of the holders of the Convertible
Preferred Stock and the Series A Preferred Stock shall revert to and be
the same as such rights, preferences and privileges existing immediately prior
to the date of the first notice referred to in subsection 2(c)(iv) hereof.

(iv)     The Company shall give each holder of record
of Convertible Preferred Stock and the Series A Preferred Stock written
notice of such impending transaction not later than 20 days prior to the
shareholders meeting called to approve such transaction, or 20 days prior to
the closing of such transaction, whichever is earlier, and shall also notify
such holders in writing of the final approval of such transaction; provided,
however, that the holder of any shares of then outstanding Convertible
Preferred Stock or Series A Preferred Stock shall have the right during
such 20–day period to convert such shares pursuant to Section 3
hereof. The first of such notices shall describe the material terms and
conditions of the impending transaction and the provisions of this Section 2,
and the Company shall thereafter give such holders prompt notice of any
material changes. The transaction shall in no event take place sooner than 20
days after the Company has given the first notice provided for herein or sooner
than ten days after the Company has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of the Convertible Preferred Stock and the
Series A Preferred Stock that are entitled to such notice rights or similar
notice rights and that represent at least a majority of the voting power of all
then outstanding shares of each of the classes of preferred stock, voting
separately as a class.

3.       Conversion.

(a)      Conversion Right.  At the
option of the holder thereof, each
share of Series A Preferred Stock shall be convertible at any time during
the period commencing on the day on which the Series A Preferred Stock is
issued and expiring on May 15, 2000 (the date which is the second anniversary
of the date of issuance of the Series A Preferred Stock); provided,
however, that such expiration date shall be extended for a number of days equal
to the number of days beyond the 90th day following the date of issuance of the
Series A Preferred Stock that the Registration Statement (as such term is
defined in the Registration Rights Agreement, of even date herewith, entered
into by and between the Company and the Investors set forth on Schedule A
thereto) is not effective (such date, including any extension thereof pursuant
to the foregoing proviso, being herein referred to as the Second
Anniversary).  The Series A Preferred
Stock shall be convertible at the office of the Company or any transfer agent
for such stock into such number of fully paid and nonassessable shares of the Companys
common stock as is determined by dividing the Original Issue Price, subject to
adjustment as provided in Section 4, by the Conversion Price applicable to
such shares, determined as hereafter provided, in effect on the date the
certificates representing such shares are surrendered for conversion (the
Conversion Date).  The Conversion
Price shall be equal to the average closing bid price of one share of the
Companys common stock as quoted by the Nasdaq SmallCap Market, the Nasdaq
National Market or the principal exchange upon which shares of the Companys
common stock may be listed, or, if the Companys common stock shall not then be
quoted on the Nasdaq SmallCap Market or the Nasdaq National Market or listed on
a national securities exchange, but shall otherwise be traded in the over–the–counter
market, on such over–the–counter market for the ten–day
period ending on the day prior to the Conversion Date (the Trading Period)
multiplied by .8 (the Conversion Price); provided, however, that in no event
shall the Conversion Price exceed $5.00 per share or be less than $2.75 (the
Maximum Price and Minimum Price, respectively) per share; and provided,
further, that appropriate adjustments shall be made in determining the average
closing bid price if a recapitalization or other event affecting the Companys
common stock shall occur during the Trading Period.

(b)      Dividend Payment. Should the
Company, pursuant to Section 1 hereof, not elect to pay all outstanding,
cumulative, accrued and unpaid dividends on the Series A Preferred Stock in
shares of its common stock, the Company shall pay, in immediately available
funds, to the holder of any shares of Series A Preferred Stock being converted,
within two days, all such dividends on the date that it receives notice of such
holders intent to convert such shares pursuant to (d) below.  Separately, should the Company elect to pay
all outstanding, cumulative, accrued and unpaid dividends on the Series A
Preferred Stock in shares of its common stock, it shall, within two business
days of receiving a holders notice of intent to convert, deliver certificates
representing such shares to the holder of the Series A Preferred Stock.

