Document:

STOCK PURCHASE AGREEMENT

         This Agreement is made and entered into as of the 11th day of February,
2000, between Datakey, Inc., a Minnesota corporation (the "Company") and each of
the persons listed on Schedule 1 to this Agreement (the "Investors"). Reference
to any exhibits herein refers to the exhibits included in the Company's offering
materials dated February 3, 2000 (the "Offering Materials").

         For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged by the Company and each of the Investors, the Company
and the Investors agree as follows:

         1. Sale and Purchase of Securities. Subject to the terms and conditions
hereof, the Company agrees to sell to each Investor at the Closing (as defined
herein), and each Investor severally agrees to purchase from the Company at the
Closing, that number of shares of the Company's Common Stock (the "Shares") set
forth opposite each Investor's name on Schedule 1 at a purchase price of five
dollars ($5.00) per share, together with a five-year warrant in the form
attached hereto as Exhibit A (the "Warrant") to purchase that number of Shares
of the Company's Common Stock set forth on Schedule 1 at an exercise price of
five dollars ($5.00) per share. The Shares and the Warrants are referred to
herein collectively as the "Securities."

         2. Closing. The closing shall take place at the offices of Fredrikson &
Byron, P.A., Minneapolis, Minnesota 55402, at 1:00 p.m., Minneapolis time, on
Friday, February 11th, 2000 (the "Closing") and/or at such other place or time
as may be mutually acceptable to the Investors and the Company. At the Closing,
subject to the satisfaction of the conditions in Section 6 below, the Company
will deliver to each Investor a certificate representing the Shares purchased by
such Investor, together with a Warrant representing the right to purchase that
number of shares of Common Stock of the Company set forth opposite each
Investor's name on Schedule 1, against payment of the purchase price therefor by
certified check or wire transfer to the Company in the amounts set forth after
their respective names in Schedule 1 hereto.

         3. Representations and Warranties by the Company. To induce each
Investor to enter into this Agreement and to purchase the number of Securities
set forth after his or its name on Schedule 1, the Company hereby represents and
warrants to each Investor that:

                  3.1 Organization, Standing, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Minnesota, and has the requisite corporate power and authority to own
its properties and to carry on its business in all material respects as it is
now being conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing in all states or jurisdictions in which the
ownership or lease of its property or the conduct of its business requires such
qualification and the failure to be so qualified would have a materially adverse
effect on the Company's business.

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                  3.2 Authorization and Enforceability. The Company has full
legal power, right and authority to enter into this Agreement and the
Registration Rights Agreement among the Company and the Investors, the form of
which is attached hereto as Exhibit B (the "Registration Rights Agreement") and
to issue the Securities. This Agreement, the Registration Rights Agreement and
the Securities, have been duly authorized, executed and delivered on behalf of
the Company and are the valid and binding obligations of the Company,
enforceable in accordance with their respective terms and subject, as to
enforcement, to applicable bankruptcy, insolvency, reorganization, moratorium
and other laws affecting the rights of creditors generally, to the exercise of
judicial discretion as to the availability of equitable remedies such as
specific performance in injunction and subject, as to enforcement of the
indemnification provisions, to limitations under applicable securities laws. The
Securities when delivered pursuant to the terms of this Agreement will be
validly issued, fully paid and nonassessable.

                  3.3 Subsidiaries. The Company has one wholly owned subsidiary,
Datakey FSC.

                  3.4 Financial Statements. Included in the Offering Materials
are (a) the preliminary unaudited 1999 financial statements, (b) the Company's
annual report on Form 10-KSB for the year ended December 31, 1998, (c) the
Company's quarterly reports on Form 10-QSB for the quarters ended April 3, 1999,
July 3, 1999, and October 2, 1999 (d) the Company's Proxy Statement for the
Annual Meeting of Shareholders held in 1999, (e) the Company's 1998 Annual
Report, and (f) the Company's Forms 8-K dated June 21, 1999 and October 29,
1999. The financial statements included in such reports (i) are in accordance
with the books and records of the Company, (ii) present fairly the financial
condition of the Company at the balance sheet dates and the results of its
operations for the periods therein specified, subject, in the case of the April
3, 1999, July 3, 1999, and the October 2, 1999 financial statements, to normal
year-end adjustments, and (iii) have, in all material respects, been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior accounting periods. Without limiting the generality of the
foregoing, the balance sheets included in such reports or notes thereto disclose
all of the debts, liabilities and obligations of any nature (whether absolute,
accrued or contingent and whether due or to become due) of the Company at
December 31, 1998, April 3, 1999, July 3, 1999, October 2, 1999, and December
31, 1999, which, individually, or in the aggregate, are material or which in
accordance with generally accepted accounting principles would be required to be
disclosed in such balance sheets, and includes appropriate reserves for all
taxes and other liabilities accrued as of such dates but not yet payable.

                  3.5 Tax Returns and Audits. All required federal, state and
local tax returns and appropriate extension requests of the Company have been
filed, and all federal, state and local taxes required to be paid with respect
to such returns have been paid or due provision for the payment thereof has been
made. The Company is not delinquent in any material respect in the payment of
any such tax or in the payment of any assessment or governmental charge. The
Company has not received notice of any tax deficiency proposed or assessed
against it, and it has not executed any waiver of any statute of limitations on
the assessment or collection of any tax.

