<PAGE>
                               SECURITY AGREEMENT


         SECURITY  AGREEMENT (as amended,  restated,  supplemented  or otherwise
modified from time to time in accordance herewith and including all attachments,
exhibits and schedules  hereto,  the  "Agreement"),  dated as of March 26, 2003,
made by P-COM,  INC., a Delaware  corporation (the  "Grantor"),  in favor of DMG
Legacy Institutional Fund LLC (the "Agent"), as collateral agent for each of the
Secured Parties whose names are set forth on Exhibit A hereto (collectively, the
"Secured Parties").

         WHEREAS, the Grantor has issued separate secured convertible promissory
notes to the Secured Parties (the "Notes") in the aggregate  principal amount of
$1,500,000  pursuant to a Securities Purchase Agreement by and among the Grantor
and the Secured Parties dated the date hereof (the "Purchase Agreement"); and

         WHEREAS,  it is a condition precedent to the Secured Parties making the
loan evidenced by the Notes to the Grantor that the Grantor  execute and deliver
to the  Secured  Parties a  security  agreement  providing  for the grant to the
Secured Parties of a continuing  security  interest in all personal property and
assets of the  Grantor,  all in  substantially  the form  hereof  to secure  all
Obligations (hereinafter defined); and

         WHEREAS,  all rights,  remedies and  obligations of the parties to this
Agreement  are  subject  to (i) the  provisions  of that  certain  Subordination
Agreement by and among the Secured  Parties and Silicon  Valley Bank dated as of
March 26,  2003,  and (ii) the rights of Silicon  Valley Bank under the SVB Loan
Agreements.

         NOW, THEREFORE, the parties agree as follows:

                             ARTICLE I. Definitions

         Section 1.1.  Definition of Terms Used Herein.  All  capitalized  terms
used  herein  and not  defined  herein  have the  respective  meanings  provided
therefor in the Purchase Agreement.  All terms defined in the Uniform Commercial
Code  (hereinafter  defined)  as in effect from time to time and used herein and
not otherwise  defined herein (whether or not such terms are  capitalized)  have
the same definitions herein as specified therein.

         Section 1.2.  Definition of Certain Terms Used Herein.  As used herein,
the following terms have the following meanings:

         "Collateral"  means all  accounts  receivable  of the  Grantor  and all
personal  and  fixture  property of every kind and  nature,  including,  without
limitation,  all furniture,  fixtures,  equipment, raw materials,  inventory, or
other  goods,  accounts,  contract  rights,  rights  to the  payment  of  money,
insurance  refund  claims  and all other  insurance  claims and  proceeds,  tort
claims, chattel paper, documents,  instruments,  securities and other investment
property,  deposit  accounts,  rights to  proceeds  of letters of credit and all
general  intangibles  including,  without  limitation,  all tax  refund  claims,
license  fees,  patents,  patent  licenses,  patent  applications,   trademarks,
trademark licenses, trademark applications,  trade names, copyrights,  copyright
licenses,   copyright   applications,   rights  to  sue  and  recover  for  past
infringement of patents, trademarks and copyrights,  computer programs, computer
software, engineering drawings, service marks, customer lists, goodwill, and all
licenses,  permits,  agreements  of any kind or  nature  pursuant  to which  the
Grantor  possesses,  uses or has  authority to possess or use property  (whether


<PAGE>

tangible or  intangible) of others or others  possess,  use or have authority to
possess or use property (whether tangible or intangible) of the Grantor, and all
recorded  data of any kind or  nature,  regardless  of the  medium of  recording
including, without limitation, all books and records, software, writings, plans,
specifications  and  schematics;  and all  proceeds  and products of each of the
foregoing.

         "Default"  means any event or  circumstance  which,  with the giving of
notice,  the lapse of time, or both, would (if not cured,  waived,  or otherwise
remedied during such time) constitute an Event of Default.

         "Event of Default" has the meaning specified in the Notes.

         "Indemnitees" has the meaning specified in Section 7.5(b).

         "Lien" means: (i) any interest in property  securing an obligation owed
to, or a claim by, a Person other than the owner of the  property,  whether such
interest is based on the common  law,  statute,  or  contract,  and  including a
security  interest,  charge,  claim,  or lien arising  from a mortgage,  deed of
trust,  encumbrance,  pledge,  hypothecation,  assignment,  deposit arrangement,
agreement,  security  agreement,  conditional  sale or trust receipt or a lease,
consignment or bailment for security  purposes;  (ii) to the extent not included
under  clause  (i),  any   reservation,   exception,   encroachment,   easement,
right-of-way,  covenant, condition,  restriction, lease or other title exception
or encumbrance  affecting property;  and (iii) any contingent or other agreement
to provide any of the foregoing.

         "Notes" has the meaning  assigned to such term in the first  recital of
this Agreement.

         "Permitted  Lien" has the meaning set forth in the SVB Loan  Agreements
(as in effect on the date hereof),  except that,  with respect to clause (iv) of
such  definition,  such  additional  security  interests  and liens must also be
consented to in writing by the Collateral  Agent,  which consent may be withheld
in its good faith business judgment.

         "Obligations"   means  all  indebtedness,   liabilities,   obligations,
covenants and duties of the Grantor to the Secured Parties of every kind, nature
and  description,  direct or indirect,  absolute or contingent,  due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise,  now existing of hereafter arising under or in connection with the
Notes,  the  Purchase  Agreement,   this  Agreement  or  the  other  Transaction
Documents.

