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                                                                    EXHIBIT 10.2

 

                              EMPLOYMENT AGREEMENT

 

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 1st day

of April, 2000 (the "Agreement Date"), by and between RSA Security Inc., a

Delaware corporation ("Employer"), and Arthur W. Coviello, Jr. ("Employee").

 

         WHEREAS, Employer and Employee are parties to a letter agreement, dated

as of August 21, 1995 (the "1995 Agreement"); and

 

         WHEREAS, Employer and Employee are desirous of continuing Employee's

employment with Employer for the period, and on the terms and conditions, set

forth herein;

 

         NOW, THEREFORE, in consideration of the foregoing and of the mutual

covenants and conditions herein contained, the parties hereby agree as follows:

 

 

Section 1.        EMPLOYMENT.

 

         Employer hereby agrees to continue to employ Employee, and Employee

accepts such continued employment, according to the terms and conditions set

forth in this Agreement.

 

Section 2.        TERM.

 

         The initial term of this Agreement (the "Initial Term") shall be for a

period commencing on April [1], 2000 and continuing through March 31, 2002.

Thereafter, this Agreement shall be automatically renewed for additional

one-year periods (each, the "Renewal Term") on the same terms and conditions

(except as may be otherwise mutually agreed to in writing by the parties) unless

either party gives the other written notice of non-renewal at least ninety (90)

days prior to the expiration of the then-current term. Notwithstanding the

foregoing, the Employment Period (as defined below) may be terminated at any

time upon the occurrence of any one of the following events: (i) Employee's

decision to resign pursuant to Section 9 of this Agreement, (ii) Employer's

decision to terminate Employee, either "for cause" or other than "for cause"

pursuant to Section 9, or (iii) the parties' agreement in writing to terminate

the Agreement. The period of time between the commencement and termination of

Employee's employment shall be referred to herein as the "Employment Period."

 

 

 

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Section 3.        POSITION AND SERVICES.

 

         (a)      Employee will occupy the position of President and Chief

                  Executive Officer of Employer. Employee will also be a member

                  of the Employer's Board of Directors (the "Board of

                  Directors"), subject to the terms of the Employer's Third

                  Restated Certificate of Incorporation as amended from time to

                  time. Any subsequent substantial diminution in the position,

                  office or duties of Employee (other than any such diminution

                  resulting from a Change in Control (as such term is defined in

                  Section 12 hereof)) or material breach by the Employer of its

                  obligations under this Agreement shall be deemed a termination

                  of this Agreement other than "for cause" as defined in Section

                  9 hereof. Employee will report directly to the Board of

                  Directors and shall have such duties and responsibilities as

                  are set forth in the Employer's Amended and Restated By-Laws,

                  as amended from time to time, which duties and

                  responsibilities shall include, but not be limited to, overall

                  management responsibility for the operations and

                  administration of Employer as well as such other duties and

                  responsibilities, consistent with Employee's position as

                  President and Chief Executive Officer, as shall be defined by

                  the Board of Directors.

 

         (b)      Employee will be expected to be in the full-time employment of

                  Employer, to devote substantially all of his business time and

                  attention, and exert his best efforts, to the performance of

                  his duties hereunder, and to serve Employer diligently and to

                  the best of his ability. During the Employment Period, the

                  Employee shall devote his full business time to the business

                  and interests of the Employer; provided, that, except to the

                  extent set forth in the Prior Agreements (as such term is

                  defined in Section 8 hereof), nothing set forth herein shall

                  prohibit the Employee from engaging in other activities to the

                  extent that such activities do not impair the ability of the

                  Employee to perform his duties and obligations under this

                  Agreement.

 

Section 4.        COMPENSATION.

 

         The Employer shall pay to the Employee an initial base salary (the

"Base Salary") at an annual rate of not less than $318,000, subject to

deductions for social security, state payroll and unemployment and all other

legally required or authorized deductions and withholding. Employee's salary

shall be payable at the same time and basis as Employer pays its payroll in

general. The Board of Directors shall review Employee's Base Salary during the

Employment Period at least on an annual basis. The Employee shall have the

right, by written notice to the Employer within thirty (30) days following any

decrease in

 

                                      -2-

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Employee's Base Salary at any time during the Employment Period, to treat

such reduction as a termination of this Agreement other than "for cause"

as defined in Section 9 hereof.

