EX-10.1






THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE FORM,
SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED,
OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE
SECURITIES LAWS.



P-COM, INC.




Promissory Note




due December 31, 2006




No. PN-05-01 $250,000.00


Dated: March 21, 2005



For value received, P-COM, INC., a Delaware corporation (the “Maker”), hereby promises
to pay to the order of SDS CAPITAL GROUP SPC, LTD. (together with its successors, representatives,
and permitted assigns, the “Holder”), in accordance with the terms hereinafter provided,
the principal amount of Two Hundred Fifty Thousand Dollars ($250,000.00), together with interest
thereon. Concurrently with the issuance of this Note, the Maker is issuing separate promissory
notes (the “Other Notes”) to separate purchasers (the “Other Holders”) pursuant to
the Note and Warrant Purchase Agreement dated as of November 3, 2004 (the “Purchase
Agreement”) by and among the Maker and the purchasers listed therein.



All payments under or pursuant to this Note shall be made in United States Dollars in
immediately available funds to the Holder at the address of the Holder first set forth above or at
such other place as the Holder may designate from time to time in writing to the Maker or by wire
transfer of funds to the Holder’s account, instructions for which are attached hereto as
Exhibit A. The outstanding principal balance of this Note shall be due and payable on
December 31, 2006 (the “Maturity Date”) or at such earlier time as provided herein.



ARTICLE I




Section 1.1 Purchase Agreement. This Note has been executed and delivered pursuant to
the Purchase Agreement. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for such terms in the Purchase Agreement.



Section 1.2 Interest; Payment of Interest. Beginning on the issuance date of this
Note (the “Issuance Date”), the outstanding principal balance of this Note shall bear
interest, in arrears, at a rate per annum equal to seven percent (7%), increasing to eight percent
(8%) on July 1, 2005 and ten percent (10%) on April 1, 2006 through the Maturity Date. Interest
shall be payable on a quarterly basis on each Principal Payment Date (as defined below) commencing
on June 30, 2005. Interest shall be computed on the basis of a 360-day year of twelve (12) 30-day
months and shall accrue commencing on the Issuance Date. Furthermore, upon the occurrence of an
Event of Default (as defined in Section 2.1 hereof), then to the extent permitted by law, the Maker
will pay interest to the Holder, payable on demand, on the outstanding principal balance of the
Note from the date of the Event of Default until such Event of Default is cured at the rate equal
to the lesser of the interest rate then in effect plus two percent (2%) and the maximum applicable
legal rate per annum (the “Default Rate”).



Section 1.3 Payment of Principal. Commencing on June 30, 2005 and continuing
thereafter on a quarterly basis (each, a “Quarterly Determination Period”) on each of
September 30, 2005, December 31, 2005, March 31, 2006, June 30, 2006, September 30, 2006 and
December 31, 2006 (each, a “Principal Payment Date”), the Maker shall pay an amount equal
to one-seventh (1/7) of the then outstanding principal balance of the Note (the “Principal
Installment Amount”), plus accrued interest thereon (the “Interest Installment Amount”)
provided, that, any remaining outstanding principal amount plus all accrued but
unpaid interest shall be paid in full on December 31, 2006. The Maker may pay such Principal
Installment Amount in cash or registered shares of the Maker’s common stock, par value $0.0001 per
share (the “Common Stock”). The Maker shall notify the Holder in writing five (5) Trading
Days prior to the Principal Payment Date (the “Notification Date”) of its election to pay
the Principal Installment Amount and Interest Installment Amount in cash or registered shares of
Common Stock, or any combination thereof, at the Maker’s discretion. If the Maker elects to pay
the Principal Installment Amount and the Interest Installment Amount in cash such amount shall be
wired in immediately available funds on the Principal Payment Date. If the Maker elects to pay the
Principal Installment Amount and the Interest Installment Amount in registered shares of Common
Stock, the Registration Statement must be effective and the number of registered shares of Common
Stock to be issued to the Holder shall be an amount equal to the Principal Installment Amount and
the Interest Installment Amount divided by ninety percent (90%) of the average of the twenty (20)
lowest Volume Weighted Average Prices of the Maker’s Common Stock, as reported on the OTC Bulletin
Board, for the applicable Quarterly Determination Period, excluding the Trading Days occurring on
and after the Notification Date for such Quarterly Determination Period. The Maker shall not issue
more than six million (6,000,000) shares of its Common Stock (“Share Cap Amount”) in the
aggregate in payment of Principal Installment Amounts and Interest Installment Amounts under this
Note and the Other Notes. Any payment of Principal Installment Amounts and Interest Installment
Amounts in excess of the Share Cap Amount shall be paid in cash.