         "Security  Interest"  has the meaning  specified in Section 2.1 of this
Agreement.

         "SVB Loan Agreements" means that certain Loan and Security Agreement by
and among the Grantor,  P-Com Network  Services,  Inc. and Silicon  Valley Bank,
dated  September 20, 2002,  and that certain Loan and Security  Agreement  (EXIM
Program) by and among the  Grantor,  P-Com  Network  Services,  Inc. and Silicon
Valley Bank, dated September 20, 2002.

         "Uniform  Commercial Code" means the Uniform  Commercial Code from time
to time in effect in the State of Delaware.



                                        2
<PAGE>

                         ARTICLE II. Security Interest

         Section  2.1.  Security  Interest.  As  security  for the  payment  and
performance,  in  full  of  the  Obligations,  and  any  extensions,   renewals,
modifications or refinancings of the  Obligations,  the Grantor hereby bargains,
sells,  conveys,  assigns,  sets  over,  mortgages,  pledges,  hypothecates  and
transfers  to the Secured  Parties,  and hereby  grants to the Secured  Parties,
their  successors  and assigns,  a security  interest in, all of such  Grantor's
right,  title  and  interest  in, to and under  the  Collateral  (the  "Security
Interest").

         Section 2.2. No  Assumption  of  Liability.  The  Security  Interest is
granted as security only and shall not subject the Secured Parties to, or in any
way alter or modify,  any obligation or liability of the Grantor with respect to
or arising out of the Collateral.

                  ARTICLE III. Representations and Warranties

         The Grantor represents and warrants to the Secured Parties that:

         Section 3.1. Title and Authority. The Grantor has good and valid rights
in and title to the Collateral with respect to which it has purported to grant a
security  interest  hereunder  and has full power and  authority to grant to the
Secured  Parties the Security  Interest and to execute,  deliver and perform its
obligations in accordance with the terms of this Agreement,  without the consent
or approval  of any other  Person  other than any consent or approval  which has
been obtained.

         Section 3.2.  Filings;  Actions to Achieve  Perfection.  Upon filing in
each United States governmental, municipal or other office specified in Schedule
A, properly  completed Uniform Commercial Code financing  statements  (including
fixture filings,  as applicable)  containing a description of the Collateral are
all the filings,  recordings  and  registrations  that are  necessary to publish
notice of and  protect  the  validity  of and to  establish  a legal,  valid and
perfected  security  interest in favor of the Secured  Parties in respect of all
Collateral in which the Security Interest may be perfected by filing,  recording
or registration in the United States (or any political  subdivision thereof) and
its territories and possessions,  and no further or subsequent filing, refiling,
recording, rerecording,  registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of  continuation  statements  or with respect to the filing of amendments or new
filings to reflect  the change of the  Grantor's  name,  location,  identity  or
corporate  structure.  The  Grantor's  name is  listed in the  preamble  of this
Agreement  identically to how it appears on its certificate of  incorporation or
other organizational documents.

         Section 3.3. Validity and Priority of Security  Interest.  The Security
Interest  constitutes  (a) a  legal  and  valid  security  interest  in all  the
Collateral securing the payment and performance of the Obligations,  (b) subject
only to the  filings  described  in  Section  3.2  above  and  other  previously
perfected  security  interests in the Collateral  listed on Schedule 3.3 to this
Agreement  ("Existing Liens") and Permitted Liens, a perfected security interest
in all  Collateral  in which a security  interest  may be  perfected  by filing,
recording  or  registration  in  the  United  States  pursuant  to  the  Uniform
Commercial  Code or other  applicable law in the United States (or any political
subdivision  thereof) and its  territories and possessions or any other country,
state or nation (or any political subdivision thereof). The Security Interest is
and shall be subordinate to any other Existing Lien on any of the Collateral.

                                        3
<PAGE>

         Section 3.4.  Absence of Other Liens.  The  Collateral  is owned by the
Grantor  free and clear of any Lien  other  than  Existing  Liens and  Permitted
Liens. Without limiting the foregoing and except as set forth on Schedule 3.4 to
this Agreement,  the Grantor has not filed or consented to any filing  described
in  Section  3.2 in favor of any  Person  other than the  Secured  Parties,  nor
permitted  the  granting  or  assignment  of a security  interest  or  permitted
perfection  of any security  interest in the  Collateral  in favor of any Person
other than the Secured Parties.  The Secured  Parties' having  possession of all
instruments and cash constituting Collateral from time to time and the filing of
financing  statements in the offices referred to in Schedule A hereto results in
the perfection of such security  interest.  Such security interest is, or in the
case of  Collateral  in which the Grantor  obtain  rights after the date hereof,
will be, a perfected  security  interest.  Such  notices,  filings and all other
action necessary or desirable to perfect and protect such security interest have
been duly taken.

         Section 3.5. Valid and Binding Obligation.  This Agreement  constitutes
the legal, valid and binding obligation of the Grantor,  enforceable against the
Grantor  in  accordance  with its terms,  except  (i) as  limited by  applicable
bankruptcy,  insolvency,  reorganization,  moratorium, and other laws of general
application  affecting  enforcement  of  creditors'  rights  generally,  (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief,  or other  equitable  remedies,  (iii) as limited  by the  Subordination
Agreement by and between the Secured Party and Silicon  Valley Bank, and (iv) to
the extent the  indemnification  provisions  contained in this  Agreement may be
limited by applicable federal or state securities laws.

                             ARTICLE IV. Covenants

         Section 4.1. Change of Name; Location of Collateral; Place of Business,
State of Formation or Organization.