 

Section 5.        INCENTIVE PAYMENTS.

 

         In addition to the Base Salary payable pursuant to Section 4 hereof,

Employee shall be entitled to annual bonuses if Employee satisfies agreed-upon

discrete goals/objectives to be contained in an annual incentive plan for the

Employee to be established by the Board of Directors in consultation with

Employee on an annual basis. The incentive plan for 2000 is attached as EXHIBIT

A hereto.

 

Section 6.        DEATH OR DISABILITY DURING EMPLOYMENT.

 

         If Employee is prevented from performing his duties hereunder by reason

of illness or injury for a period of (i) four or more consecutive months or (ii)

six months during any 12-month period as determined by a recognized physician

chosen by Employer and acceptable to Employee (the applicable date when either

of such disabling events shall occur being hereinafter referred to as the

"Effective Date of Disability"), or if Employee dies during the Employment

Period, Employer shall pay to the Employee, if the Employee is disabled, or to

Employee's spouse, the Executors under Employee's Last Will and Testament duly

admitted to probate within one year of his death or the Employee's heir at law,

if the Employee dies, in addition to such amounts (if any) as may be payable

pursuant to any short- or long-term disability or life insurance policies then

in effect and maintained by the Employer with respect to the Employee

("Disability Policies"), the compensation which would otherwise be payable to

the Employee under this Agreement through the end of the month in which the

Employee's Effective Date of Disability or death occurs, or, in the case of

disability (and assuming any Disability Policies are currently in effect) such

later date as the Employee would, if eligible, be entitled to receive benefits

under such Disability Policies. In addition, the Employer shall pay, at the time

when such bonus would normally be paid, all bonus payments under Section 5

hereof which the Board of Directors, in good faith, believed that the Employee

was entitled to in respect of the year in which the Effective Date of Disability

or death occurred.

 

Section 7.        BENEFITS; EXPENSES.

 

         (a)      The Employee shall be entitled to receive the same standard

                  employment benefits as other executives of the Employer

                  receive. The Employee shall be entitled to fully participate

                  in all of the Employer's future employee benefit programs in

                  accordance with their then-existing terms. The Employee shall

                  be entitled to reimbursement for all approved reasonable

                  travel and other business expenses incurred by the Employee in

                  connection with his services

 

                                      -3-

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                  to the Employer pursuant to the terms of this Agreement. All

                  business expenses for which the Employee seeks reimbursement

                  from the Employer shall be adequately documented by the

                  Employee in accordance with the Employer's procedures covering

                  expense reimbursement and in compliance with the regulations

                  of the U.S. Internal Revenue Service.

 

         (b)      The Employee shall be entitled to five weeks of vacation

                  during each year of the Employment Period. The Employee may

                  accrue and carry forward vacation time to future years;

                  provided, however, that in no event may the Employee carry

                  forward into any year in excess of five weeks of accrued paid

                  vacation time.

 

Section 8.        CONFIDENTIALITY; NON-COMPETITION.

 

         The parties acknowledge that the Employee has previously entered into a

Non-Competition Agreement and a Nondisclosure and Developments Agreement, each

dated as of August 28, 1995 (together, the "Prior Agreements"), in connection

with the Employee's employment by the Employer. The Prior Agreements are each

incorporated herein by this reference and made a part hereof as if set forth

herein in their entirety.

 

Section 9.        TERMINATION.

 

         This Agreement does not grant the Employee any right or entitlement to

be retained by the Employer, and shall not affect or prejudice the Employer's

right to discharge the Employee in accordance herewith. The Employee may

terminate this Agreement at any time during the Initial Term upon sixty (60)

days' prior written notice to the Employer. The Employer may terminate this

Agreement "for cause" (as defined below) at any time upon thirty (30) days'

prior written notice to the Employee. Employee shall, during such 30-day period,

be given an opportunity to defend the basis or facts giving rise to the notice.