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                  3.6 Changes, Dividends, Etc. Except for the transactions
contemplated by this Agreement, since December 31, 1999, the Company has not:
(i) incurred any debts, obligations or liabilities, absolute, accrued or
contingent and whether due or to become due, except current liabilities incurred
in the ordinary course of business which (individually or in the aggregate) will
not materially and adversely affect the business, properties or prospects of the
Company; (ii) paid any obligation or liability other than, or discharged or
satisfied any liens or encumbrances other than those securing, current
liabilities, in each case in the ordinary course of business; (iii) declared or
made any payment to or distribution to its shareholders as such, or purchased or
redeemed any of its shares of capital stock, or obligated itself to do so; (iv)
mortgaged, pledged or subjected to lien, charge, security interest or other
encumbrance any of its assets, tangible or intangible, except in the ordinary
course of business; (v) sold, transferred or leased any of its assets except in
the ordinary course of business; (vi) suffered any physical damage, destruction
or loss (whether or not covered by insurance) materially and adversely affecting
the tangible properties, business or prospects of the Company; (vii) encountered
any labor difficulties or labor union organizing activities; (viii) issued or
sold any shares of capital stock or other securities or granted any options
(other than to employees), warrants, or other purchase rights with respect
thereto other than pursuant to this Agreement; (ix) made any acquisition or
disposition of any material assets or became involved in any other material
transaction, other than for fair value in the ordinary course of business; (x)
materially increased the compensation payable, or to become payable, to any of
its directors or employees, or made any bonus payment or similar arrangement
with any directors or employees or increased the scope or nature of any fringe
benefits provided of its employees or directors; or (xi) agreed to do any of the
foregoing other than pursuant hereto. Except as otherwise disclosed in the
Offering Materials, there has been no material adverse change in the financial
condition, operations, results of operations or business of the Company since
December 31, 1999.

                  3.7 Title to Properties and Encumbrances. The Company has good
and marketable title to all of its properties and assets, except for property
disposed of in the ordinary course of business since December 31, 1999, which
properties and assets are not subject to any mortgage, pledge, lease, lien,
charge, security interest, encumbrance or restriction, except (a) those which
are shown and described on the December 31, 1999, balance sheet or the notes
thereto, (b) liens for taxes and assessments or other governmental charges or
levies not at the time due or in respect of which the validity thereof shall
currently be contested in good faith by appropriate proceedings, (c) statutory
liens that have arisen in the ordinary course of business, or (d) those which do
not materially affect the value of or interfere with the use made of such
properties and assets.

                  3.8 Conditions. The plant, offices and equipment of the
Company have been kept in good condition and repair in the ordinary course of
business.

                  3.9 Litigation; Governmental Proceedings. There are no legal
actions, suits, arbitrations or other legal, administrative or governmental
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company, or its properties or business, and the Company
is not aware of any facts which are likely to result in or form the basis for
any such action, suit or other proceeding. The Company is not in default with

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respect to any judgment, order or decree of any court or any governmental agency
or instrumentality with respect to which it is a party or is named as an
affected person, nor to the best of its knowledge is the Company in default with
respect to any other judgment, order or decree. The Company has not been
threatened with any action or proceeding under any business or zoning ordinance,
law or regulation.

                  3.10 Compliance With Applicable Laws or Other Instruments. To
the best of the Company's knowledge, the business and operations of the Company
have been and are being conducted in all material respects in accordance with
all applicable laws, rules and regulations of all governmental authorities.

                  3.11 Shares, Warrants and Warrant Shares. The Shares and
Warrants, when issued and paid for pursuant to the terms of this Agreement, will
be duly authorized, validly issued and outstanding, fully paid and nonassessable
and shall be free and clear of all pledges, liens, encumbrances and
restrictions, except securities restrictions as set forth in Section 4 hereof.
The Warrant Shares have been reserved for issuance and when issued upon exercise
of the Warrants, will be duly authorized, validly issued and outstanding, fully
paid, nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, except as set forth in Section 4.

                  3.12 Securities Laws. Based in part upon the representations
of the Investors, no consent, authorization, approval, permit or order of or
filing with any governmental or regulatory authority is required under current
laws and regulations in connection with the execution and delivery of this
Agreement or the offer, issuance, sale or delivery of the Shares, Warrants or
Warrant Shares, other than the qualification thereof, if required, under
applicable state securities laws, which qualification has been or will be
effected as a condition of these sales. The Company has not, directly or through
an agent, offered the Securities or any similar securities for sale to, or
solicited any offers to acquire such securities from, persons other than the
Investors and other accredited investors. Under the circumstances contemplated
by this Agreement, the offer, issuance, sale and delivery of the Shares,
Warrants or Warrant Shares will not, under current laws and regulations, require
compliance with the prospectus delivery or registration requirements of the
federal Securities Act of 1933, as amended (the "Securities Act"). The Company
has filed all reports or other documentation that it is required to file by the
federal Securities Exchange Act of 1934, as amended, any rules or regulations
promulgated thereunder, the applicable rules and regulations of the National
Association of Securities Dealers ("NASD") and all applicable state securities
laws, and the information contained in such reports or other documents did not
make any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading.

                  3.13 Patents and Other Intangible Rights. To the best of its
knowledge, the Company (a) owns or has the exclusive right to use, free and
clear of all material liens, claims and restrictions, all patents, trademarks,
service marks, trade names, copyrights, licenses and rights with respect to the
foregoing, used in the conduct of its business as now conducted without
infringing upon or otherwise acting adversely to the right or claimed right of
any person under or with respect to any of the foregoing, (b) is not obligated

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or under any liability whatsoever to make any payments of a material nature by
way of royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any patent, trademark, trade name, copyright or other intangible
asset, with respect to the use thereof or in connection with the conduct of its
business or otherwise, (c) owns or has the unrestricted right to use all trade
secrets, including know-how, customer lists, inventions, designs, processes,
computer programs and technical data necessary to the development, operation and
sale of all products and services sold or proposed to be sold by it, free and
clear of any rights, liens or claims of others, and (d) is not using any
confidential information or trade secrets of others.

                  3.14 Capital Stock. At the date hereof, the Company is
authorized by its articles of incorporation to issue 12,500,000 shares of
capital stock, which consists of the following: (a) 11,000,000 shares of common
stock, $.05 par value, of which there are outstanding 7,001,827 shares, (b)
400,000 shares of Convertible Preferred Stock, of which there are outstanding
150,000 shares, (c) 150,000 shares of Series A Convertible Preferred Stock, of
which there are none outstanding, and (d) 950,000 undesignated shares. All of
the outstanding shares of the Company were duly authorized, validly issued and
are fully paid and nonassessable. Other than with regard to the outstanding
Convertible Preferred Stock and Series A Convertible Preferred Stock, or as
otherwise disclosed on Exhibit 3.14, there are no outstanding subscriptions,
options, warrants, calls, contracts, demands, commitments, convertible
securities or other agreements or arrangements of any character or nature
whatever, other than this Agreement, under which the Company is obligated to
issue any securities of any kind representing an ownership interest in the
Company. All outstanding securities of the Company have been issued in full
compliance with or an exemption or exemptions from the registration and
prospectus delivery requirements of the Securities Act and from the regulation
and qualification requirements of all applicable state securities laws.