(c)      Automatic Conversion. Any shares
of Series A Preferred Stock remaining outstanding on the Second
Anniversary shall be automatically converted pursuant to the conversion terms
of Section 3(a) above.  The Conversion
Date with respect to such automatic conversion shall be the Second Anniversary.  In any event, the Company shall, within two
business days after automatic conversion of the Series A Preferred Stock, issue
and deliver a certificate or certificates for the number of shares of the
Companys common stock to which each former holder of Series A Preferred
Stock is entitled.  Notwithstanding the
foregoing, no automatic conversion of the Series A Preferred Stock shall occur
pursuant to this Section unless (i) all shares of the Companys common
stock underlying the shares of Series A Preferred Stock may be sold pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, (ii) the Companys common stock is listed and trading on The Nasdaq
Stock Market, and (iii) the Company has reserved and available for
issuance a number of shares of its common stock sufficient to cover conversion
of all outstanding shares of Series A Preferred Stock.

(d)      Mechanics of Conversion. 
Before any holder of Series A Preferred
Stock shall be entitled to convert the same into shares of the Companys common
stock, he, she or it  shall surrender
the certificate or certificates therefor, duly endorsed, at the office of the
Company or of any transfer agent for the Series A Preferred Stock, and
shall give written notice, via facsimile, to the Company, at its principal
corporate office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares of the
Companys common stock are to be issued. 
The Company shall, immediately thereafter (and in any event no more than
two business days thereafter), issue and deliver to such holder of
Series A Preferred Stock at the address shown on the Companys records or
at such other address as such party may designate by written notice to the
Company, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of the Companys common stock to which
such holder shall be entitled pursuant to Section 3(a) and a certificate
representing shares of Series A Preferred Stock not so converted by the
holder.  Such conversion shall be deemed
to have been made immediately prior to the close of business on the Conversion
Date, and the person or persons entitled to receive the shares of the Companys
common stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of the Companys common stock as of
such date.

(e)      Mechanics of Automatic Conversion.  On the Conversion Date with respect to the
automatic conversion pursuant to subsection 3(c) above, the certificates
representing shares of Series A Preferred Stock shall immediately
represent that number of shares of the Companys common stock into which such
shares are convertible.  Holders of
Series A Preferred Stock shall deliver their certificates, duly endorsed
in blank, to the principal office of the Company, together with a notice
setting out the name or names (with addresses) and denominations in which the
certificates representing such shares of common stock issuable upon conversion
are to be issued and including instructions for delivery thereof.  The person entitled to receive the shares of
the Companys common stock issuable upon such conversion shall be treated for
all purposes as the record holder of such shares of common stock at and on the
Conversion Date, and the rights of such person as a holder of shares of
Series A Preferred Stock shall cease and terminate at and on the
Conversion Date, in any case without regard to any failure by such holder to
deliver the certificates or the notice required by this subsection 3(e).  On the Conversion Date with respect to
automatic conversion, the Company shall pay all outstanding, cumulative,
accrued and unpaid dividends, either by the issuance of shares of its common
stock or in cash, pursuant to the provisions set forth in (a) above; provided,
however, that should the Company elect to pay such dividends by the issuance of
additional shares of its common stock, the person entitled to receive such
shares of the Companys common stock issuable upon such conversion shall be
treated for all purposes as the record holder of such additional shares on the
Conversion Date

(f)       No Impairment.  The
Company will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 3 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Series A Preferred Stock against impairment.

(g)      No Fractional Shares.
       No fractional shares shall be issued upon
the conversion of any share or shares of the Series A Preferred Stock, and
the number of shares of the Companys common stock to be issued shall be
rounded to the nearest whole share. 
Whether or not fractional shares are issuable upon such conversion shall
be determined on the basis of the total number of shares of Series A
Preferred Stock the holder is at the time converting into shares of the
Companys common stock and the number of shares of such common stock issuable
upon such aggregate conversion.

(h)      Notices of Record Date.  In
the event of any taking by the Company of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, the Company shall mail to each holder of Series A
Preferred Stock, at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such dividend,
distribution or right.

(i)       Reservation of Stock Issuable Upon
Conversion. 
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of common stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred Stock,
such number of its shares of its common stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of the
Series A Preferred Stock; and if at any time the number of authorized but
unissued shares of the Companys common stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series A Preferred
Stock, in addition to such other remedies as shall be available to the holder
of such Series A Preferred Stock, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of common stock to such number of shares as
shall be sufficient for such purposes, including engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to the
Companys Articles of Incorporation.

(j)       Notices.  Any notice
required by the provisions of
this Section 3 to be given to the holders of shares of Series A Preferred
Stock shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his, her or its address
appearing on the books of the Company.