Section 1.4 Payment on Non-Business Days. Whenever any payment to be made shall be
due on a Saturday, Sunday or a public holiday under the laws of the State of New York, such payment
may be due on the next succeeding business day and such next succeeding day shall be included in
the calculation of the amount of accrued interest payable on such date.



Section 1.5 Seniority. Except for the amounts outstanding under the Credit Facility
dated September 17, 2004 from Silicon Valley Bank, which amounts shall not exceed $5,000,000
without the consent of the Holders and the Other Holders, this Note and the Other Notes shall rank
senior to the Maker’s currently issued and outstanding indebtedness and equity securities. The
parties agree and acknowledge that all amounts due under the terms of this Note are subordinate to
all amounts due under the terms of the Credit Facility from Silicon Valley Bank.



Section 1.6 Transfer. This Note may be transferred or sold, subject to the provisions
of Section 4.8 of this Note, or pledged, hypothecated or otherwise granted as security by the
Holder.



Section 1.7 Replacement. Upon receipt of a duly executed, notarized and unsecured
written statement from the Holder with respect to the loss, theft or destruction of this Note (or
any replacement hereof), and without requiring an indemnity bond or other security, or, in the case
of a mutilation of this Note, upon surrender and cancellation of such Note, the Maker shall issue a
new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.



ARTICLE II




EVENTS OF DEFAULT; REMEDIES




Section 2.1 Events of Default. The occurrence of any of the following events shall be
an “Event of Default” under this Note:



(a) the Maker shall fail to make the payment of any Principal Installment Amount on the date
such payment is due hereunder; or



(b) the Maker shall fail to make any payment of Interest Installment Amount on the date such
payment is due hereunder; or



(c) the failure of the Registration Statement to be declared effective by the Securities and
Exchange Commission on or prior to the date which is one hundred twenty (120) days after the
Closing Date; or



(d) the suspension from listing, without subsequent listing on any one of, or the failure of
the Common Stock to be listed on at least one of the OTC Bulletin Board, Nasdaq National Market,
Nasdaq SmallCap Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc. for
a period of five (5) consecutive Trading Days; or



(e) the Maker shall fail to (i) timely deliver the shares of Common Stock in accordance with
Section 1.3 hereof, (ii) timely file the Registration Statement or (iii) make the payment of any
fees and/or liquidated damages under this Note, the Purchase Agreement or the Registration Rights
Agreement, which failure in each case is not remedied within three (3) business days after the
occurrence thereof; or



(f) default shall be made in the performance or observance of (i) any material covenant,
condition or agreement contained in this Note (other than as set forth in clause (e) of this
Section 2.1) and such default is not fully cured within five (5) business days after the receipt by
the Maker of a notice of default or (ii) any material covenant, condition or agreement contained in
the Purchase Agreement, the Other Notes or the Registration Rights Agreement which is not covered
by any other provisions of this Section 2.1 and such default is not fully cured within five (5)
business days after the receipt by the Maker of a notice of default; or



(g) any material representation or warranty made by the Maker herein or in the Purchase
Agreement, the Registration Rights Agreement or the Other Notes shall prove to have been false or
incorrect or breached in a material respect on the date as of which made; or



(h) the Maker shall (i) default in any payment of any amount or amounts of principal of or
interest on any Indebtedness (other than the Indebtedness hereunder) the aggregate principal amount
of which Indebtedness is in excess of $250,000 or (ii) default in the observance or performance of
any other agreement or condition relating to any Indebtedness or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to cause, or to permit the holder
or holders or beneficiary or beneficiaries of such Indebtedness to cause with the giving of notice
if required, such Indebtedness to become due prior to its stated maturity; or