                  3.15 License and Approvals. The Company has all licenses,
certificates, permits and other approvals from governmental and regulatory
authorities necessary for the conduct of its business as it is currently being
conducted and as proposed to be conducted except those which would not have a
material adverse effect or the Company if not obtained.

                  3.16 Defaults. The Company is not in breach, default or
violation of, and the execution of this Agreement and the Registration Rights
Agreement and the consummation of the transactions herein and therein
contemplated will not conflict with or result in any breach of, any of the terms
or conditions of, or constitute a default or violation under, (i) the Articles
of Incorporation, as amended, or Bylaws, as amended, of the Company, (ii) any
indenture, agreement or other instrument to which the Company is now a party, or
(iii) to the best of the Company's knowledge, any law or any order, rule or
regulation applicable to the Company of any court or of any federal or state
regulatory body or administrative agency having jurisdiction over the Company or
its property.

                  3.17 Insurance Coverage. There are in full force policies of
insurance issued by insurers of recognized responsibility insuring the Company
and its properties and business against such losses and risks, and in such
amounts, as in the Company's best judgment, after advice from its insurance
broker, are acceptable for the nature and extent of such business and its
resources.

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                  3.18 No Brokers or Finders. Except for Miller, Johnson &
Kuehn, Incorporated, which is assisting the Company in the transactions
contemplated by this Agreement, no person, firm or corporation has or will have,
as a result of any act or omission of the Company, any right, interest or valid
claim against the Company or any Investor for any commission, fee or other
compensation as a finder or broker in connection with the transactions
contemplated by this Agreement. The Company will indemnify and hold each of the
Investors harmless against any and all liability with respect to any such
commission, fee or other compensation which may be payable or determined to be
payable in connection with the transactions contemplated by this Agreement.

                  3.19 Disclosure. The Company has not knowingly withheld from
the Investors any material facts relating to the assets, business, operations,
financial condition or prospects of the Company. No representation or warranty
in this Agreement or in any certificate, schedule or other document furnished or
to be furnished to any Investor pursuant hereto or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact required to
be stated herein or therein or necessary to make the statements herein or
therein not misleading.

                  3.20 Reporting. The Company is subject to the reporting
requirements of the Securities Act and the Exchange Act and (i) has timely filed
all reports and statements required to be filed thereunder in the 12-month
period prior to the date hereof, and (ii) each report and statement was true and
complete in all material respects when filed.

         4. Representations of the Investors. Each Investor represents for
itself that:

                  4.1 Investment Intent. The Securities being acquired by such
Investor are being purchased for investment for such Investor's own account and
not with the view to, or for resale in connection with, any distribution or
public offering thereof. Such Investor understands that the Securities have not
been registered under the Securities Act or any state securities laws by reason
of their contemplated issuance in transactions exempt from the registration
requirements of the Securities Act and applicable state securities laws, and
that the reliance of the Company and others upon these exemptions is predicated
in part upon this representation by each Investors. Such Investor further
understands that the Securities may not be transferred or resold without (i)
registration under the Securities Act and any applicable state securities laws,
or (ii) an exemption from the requirements of the Securities Act and applicable
state securities laws.

                  Such Investor understands that an exemption from such
registration is presently available pursuant to Rule 144 promulgated under the
Securities Act by the Securities and Exchange Commission (the "Commission") but
that in any event an Investor may not sell any securities pursuant to Rule 144
prior to the expiration of a one-year period after such Investor has acquired
such securities. Such Investor understands that any sales pursuant to Rule 144
can be made only in full compliance with the provisions of Rule 144.

<PAGE>

                  4.2 Location of Principal Office, Qualification as an
Accredited Investor, Etc. The state in which such Investor's principal office
(or domicile, if such Investor is an individual) is located is the state set
forth in such Investor's address on Schedule 1. Unless otherwise indicated on
such Investor's signature page to this Agreement, such Investor qualifies as an
"accredited investor" for purposes of Regulation D promulgated under the
Securities Act for the reasons specified after such investor's name on such
signature page. Such Investor acknowledges that the Company has made available
to such Investor at a reasonable time prior to the execution of this Agreement
the opportunity to ask questions and receive answers concerning the business and
affairs of the Company and the terms and conditions of the sale of securities
contemplated by this Agreement and to obtain any additional information (which
the Company possesses or can acquire without unreasonable effort or expense) as
may be necessary to verify the accuracy of information furnished to such
Investor. Such Investor (a) is able to bear the loss of its entire investment in
the Shares without any material adverse effect on its business, operations or
prospects, and (b) has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
to be made by it pursuant to this Agreement.

                  4.3 Acts and Proceedings. This Agreement has been duly
authorized by all necessary action on the part of such Investor, has been duly
executed and delivered by such Investor, and is a valid and binding agreement of
such Investor.

                  4.4 No Brokers or Finders. Except for Miller, Johnson & Kuehn,
Incorporated, which is assisting the Company in the transactions contemplated by
this Agreement, no person, firm or corporation has or will have, as a result of
any act or omission by such Investor, any right, interest or valid claim against
the Company for any commission, fee or other compensation as a finder or broker,
or in any similar capacity, in connection with the transactions contemplated by
this Agreement. Such Investor will indemnify and hold the Company harmless
against any and all liability with respect to any such commission, fee or other
compensation which may be payable or determined to be payable as a result of the
actions of such Investor in connection with the transactions contemplated by
this Agreement.

                  4.5 Exculpation Among Investors. Such Investor acknowledges
that in making his or its decision to invest in the Company, he or it is not
relying on any other Investor or upon any person, firm or company, other than
the Company and its officers, employees and/or directors. Such Investor agrees
that no other Investor, nor the partners, employees, officers or controlling
persons of any other Investor shall be liable for any actions taken by such
Investor, or omitted to be taken by such Investor, in connection with such
investment.