4.       Anti-Dilution Provisions.

The Original
Issue Price shall be subject to adjustment from time to time upon the happening
of any of the following events:  (a) In
the event the Company shall issue or sell any shares of its common stock
(except as provided in paragraph (e) hereof) for a consideration per share less
than the greater of (A) $5.00, or (B) 80% of the Market Price (as
defined below) on the date of such issue or sale, then the Original Issue Price
shall be increased to such greater price (calculated to the nearest cent) as
shall be determined by multiplying the Original Issue Price by a fraction, the
numerator of which shall be the number of shares of the Companys common stock
outstanding immediately after the issuance or sale of such additional shares,
and the denominator of which shall be the sum of (i) the number of shares
of the Companys common stock outstanding immediately prior to the issuance or
sale of such additional shares, and (ii) the number of shares of the Companys
common stock which the aggregate consideration received for the issuance or
sale of such additional shares would purchase at the greater of $5.00, or if
such shares of the Companys common stock shall have been issued for a
consideration per share less than 80% of the Market Price on the date of
issuance or sale, the current Market Price. 
For purposes of this paragraph, all shares of the Companys common stock
issuable upon exercise of outstanding options and warrants shall be deemed to
be outstanding.

(b)      For the purposes of paragraph 4(a) above,
the following subparagraphs (i) to (vii), inclusive, shall be applicable:

(i)     
  If at any time the Company shall issue or
sell any rights to subscribe for, or any rights or options to purchase, shares
of its common stock or any stock or other securities convertible into or exchangeable
for such common stock (such convertible or exchangeable stock or securities
being hereinafter called Convertible Securities), whether or not such rights
or options or the right to convert or exchange any such Convertible Securities
shall be immediately exercisable, and the price per share for which shares of
the Companys common stock shall be issuable upon the exercise of such rights
or options or upon conversion or exchange of such Convertible Securities
(determined by dividing (1) the total amount, if any, received or
receivable by the Company as consideration for the granting of such rights or
options, plus the minimum aggregate amount of additional consideration payable
to the Company upon the exercise of such rights or options, plus, in the case
of any such rights or options which shall relate to Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (2) the total number of shares of the Companys
common stock issuable upon the exercise of such rights or options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options) shall be less than the greater of
(x) the $5.00, or (y) 80% of the Market Price at the time of such
issue or sale, then the total number of shares of the Companys common stock
issuable upon the exercise of such rights or options or upon conversion or
exchange of the total amount of such Convertible Securities issuable upon the
exercise of such rights or options shall (as of the date of granting of such
rights or options) be deemed to be outstanding and to have been issued for such
price per share, and except as provided in paragraph 4(d), no further
adjustments of the Original Issue Price shall be made upon the actual issue of
such shares of common stock or of such Convertible Securities, upon the
exercise of such rights or options or upon the actual issue of such common stock
upon conversion or exchange of such Convertible Securities.

(ii)     
 If at any time the Company shall issue or
sell any Convertible Securities, whether or not the rights to exchange or
convert thereunder shall be immediately exercisable, and the price per share
for which shares of the Companys common stock shall be issuable upon such
conversion or exchange (determined by dividing (1) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (2) the total number of shares of the Companys common stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the greater of (x) $5.00, or (y) 80% of the Market
Price at the time of such issue or sale, then the total number of shares of the
Companys common stock issuable upon conversion or exchange of all such
Convertible Securities shall (as of the date of the issue or sale of such
Convertible Securities) be deemed to be outstanding and to have been issued for
such price per share, and, except as provided in paragraph 4(d), no
further adjustments of the Original Issue Price shall be made upon the actual
issue of such shares of common stock upon conversion or exchange of such
Convertible Securities.  In addition, if
any issue or sale of such Convertible Securities shall be made upon exercise of
any rights to subscribe for or to purchase or any option to purchase any such
Convertible Securities for which adjustments of the Original Issue Price shall
have been or shall be made pursuant to other provisions of this
paragraph 4(b)(ii), no further adjustment of the Original Issue Price
shall be made by reason of such issue or sale.

(iii)    
If at any time the Company shall declare
and pay a dividend or make any other distribution upon the shares of its common
stock payable in such stock or Convertible Securities, any such stock or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.

