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                                                                   Exhibit 10.86

December 7, 2000



Leighton J. Stephenson
Vice President & Chief Financial Officer
P-COM, Inc.
3175 South Winchester Boulevard
Campbell, CA  95008

Dear Leighton:

     We are pleased to inform you that the Board of Directors of P-Com, Inc.
(the "Company") has recently authorized and approved a special benefit program
for you and the other key executives.  The purpose of this letter agreement is
to set forth the terms and conditions of your benefit package and to explain the
limitations which will govern the overall value of your benefits.

     Your benefits will become payable in the event your employment terminates,
either voluntarily or involuntarily for any reason, within twenty-four (24)
months following certain changes in ownership or control of the Company.  To
understand the full scope of your benefits, you should familiarize yourself with
the definitional provisions of Section I of this letter agreement.  The benefits
comprising your package are detailed in Section II.  Section III addresses the
treatment of any excise tax imposed in the event that any of your benefits
constitute excess parachute payments for purposes of the Federal tax laws and
Section IV deals with ancillary matters affecting your arrangement.

SECTION I - DEFINITIONS

     For purposes of this letter agreement the following definitions will be in
effect:

     1.1  Average Compensation means the average of your W-2 wages from the
Company for the five (5) calendar years completed immediately prior to the
calendar year in which the Change of Control is effected. Any W-2 wages for a
partial year of employment will be annualized, in accordance with the frequency
which such wages are paid during such partial year, before inclusion in your
Average Compensation. If any of your compensation from the Company during such
five (5)-year or shorter period was not included in your W-2 wages for U.S.
income tax purposes, either because you were not a U.S. citizen or resident or
because such compensation was excludible from income as foreign earned income
under Code Section 911 or as pre-tax income under Code Section 125 or 402(g),
then such compensation will nevertheless be included in your Average
Compensation to the same extent as if it were part of your W-2 wages.

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     1.2  Base Salary means the annual rate of base salary in effect for you
immediately prior to the Change in Control or (if greater) the annual rate of
base salary in effect at the time of your Termination.

     1.3  Board means the Company's Board of Directors.

     1.4  Change in Control means any of the following transactions effecting a
change in ownership or control of the Company:

        (i)    a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Company is incorporated,

        (ii)   the sale, transfer or other disposition of all or substantially
all of the assets of the Company in complete liquidation or dissolution of the
Company,

        (iii)  any reverse merger in which the Company is the surviving entity
but in which securities possessing fifty percent (50%) or more of the total
combined voting power of the Company's outstanding securities are transferred to
person or persons different from the persons holding those securities
immediately prior to such merger,

        (iv)   a Hostile Take-Over, or

        (v)    the acquisition, directly or indirectly by any person or related
group of persons (other than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company), of
beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than thirty percent (30%) of the total combined
voting power of the Company's outstanding securities pursuant to a tender or
exchange offer made directly to the Company's stockholders.

     1.5  Code means the Internal Revenue Code of 1986, as amended.

     1.6  Common Stock means the Company's common stock.

     1.7  Disability shall mean your inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.

     1.8  Fair Market Value means, with respect to any shares of Common Stock
subject to any of your Options, the closing selling price per share of Common
Stock on the date in question, as reported on the Nasdaq National Market. If
there is no reported sale of Common Stock on such date, then the closing selling
price on the Nasdaq National Market on the next preceding day for which there
does exist such quotation shall be determinative of Fair Market Value.
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     1.9  Health Care Coverage means the continued health care coverage to which
you and your eligible dependents may become entitled under Section II of this
letter agreement upon the Termination of your employment.

     1.10 Hostile Take-Over means either of the following transactions:

        (i)    the successful acquisition by a person or a group of related
persons, other than the Company or a person controlling, controlled by or under
common control with the Company, of beneficial ownership (as determined pursuant
to the provisions of Rule 13d-3 under the 1934 Act) of securities possessing
more than twenty-five percent (25%) of the total combined voting power of the
Company's outstanding securities pursuant to a transaction or series of related
transactions which the Board does not at any time recommend the Company's
stockholders to accept or approve, or

        (ii)   a change in the composition of the Board over a period of twenty-
four (24) consecutive months or less such that a majority of the Board ceases,
by reason of one or more contested elections for Board membership, to be
comprised of individuals who either (I) have been members of the Board
continuously since the beginning of such period or (II) have been elected or
nominated for election as Board members during such period by at least a two-
thirds majority of the Board members described in clause (I) who were still in
office at the time such election or nomination was approved by the Board.

