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                                                                    Exhibit 10.3


                      SECURITY DYNAMICS TECHNOLOGIES, INC.

                         1994 DIRECTOR STOCK OPTION PLAN

1. Purpose.

     The purpose of this 1994 Director Stock Option Plan (the "Plan") of
Security Dynamics Technologies, Inc. (the "Company") is to encourage ownership
in the Company by outside directors of the Company whose continued services are
considered essential to the Company's future progress and to provide them with a
further incentive to remain as directors of the Company.

2. Administration.

     The Board of Directors shall supervise and administer the Plan. Grants of
stock options under the Plan and the amount and nature of the awards to be
granted shall be automatic in accordance with Section 5. However, all questions
concerning interpretation of the Plan or any options granted under it shall be
resolved by the Board of Directors and such resolution shall be final and
binding upon all persons having an interest in the Plan.

3. Participation in the Plan.

     Directors of the Company who are not full-time employees of the Company or
any subsidiary of the Company ("outside directors") shall be eligible to receive
options under the Plan.

4. Stock Subject to the Plan.

     (a) The maximum number of shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), which may be issued under the Plan shall be
75,000 shares (after giving effect to the Company's one-for-two reverse stock
split effective as of October 24, 1994), subject to adjustment as provided in
Section 7.

     (b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares covered by the
unexercised portion of such option shall again become available for issuance
pursuant to the Plan.

     (c) All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").

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5. Terms, Conditions and Form of Options.

     Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:

     (a) Option Grant Dates. Options shall automatically be granted to all
eligible outside directors as follows:

          (i) each person who is an eligible outside director on the closing
date (the "Closing Date") of the Company's initial public offering of Common
Stock pursuant to an effective registration statement under the Securities Act
of 1933, as amended, shall be granted an option to purchase the Pro Rata Number
of shares of Common Stock calculated pursuant to Section 5(b) on the Closing
Date;

          (ii) each person who first becomes an eligible outside director after
the Closing Date shall be granted an option to purchase the Pro Rata Number of
shares of Common Stock calculated pursuant to Section 5(b) on the date of his or
her initial election to the Board of Directors, provided that such eligible
director is elected on a date other than the date of an Annual Meeting of
Stockholders; and

          (iii) each eligible outside director shall be granted an additional
option to purchase 3,000 shares of Common Stock on the date of each Annual
Meeting of Stockholders of the Company commencing with the 1995 Annual Meeting
of Stockholders, provided that he or she continues to serve as a director
immediately following such Annual Meeting.

     (b) Shares Subject to Option. Each option described in clauses (i) and (ii)
of Section 5(a) shall be for such number (and if such number is not a whole
number, rounded up to the nearest whole number) of shares of Common Stock (the
"Pro Rata Number"), if any, as is determined by multiplying (x) 3,000 by (y) the
quotient of (A) the number of whole calendar months between the applicable
Option Grant Date and the date of the next Annual Meeting of Stockholders
(which, for purposes of the Plan, shall be assumed to occur in the month of May)
and (B) 12. For example, if an eligible outside director were first elected on
October 15th, he or she would receive an option to purchase 1,500 shares of
Common Stock (3,000 x (6 (the number of whole calendar months between the Option
Grant Date and May (i.e., November through April)) / 12)).

     (c) Option Exercise Price. The option exercise price per share for each
option described in clause (i) of Section 5(a) shall be equal to the reported
last sale price of the Common Stock on the Nasdaq National Market on the Closing
Date. The option exercise price per share for each option described in clauses
(ii) and (iii) of Section 5(a) shall be determined as follows: (i) if the Common
Stock is listed on the

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Nasdaq National Market or another nationally recognized exchange or trading
system as of the Option Grant Date, the option exercise price shall be deemed to
be the lesser of (x) the reported last sale price per share of Common Stock
thereon on such date (or if no such price is reported on such date, such price
on the nearest preceding date on which such a price is reported) or (y) the
average of the reported last sales prices per share of Common Stock, as
published in The Wall Street Journal, for a period of ten consecutive trading
days prior to such date; and (ii) if the Common Stock is not listed on the
Nasdaq National Market or another nationally recognized exchange or trading
system as of the Option Grant Date, the exercise price per share shall be deemed
to be the fair market value of the Common Stock as of the Option Grant Date as
determined in good faith by the Board of Directors.

     (d) Options Non-Transferable. To the extent required to qualify for the
exemption provided by Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), any option granted under the Plan to an optionee
shall not be transferable by the optionee other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder, and shall be exercisable during the optionee's lifetime
only by the optionee or the optionee's guardian or legal representative.

     (e) Vesting Period.

     (i) General. Each option described in clauses (i) and (ii) of Section 5(a)
shall become exercisable on the first anniversary of the Option Grant Date, and
each option described in clause (iii) of Section 5(a) shall become exercisable
on the earlier of (x) the first anniversary of the Option Grant Date or (y) the
day prior to the fist Annual Meeting of Stockholders following the Option Grant
Date; provided, however, that in each instance described herein the optionee
continue to serve as a director on such dates.

     (ii) Acceleration Upon Change in Control. Notwithstanding the foregoing,
each outstanding option granted under the Plan shall immediately become
exercisable in full in the event a Change in Control (as defined in Section 8)
of the Company occurs.