(iv)     If at any time any shares of the
Companys common stock or Convertible Securities or any rights or options to
purchase shares of any such stock or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Company in connection therewith.  In case any shares of the Companys common
stock or Convertible Securities or any rights or options to purchase any such
common stock or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair value of such
consideration as determined by the Companys Board of Directors, without
deduction therefrom of any expenses incurred or any underwriting commissions or
concessions or discounts paid or allowed by the Company in connection
therewith.  In case any shares of the
Companys common stock or Convertible Securities or any rights or options to
purchase any such common stock or Convertible Securities shall be issued in
connection with any merger of another corporation into the Company, the amount
of consideration therefor shall be deemed to be the fair value of the net
assets of such merged corporation as determined by the Companys Board of
Directors after deducting therefrom all cash and other consideration (if any)
paid by the Company in connection with such merger.

(v)     
If at any time the Company shall take a
record of the holders of its common stock for the purpose of entitling them (1)
to receive a dividend or other distribution payable in shares of the Companys
common stock or in Convertible Securities, or (2) to subscribe for or purchase
shares of the Companys common stock or Convertible Securities, then such
record date shall be deemed to be  the
date of the issue or sale of the shares of the Companys common stock deemed to
have been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.

(vi)     The number of shares of the Companys
common stock outstanding at any given time shall not include shares owned or held
by or for the account of the Company, provided that such shares are neither
issued, sold or otherwise distributed by the Company.

(vii)    For purposes hereof, the Market Price
shall mean the average closing bid price of the Companys common stock on the
Nasdaq SmallCap Market, the Nasdaq National Market or the principal exchange
upon which shares of the Companys common stock may be listed, or, if the
Companys common stock shall not then be quoted on the Nasdaq SmallCap Market
or the Nasdaq National Market or listed on a national securities exchange, but
shall otherwise be traded in the over-the-counter market, on such
over-the-counter market, in each case for the ten day period immediately
preceding any determination of such Market Price (subject to appropriate
adjustments which shall be made in determining the average closing bid price if
a recapitalization or other event affecting the Companys common stock shall
occur during such 10-day period).  If at
any time shares of the Companys common stock shall not be quoted on the Nasdaq
SmallCap Market or the Nasdaq National Market, listed on a national securities
exchange, or otherwise traded in the over–the-counter market, the Market
Price of a share of the Companys common stock shall be deemed to be the
higher of (x) the book value thereof (as determined by any firm of
independent public accountants of nationally recognized standing selected by
the Companys Board of Directors) as of the last day of any month ending within
60 days preceding the date of determination, or (y) the fair value thereof
(as determined in good faith by the Companys Board of Directors) as of a date
which shall be within 15 days of the date of determination.

(c)      In case at any time the Company shall
subdivide its outstanding shares of common stock into a greater number of
shares, the Original Issue Price in effect immediately prior to such
subdivision, the Maximum Price and the Minimum Price shall be proportionately
reduced, and the Company shall subdivide the Series A Preferred Stock in
the same proportion.  In case at any
time the outstanding shares of the Companys common stock shall be combined
into a smaller number of shares, the Original Issue Price in effect immediately
prior to such combination, the Maximum Price and the Minimum Price shall be
proportionately increased, and the Company shall combine the Series A
Preferred Stock in the same proportion. 
Any adjustment under this paragraph 4(c) shall become effective at the
close of business on the date the subdivision or combination shall become
effective.  The Company will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Series A Preferred Stock to such
number of shares as shall be sufficient for any such purposes, including
engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to the Companys Articles of Incorporation.

(d)      If the purchase or exercise price
provided for in any right or option referred to in paragraph 4(b)(i), or the
rate at which any Convertible Securities referred to in paragraph 4(b)(i) or
(ii) shall be convertible into or exchangeable for shares of the Companys
common stock, shall change or a different purchase or exercise price or rate
shall become effective at any time or from time to time (including any change
resulting from termination of such right, option or convertible security),
then, upon such change becoming effective, the Original Issue Price then in
effect hereunder shall forthwith be increased or decreased to such Original
Issue Price as would have been obtained had the adjustments made upon the
granting or issuance of such rights or options or Convertible Securities been
made upon the basis of (A) the issuance of the number of shares of the
Companys common stock theretofore actually delivered upon the exercise of such
options or rights or upon the conversion or exchange of such Convertible
Securities, and (B) the granting or issuance at the time of such change of any
such options, rights or Convertible Securities then still outstanding for the
consideration, if any, received by the Company therefor and to be received on
the basis of such changed price.