     1.11 Involuntary Termination means the termination of your employment with
the Company (or successor):

        (i)    involuntarily upon your discharge or dismissal,

        (ii)   voluntarily upon your resignation following (I) a change in your
position with the Company (or successor) which reduces your duties or level of
responsibility or otherwise changes the level of management to which you report,
(II) a reduction in your level of compensation (including base salary, fringe
benefits and target bonus under any incentive      performance plan) or (III) a
change in your place of employment which is more than fifty (50) miles from your
place of employment prior to the Change in Control, provided and only if such
change or reduction is effected without your written concurrence, or

        (iii)  by reason of your death or Disability.

     1.12 1934 Act shall mean the Securities Exchange Act of 1934, as amended.

     1.13 Option means any option granted to you under the Plans which is
outstanding at the time of the Change in Control or your subsequent Termination.
Your Options will be divided into two (2) separate categories as follows:

        Acquisition-Accelerated Options: any outstanding Option (or installment
        --------------------------------
thereof) which automatically accelerates, pursuant to the acceleration
provisions of the agreement
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evidencing that Option, upon a change in control or ownership of the Company
under certain specified circumstances.

        Severance-Accelerated Options: any outstanding Option (or installment
        ------------------------------
thereof) which accelerates upon your Termination pursuant to Section II of this
letter agreement.

     1.14 Option Parachute Payment means, with respect to any Acquisition-
Accelerated Option or any Severance-Accelerated Option, the portion of that
Option deemed to be a parachute payment under Code Section 280G and the Treasury
Regulations issued thereunder.  The portion of such Option which is categorized
as an Option Parachute Payment will be calculated in accordance with the
valuation provisions established under Code Section 280G and the applicable
Treasury Regulations and will include an appropriate dollar adjustment to
reflect the lapse of your obligation to remain in the Company's employ as a
condition to the vesting of the accelerated installment.  In no event, however,
will the Option Parachute Payment attributable to any Acquisition-Accelerated
Option or Severance-Accelerated Option (or accelerated installment) exceed the
spread (the excess of the Fair Market Value of the accelerated option shares
over the option exercise price payable for those shares) existing at the time of
acceleration.

     1.15 Other Parachute Payment means any payment in the nature of
compensation (other than the benefits to which you become entitled under Section
II of this letter agreement) which are made to you in connection with the Change
in Control and which accordingly qualify as parachute payments within the
meaning of Code Section 280G(b)(2) and the Treasury Regulations issued
thereunder. Your Other Parachute Payments will include (without limitation) the
Present Value, measured as of the Change in Control, of the aggregate Option
Parachute Payment attributable to your Acquisition-Accelerated Options (if any).

     1.16 Plans means (i) the Company's 1992 Stock Option Plan, (ii) the
Company's 1995 Stock Option/Stock Issuance Plan, as amended or restated from
time to time, and (iii) any successor stock incentive plan subsequently
implemented by the Company.

     1.17 Present Value means the value, determined as of the date of the Change
in Control, of any payment in the nature of compensation to which you become
entitled in connection with the Change in Control or the subsequent Termination
of your employment, including (without limitation) the Option Parachute Payment
attributable to your Severance-Acceleration Options, your Severance Payments
under Section II of this letter agreement and the Option Parachute Payment
attributable to your Acquisition-Accelerated Options. The Present Value of each
such payment will be determined in accordance with the provisions of Code
Section 280G(d)(4), utilizing a discount rate equal to one hundred twenty
percent (120%) of the applicable Federal rate in effect at the time of such
determination, compounded semi-annually to the effective date of the Change in
Control.