The Employer may terminate this Agreement other than "for cause" at any time

during the Initial Term upon sixty (60) days' prior written notice to the

Employee. Either party may terminate this Agreement at any time during the

Renewal Term upon ninety (90) days' prior written notice to the other party. If

Employee is terminated either "for cause" or for reasons other than "for cause,"

Employee shall be entitled to the following severance payments:

 

         (i)      If termination occurs by the Employer other than "for cause,"

                  then the following severance payments (less applicable

                  deductions for social security, payroll and other applicable

                  taxes) and related arrangements will be made:

 

                                      -4-

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                  (a)      cash payments at the Employee's current monthly Base

                           Salary at the time of termination (less applicable

                           deductions) for a period of 24 months commencing with

                           the month immediately succeeding the month during

                           which the 30-day period after the giving of notice

                           shall have ended (the "Effective Date of

                           Termination");

 

                  (b)      in addition to (a) above, normal employee medical and

                           insurance benefits will be continued on an insured

                           basis for the Employee and for each of the Employee's

                           children who are under the age of 18 and the

                           Employee's spouse at the Effective Date of

                           Termination (the "Family") for a period of 24 months

                           following the Effective Date of Termination, provided

                           that medical benefits provided to the Employee and

                           the Family pursuant to this subparagraph (b) may be

                           reduced from time to time to the extent that medical

                           benefits are provided through Medicare or through any

                           other employer following the Effective Date of

                           Termination;

 

                  (c)      to the extent that all or any stock options granted

                           to Employee shall not have vested as of the Effective

                           Date of Termination, then all such stock options

                           shall automatically vest;

 

                  (d)      the Employer shall pay to the Employee, in a single

                           lump sum payment within 30 days following the

                           Effective Date of Termination, an amount equal to a

                           pro rata portion of the Employee's current monthly

                           Base Salary at the time of termination (less

                           applicable deductions) with respect to the month in

                           which the Effective Date of Termination occurs based

                           upon the number of days elapsed in such month prior

                           to the Effective Date of Termination;

 

                  (e)      the Employer shall pay to the Employee, in a single

                           lump sum payment within 30 days following the

                           Effective Date of Termination, an amount equal to the

                           greater of (i) a pro rata portion of the bonus

                           payable to the Employee pursuant to Section 5 of this

                           Agreement with respect to the year in which such

                           termination shall have occurred, calculated at 100%

                           of the Employee's target bonus amount, and (ii) a pro

                           rata portion of the actual bonus payable to the

                           Employee pursuant to Section 5 of this Agreement with

                           respect to the year in which such termination shall

                           have occurred (assuming the Employee had been

                           employed by the Employer the entire year); and

 

                                      -5-

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                  (f)      the Employer shall reimburse the Employee for any

                           reasonable legal expenses incurred by the Employee in

                           connection with the termination of the Agreement

                           (excluding any expenses incurred in contesting any

                           such termination).

 

         (ii)     If Employee is terminated by the Employer "for cause," the

                  Employer shall (a) provide the Employee with normal employee

                  medical and insurance benefits for a period of six months

                  following the Effective Date of Termination, and (b) pay to

                  the Employee an amount equal to a pro rata portion of any

                  bonus payable to the Employee pursuant to Section 5 of this

                  Agreement with respect to the year in which such termination

                  shall have occurred based on the number of days elapsed in

                  such year prior to the Effective Date of Termination. Except

                  as set forth in the prior sentence, in the event of a

                  termination for cause, the Employee shall not be entitled to

                  any salary, severance or other payments or any benefits of any

                  kind beyond the Effective Date of Termination. Termination

                  "for cause" as used herein, and as determined by the Board of

                  Directors, shall include only the following Employee behavior:

                  (1) any act committed by Employee which shall represent (x) a

                  breach in any material respect of any of the terms hereof or

                  (y) a material breach of fiduciary duty to the Employer and/or

                  all of its stockholders under the laws of the State of

                  Delaware; (2) willful failure to carry out reasonable assigned

                  duties; (3) gross negligence, consisting of wanton and

                  reckless acts or omissions in the performance of Employee's

                  duties to the material detriment of Employer; (4) addiction to

                  drugs or chronic alcoholism which impairs the Employee's

                  ability to carry out his obligations under this Agreement; or

                  (5) any conviction of the Employee of a felony which is

                  subject to a jail sentence of at least three months; provided,

                  that in the case of a termination for cause pursuant to clause

                  (1), (2) or (3) of this paragraph (ii), the Employee shall be

                  provided with not less than 30 days' written notice thereof

                  from the Board of Directors or the Compensation Committee of

                  the Board of Directors and an opportunity to cure such event

                  to the reasonable satisfaction of the Board of Directors.