(e)      The Company shall not be required to make
any adjustment to the Original Issue Price in the case of:

(i)     
  the granting, after the date hereof, by
the Company of stock options under the Companys 1997 Stock Option Plan, so
long as the shares of the Companys common stock underlying such options are
covered by the 800,000 shares currently reserved for issuance under such plan
as of the date hereof, assuming approval by the Companys shareholders of the
300,000 share increase at the Companys 1998 Annual Meeting of Shareholders;

(ii)     
 the issuance of shares of the Companys
common stock, pursuant to the exercise of the options referred to in paragraph
4(e)(i) above or the exercise of any other options or warrants outstanding as
of the date hereof; or

(iii)    
the issuance of shares of the
Series A Preferred Stock hereunder or of shares of the Companys common
stock upon the conversion of any shares of the Series A Preferred Stock or
upon the exercise of the Warrant or the Warrant issued to Miller, Johnson &
Kuehn, Incorporated on the same date as the Preferred Stock Purchase Agreement
to which this certificate of Designation is an Exhibit.

5.       Voting Rights. The holder
of each share of Series A Preferred Stock shall have the right to the
number of votes on all matters submitted to the Companys shareholders that shall
be equal to the number of shares of the Companys common stock into which such
holders shares of Series A Preferred Stock shall then be convertible (assuming
a conversion as of the record date set for the vote).

6.       Status of Converted Stock.  In the event any shares of Series A
Preferred Stock shall be converted pursuant to Section 3 hereof, the shares of
Series A Preferred Stock so converted shall be canceled and shall not be
issuable by the Company.  The Articles
of Incorporation of the Company shall be appropriately amended to effect the
corresponding reduction in the Companys authorized capital stock.

7.       Notice of Adjustment.  The Company shall provide all holders of
shares of Series A Preferred Stock five business days prior written notice
of any adjustments in the Original Issue Price, the Maximum Price, the Minimum
Price or any other adjustments made pursuant to the provisions hereof.



Filed with
State of Minnesota
May 14, 1998

STATEMENT OF
DESIGNATION
OF ADDITIONAL SHARES
OF
DATAKEY, INC.



The
undersigned hereby certifies that the resolutions set forth below were duly
adopted by the Board of Directors of Datakey, Inc., a Minnesota corporation, on
January 25, 2000:



WHEREAS,
pursuant to the Articles of Incorporation of this corporation, the Board of
Directors has authority to establish, from the 1,950,000 undesignated shares of
capital stock, one or more classes or series of shares and to fix the relative
rights and preferences of each such class of or series; andWHEREAS, the
Board of Directors deems it advisable to designate additional common shares;NOW,
THEREFORE, RESOLVED, that, of the 1,950,000 undesignated shares, currently
authorized, 1,000,000 shares are designated as additional common shares.

I swear that
the foregoing is true and accurate and that I have the authority to sign this
document on behalf of the corporation.



Dated: 
February 10, 2000

/s/
  Carl P. BoecherCarl
  P. Boecher, President andChief
  Executive Officer of Datakey, Inc.

Filed with
State of Minnesota
Feb. 11, 2000

ARTICLES
OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
DATAKEY, INC.



Pursuant to the provisions of Minnesota Statutes, Section 302A.135, the
amendment to the Articles of Incorporation of Datakey, Inc., amending and
restating Article 3.01 in its entirety, as set forth below, was duly adopted by
the shareholders of the corporation on May 31, 2000:

3.01  The aggregate number of shares of stock
which this corporation shall have authority to issue is 30,000,000 shares,
consisting of 20,000,000 shares of common stock, par value $.05, 400,000 shares
of convertible preferred stock, which shall have the rights and preferences as
set forth on a Certificate of Rights and Preferences filed with the Minnesota
Secretary of State on December 24, 1985, and 9,600,000 undesignated shares.



The undersigned swears that the foregoing is true and accurate and that
the undersigned has the authority to sign this document on behalf of the
corporation.



Dated:   May 31, 2000



/s/ Carl P. BoecherCarl P. Boecher, President and Chief Executive OfficerFiled with
State of Minnesota
June 19, 2000