1 EXHIBIT 10.47 TELCO SYSTEMS, INC. 63 NAHATAN STREET NORWOOD, MASSACHUSETTS 02062 February 2, 1995 Dr. William Smith Boulder, Colorado Dear Will: This letter will set forth the agreed terms of your employment by the Company: POSITION President and Chief Operating Officer. EFFECTIVE DATE February 2, 1995 EMPLOYMENT COMMENCEMENT DATE March 6, 1995. SALARY RATE $230,000 per annum. MIPS 60% of salary, with a guaranteed minimum of $50,000 for FY '95. STOCK OPTIONS 100,000 shares, exercise price equal to market value at date of issue, four-year vesting. FRINGE BENEFITS Standard benefits presently available to the current president, including health, dental and life insurance. CHANGE OF CONTROL Separate contract providing for lump sum payment equal to 1.5X annual salary plus latest bonus if change of control is followed by termination or demotion; form of contract substantially the same as that of the current president with changes to reflect changes in the law since 1989. RELOCATION Standard relocation allowance and home sale/purchase assistance (or special terms as agreed between you and the Company). 2 Dr. William Smith February 2, 1995 Page 2 SEVERANCE If you are not appointed CEO by 3/1/96 and voluntarily terminate by 5/31/96, total severance payments equal to $345,000 payable in equal monthly installments over two years from termination date. If you are not appointed CEO by 3/1/96 and have not tendered your resignation prior to 5/31/96, no contractual severance payment. If you are appointed CEO by 3/1/96 or are terminated at any time for cause, no contractual severance payment. If you terminate your employment voluntarily at any time (except during the three-month period referred to above), no contractual severance payment. If you become employed during a severance payment period, you will receive a lump-sum payment equal to one-half of the Company's remaining severance obligations in full discharge of all such remaining obligations. We are all delighted that you have accepted this offer. If the above accurately describes your understanding of your employment terms, please sign and return the enclosed copy of this letter. Very truly yours, TELCO SYSTEMS, INC. By /S/ John A. Ruggiero ----------------------- John A. Ruggiero, CEO Accepted and agreed to: /S/ William B. Smith - ---------------------- William Smith