                  4.6 Legends. It is understood that the certificates evidencing
the Shares may bear legends required by applicable federal and state securities
laws as well as the following legend:

                  THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
                  ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE

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                  SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY NOT
                  BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
                  AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
                  1933 AND APPLICABLE STATE SECURITIES LAWS. ADDITIONALLY, THE
                  TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
                  SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT DATED FEBRUARY
                  11, 2000, AMONG DATAKEY, INC. AND CERTAIN OTHER SIGNATORIES
                  THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR
                  EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.

         5. Conditions of Each Investor's Obligation. The obligation to purchase
and pay for the Securities which each Investor has agreed to purchase on the
closing date is subject to the fulfillment prior to or on the closing date of
the conditions set forth in this Article 5.

                  5.1 Representations and Warranties. The representations and
warranties of the Company under this Agreement shall be true in all material
respects as of the closing date with the same effect as though made on and as of
the closing date.

                  5.2 Compliance with Agreement. The Company shall have
performed and complied with all agreements or conditions required by this
Agreement to be performed and complied with prior to or as of the closing date.

                  5.3 Certificate of Officers. The Company shall have delivered
to Miller, Johnson & Kuehn, Incorporated a certificate, dated the closing date,
executed by the President and the senior financial officers of the Company and
certifying to the satisfaction of the conditions specified in Sections 5.1 and
5.2.

                  5.4 Opinion of the Company's Counsel. The Company shall have
delivered to Miller, Johnson & Kuehn, Incorporated an opinion of Fredrikson &
Byron, P.A., counsel for the Company, dated the closing date, to the effect
that:

                           (a) The Company is a corporation duly organized and
                  validly existing in good standing under the laws of the state
                  of its incorporation, and has the corporate power and
                  authority to own and hold the properties owned and leased by
                  it and to carry on the business in which it is engaged. The
                  Company has the corporate power and authority to enter into
                  this Agreement, to issue and sell the Shares, Warrants and the
                  Warrant Shares and to carry out the provisions of this
                  Agreement.

                           (b) This Agreement has been duly authorized, executed
                  and delivered by the Company, and is the legal, valid and
                  binding agreement of the Company and is enforceable against
                  the Company in accordance with its terms, subject, as to the
                  enforcement of remedies, to limitations under applicable

<PAGE>

                  bankruptcy, insolvency, moratorium, reorganization, and other
                  laws affecting the rights of creditors generally and to
                  judicial limitations on the enforcement of the remedy of
                  specific performance and other equitable remedies.

                           (c) The Securities being purchased on the closing
                  date have been duly authorized, validly issued and delivered
                  by the Company, are fully paid and nonassessable, and are
                  entitled to the rights, preferences and provisions of the
                  Company's articles of incorporation and the benefits of the
                  provisions of this Agreement applicable thereto. The
                  certificates evidencing the Shares and the Warrants are in
                  valid and sufficient form.

                           (d) All corporate proceedings required by law or by
                  the provisions of this Agreement to be taken by the Board of
                  Directors and shareholders of the Company on or prior to such
                  closing date in connection with the execution and delivery of
                  this Agreement, the offer, issuance and sale of the Securities
                  and the consummation of the transactions contemplated by this
                  Agreement, have been duly and validly taken.

                           (e) The Company is authorized by its articles of
                  incorporation to issue 12,500,000 shares of capital stock,
                  which consists of the following: (a) 11,000,000 shares of
                  common stock, $.05 par value, of which there are outstanding
                  7,001,827 shares, (b) 400,000 shares of Convertible Preferred
                  Stock, of which there are outstanding 150,000 shares, (c)
                  150,000 shares of Series A Convertible Preferred Stock, of
                  which there are none outstanding, and (d) 950,000 undesignated
                  shares. All shares outstanding immediately prior to the
                  closing date have been duly authorized and validly issued.
                  Except for the Common Stock, the Convertible Preferred Stock
                  and the Series A Convertible Preferred Stock, the Company has
                  no other authorized series or class of capital stock and, to
                  the best of such counsel's knowledge and without any special
                  inquiry into this matter, has no outstanding options, warrants
                  or other rights to acquire securities of the Company, other
                  than as disclosed in Exhibit B.

                           (f) The requisite number of Warrant Shares have been
                  validly authorized and reserved for issuance upon exercise of
                  the Warrants, and when issued upon such exercise, will be
                  authorized, validly issued and outstanding, fully paid and
                  nonassessable. To the best of such counsel's knowledge, except
                  for with regard to the outstanding shares of Stock, no
                  security holder of the Company is entitled to preemptive or
                  similar rights as a result of the execution or delivery of
                  this Agreement or the issuance of the Shares, Warrants, or
                  Warrant Shares.

                           (g) Assuming the accuracy of the representations made
                  by the Investors in their Acceptances and Section 4 hereof,
                  the offer, sale, issuance and delivery of the Securities to
                  the Investors under the circumstances contemplated by this
                  Agreement are exempt from the registration and prospectus
                  delivery requirements of the Securities Act and all applicable
                  state securities laws.

<PAGE>

                           (h) Except for matters disclosed as part of Exhibit
                  B, such counsel has no knowledge of any litigation, proceeding
                  or governmental investigation pending or threatened against
                  the Company or its properties or business.

                           (i) Nothing has come to the attention of counsel
                  which would lead counsel to reasonably believe that the
                  Company's business and operations are not being conducted in
                  all material respects in compliance with applicable laws,
                  rules, and regulations.

                  5.5 Supporting Documents. Miller, Johnson & Kuehn,
Incorporated, as representatives for each investor, shall have received the
following:

                           (a) A copy of resolutions of the Board of Directors
                  of the Company certified by the Secretary of the Company
                  authorizing and approving the execution, delivery and
                  performance of this Agreement and issuance of the Securities;

                           (b) A certificate of incumbency executed by the
                  Secretary of the Company certifying the names, titles and
                  signatures of the officers authorized to execute this
                  Agreement and further certifying that the articles of
                  incorporation and bylaws of the Company delivered to legal
                  counsel for the Investors at the time of the execution of this
                  Agreement have been validly adopted and have not been amended
                  or modified;

                           (c) The certificates contemplated by Section 5.3
                  above; and

                           (d) Such additional supporting documentation and
                  other information with respect to the transactions
                  contemplated hereby as legal counsel for the Investors may
                  reasonably request.