                  (a) The Grantor shall notify the Agent in writing  promptly of
         any  change  (i) in its  corporate  name or in any  trade  name used to
         identify it in the conduct of its  business or in the  ownership of its
         properties,  (ii) in the location of its chief  executive  office,  its
         principal place of business,  any office in which it maintains books or
         records relating to Collateral owned by it (including the establishment
         of any such new office or facility), (iii) in its identity or corporate
         structure  such that a filed  filing made under the Uniform  Commercial
         Code becomes misleading or (iv) in its Federal Taxpayer  Identification
         Number. In extension of the foregoing,  the Grantor shall not effect or
         permit any change  referred  to in the  preceding  sentence  unless all
         filings have been made under the Uniform  Commercial  Code or otherwise
         that are  required in order for the Secured  Parties to continue at all
         times  following  such  change  to have a valid,  legal  and  perfected
         security interest in all the Collateral.

                  (b) Without limiting Section 4.1(a), without the prior written
         consent of the Agent in each instance, the Grantor shall not change its
         state of incorporation, formation or organization.

         Section 4.2. Records.  The Grantor shall maintain,  at its own cost and
expense, such complete and accurate records with respect to the Collateral owned
by it as is consistent  with its current  practices and in accordance  with such
prudent  and  standard  practices  used in  industries  that  are the same as or
similar to those in which the  Grantor is  engaged,  but in any event to include
complete  accounting  records indicating all payments and proceeds received with
respect to any part of the  Collateral,  and, at such time or times as the Agent
may  reasonably  request,  promptly  to prepare  and deliver to the Agent a duly

                                        4
<PAGE>

certified  schedule or  schedules in form and detail  satisfactory  to the Agent
showing the identity, amount and location of any and all Collateral.

         Section 4.3. Periodic  Certification;  Notice of Changes.  In the event
there  should  at any time be any  change  in the  information  represented  and
warranted  herein or in the documents and instruments  executed and delivered in
connection  herewith,  the Grantor shall immediately notify the Agent in writing
of such change (this notice  requirement  shall be in extension of and shall not
limit or relieve the Grantor of any other covenants hereunder).

         Section 4.4. Protection of Security. The Grantor shall, at its own cost
and  expense,  take  any  and all  actions  necessary  to  defend  title  to the
Collateral  against  all  persons  and to defend the  Security  Interest  of the
Secured  Parties in the  Collateral  and the priority  thereof  against any Lien
other than Existing Liens and Permitted Liens.

         Section 4.5. Inspection and Verification. The Agent and such persons as
the  Agent  may  reasonably  designate  shall  have  the  right to  inspect  the
Collateral,  all records  related  thereto (and to make extracts and copies from
such records) and the premises upon which any of the  Collateral is located,  to
discuss  the  Grantor's  affairs  with  the  officers  of the  Grantor  and  its
independent  accountants and to verify under reasonable procedures the validity,
amount, quality,  quantity,  value, condition and status of, or any other matter
relating  to,  the  Collateral,  including,  in the  case of  collateral  in the
possession of any third Person and upon an Event of Default,  by contacting  any
account  debtor or third Person  possessing  such  Collateral for the purpose of
making  such a  verification.  Out-of-pocket  expenses  in  connection  with any
inspections by  representatives of the Agent shall be (a) the obligations of the
Grantor with respect to any inspection after the Secured Parties' demand payment
of the Notes or (b) the obligation of the Secured Parties in any other case.

         Section 4.6.  Taxes;  Encumbrances.  At its option,  the Agent (for the
benefit of the Secured Parties) may discharge  Liens,  other than Existing Liens
and Permitted  Liens, at any time levied or placed on the Collateral and may pay
for the maintenance and preservation of the Collateral to the extent the Grantor
fails to do so and the Grantor  shall  reimburse the Agent Parties on demand for
any payment made or any expense  incurred by the Agent pursuant to the foregoing
authorization;  provided,  however,  that  nothing  in  this  Section  shall  be
interpreted  as excusing  the Grantor from the  performance  of, or imposing any
obligation on the Agent to cure or perform, any covenants or other obligation of
the  Grantor  with  respect  to any  Lien  or  maintenance  or  preservation  of
Collateral as set forth herein.

         Section 4.7. Use and  Disposition of Collateral.  The Grantor shall not
make  or  permit  to be made  an  assignment,  pledge  or  hypothecation  of any
Collateral or shall grant any other Lien in respect of the Collateral other than
Existing  Liens and Permitted  Liens  without the prior  written  consent of the
Secured Parties. The Grantor shall not make or permit to be made any transfer of
any  Collateral  and the Grantor  shall remain at all times in possession of the
Collateral  owned by it,  other than with  respect to  Existing  Liens and other
liens approved by the Secured Parties.