     (f) Termination. Each option shall terminate, and may no longer be
exercised, on the earlier of the (i) the date 10 years after the Option Grant
Date or (ii) the date 60 days after the optionee ceases to serve as a director
of the Company; provided that, in the event an optionee ceases to serve as a
director due to his or her death or disability (within the meaning of Section
22(e)(3) of the Code or any successor provision), then the exercisable portion
of the option may be exercised, within the period of 180 days following the date
the optionee ceases to serve as a director (but in no event later than 10 years
after the Option Grant Date), by the

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optionee or by the person to whom the option is transferred by will, by the laws
of descent and distribution, or by written notice pursuant to Section 5(h).

     (g) Exercise Procedure. An option may be exercised only by written notice
to the Company at its principal office accompanied by payment in cash of the
full consideration for the shares as to which the option is exercised.

     (h) Exercise by Representative Following Death of Director. An optionee, by
written notice to the Company, may designate one or more persons (and from time
to time change such designation), including his or her legal representative,
who, by reason of the optionee's death, shall acquire the right to exercise all
or a portion of the option. If the person or persons so designated wish to
exercise any portion of the option, they must do so within the term of the
option as provided herein. Any exercise by a representative shall be subject to
the provisions of the Plan.

6. Limitation of Rights.

     (a) No Right to Continue as a Director. Neither the Plan, nor the granting
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain the optionee as a director for any period of time.

     (b) No Stockholders' Rights for Options. An optionee shall have no rights
as a stockholder with respect to the shares covered by his or her option until
the date of the issuance to him or her of a stock certificate therefor, and no
adjustment will be made for dividends or other rights (except as provided in
Section 7) for which the record date is prior to the date such certificate is
issued.

7. Adjustment Provisions for Mergers, Recapitalizations and Related
Transactions.

     If, through or as a result of any merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split (other than the Company's one-for-two reverse stock split effective as of
October 24, 1994), or other similar transaction, (i) the outstanding shares of
Common Stock are exchanged for a different number or kind of securities of the
Company or of another entity, or (ii) additional shares or new or different
shares or other securities of the Company or of another entity are distributed
with respect to such shares of Common Stock, the Board of Directors shall make
an appropriate and proportionate adjustment in (x) the maximum number and kind
of shares reserved for issuance under the Plan, (y) the number and kind of
shares or other securities subject to then outstanding options under the Plan,
and/or (z) the price for each share subject to any then outstanding options
under the Plan (without changing the aggregate purchase price for such options),
to the end that each option shall be exercisable, for the same aggregate
exercise price, for such securities as such optionholder would have held

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immediately following such event if he had exercised such option immediately
prior to such event. No fractional shares will be issued under the Plan on
account of any such adjustments.

8. Change in Control. For purposes of the Plan, a "Change in Control" shall be
deemed to have occurred only if any of the following events occurs: (i) any
"person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities; (ii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; (iii) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets; or (iv) individuals who, on the date
on which the Plan was adopted by the Board of Directors, constituted the Board
of Directors of the Company, together with any new director whose election by
the Board of Directors or nomination for election by the Company's stockholders
was approved by a vote of at least a majority of the directors then still in
office who were directors on the date on which the Plan was adopted by the Board
of Directors or whose election or nomination was previously so approved, cease
for any reason to constitute at least a majority of the Board of Directors.

9. Modification, Extension and Renewal of Options.

     The Board of Directors shall have the power to modify or amend outstanding
options; provided, however, that no modification or amendment may (i) have the
effect of altering or impairing any rights or obligations of any option
previously granted without the consent of the optionee, or (ii) modify the
number of shares of Common Stock subject to the option (except as provided in
Section 7).

10. Termination and Amendment of the Plan.

     The Board of Directors may suspend, terminate or discontinue the Plan or
amend it in any respect whatsoever; provided, however, that without approval of
the stockholders of the Company, no amendment may (i) increase the number of
shares

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subject to the Plan (except as provided in Section 7), (ii) materially modify
the requirements as to eligibility to receive options under the Plan, or (iii)
materially increase the benefits accruing to participants in the Plan; and
provided further that the Board of Directors may not amend the provisions of
Sections 3, 5(a), 5(b) or 5(c) more frequently than once every six months, other
than to comply with changes in the Code or the rules thereunder.

11. Notice.

     Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Controller of the Company and shall become
effective when it is received.

12. Governing Law.

     The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Delaware.

13. Stockholder Approval.

     The Plan is conditional upon stockholder approval of the Plan within one
year from its date of adoption by the Board of Directors. No option under the
Plan may be exercised until such stockholder approval is obtained, and the Plan
and all options granted under the Plan shall be null and void if the Plan is not
so approved by the Company's stockholders.

                                     Adopted by the Board of Directors on
                                     October 4, 1994

                                     Approved by the stockholders on October 24,
                                     1994

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                                 Amendment No. 1

                                       to

                         1994 Director Stock Option Plan

1. That the 1994 Director Stock Option Plan be amended to delete subsection 5(d)
thereof and replace such subsection in its entirety with the following:

          "(d) Transferability of Options. Except as the Board of Directors may
     otherwise determine or provide in the applicable option agreement, options
     shall not be sold, assigned, transferred, pledged or otherwise encumbered
     by the optionee to whom they are granted, either voluntarily or by
     operation of law, except by will or the laws of descent and distribution,
     and, during the life of the optionee, shall be exercisable only by the
     optionee. References to an optionee, to the extent relevant in the context,
     shall include references to authorized transferees."

2. That the Director Plan be further amended to delete the phrase

          "; and provided further that the Board of Directors may not amend the
          provisions of Sections 3, 5(a), 5(b) or 5(c) more frequently than once
          every six months, other than to comply with changes in the Code or the
          rules thereunder"

appearing at the end of Section 10 of the Director Plan.

                                            Adopted by the Board of Directors on
                                            February 12, 1997