                  5.6 Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws for the lawful execution and delivery of this Agreement
and the offer, sale, issuance and delivery of the Securities to the Investors at
the closing shall have been obtained.

                  5.7 Proceeding and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction shall be satisfactory in
form and substance to legal counsel for the Investors.

                  5.8 Registration Rights Agreement. The Company, each Investor
and each of the parties listed on the signature page of Exhibit 5.8 shall enter
into the Registration Rights Agreement dated as of the Closing in the form
attached as Exhibit 5.8.

<PAGE>

         6. Conditions of the Company's Obligations at Closing. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor.

                  6.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 4 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.

                  6.2 Payment of Purchase Price. The Investors shall have
delivered the purchase price as specified in Section 1.

         7. Affirmative Covenants of the Company. The Company covenants and
agrees as follows:

                  7.1 Corporate Existence. The Company will maintain its
corporate existence in good standing and comply with all applicable laws and
regulations of the United States or of any state or political subdivision
thereof and of any government authority where failure to so comply would have a
material adverse impact on the Company or its business or operations.

                  7.2 Books of Accounts and Reserves. The Company will keep
books of record and account in which full, true and correct entries are made of
all of its respective dealings, business and affairs, in accordance with
generally accepted accounting principles. The Company will employ certified
public accountants who are "independent" within the meaning of the accounting
regulations of the Commission.

                  7.3 Application of Proceeds. Unless otherwise approved by the
Investors, the net proceeds received by the Company from the sale of the Shares
on the closing date shall be used for the purposes set forth in the Use of
Proceeds section of the Offering Materials.

                  7.4 Filing of Reports. The Company will make timely filings of
such reports as are required to be filed by it with the Commission so that Rule
144 under the Securities Act or any successor provision thereto will be
available to the security holders of the Company who were otherwise able to take
advantage of the provisions of such Rule.

                  7.5 Patents and Other Intangible Rights. The Company will
apply for, or obtain assignments of, or licenses to use, all patents,
trademarks, trade names and copyrights which in the opinion of a prudent and
experienced businessperson operating in the industry in which the Company is
operating are desirable or necessary for the conduct and protection of the
business of the Company.

         8.       Miscellaneous.

                  8.1 Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first-class postage prepaid, registered or certified mail:

<PAGE>

                  (a) if to any holder of any Shares addressed to such holder at
         its address as shown on the books of the Company, or at such other
         address as such holder may specify by written notice to the Company, or

                  (b) if to the Company at 407 West Travelers Trail, Burnsville,
         MN 55337, Attention: President; or at such other address as the Company
         may specify by written notice to the Investors;

and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by mail, when received.

                  8.2 Survival of Representations and Warranties, Etc. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by the Investors
or on their behalf, and the sale and purchase of the Shares and payment
therefor. All statements contained in any certificate, instrument or other
writing delivered by or on behalf of the Company pursuant to this Agreement
(other than legal opinions) at the closing shall constitute representations and
warranties by the Company hereunder.

                  8.3 Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not, and, in particular, shall inure to the benefit of and be
enforceable by the holder or holders from time to time of any of the Shares;
provided, however, that a successor or assign of an Investor shall not be
regarded as an "Investor."

                  8.4 Headings. The headings of the articles and sections of
this Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.

                  8.5 Choice of Law. The laws of Minnesota shall govern the
validity of this Agreement, the construction of its terms and the interpretation
of the rights and duties of the parties hereunder.

                  8.6 Counterparts. This Agreement may be executed at different
times by different Investors and in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Notwithstanding any other section of this Agreement, the
execution of this Agreement on different dates by different Investors shall not
be deemed an amendment to this Agreement.

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized representative and each of the Investors has an
executed acceptance form attached to this Agreement.

                                  DATAKEY, INC.

                                  By:    /s/ Alan G. Shuler
                                         Alan G. Shuler, Vice President and
                                         Chief Financial Officer