         Section 4.8.  Insurance/Notice  of Loss.  Within a reasonable period of
time following the date of this Agreement,  Grantor,  at its own expense,  shall
maintain or cause to be maintained insurance covering physical loss or damage to

                                        5
<PAGE>

the  Collateral.  In  extension of the  foregoing  and without  limitation,  the
Secured Parties shall be listed as an "additional  insured" on Grantor's general
liability  insurance.  Such insurance shall not be terminated,  cancelled or not
renewed for any reason, including non-payment of insurance premiums,  unless the
insurer shall have  provided the Secured  Parties at least 30 days prior written
notice. Grantor irrevocably makes,  constitutes and appoints the Secured Parties
(and all officers, employees or agents designated by the Secured Parties) as its
true  and  lawful  agent  and  attorney-in-fact  for the  purpose,  at any  time
following  the  Secured  Parties'  demand for  payment of the Notes,  of making,
settling  and  adjusting  claims in  respect of  Collateral  under  policies  of
insurance,  endorsing  the name of Grantor on any check,  draft,  instrument  or
other item of payment for the  proceeds of such  policies of  insurance  and for
making all determinations and decisions with respect thereto.  In the event that
Grantor  at any  time or times  shall  fail to  obtain  or  maintain  any of the
policies  of  insurance  required  hereby or to pay any premium in whole or part
relating  thereto,  the Secured  Parties may,  without  waiving or releasing any
obligation or liability of Grantor hereunder,  in their sole discretion,  obtain
and maintain  such policies of insurance and pay such premium and take any other
actions with respect  thereto as the Secured  Parties deem  advisable.  All sums
disbursed  by the Secured  Parties in  connection  and in  accordance  with this
Section,  including reasonable  attorneys' fees, court costs, expenses and other
charges  relating  thereto,  shall be  payable  upon  demand,  by Grantor to the
Secured  Parties and shall be additional  Obligations  secured  hereby.  Grantor
shall  promptly  notify  the  Secured  Parties  if any  material  portion of the
Collateral owned or held by Grantor is damaged or destroyed. The proceeds of any
casualty  insurance  in respect of any  casualty  loss of any of the  Collateral
shall (i) so long as the Secured Parties have not demanded payment of the Notes,
be disbursed to Grantor for direct  application  by Grantor solely to the repair
or  replacement of Grantor's  property so damaged or destroyed,  and (ii) in all
other  circumstances,  be held by the Secured Parties as cash collateral for the
Obligations.  The Secured Parties may, at their sole option,  disburse from time
to time all or any part of such proceeds so held as cash  collateral,  upon such
terms and conditions as the Secured Parties may reasonably prescribe, for direct
application  by the  Secured  Parties  solely to the  repair or  replacement  of
Grantor's property so damaged or destroyed, or Grantor may apply all or any part
of such proceeds to the Obligations.

         Section  4.9.  Legend.   Grantor  shall  legend,  in  form  and  manner
satisfactory  to the Secured  Parties,  its accounts and its books,  records and
documents evidencing or pertaining thereto with an appropriate  reference to the
fact that such accounts  have been assigned to the Secured  Parties and that the
Secured Parties have a security interest therein.

                ARTICLE V. Further Assurances; Power of Attorney

         Section 5.1. Further Assurances. The Agent is hereby authorized to file
Uniform  Commercial  Code  financing  statements  and/or  any other  appropriate
filings,  recording or registrations  evidencing the security  interests granted
herein.  Grantor shall, at its own expense,  execute,  acknowledge,  deliver and
cause to be duly filed all such further  instruments  and documents and take all
such actions as the Secured Parties may from time to time reasonably  request to
better  assure,  preserve,  protect and perfect the  Security  Interest  and the
rights and remedies created hereby,  including the payment of any fees and taxes
required in connection  with the execution and delivery of this  Agreement,  the
granting of the  Security  Interest and the filing of any  financing  statements
(including  fixture  filings)  or other  documents  in  connection  herewith  or
therewith.  If  any  amount  payable  under  or in  connection  with  any of the
                                        6
<PAGE>

Collateral  shall  be or  become  evidenced  by any  promissory  note  or  other
instrument,  such note or instrument shall be immediately  pledged and delivered
to the Secured  Parties,  duly endorsed in a manner  satisfactory to the Secured
Parties.

         Section 5.2. Power of Attorney.

                  (a) Grantor  hereby  irrevocably  (as a power  coupled with an
interest)  constitutes  and appoints the Agent (and all  officers,  employees or
agents  designated  by the  Agent),  its  attorney-in-fact  with  full  power of
substitution,  for the benefit of the Secured Parties, at any time following the
Secured Parties' demand for payment of the Notes (i) to receive, endorse, assign
and/or deliver any and all notes,  acceptances,  checks, drafts, money orders or
other evidences of payment relating to the Collateral or any part thereof;  (ii)
to demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the  Collateral;  (iii) to sign the name of Grantor on
any invoice or bill of lading  relating to any of the  Collateral;  (iv) to send
verifications  of accounts to any account  debtor or any other Person liable for
an  account;  (v) to  commence  and  prosecute  any and all  suits,  actions  or
proceedings  at law or in  equity  in any  court of  competent  jurisdiction  to
collect or otherwise  realize on all or any of the  Collateral or to enforce any
rights in  respect of any  Collateral;  (vi) to  settle,  compromise,  compound,
adjust or defend any actions,  suits or proceeding relating to all or any of the
Collateral; and (vii) to use, sell, assign, transfer, pledge, make any agreement
with respect to or otherwise deal with all or any of the  Collateral,  and to do
all other acts and things necessary to carry out the purposes of this Agreement,
as fully and completely as though the Secured Parties were the absolute owner of
the  Collateral  for  all  purposes;  provided,  however,  that  nothing  herein
contained  shall be construed as requiring or obligating the Secured  Parties to
make any  commitment or to make any inquiry as to the nature or  sufficiency  of
any payment received by the Secured Parties,  or to present or file any claim or
notice, or to take any action with respect to the Collateral or any part thereof
or the moneys due or to become due in respect  thereof or any  property  covered
thereby,  and no action taken or omitted to be taken by the Secured Parties with
respect to the  Collateral  or any part thereof  shall give rise to any defense,
counterclaim or offset in favor of Grantor or to any claim or action against the
Secured Parties.