     1.18 Severance Payments means the severance payments to which you may
become entitled under Section II in the event of a Termination following a
Change in Control, subject, however, to the dollar limitations of Section III.
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     1.19 Termination means a Voluntary Resignation or an Involuntary
Termination of your employment.

     1.20 Voluntary Resignation means a resignation by you other than one which
constitutes an Involuntary Termination.



SECTION II - BENEFITS

     Upon the Termination of your employment within twenty-four (24) months
following a Change in Control, you will become entitled to receive the special
benefits provided in this Section II.

     2.1  Payments

     (a)  Base Salary

     You will be entitled to a Severance Payment in an amount equal to two (2)
times your Base Salary.

     (b)  Bonus

     You will be entitled to an additional Severance Payment in an amount equal
to the greater of the following bonus amounts: (a) two (2) times the full amount
of the target bonus payable to you with respect to the fiscal year in which the
Termination occurs or (b) two (2) times the full amount of the target bonus
payable to you with respect to the fiscal year in which the Change in

Control occurs.

     (c)  Payment of Severance Payments

     In the absence of a Hostile Take-Over, your Severance Payments will be made
at bi-weekly intervals following your Termination.  However, these payments will
immediately terminate in the event you fail to abide by the restrictive
covenants set forth in Paragraph 2.4.

     Should your Termination occur in connection with a Hostile Take-Over, the
Severance Payments will be made to you in a lump sum payment within thirty (30)
days after your Termination and the provisions of Paragraph 2.4 will not apply.

     All Severance Payments will be subject to the Company's collection of all
applicable federal and state income and employment withholding taxes.
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     2.2  Option Acceleration

     Each of your outstanding Options will (to the extent not then otherwise
fully exercisable) automatically accelerate so that each such Option will become
fully vested and immediately exercisable for the total number of shares of
Common Stock at the time subject to that Option.  Each such accelerated Option,
together with all your other vested Options, will remain exercisable for fully-
vested shares until the earlier of (i) the expiration date of the ten (10)-year
option term or (ii) the end of two (2) full years measured from the date of your
Termination or greater if set forth in the Option.

     2.3  Additional Benefits

     (a)  Health Care Coverage

     The Company will, at its expense, provide you and your eligible dependents
with continued health care coverage under the Company's medical/dental/vision
plan until the earlier of (i) twenty-four (24) months after the date of your
Termination or (ii) the first date that you are covered under another employer's
health benefit program which provides substantially the same level of benefits
without exclusion for pre-existing medical conditions.  The coverage so provided
you and your eligible dependents will be in full and complete satisfaction of
the continued health care coverage to which you or your eligible dependents
would otherwise, at your own expense, be entitled under Code Section 4980B by
reason of your termination of employment.

     (b)  Unpaid Benefits

     You will receive an immediate lump sum payment of all unpaid vacation days
which you have accrued through the date of your Termination.

     2.4  Restrictive Covenants

     For the twenty-four (24)-month period following your Termination, you will
not:

        (i)    directly or indirectly, whether for your own account or as an
employee, director, consultant or advisor, provide services to any business
enterprise which is at the time in competition with any of the Company's then-
existing or formally planned product lines and which is located geographically
in an area where the Company maintains substantial business activities;

        (ii)   directly or indirectly encourage or solicit any individual to
leave the Company's employ for any reason or interfere in any other manner with
the employment relationships at the time existing between the Company and its
current or prospective employees; or

        (iii)  induce or attempt to induce any customer, supplier, distributor,
licensee or other business affiliate of the Company to cease doing business with
the Company or in any way
<PAGE>

interfere with the existing business relationship between any such customer,
supplier, distributor, licensee or other business affiliate and the Company.

     You acknowledge that monetary damages may not be sufficient to compensate
the Company for any economic loss which may be incurred by reason of your breach
of the foregoing restrictive covenants.  Accordingly, in the event of any such
breach, the Company will, in addition to the cessation of the severance benefits
provided under this agreement and any remedies available to the Company at law,
be entitled to obtain equitable relief in the form of an injunction precluding
you from continuing to engage in such breach.