                                  INVESTOR

                                  Signed by each investor of Schedule 1

<PAGE>

                                                                     Schedule 1

Investor                                               Shares          Warrants
------------------------------------                  -------          --------
Robert G. Allison                                      10,000           10,000
John Altmann                                            2,500            2,500
Gary R. Archambault &                                   5,000            5,000
  Karen L. Archambault JTWROS
Steven J. Bateman                                      10,000           10,000
Shirley A. Baxter, TTEE                                 5,000            5,000
  FBO Shirley A. Baxter Rev Trust u/a dtd 7/3/96
Kenneth G. Benson                                       7,500            7,500
Gary a. Bergren                                         5,000            5,000
Aaron Boxer TTEE                                      100,000          100,000
  Aaron Boxer Rev Trust u/a dtd 8/1/89
Pamela L. Brown, Trustee, FBO                           5,000            5,000
  Pamela L. Brown Trust u/a dtd 9/16/88
Craig L. Campbell                                       7,500            7,500
Elizabeth H. Confer                                     5,000            5,000
Ogden W. Confer                                        10,000           10,000
Kenneth L. Cutler & Linda Cutler JTWROS                10,000           10,000
Catherine Reid Day IRA                                  5,000            5,000
  First Trust National Association TTEE
Charles E. Dolsky                                       5,000            5,000
USB Piper Jaffray as Custodian                          8,000            8,000
  FBO Bradley A. Erickson IRA
Robert E. Flynn IRA                                     5,000            5,000
  First Trust National Association TTEE
Luther O. Forde                                        10,000           10,000
Dennis D. Gonyea                                       10,000           10,000
Dorothy J. Hoel                                         6,000            6,000
Betty L. Johnson                                       40,000           40,000
Brian R. Johnson & Jennifer Johnson JTWROS              5,000            5,000
David B. Johnson Family Foundation                    100,000          100,000
Gary Kohler                                            10,000           10,000
Sol Menche & Rochelle Menche JTWROS                    60,000           60,000
Jon Nelson & Paula Nelson JTWROS                        2,500            2,500
Perkins Capital Management, Inc.                        5,000            5,000
  Profit Sharing Plan & Trust UA dtd 12/15/86
  Richard W. Perkins TTEE
USB Piper Jaffray as Custodian                          5,000            5,000
  FBO Daniel S. Perkins IRA
Perkins Foundation                                      5,000            5,000
Perkins and Partners                                    5,000            5,000
  Profit Sharing Plan & Trust u/a dtd 10/19/76
  Richard W. Perkins TTEE
USB Piper Jaffray as Custodian                          3,000            3,000
  FBO Patrice M. Perkins IRA
Richard C. Perkins                                     10,000           10,000
USB Piper Jaffray as Custodian                         20,000           20,000
  FBO Richard C. Perkins IRA
USB Piper Jaffray as Custodian                          6,000            6,000
  FBO James G. Peters IRA
USB Piper Jaffray as Custodian                          6,000            6,000
  FBO David H. Potter IRA
Pyramid Partners, L.P.                                 50,000           50,000
LIT Division of First Options                          80,000           80,000
  F/A/O Pyramid Trading Ltd Partnership
Jeffrey D. Rahm & Susan D. Rahm JTWROS                  7,500            7,500
David E. Riviere                                        2,500            2,500
USB Piper Jaffray as Custodian                         10,000           10,000
  FBO Harold Roitenberg IRA
Angeline A. Schnobrich                                  5,000            5,000
Sterling Supply, Inc. Profit Sharing Plan Trust dtd     5,000            5,000
  12/27/67, Jay & Neil Norelius TTEES
Thomas C. Tsatsos IRA                                   7,500            7,500
First Trust National Association TTEE
Jeff Walker                                             5,000            5,000
Shawn P. Weinand                                       10,000           10,000
David M. Westrum, TR UA 06/01/97, David M. Westrum      7,500            7,500
  Revocable Living Trust
Raymond A. Lipkin                                      96,000           96,000
                                                      -------          -------
         TOTALS                                       800,000          800,000REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement is made and entered into as of the
11th day of February 2000, by and among Datakey, Inc., a Minnesota corporation
(the "Company") and the Investors listed on Schedule A attached hereto
(individually, an "Investor" and collectively, the Investors").

                                    RECITALS

         A. The Investors and the Company have entered into that certain Stock
Purchase Agreement, dated February 11, 2000 (the "Purchase Agreement").

         B. It is a condition to the transactions contemplated in the Purchase
Agreement that the Company provide the registration and other rights provided
herein and the parties hereto desire to provide for such rights on the terms and
conditions contained herein.

         NOW, THEREFORE, in consideration of the premises and covenants
contained herein, the parties hereto agree as follows:

         1. Defined Terms. Unless otherwise noted, all capitalized terms used
herein shall have the meanings afforded them in the Purchase Agreement and the
Exhibits attached thereto.

         2. Required Registration. Within 45 days of the Closing date (the "File
Date"), the Company shall file a Registration Statement under the Securities Act
of 1933, as amended (the "Securities Act"), in accordance with the provisions of
either Form S-1 or Form S-3, as required by the Securities and Exchange
Commission (the "Commission") covering (i) the resale of the Shares and (ii) the
issuance and resale of the Warrant Shares, and will use its best efforts to have
such Registration Statement become effective with the Commission as soon as
possible thereafter, and in any event, within 90 days of the date on which it is
filed. The Shares and the Warrants Shares are referred to herein as the
"Registrable Stock."

         3. Registration - General Provisions. In connection with the
registration of the Registrable Stock under the Securities Act, the Company
will:

                  (a) prepare and file with the Commission a registration
statement with respect to the Registrable Stock, within 45 days of the Closing
date of the Purchase Agreement, and use its best efforts to cause such
registration statement to become effective within 90 days of the date it is
filed and keep the prospectus which is a part of such Registration Statement
current until the earlier of the date on which: (i) all Registrable Stock has
been sold, or (ii) one year after the date it is declared effective by the
Commission;

                  (b) prepare and file with the Commission such amendments to
such Registration Statement and supplements to the prospectus contained therein
as may be necessary to keep such Registration Statement effective for the period
required by Section 3(a) above;

<PAGE>

                  (c) provide the Investors' counsel with reasonable
opportunities to review and comment on, and otherwise participate in, the
preparation of such Registration Statement;

                  (d) furnish to the Investors participating in such
registration and to the underwriters of the securities being registered, if any,
such reasonable number of copies of the Registration Statement, preliminary
prospectus, final prospectus and such other documents as the Investors and
underwriters may reasonably request in order to facilitate the public offering
of such securities;

                  (e) use its diligent, good faith efforts to register or
qualify the securities covered by such Registration Statement under such state
securities or blue sky laws of such jurisdictions as the Investors may
reasonably request, except that the Company shall not for any purpose be
required to execute a general consent to service of process (which shall not
include a "Uniform Consent to Service of Process" or other similar consent to
service of process which relates only to actions or proceedings arising out of
or in connection with the sale of securities, or out of a violation of the laws
of the jurisdiction requesting such consent) or to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified;

                  (f) notify the Investors, promptly after it shall receive
notice thereof, of the time when such Registration Statement has become
effective or a supplement to any prospectus forming a part of such Registration
Statement has been filed with the Commission;

                  (g) notify the Investors promptly of any request by the
Commission for the amending or supplementing of such Registration Statement or
prospectus or for additional information;

                  (h) prepare and file with the Commission, promptly upon the
request of the Investors, any amendments or supplements to such Registration
Statement or prospectus which, in the opinion of counsel for the Investors (and
concurred in by counsel for the Company), is required under the Securities Act
or the rules and regulations promulgated thereunder in connection with the
distribution of the shares of the Company's common stock by the Investors;

                  (i) prepare and promptly file with the Commission and promptly
notify the Investors of the filing of such amendment or supplement to such
Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event shall
have occurred as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not misleading;