                  (b) The  provisions  of this Article shall in no event relieve
Grantor of any of its  obligations  hereunder  with respect to the Collateral or
any part thereof or impose any  obligation on the Secured  Parties to proceed in
any particular manner with respect to the Collateral or any part thereof,  or in
any way limit the exercise by the Secured  Parties of any other or further right
which it may have on the date of this Agreement or hereafter, whether hereunder,
by law or otherwise.

                              ARTICLE VI. Remedies

         Section 6.1. Remedies upon Default.

                  (a) Upon the occurrence and during the continuance of an Event
of Default, Grantor agrees to deliver each item of its Collateral to the Secured
Parties on demand,  and it is agreed  that the  Secured  Parties  shall have the
right to take any of or all the following actions at the same or different times
(but at all times subject to any Existing Liens):  with or without legal process
and with or without prior notice or demand for  performance,  to take possession
of the Collateral and without liability for trespass to enter any premises where
the  Collateral  may be  located  for the  purpose  of taking  possession  of or
removing the  Collateral,  exercise  Grantor's right to bill and receive payment
for completed work and, generally,  to exercise any and all rights afforded to a
                                        7
<PAGE>

secured party under the Uniform Commercial Code or other applicable law. Without
limiting  the  generality  of the  foregoing,  Grantor  agrees  that the Secured
Parties  shall  have  the  right,  subject  to  the  mandatory  requirements  of
applicable  law,  to  sell  or  otherwise  dispose  of all or  any  part  of the
Collateral,  at  public  or  private  sale or at any  broker's  board  or on any
securities exchange, for cash, upon credit or for future delivery as the Secured
Parties shall deem  appropriate.  The Secured Parties shall be authorized at any
such  sale (if it deems  it  advisable  to do so) to  restrict  the  prospective
bidders or  purchasers  to persons  who will  represent  and agree that they are
purchasing  the  Collateral  for their own account for investment and not with a
view to the distribution or sale thereof, and upon consummation of any such sale
the Secured Parties shall have the right to assign,  transfer and deliver to the
purchaser or purchasers  thereof the Collateral so sold.  Each such purchaser at
any such sale shall hold the property  sold  absolutely,  free from any claim or
right on the part of Grantor, and Grantor hereby waives (to the extent permitted
by law) all rights of  redemption,  stay and appraisal  which Grantor now has or
may at any time in the future have under any rule of law or statute now existing
or hereafter enacted.

                  (b) The  Secured  Parties  shall give  Grantor  ten (10) days'
written notice (which Grantor agrees is reasonable  notice within the meaning of
Section  9-504(3)  of the  Uniform  Commercial  Code)  of the  Secured  Parties'
intention to make any sale of Collateral.  Such notice,  in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange,  shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof,  will first be offered  for sale at such  board or  exchange.  Any such
public sale shall be held at such time or times within  ordinary  business hours
and at such  place or places  as the  Secured  Parties  may fix and state in the
notice  (if any) of such  sale.  At any such sale,  the  Collateral,  or portion
thereof,  to be  sold  may be  sold in one  lot as an  entirety  or in  separate
parcels,  as the  Secured  Parties may (in their sole and  absolute  discretion)
determine.  The Secured  Parties  shall not be obligated to make any sale of any
Collateral  if it shall  determine  not to do so,  regardless  of the fact  that
notice of sale of such  Collateral  shall have been given.  The Secured  Parties
may, without notice or publication,  adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may,  without further notice,  be made at the time
and  place to which  the same was so  adjourned.  In case any sale of all or any
part of the Collateral is made on credit or for future delivery,  the Collateral
so sold may be retained by the Secured  Parties  until the sale price is paid by
the purchaser or purchasers thereof, but the Secured Parties shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like  notice.  At any public (or, to the extent  permitted by
law,  private) sale made pursuant to this Section,  the Secured  Parties may bid
for or  purchase,  free (to the  extent  permitted  by law)  from  any  right of
redemption, stay, valuation or appraisal on the part of Grantor (all said rights
being also hereby  waived and  released  to the extent  permitted  by law),  the
Collateral or any part thereof  offered for sale and may make payment on account
thereof by using any claim  then due and  payable to the  Secured  Parties  from
Grantor as a credit  against the purchase  price,  and the Secured  Parties may,
upon  compliance  with the  terms of sale,  hold,  retain  and  dispose  of such


                                        8
<PAGE>

property  without  further  accountability  to Grantor  therefor.  For  purposes
hereof,  a written  agreement to purchase the Collateral or any portion  thereof
shall be treated as a sale thereof;  the Secured  Parties shall be free to carry
out such sale  pursuant to such  agreement  and Grantor shall not be entitled to
the  return  of  the  Collateral  or  any  portion  thereof   subject   thereto,
notwithstanding  the fact that after the Secured Parties shall have entered into
such an agreement all  Obligations  have been paid in full. As an alternative to
exercising the power of sale herein  conferred upon it, the Secured  Parties may
proceed by a suit or suits at law or in equity to foreclose  this  Agreement and
to sell the Collateral or any portion  thereof  pursuant to a judgment or decree
of a court or courts having  competent  jurisdiction or pursuant to a proceeding
by a court-appointed receiver.