     None of the foregoing restrictive covenants will be applicable in the event
your Termination occurs in connection with a Hostile Take-Over.


SECTION III - PARACHUTE PAYMENTS

     3.1  Parachute Tax Gross-Up

     Should the aggregate Present Value (measured as of the Change in Control)
of (i) the benefits to which you become entitled under Section II at the time of
your Termination (namely the Severance Payments, the Option Parachute Payment
attributable to your Severance-Accelerated Options and your Health Care
Continuation) and (ii) all Other Parachute Payments to which you are entitled,
exceed 2.99 times your Actual Average Compensation (the "Parachute Limit") and
thereby result in an excise tax liability under Section 4999 of the Code, then
the Company will provide you with a full tax gross-up with respect to such
excise tax liability. The amount of such tax gross-up will be determined
pursuant to the following formula:

      X  =  Y   1 - (A + B + C), where

      X is the total dollar payment (the "Tax Gross-Up") required to be paid
      under this letter agreement,

      Y is the total excise tax (the "Parachute Tax") imposed on you pursuant
      to Section 4999 of the Code (or any successor provision) with respect to
      the Severance Payments, the Option Parachute Payment attributable to your
      Severance-Accelerated Options, your Health Care Continuation and all Other
      Parachute Payments,

      A is the excise tax rate in effect under Section 4999 of the Code for
      excess parachute payments,

      B is the highest combined marginal federal income and applicable state
      income tax rate in effect for you, after taking into account the
      deductibility of state income taxes against federal income taxes to the
      extent allowable, for the calendar year in which the Tax Gross-Up is paid,
      and,

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      C is the applicable Hospital Insurance (Medicare) Tax Rate in effect for
      you for the calendar year in which the Tax Gross-Up is paid.

     3.2  Initial Payment

     Within ninety (90) days after each determination is made by the Internal
Revenue Service or your tax advisor that you have received a parachute payment
for which you are liable for a Parachute Tax, you will identify the nature of
such parachute payment to the Company and submit to the Company the calculation
of the Parachute Tax attributable to that payment and the Tax Gross-Up to which
you are entitled with respect to such tax liability. The Company will pay such
Tax Gross-Up to you (net of all applicable withholding taxes, including any
taxes required to be withheld under Section 4999 of the Code) within ten (10)
business days after your submission of the calculation of such Parachute Tax and
the resulting Tax Gross-Up, provided such calculations represent a reasonable
interpretation of the applicable law and regulations.

     3.3  Final Determination

     In the event that your actual Parachute Tax liability is determined by a
Final Determination to be greater than the Parachute Tax liability taken into
account for purposes of the Tax-Gross-Up paid pursuant to this Section, then
within ninety (90) days following the Final Determination, you will submit to
the Company a new Parachute Tax calculation based upon the Final Determination.
Within ten (10) business days after receipt of such calculation, the Company
will pay you the additional Tax Gross-Up attributable to such excess Parachute
Tax liability.

     3.4  Refund

     In the event that your actual Parachute Tax liability is determined by a
Final Determination to be less than the Parachute Tax liability taken into
account for purposes of the Tax Gross-Up paid to you pursuant to this Section,
then you will refund to the Company, promptly upon receipt, any federal or state
tax refund attributable to the Parachute Tax overpayment.

     3.5  Definition

     For purposes of this section, a Final Determination means an audit
adjustment by the Internal Revenue Service that is either agreed to by you or
your estate or an adjustment that is sustained by a court of competent
jurisdiction in a decision with which you concur or with respect to which the
period within which an appeal may be filed has lapsed without a notice of appeal
being filed.
<PAGE>

SECTION IV - MISCELLANEOUS PROVISIONS

     4.1  Death

     In the event of your death, the Severance Payments (including the Parachute
Payments) to which you become entitled under this letter agreement will be made,
on the due date hereunder, to the executors or administrators of your estate.
Should you die before you exercise all your outstanding Options, then such
Options may be exercised, within twelve (12) months after your death, by the
executors or administrators of your estate or by persons to whom the Options are
transferred pursuant to your will or in accordance with the laws of inheritance.
In no event, however, may any such Option be exercised after the specified
expiration date of the option term.