                  (j) advise the Investors, and the Investors' counsel, if any,
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the Commission suspending the effectiveness of

<PAGE>

such Registration Statement or the initiation or threatening of any proceeding
for that purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should be issued;

                  (k) not file any amendment or supplement to such Registration
Statement or prospectus to which the Investors shall have reasonably objected on
the grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or the rules and
regulations promulgated thereunder, after having been furnished with a copy
thereof at least five business days prior to the filing thereof, unless in the
opinion of counsel for the Company the filing of such amendment or supplement is
reasonably necessary to protect the Company from any material liabilities under
any applicable federal or state law and such filing will not violate applicable
law; and

                  (l) at the request of the Investors, furnish on the effective
date of the Registration Statement and, if such registration includes an
underwritten public offering, at the closing provided for in the underwriting
agreement: (i) opinions, dated such respective dates, of the counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, if any, and to the Investors making such request, covering such
matters as such underwriters or Investors may reasonably request, and (ii)
letters, dated such respective dates, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and to the
Investors, covering such matters as such underwriters or Investors may
reasonably request, in which letter such accountants shall state (without
limiting the generality of the foregoing) that they are independent certified
public accountants within the meaning of the Securities Act and that in the
opinion of such accountants the financial statements and other financial data of
the Company included in the Registration Statement or the prospectus or any
amendment or supplement thereto comply in all material respects with the
applicable accounting requirements of the Securities Act.

         4. Registration Expense. The Company shall pay all Registration
Expenses (as defined below) in connection with the inclusion of shares of the
Company's common stock in any Registration Statement, or application to register
or qualify such shares under state securities laws, filed by the Company
hereunder, other than as set forth herein. For purposes of this Agreement, the
term "Registration Expenses" means the filing fees payable to the Commission,
any state agency and the NASD; the fees and expenses of the Company's legal
counsel and independent certified public accountants in connection with the
preparation and filing of the Registration Statement (and all amendments and
supplements thereto) with the Commission; and all expenses relating to the
printing of the Registration Statement, prospectuses and various agreements
executed in connection with the Registration Statement. Notwithstanding the
foregoing, the Investors will pay the fees and expenses of any legal counsel the
Investors may engage, as well as the Investors' proportionate share of any
custodian fees or commission or discounts which may be payable to any
underwriter.

         5. Penalty Payments. In the event that the Registration Statement
relating to the resale of the Registrable Stock is not (i) filed with the
Commission by the Company on or before the File Date, or (ii) declared effective
by the Commission within 120 days of the Closing date, then, the Company shall
pay the Investors the following amounts ("Penalty Payments"): (i) 1% of the
purchase price of the Stock (the "Purchase Price") paid by the Investors to the

<PAGE>

Company if (A) the Registration Statement is not filed with the Commission by
the File Date, and/or (B) the Registration Statement is not declared effective
by the Commission within 120 days of the Closing date, (ii) an additional 1% of
the Purchase Price if the Registration Statement is not declared effective by
the Commission within 150 days of the Closing date, and (iii) an additional 3%
of the Purchase Price for each 30-day period thereafter in which the
Registration Statement is not declared effective by the Commission. Penalties
for failure to file and/or to obtain effectiveness shall be cumulative. The
Company shall be liable to the Investor for a full 30-day period, determined in
accordance with the above schedule, regardless of by how many days it misses one
of the targeted filing or effective dates set forth above. All such Penalty
Payments shall be immediately payable by the Company to the Investors (on a pro
rata basis based on the number of shares of Stock purchased by each under the
Purchase Agreement) via wire transfer of immediately available funds by the
close of business on last day of each respective period set forth above.

         6. Indemnification. With respect to the registration of the resale of
the shares of Registrable Stock:

         (a) to the fullest extent permitted by law, the Company will indemnify
and hold harmless each Investor, the trustees, partners, officers, directors and
agents of each Investor, any underwriter (as defined in the Securities Act) for
such Investor and each person, if any, who controls such Investor or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by the Registration Statement; and the Company will reimburse each such
Investor, trustee, partner, officer, director, agent, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
Section 6 shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished to
it expressly for use in connection with such registration by an Investor,
trustee, partner, officer, director, agent, underwriter or controlling person of
an Investor.

<PAGE>

                  (b) to the extent permitted by law, each Investor will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter and any other Investor selling securities
under the Registration Statement or any of such other Investor's, trustees,
partners, directors or officers or any person who controls such Investor,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Investor, or trustee, partner, director, officer or controlling
person of such other Investor may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and only to the extent) that
such Violation occurs in reliance upon and in conformity with written
information furnished by such Investor and stated to be specifically for use in
connection with such registration; and each such Investor will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Investor, or trustee, partner,
officer, director or controlling person of such other Investor in connection
with investigating or defending any such loss, claim, damage, liability or
action if it is judicially determined that there was such a Violation; provided,
however, that the indemnity agreement contained in this Section 6 shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Investor,
which consent shall not be unreasonably withheld; provided further, that in no
event shall any indemnity under this Section 6 exceed the gross proceeds from
the offering received by such Investor unless the Violation is the result of
fraud on the part of such Investor.

                  (c) promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action (including any governmental
action), such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party; and provided further, that if there is more than one
indemnified party, the indemnifying party shall pay for the fees and expenses of
one counsel for any and all indemnified parties to be mutually agreed upon by
such indemnified parties, unless representation of an indemnified party by the
counsel retained by the other indemnified parties would be inappropriate due to
actual or potential differing interests between such indemnified parties. The
failure to deliver written notice to the indemnifying party within a reasonable
time of the commencement of any such action, if materially prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section.

<PAGE>

                  (d) if the indemnification provided for in this Section is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. No person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11 of the Securities Act) shall
be entitled to contribution from any person or entity who shall not have been
guilty of such fraudulent misrepresentation.

                  (e) the obligation of the Company and the Investors under this
Section shall survive the completion of any offering for resale of shares of the
Registrable Stock in the Registration Statement, and otherwise.