 

         (iii)    If Employee voluntarily resigns then the following severance

                  payments (less applicable deductions for social security,

                  payroll and other applicable taxes) and related arrangements

                  will be made:

 

                  (a)      normal employee medical and insurance benefits will

                           be continued on an insured basis for the Employee and

                           for the Family for a period of 12 months following

                           the Effective Date of Termination, provided that

                           medical benefits provided to the Employee and the

                           Family pursuant

 

                                      -6-

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                           to this subparagraph (a) may be reduced from time to

                           time to the extent that medical benefits are provided

                           through Medicare or through any other employer

                           following the Effective Date of Termination;

 

                  (b)      the Employer shall pay to the Employee, in a single

                           lump sum payment within 30 days following the

                           Effective Date of Termination, an amount equal to a

                           pro rata portion of the Employee's current monthly

                           Base Salary at the time of termination (less

                           applicable deductions) with respect to the month in

                           which the Effective Date of Termination occurs based

                           upon the number of days elapsed in such month prior

                           to the Effective Date of Termination; and

 

                  (c)      the Employer shall pay to the Employee, in a single

                           lump sum payment within 30 days following the

                           Effective Date of Termination, an amount equal to a

                           pro rata portion of the actual bonus payable to the

                           Employee pursuant to Section 5 of this Agreement with

                           respect to the year in which such termination shall

                           have occurred (assuming the Employee had been

                           employed by the Employer the entire year).

 

Section 10.       BREACH OR VIOLATION OF AGREEMENT.

 

         Any controversy or claim arising out of, or relating to, this

Agreement, or the breach thereof, shall be settled by arbitration in accordance

with the Commercial Arbitration Rules of the American Arbitration Association,

and judgment upon the award rendered may be entered in any court having

jurisdiction thereof. Notwithstanding the foregoing, the parties agree that a

breach or violation of this Agreement will result in immediate and irreparable

injury and harm to the other party, who shall have the right of an injunction,

specific performance or other equitable relief to prevent the violation of the

obligations hereunder. In addition, the prevailing party in any arbitration or

litigation relating to the interpretation or enforcement of this Agreement shall

be entitled to reimbursement of all reasonable costs and expenses (including

without limitation fees and expenses of counsel) incurred in connection

therewith.

 

                                      -7-

 

<PAGE>   8

 

Section 11.       NOTICES.

 

         Any notice required to be given pursuant to the provisions of this

Agreement shall be in writing and, if mailed, sent by registered or certified

mail, postage prepaid, with a copy delivered by an overnight courier service of

recognized standing, to the party named at the address set forth below, or at

such other address as each party may hereafter designate in writing to the other

party:

 

                  Employer:  RSA Security Inc.

                             36 Crosby Drive

                             Bedford, MA  01730

                             Attn:  Secretary

 

                  cc:        Hale and Dorr LLP

                             60 State Street

                             Boston, MA  02109

                             Attn:  Hal J. Leibowitz, Esq.

 

                  Employee:  Arthur W. Coviello, Jr.

                             16 South Merrimack Road

                             Hollis, NH 03049

 

         Any such notices shall be deemed to have been delivered when served

personally, or 28 hours after being mailed in the manner specified above.

 

Section 12.       CHANGE IN CONTROL EVENT.

 

         (a)      If a Change in Control (as such term is defined below) shall

                  have occurred, Employee shall be entitled, at his election, to

                  receive, if he chooses to leave Employer's management at any

                  time during the first 18 months after the effective date of

                  the Change in Control, (a) a lump sum payment in an amount

                  equal to two times his then-current monthly Base Salary (less

                  applicable deductions) provided for in Section 4 hereof for a

                  12-month period, and (b) a pro rata portion of any bonus

                  otherwise payable to the Employee pursuant to Section 5 of

                  this Agreement with respect to the year in which such Change

                  in Control shall have occurred, calculated at 100% of the

                  Employee's target bonus amount, based on the number of days

                  elapsed in such year prior to the Employee's last day of full

                  time employment with the Employer.