         Section 6.2.  Application of Proceeds.  The Secured Parties shall apply
the  proceeds  of any  collection  or  sale  of the  Collateral,  as well as any
Collateral consisting of cash, as follows:

                  (a) FIRST,  to the payment of all costs and expenses  incurred
by the Secured  Parties in connection  with such collection or sale or otherwise
in connection with this Agreement or any of the Obligations, including all court
costs and the fees and expenses of its agents and legal  counsel,  and any other
costs or  expenses  incurred  in  connection  with the  exercise of any right or
remedy  hereunder,  under  the  Purchase  Agreement,  the  Notes  and the  other
Transaction Documents;

                  (b) SECOND, to the payment in full of the Obligations; and

                  (c) THIRD,  to  Grantor,  its  successors  or  assigns,  or to
whomsoever  may be  lawfully  entitled  to  receive  the same,  or as a court of
competent jurisdiction may otherwise direct.

                  Subject  to the  foregoing,  the  Secured  Parties  shall have
absolute  discretion as to the time of application  of such proceeds,  moneys or
balances in accordance with this  Agreement.  Upon any sale of the Collateral by
the Secured Parties (including pursuant to a power of sale granted by statute or
under a  judicial  proceeding),  the  receipt  of any such  proceeds,  moneys or
balances  by the Secured  Parties or of the  officer  making the sale shall be a
sufficient  discharge to the purchaser or  purchasers of the  Collateral so sold
and  such  purchaser  or  purchasers  shall  not  be  obligated  to  see  to the
application of any part of the purchase  money paid over to the Secured  Parties
or such officer or be answerable in any way for the misapplication thereof.

         Section 6.3.  Grant of License to Use  Intellectual  Property.  For the
purpose of enabling the Secured  Parties to exercise  rights and remedies  under
this Article at such time as the Secured  Parties shall be lawfully  entitled to
exercise  such  rights  and  remedies,  to  the  extent  not  prohibited  by any
intellectual  property license,  Grantor hereby grants to the Secured Parties an
irrevocable,  non-exclusive  license  (exercisable without payment of royalty or
other  compensation  to  Grantor)  to use,  license  or  sub-license  any of the
Collateral  consisting of intellectual  property now owned or hereafter acquired
by Grantor,  and wherever the same may be located, and including in such license
reasonable  access  to all  media  in which  any of the  licensed  items  may be
recorded  or stored  and to all  computer  software  and  programs  used for the
compilation or printout thereof.  The use of such license by the Secured Parties
may be  exercised,  at the option of the Secured  Parties,  only  following  the
Secured Parties' demand for payment of the Notes.

                                        9
<PAGE>

                           ARTICLE VII. Miscellaneous

         Section 7.1. Notices.  All  communications and notices hereunder to the
Grantor  and to  the  Secured  Parties  shall  (except  as  otherwise  expressly
permitted  herein) be in writing  and  delivered  to the  Grantor or the Secured
Parties, as the case may be, as provided in the Purchase Agreement.

         Section  7.2.  Security  Interest  Absolute.  All rights of the Secured
Parties  hereunder,  the  Security  Interest  and  all  obligations  of  Grantor
hereunder  shall be absolute and  unconditional  irrespective of (a) any lack of
validity  or  enforceability  of the  Purchase  Agreement,  the Notes,  any Loan
Document or any agreement  with respect to any of the  Obligations  or any other
agreement or instrument relating to any of the foregoing,  (b) any change in the
time,  manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Purchase Agreement, the Notes, any Loan Document or any other agreement
or instrument,  (c) any exchange, release or non-perfection of any Lien on other
collateral,  or any  release  or  amendment  or  waiver of or  consent  under or
departure  from  any  guarantee,  securing  or  guaranteeing  all  or any of the
Obligations,  or (d) any other  circumstance  that might otherwise  constitute a
defense  available to, or a discharge of, Grantor in respect of the  Obligations
or this Agreement.

         Section  7.3.  Survival  of  Agreement.   All  covenants,   agreements,
representations and warranties made by Grantor herein and in the certificates or
other  instruments  prepared or delivered in connection with or pursuant to this
Agreement  shall be considered  to have been relied upon by the Secured  Parties
and shall  survive the making of the loan and the  execution and delivery to the
Secured  Parties  of the  Notes,  regardless  of any  investigation  made by the
Secured Parties or on their behalf;  and shall continue in full force and effect
until this Agreement shall terminate. The provisions of Section 7.5 hereof shall
survive termination of this Agreement.

         Section 7.4. Binding Effect; Several Agreement; Successors and Assigns.
This Agreement  shall become  effective as to Grantor when a counterpart  hereof
executed on behalf of Grantor shall have been  delivered to the Secured  Parties
and a  counterpart  hereof  shall have been  executed  on behalf of the  Secured
Parties,  and thereafter  shall be binding upon Grantor and the Secured  Parties
and their respective  successors and assigns,  and shall inure to the benefit of
Grantor, the Secured Parties and their respective successors and assigns, except
that  Grantor  shall  not have the right to assign  or  transfer  its  rights or
obligations  hereunder or any interest herein or in the Collateral (and any such
assignment or transfer shall be void) except as expressly  contemplated  by this
Agreement, the Purchase Agreement, the Notes or the other Transaction Documents.


         Section 7.5. Secured Parties' Fees and Expense; Indemnification.