         7. Limitation on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of all of the Investors, enter into any agreement with any person or persons
providing for the granting to such holder of registration rights pari passu or
senior to those granted to Investors pursuant to this Agreement, or of
registration rights which might cause a reduction in the number of shares
includable by the Investors in any registration.

         8. Miscellaneous.

                  (a) The Company shall not hereafter enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Investors in this Agreement.

                  (b) Except as otherwise provided herein, the provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to or departures from the provisions hereof may not be given or made
unless the Company has obtained the written consent of the Investors.

                  (c) All notices and other communications provided for or
permitted hereunder shall be made by hand delivery, telex, facsimile, overnight
courier or registered first-class mail:

                  (i) if to an Investor, at the address set forth on Schedule A
         attached hereto;

                  (ii) if to the Company, at the address set forth in the
         Purchase Agreement.

<PAGE>

All such notices and communications shall be deemed to have been duly given:
when delivered, if by hand, overnight courier or mail; when the appropriate
answer back is received, if by telex; when transmission is confirmed by the
sending unit, if by facsimile.

                  (d) This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one an the same agreement.

                  (e) The headings to this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

                  (f) This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota without giving effect to the
principles of choice or conflict of law thereof. Each of the Company and the
Investors irrevocably consent to the exclusive jurisdiction of the United States
Federal courts and state courts, located in Hennepin County, Minnesota, in any
suit or proceeding relating to, based on or arising under this Agreement and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. Service of
process on the Company mailed by first class mail shall be deemed in every
respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect the right of any Investor to serve
process in any manner permitted by law.

                  (g) In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the Investors and the
Company shall be enforceable to the fullest extent permitted by law.

                  (h) The remedies provided for in this Agreement shall be
cumulative and in addition to all other remedies available, at law or in equity,
and nothing herein shall limit a holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Agreement.

<PAGE>

                  IN WITNESS WHEREOF, the parties have executed this
Registration Rights Agreement as of the date first written above.

                                  Company:

                                  DATAKEY, INC.

                                  By:    /s/ Alan G. Shuler
                                       Name:  Alan G. Shuler
                                       Title:  Vice President and
                                               Chief Financial Officer

                                  Investors:

                                  Signed by each investor on Schedule A
<PAGE>

                                   SCHEDULE A

Investor                                               Shares          Warrants
------------------------------------                  -------          --------
Robert G. Allison                                      10,000           10,000
John Altmann                                            2,500            2,500
Gary R. Archambault &                                   5,000            5,000
  Karen L. Archambault JTWROS
Steven J. Bateman                                      10,000           10,000
Shirley A. Baxter, TTEE                                 5,000            5,000
  FBO Shirley A. Baxter Rev Trust u/a dtd 7/3/96
Kenneth G. Benson                                       7,500            7,500
Gary a. Bergren                                         5,000            5,000
Aaron Boxer TTEE                                      100,000          100,000
  Aaron Boxer Rev Trust u/a dtd 8/1/89
Pamela L. Brown, Trustee, FBO                           5,000            5,000
  Pamela L. Brown Trust u/a dtd 9/16/88
Craig L. Campbell                                       7,500            7,500
Elizabeth H. Confer                                     5,000            5,000
Ogden W. Confer                                        10,000           10,000
Kenneth L. Cutler & Linda Cutler JTWROS                10,000           10,000
Catherine Reid Day IRA                                  5,000            5,000
  First Trust National Association TTEE
Charles E. Dolsky                                       5,000            5,000
USB Piper Jaffray as Custodian                          8,000            8,000
  FBO Bradley A. Erickson IRA
Robert E. Flynn IRA                                     5,000            5,000
  First Trust National Association TTEE
Luther O. Forde                                        10,000           10,000
Dennis D. Gonyea                                       10,000           10,000
Dorothy J. Hoel                                         6,000            6,000
Betty L. Johnson                                       40,000           40,000
Brian R. Johnson & Jennifer Johnson JTWROS              5,000            5,000
David B. Johnson Family Foundation                    100,000          100,000
Gary Kohler                                            10,000           10,000
Sol Menche & Rochelle Menche JTWROS                    60,000           60,000
Jon Nelson & Paula Nelson JTWROS                        2,500            2,500
Perkins Capital Management, Inc.                        5,000            5,000
  Profit Sharing Plan & Trust UA dtd 12/15/86
  Richard W. Perkins TTEE
USB Piper Jaffray as Custodian                          5,000            5,000
  FBO Daniel S. Perkins IRA
Perkins Foundation                                      5,000            5,000
Perkins and Partners                                    5,000            5,000
  Profit Sharing Plan & Trust u/a dtd 10/19/76
  Richard W. Perkins TTEE
USB Piper Jaffray as Custodian                          3,000            3,000
  FBO Patrice M. Perkins IRA
Richard C. Perkins                                     10,000           10,000
USB Piper Jaffray as Custodian                         20,000           20,000
  FBO Richard C. Perkins IRA
USB Piper Jaffray as Custodian                          6,000            6,000
  FBO James G. Peters IRA
USB Piper Jaffray as Custodian                          6,000            6,000
  FBO David H. Potter IRA
Pyramid Partners, L.P.                                 50,000           50,000
LIT Division of First Options                          80,000           80,000
  F/A/O Pyramid Trading Ltd Partnership
Jeffrey D. Rahm & Susan D. Rahm JTWROS                  7,500            7,500
David E. Riviere                                        2,500            2,500
USB Piper Jaffray as Custodian                         10,000           10,000
  FBO Harold Roitenberg IRA
Angeline A. Schnobrich                                  5,000            5,000
Sterling Supply, Inc. Profit Sharing Plan Trust dtd     5,000            5,000
  12/27/67, Jay & Neil Norelius TTEES
Thomas C. Tsatsos IRA                                   7,500            7,500
First Trust National Association TTEE
Jeff Walker                                             5,000            5,000
Shawn P. Weinand                                       10,000           10,000
David M. Westrum, TR UA 06/01/97, David M. Westrum      7,500            7,500
  Revocable Living Trust
Raymond A. Lipkin                                      96,000           96,000
                                                      -------          -------
         TOTALS                                       800,000          800,000

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}]]