 

         (b)      In addition, all of the stock options granted to Employee

                  which shall not have vested or which shall still remain

                  exercisable as of the effective date of the

 

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                  Change in Control shall immediately thereupon automatically

                  vest and be free from repurchase. However, notwithstanding any

                  other provision of this Agreement, in the event that within

                  two years after the Agreement Date, (i) a plan for a Change in

                  Control is initiated, (ii) the Board of Directors desires that

                  the transaction giving rise to such Change in Control be

                  accounted for as a pooling of interests and (iii) this Section

                  12(b) is determined to prevent such transaction from being

                  accounted for as a pooling of interests, then (x) this Section

                  12(b) shall be inapplicable to such transaction and (y) the

                  provision set forth in the last sentence of Section 3 of the

                  1995 Agreement shall instead apply.

 

         (c)      For purposes of this Agreement, a "Change in Control" shall be

                  deemed to have taken place if:

 

                  (i)      there shall be consummated any consolidation or

                           merger of Employer in which Employer is not the

                           continuing or surviving corporation or pursuant to

                           which shares of the Employer's capital stock are

                           converted into cash, securities or other property,

                           other than a consolidation or merger of Employer in

                           which each holder of the Employer's capital stock

                           immediately prior to the consolidation or merger has

                           upon consummation of the consolidation or merger the

                           same proportionate ownership of each class or series

                           of capital stock of the surviving corporation as such

                           holder had of each class or series of the Employer's

                           capital stock immediately prior to the consolidation

                           or merger, or any sale, lease, exchange or other

                           transfer (in one transaction or a series of

                           transactions contemplated or arranged by any party as

                           a single plan) of all or substantially all of the

                           assets of Employer; or

 

                  (ii)     any person (as such term is used in Sections 13(d)

                           and 14(d)(2) of the Securities Exchange Act of 1934,

                           as amended (the "Exchange Act"), shall after the

                           Agreement Date become the beneficial owner (as

                           defined in Rules 13(d)(3) and 13(d)(5) under the

                           Exchange Act), directly or indirectly, of securities

                           of Employer representing more than 50% of the voting

                           power of all then outstanding securities of Employer

                           having the right under ordinary circumstances to vote

                           in an election of the Board of Directors (for

                           purposes of this clause (ii), any securities of

                           Employer that any such person has the right to

                           acquire pursuant to any agreement, or upon exercise

                           of conversion rights, warrants or options, or

                           otherwise, shall be deemed beneficially owned by such

                           person).

 

                                      -9-

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Section 13.       EXERCISE OF STOCK OPTIONS.

 

         Upon a termination of the Employment Period "for cause," all stock

options held by the Employee shall terminate automatically upon the Effective

Date of Termination. Upon a termination of the Employment Period (i) other than

"for cause," (ii) by reason of Employee's voluntary resignation or (iii) by

death or disability, all stock options held by the Employee shall be exercisable

in accordance with their terms.

 

Section 14.       LIMITATIONS ON PARACHUTE PAYMENTS.

 

         (a)      In the event that the Employer undergoes a "Change in

                  Ownership or Control" (as defined below), a portion of any

                  "Contingent Compensation Payments" (as defined below) that the

                  Employee would otherwise be entitled to receive shall be

                  eliminated to the extent necessary to eliminate any "excess

                  parachute payments" (as defined in Section 280G(b)(1) of the

                  Internal Revenue Code of 1986, as amended (the "Code")) for

                  the Employee. For purposes of this Section 14, the Contingent

                  Compensation Payments so eliminated shall be referred to as

                  the "Eliminated Payments" and the aggregate amount (determined

                  in accordance with Proposed Treasury Regulation Section

                  1.280G-1, Q/A-30 or successor provision) of the Contingent

                  Compensation Payments so eliminated shall be referred to as

                  the "Eliminated Amount." Notwithstanding the foregoing, no

                  such reduction in payments shall occur if the excess of (A)

                  110% of the Eliminated Amount (computed without regard to this

                  sentence) over (B) the aggregate present value (determined in

                  accordance with Proposed Treasury Regulation Section 1.280G-1,

                  Q/A-31, and Q/A-32 or successor provisions) of the amount of

                  any additional taxes that would be incurred by the Employee if

                  the Eliminated Payments (determined without regard to this

                  sentence) were paid to him (including, state and federal

                  income taxes on the Eliminated Payments, the excise tax

                  imposed by Section 4999 of the Code payable with respect to

                  all of the Contingent Compensation Payments, and any

                  withholding taxes) is greater than zero. For purpose of the

                  preceding sentence, any federal or state income tax that would

                  be attributable to the receipt of the Eliminated Payments

                  shall be computed by multiplying the amount of the Eliminated

                  Payment by the maximum combined federal and state income tax

                  rate provided by law; provided, however, that if the Employee

                  so notifies the Employer within 90 days following the timely

                  filing of all relevant tax returns for the Employee for the

                  year or other taxable period in which the Eliminated Payments

                  would have been made, the Eliminated Payments shall be

                  recomputed based upon all of the Employee's actual tax

                  circumstances. If, as a result of such recomputation, there

                  are no Eliminated Payments, the Employee shall become entitled

                  to receive Contingent Compensation

 