                  (a) Grantor  agrees to pay upon demand,  and to save the Agent
and  each of the  Secured  Parties  harmless  from,  the  amount  of any and all
reasonable  expenses,  including all reasonable  fees,  disbursements  and other
charges of its counsel and of any experts or agents,  which the Secured  Parties
may incur in connection with (i) the administration of this Agreement (including
the customary fees and charges of the Secured  Parties for any audits  conducted
by them or on their  behalf with respect to the  accounts  inventory),  (ii) the
custody or preservation of, or the sale of, collection from or other realization
upon any of the Collateral, (iii) the exercise, enforcement or protection of any
of the rights of the Secured Parties hereunder or (iv) the failure of Grantor to
perform or observe any of the provisions hereof.



                                       10
<PAGE>

                  (b)  Grantor  agrees  to  indemnify  the Agent and each of the
Secured Parties and any agents, contractors and employees of the Secured Parties
(collectively,  the "Indemnitees") against, and hold each of them harmless from,
any and all losses, claims, damages, liabilities and related expenses, including
reasonable  fees,  disbursements  and other  charges of counsel,  incurred by or
asserted  against any of them arising out of, in any way connected with, or as a
result of, the  execution,  delivery,  or  performance  of this Agreement or any
agreement  or  instrument   contemplated   hereby  or  any  claim,   litigation,
investigation or proceeding relating hereto or to the Collateral, whether or not
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee,  be available to the extent that such losses,  claims,  damages,
liabilities  or  related  expenses  are  determined  by  a  court  of  competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.

                  (c) Any such amounts  payable as provided  hereunder  shall be
additional  Obligations  secured  hereby.  The  provisions of this Section shall
remain  operative and in full force and effect  regardless of the termination of
this  Agreement,  the  Purchase  Agreement,  the Notes or the other  Transaction
Documents,  the  consummation  of  the  transactions  contemplated  hereby,  the
repayment of any of the Obligations,  the invalidity or  unenforceability of any
term or provision of this Agreement,  the Purchase  Agreement,  the Notes or the
other Transaction  Documents,  or any investigation  made by or on behalf of the
Secured Parties.  All amounts due under this Section shall be payable on written
demand therefor.

         Section  7.6.  GOVERNING  LAW.  THIS  AGREEMENT  SHALL BE  CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.

         Section 7.7. Waivers; Amendment.

                  (a) No failure or delay of the Secured  Parties in  exercising
any power or right hereunder  shall operate as a waiver  thereof,  nor shall any
single or partial  exercise of any such right or power,  or any  abandonment  or
discontinuance of steps to enforce such a right or power,  preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Secured Parties  hereunder and under the Purchase  Agreement
are  cumulative  and are not exclusive of any rights or remedies that they would
otherwise  have.  No waiver of any  provisions of this  Agreement,  the Purchase
Agreement,  the Notes or the  other  Transaction  Documents  or  consent  to any
departure by Grantor  therefrom shall in any event be effective  unless the same
shall be permitted by paragraph (b) below, and then such waiver or consent shall
be effective only in the specific  instance and for the purpose for which given.
No notice to or demand on Grantor in any case shall entitle Grantor to any other
or further notice or demand in similar or other circumstances.

                  (b) Neither this  Agreement  nor any  provision  hereof may be
waived,  amended or modified except  pursuant to an agreement or agreements,  in
writing entered into by the Secured Parties and Grantor.

                                       11
<PAGE>


         Section 7.8. WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY  LITIGATION  DIRECTLY  OR  INDIRECTLY  ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE PURCHASE AGREEMENT OR THE NOTES.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF  LITIGATION,  SEEK TO ENFORCE THE FOREGOING  WAIVER AND (B)
ACKNOWLEDGES  THAT IT AND THE OTHER  PARTIES  HERETO HAVE BEEN  INDUCED TO ENTER
INTO THIS AGREEMENT,  THE PURCHASE  AGREEMENT AND THE NOTES, AS APPLICABLE,  BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

         Section  7.9.  Severability.  In  the  event  any  one or  more  of the
provisions  contained  in this  Agreement  should be held  invalid,  illegal  or
unenforceable in any respect,  the validity,  legality and enforceability of the
remaining  provisions  contained  herein  shall  not in any way be  affected  or
impaired  thereby  (it being  understood  that the  invalidity  of a  particular
provision in a  particular  jurisdiction  shall not in and of itself  affect the
validity  of such  provision  in any  other  jurisdiction).  The  parties  shall
endeavor  in  good-faith  negotiations  to  replace  the  invalid,   illegal  or
unenforceable  provisions  with valid  provisions  the economic  effect of which
comes as close as  possible  to that of the  invalid,  illegal or  unenforceable
provisions.

         Section 7.10.  Counterparts.  This  Agreement may be executed in two or
more  counterparts,  each of which shall constitute an original but all of which
when taken  together  shall  constitute  but one  contract.  Each party shall be
entitled to rely on a facsimile  signature of any other party hereunder as if it
were an original.

         Section 7.11. Jurisdiction; Consent to Service of Process.

                  (a) Grantor hereby  irrevocably and  unconditionally  submits,
for itself and its property,  to the  nonexclusive  jurisdiction of any Delaware
State  court or  Federal  court of the  United  States  of  America  sitting  in
Delaware,  and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this  Agreement,  the  Purchase  Agreement  or the
Notes,  or for  recognition  or  enforcement  of any  judgment,  and each of the
parties hereto hereby irrevocably and unconditionally  agrees that all claims in
respect of any such action or  proceeding  may be heard and  determined  in such
Delaware State or, to the extent  permitted by law, in such Federal court.  Each
of the  parties  hereto  agrees  that a final  judgment  in any such  action  or
proceeding  shall be conclusive  and may be enforced in other  jurisdictions  by
suit on the  judgment or in any other  manner  provided by law.  Nothing in this
Agreement  shall affect any right that the Secured Parties may otherwise have to
bring  any  action  or  proceeding  relating  to this  Agreement,  the  Purchase
Agreement,  the Notes or the other Transaction  Documents against Grantor or its
properties in the courts of any jurisdiction.