     4.2  General Creditor Status

     The payments and benefits to which you become entitled hereunder will be
paid, when due, from the general assets of the Company, and no trust fund,
escrow arrangement or other segregated account will be established as a funding
vehicle for such payment.  Accordingly, your right (or the right of the personal
representatives or beneficiaries of your estate) to receive any payments or
benefits hereunder will at all times be that of a general creditor of the
Company and will have no priority over the claims of other general creditors.

     4.3  Indemnification

     The indemnification provisions for officers and directors under the Company
certificate of incorporation, indemnification agreement, Bylaws and insurance
policies will (to the maximum extent permitted by law) be extended to you with
respect to any and all matters, events or transactions occurring or effected
during your employment with the Company.

     4.4  Miscellaneous

     This letter agreement will be binding upon the Company, its successors and
assigns (including, without limitation, the surviving entity in any Change in
Control) and is to be construed and interpreted under the laws of the State of
California.  Except as set forth herein, this letter agreement supersedes all
prior agreements between you and the Company relating to the subject of
severance benefits payable upon a change in control or ownership of the Company,
including the Plans and the agreements evidencing the Options, and may only be
amended by written instrument signed by you and an authorized officer of the
Company.  If any provision of this letter agreement as applied to any party or
to any circumstance should be adjudged by a court of competent jurisdiction to
be void or unenforceable for any reason, the invalidity of that provision will
in no way affect (to the maximum extent permissible by law) the application of
such provision under circumstances different from those adjudicated by the
court, the application of any other provision of this letter agreement, or the
enforceability or invalidity of this letter agreement as a whole.  Should any
provision of this letter agreement become or be deemed  invalid, illegal or
unenforceable in any jurisdiction by reason of the scope, extent or duration of
its coverage, then such provision will be deemed amended to the extent necessary
to conform to
<PAGE>

applicable law so as to be valid and enforceable or, if such provision cannot be
so amended without materially altering the intention of the parties, then such
provision will be stricken and the remainder of this letter agreement will
continue in full force and effect.

     4.5  Attorney Fees

     In the event legal proceeding should be initiated by you or by the  Company
with respect to any controversy, claim or dispute relating to the interpretation
or application of the provisions of this letter agreement or any benefits
payable hereunder, the prevailing party in such proceedings will be entitled to
recover from the losing party reasonable attorney fees and costs incurred in
connection with such proceedings or in the enforcement or collection of any
judgment or award rendered in such proceedings.  For purposes of this provision,
the prevailing party means the party determined by the court to have most nearly
prevailed in the proceedings, even if that party does not prevail in all
matters, and does not necessarily mean the party in those favor the judgment is
actually rendered. If the Company materially breaches any of its obligations
under this letter agreement and fails to cure that breach within thirty (30)
days after written notice from you, you will then be entitled to reimbursement
from the Company for any reasonable expenses and attorney fees you incur in
having the Company subsequently cure that breach, whether or not legal
proceedings are actually commenced in connection with such
breach.

     4.6  Independent Legal Counsel

     By executing this letter agreement, you acknowledge that (i) this agreement
has been prepared by Brobeck, Phleger & Harrison LLP ("Brobeck") acting it its
capacity as legal counsel to the Company and (ii) you have had an opportunity to
seek advice from your own legal counsel with respect to the matters contained
herein and such individual counsel is not Brobeck.

     Please indicate your acceptance of the foregoing provisions of this letter
agreement by signing the enclosed copy of this agreement and returning it to the
Company.


P-COM, INC.:                               ACCEPTANCE:

Signature:  /s/ George P. Roberts          I hereby agree to all the terms and
           ----------------------          provisions of the foregoing letter
By:  George P. Roberts                     agreement governing the special
Title:  Chairman & CEO                     benefits to which I may become
                                           entitled in connection with certain
                                           changes in control or ownership of
                                           P-Com, Inc.

                                           Signature: /s/ Leighton J. Stephenson
                                                      --------------------------
                                           Date: December 7, 2000