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<PAGE>   11

 

                  Payments previously treated as Eliminated Payments within 10

                  days of the delivery of the aforementioned notice together

                  with interest thereon computed at the prime rate announced

                  from time to time by the Wall Street Journal compounded

                  monthly from the date that such payments originally would have

                  been made.

 

         (b)      For purposes of this Section 14, the following terms shall

                  have the meaning given them in this subsection (b):

 

                  (i)      "Change in Ownership or Control" shall mean a change

                           in the ownership or effective control of the Employer

                           or in the ownership of a substantial portion of the

                           assets of the Employer determined in accordance with

                           Section 280G(b)(2) of the Code.

 

                  (ii)     "Contingent Compensation Payment" shall mean any

                           payment (or benefit) in the nature of compensation

                           that is made or supplied to a "disqualified

                           individual" (as defined in Section 280G(c) of the

                           Code) and that is contingent (within the meaning of

                           Section 280G(b)(2)(A)(i) of the Code) on a Change in

                           Ownership or Control of the Employer.

 

           (c)    The amount of any payments or other benefits otherwise due to

                  the Employee following a Change in Ownership or Control that

                  could reasonably be characterized as Contingent Compensation

                  Payments (as determined by the Employer) shall not be made

                  until 30 days after the date on which they would otherwise

                  have been due (the "Extended Due Date"). Within 15 days of the

                  date on which such payments or benefits would have originally

                  been due, the Employer shall determine and notify the Employee

                  (with reasonable detail regarding the basis for its

                  conclusions) (i) whether some or all of such payments and

                  benefits constitute Contingent Compensation Payments and (ii)

                  the amount of any Eliminated Amount. On or prior to the

                  Extended Due Date, the Employee shall notify the Employer

                  either (A) that he agrees with the Employer's determination

                  pursuant to the preceding sentence, in which case he shall

                  indicate, if applicable, the Contingent Compensation Payments

                  that will be treated as Eliminated Payments or (B) that he

                  disagrees with such determination, in which case he shall

                  indicate those payments that should be characterized as

                  Contingent Compensation Payments, the amount of any Eliminated

                  Amount and, if applicable, the Contingent Compensation

                  Payments that will be treated as Eliminated Payments. The

                  amount and characterization of any item in the notice from the

                  Employee shall be final; provided, however, that in the event

                  that the Employee fails to notify the Employer pursuant to the

                  preceding sentence on or before the Extended Due Date, the

                  Employer's initial

 

                                      -11-

<PAGE>   12

 

                  determination shall be final and the Contingent Compensation

                  Payments that will be treated as Eliminated Payments shall be

                  determined by the Employer in its absolute discretion. In no

                  event shall the Employer be liable to the Employee as a result

                  of any factual or legal determination made by it pursuant to

                  this subsection (c) or for any information supplied by it to

                  the Employee or his advisors.

 

         (d)      The provisions of this Section 14 are intended to apply to any

                  and all payments or benefits available to the Employee under

                  this Agreement.

 

Section 15.       LEGAL EXPENSES.

 

         The Employer shall reimburse the Employee for any reasonable legal

expenses incurred by the Employee in connection with the preparation and

negotiation of this Agreement and any amendments hereto.

 

Section 16.       ENTIRE AGREEMENT.

 

         (a)      CHANGE, MODIFICATION, WAIVER. No change or modification of

                  this Agreement shall be valid unless it is in writing and

                  signed by each of the parties hereto. No waiver of any

                  provision of this Agreement shall be valid unless it is in

                  writing and signed by the party against whom the waiver is

                  sought to be enforced. The failure of a party to insist upon

                  strict performance of any provision of this Agreement in any

                  one or more instances shall not be construed as a waiver or

                  relinquishment of the right to insist upon strict compliance

                  with such provision in the future.