                  (b) Grantor hereby irrevocably and unconditionally  waives, to
the fullest extent it may legally and  effectively do so, any objection which it
may now or  hereafter  have to the  laying  of  venue  of any  suit,  action  or
proceeding arising out of or relating to this Agreement, the Purchase Agreement,
the Notes or the other  Transaction  Documents in any Delaware  State or Federal
court.  Each of the parties  hereto hereby  irrevocably  waives,  to the fullest


                                       12
<PAGE>

extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.

                  (c)  Each  party to this  Agreement  irrevocably  consents  to
service of process in the manner provided for notices in Section 7.1. Nothing in
this  Agreement  will affect the right of any party to this Agreement to process
in any other manner permitted by law.

         Section 7.12.  Termination.  This  Agreement and the Security  Interest
shall terminate when all the  Obligations  have been paid in full, at which time
the Secured Parties shall execute and deliver to Grantor,  at Grantor's expense,
all Uniform  Commercial Code termination  statements and similar documents which
Grantor shall reasonably request to evidence such termination. Any execution and
delivery of termination  statements or documents  pursuant to this Section shall
be without recourse to or warranty by the Secured Parties.

         Section 7.13. Prejudgment Remedy Waiver. Grantor acknowledges that this
Agreement, the Purchase Agreement, the Notes and the other Transaction Documents
evidence a commercial transaction and that it could, under certain circumstances
have the right,  to notice of and hearing on the right of the Secured Parties to
obtain a prejudgment  remedy,  such as attachment,  garnishment and/or replevin,
upon commencing any litigation against Grantor. Notwithstanding,  Grantor hereby
waives all rights to notice,  judicial  hearing or prior court order to which it
might   otherwise  have  the  right  under  any  state  or  federal  statute  or
constitution  in  connection  with the  obtaining by the Secured  Parties of any
prejudgment  remedy by reason of this  Agreement,  the Purchase  Agreement,  the
Notes,  the other  Transaction  Documents or by reason of the Obligations or any
renewals or  extensions  of the same.  Grantor also waives any and all objection
which it might otherwise assert, now or in the future, to the exercise or use by
the  Secured  Parties of any right of setoff,  repossession  or self help as may
presently exist under statute or common law.

                            [Signature page follows]

                                       13
<PAGE>


         IN WITNESS  WHEREOF,  the  parties  have duly  executed  this  Security
Agreement as of the day and year first written above.


                       P-COM, INC.


                       By:   /s/ George Roberts
                             --------------------------------
                             Name:  George Roberts
                             Title:  Chief Executive Officer





DMG LEGACY INSTITUTIONAL FUND LLC, as Agent


By:      /s/ Andrew Wilder
-----------------------------------
Name:    Andrew Wilder
Title:   Chief Financial Officer

<PAGE>

                                    EXHIBIT A
                                 Secured Parties

DMG Legacy Fund LLC
c/o DMG Advisors LLC
53 Forest Avenue, Second Floor
Old Greenwich, CT 06870
Attention: Andrew Wilder
Fax No.: (203) 967-5851

DMG Legacy Institutional Fund LLC
c/o DMG Advisors LLC
53 Forest Avenue, Second Floor
Old Greenwich, CT 06870
Attention: Andrew Wilder
Fax No.: (203) 967-5851

DMG Legacy International Ltd.
c/o DMG Advisors LLC
53 Forest Avenue, Second Floor
Old Greenwich, CT 06870
Attention: Andrew Wilder
Fax No.: (203) 967-5851

<PAGE>
                                   SCHEDULE A

          Places of Business; Chief Executive Office; Filing Locations

State of Incorporation:
-------------------------
Delaware

Chief Executive Office:
--------------------------
3175 South Winchester Blvd.
Campbell, CA 95008


Filing Locations:
----------------
Secretary of State of the State of Delaware

<PAGE>
                                  SCHEDULE 3.3
                                 Existing Liens

Silicon  Valley Bank holds a blanket  security  interest in all of the Grantor's
assets  pursuant to that certain  Loan and  Security  Agreement by and among the
Grantor,  P-Com Network Services,  Inc. and Silicon Valley Bank, dated September
20, 2002,  and that certain Loan and Security  Agreement  (EXIM  Program) by and
among the Grantor,  P-Com Network Services,  Inc. and Silicon Valley Bank, dated
September 20, 2002.


<PAGE>
                                  SCHEDULE 3.4
                             Absence of Other Liens

Silicon  Valley Bank holds a blanket  security  interest in all of the Grantor's
assets  pursuant to that certain  Loan and  Security  Agreement by and among the
Grantor,  P-Com Network Services,  Inc. and Silicon Valley Bank, dated September
20, 2002,  and that certain Loan and Security  Agreement  (EXIM  Program) by and
among the Grantor,  P-Com Network Services,  Inc. and Silicon Valley Bank, dated
September 20, 2002.

The Grantor has executed and delivered that certain Senior Subordinated  Secured
Promissory Note, dated November 1, 2002, in favor of BBT Fund LP in the original
principal amount $201,875.







<PAGE>