 

         (b)      INTEGRATION OF ALL AGREEMENTS. This Agreement, together with

                  the Prior Agreements, constitutes the entire Agreement between

                  the parties and is intended to be an integration of all

                  agreements between the parties with respect to Employee's

                  service with Employer. Subject to Section 12(b) hereof, any

                  and all prior agreements, including without limitation the

                  1995 Agreement, between Employee and Employer with respect to

                  the subject matter hereof (other than the Prior Agreements)

                  are hereby revoked.

 

         (c)      SEVERABILITY OF PROVISIONS. If for any reason any provision of

                  this Agreement should be declared void or invalid, such

                  declaration shall not affect the validity of the rest of this

                  Agreement, which shall remain in force as if executed with the

                  void or invalid provision eliminated. Each of the Prior

                  Agreements shall survive any termination of this Agreement in

                  accordance with its terms.

 

                                      -12-

<PAGE>   13

 

Section 17.       BINDING EFFECT.

 

         This Agreement shall be binding upon all parties hereto and their

heirs, successors and assigns. This Agreement shall be binding upon any

successor entity to Employer, including without limitation any successor by

merger, consolidation or sale of assets, and shall be assignable by the Employer

to any entity controlled by or under common control with the Employer.

 

Section 18.       GOVERNING LAW.

 

         This Agreement shall be governed by and construed in accordance with

the internal laws of The Commonwealth of Massachusetts, without regard to

conflicts of laws principles.

 

Section 19.       MISCELLANEOUS.

 

         (a)      FORM. As employed in this Agreement, the singular form shall

                  include, if appropriate, the plural.

 

         (b)      HEADINGS. The headings employed in this Agreement are solely

                  for the convenience and reference of the parties and are not

                  intended to be descriptive of the entire contents of any

                  paragraph and shall not limit or otherwise affect any of

                  terms, provisions or construction thereof.

 

         (c)      COUNTERPARTS. This Agreement may be executed in counterparts,

                  each of which shall be deemed an original, but all of which

                  together shall constitute one and the same instrument.

 

 

                                      -13-

<PAGE>   14

 

 

         IN WITNESS WHEREOF, this Agreement is executed as of the date first

above written.

 

                                             EMPLOYER:

 

                                             RSA SECURITY INC.

 

 

                                             /s/ JOSEPH B. LASSITER, III

                                             -----------------------------------

                                             Joseph B. Lassiter, III

                                             Director and Chairman of the

                                             Compensation Committee of the

                                             Board of Directors

 

                                             EMPLOYEE:

 

 

                                              /s/ ARTHUR W. COVIELLO, JR.

                                              ----------------------------------

                                              Arthur W. Coviello, Jr.

 

 

 

                                      -14-

 

<PAGE>   15

 

 

                                 Attachment "A"

                                RSAS CONFIDENTIAL

                             2000 COMPENSATION PLAN

 

<TABLE>

<CAPTION>

 

<S>                                        <C>              <C>                 <C>                <C>

     A. COVIELLO

 

I.   SALARY                                                  $318,000

 

II.  BONUS**                                                THRESHOLD               PLAN           STRETCH

                                                            ---------               ----           -------

 

     TARGET REVENUE (in 000's)                                  $261M              $268M             $280M

                                                                -----              -----

A)   REVENUE                                60%              $114,480           $143,100          $171,720

                                                             --------           --------          --------

 

     TARGET EPS***                                               0.85               0.89              >.90

                                                                 ----               ----              ----

B)   EARNINGS PER SHARE***                  40%               $76,320            $95,400          $114,480

                                                              -------            -------          --------

 

     TOTAL BONUS                                             $190,800           $238,500          $286,200

 

     % OF BASE SALARY                                          60.00%             75.00%            90.00%

</TABLE>

 

 

*   All bonus paid after year end audit

**  Bonus paid linearly to the Plan - no bonus payment if threshold is not

    reached

*** On an operating basis only - including interest income - excluding one time

    gains and losses and operations of RSA Capital.

 

 

                                Payout as a % of

                                  Target Bonus

 

THRESHOLD                              80%

PLAN                                  100%

STRETCH GOAL                          120%

 

Stretch Goal is $280M in revenue and >90 cents EPS (including additional bonus)

No additional bonus between Plan and Stretch

 

Bonus will be prorated after 120%

 

 

                                      -15-

</TEXT>

</DOCUMENT>