(i) the Maker shall (i) apply for or consent to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or assets, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in
effect) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a
petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or
other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce in
writing to any petition filed against it in an involuntary case under United States Bankruptcy Code
(as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or
domestic), (vi) issue a notice of bankruptcy or winding down of its operations or issue a press
release regarding same, or (vii) take any action under the laws of any jurisdiction (foreign or
domestic) analogous to any of the foregoing; or



(j) a proceeding or case shall be commenced in respect of the Maker, without its application
or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization,
moratorium, dissolution, winding up, or composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets in connection with the liquidation or dissolution of the Maker or
(iii) similar relief in respect of it under any law providing for the relief of debtors, and such
proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed
and in effect, for a period of sixty (60) days or any order for relief shall be entered in an
involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the
comparable laws of any jurisdiction (foreign or domestic) against the Maker or action under the
laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken
with respect to the Maker and shall continue undismissed, or unstayed and in effect for a period of
sixty (60) days; or



(k) the failure of the Maker to instruct its transfer agent to remove any legends from shares
of Common Stock eligible to be sold under Rule 144 of the Securities Act and issue such unlegended
certificates to the Holder within three (3) business days of the Holder’s request so long as the
Holder has provided reasonable assurances to the Maker that such shares of Common Stock can be
resold pursuant to Rule 144; or




(l) the occurrence of an Event of Default under the Other Notes.



Section 2.2 Remedies Upon An Event of Default. If an Event of Default shall have
occurred and shall be continuing, the Holder of this Note may at any time at its option, (a)
declare the entire unpaid principal balance of this Note, together with all interest accrued
hereon, due and payable, and thereupon, the same shall be accelerated and so due and payable,
without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally
and irrevocably waived by the Maker; provided, however, that upon the occurrence of
an Event of Default described in (i) Sections 2.1(i) or (j), the outstanding principal balance and
accrued interest hereunder shall be automatically due and payable and (ii) Sections 2.1 (c)-(h),
demand the prepayment of this Note pursuant to Section 3.3 hereof, (b) demand that the principal
amount of this Note then outstanding and all accrued and unpaid interest thereon shall be converted
into shares of Common Stock at a conversion price per share calculated pursuant to Section 1.3
hereof assuming that the Trading Day that precedes the date that the Event of Default occurs is the
last day of a ninety day period to determine the average of the twenty (20) lowest Volume Weight
Average Prices, or (c) exercise or otherwise enforce any one or more of the Holder’s rights,
powers, privileges, remedies and interests under this Note, the Purchase Agreement, the
Registration Rights Agreement or applicable law. No course of delay on the part of the Holder
shall operate as a waiver thereof or otherwise prejudice the right of the Holder. No remedy
conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter
available at law, in equity, by statute or otherwise.



ARTICLE III




DELIVERY OF COMMON STOCK; PREPAYMENT





Section 3.1 Delivery of Common Stock.



(a) On the Principal Payment Date, the Maker or its designated transfer agent, as applicable,
shall issue and deliver to the Depository Trust Company (“DTC”) account on the Holder’s
behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) as specified by the
Holder, registered in the name of the Holder or its designee, for the number of shares of Common
Stock to which the Holder shall be entitled. In the alternative, the Maker shall deliver to the
Holder by express courier a certificate or certificates which shall be free of restrictive legends
and trading restrictions (other than those required by Section 5.1 of the Purchase Agreement)
representing the number of shares of Common Stock being issued in payment of the Principal
Installment Amount and the Interest Installment Amount on the Principal Payment Date.
Notwithstanding the foregoing to the contrary, the Maker or its transfer agent shall only be
obligated to issue and deliver the shares to the DTC on the Holder’s behalf via DWAC (or
certificates free of restrictive legends) if such conversion is in connection with a sale and the
Holder has complied with the applicable prospectus delivery requirements.



(b) The Maker understands that a delay in the delivery of the shares of Common Stock beyond
the Principal Payment Date could result in economic loss to the Holder. If the Maker fails to
deliver to the Holder such shares via DWAC or a certificate or certificates pursuant to this
Section hereunder by the Principal Payment Date, the Maker shall pay to such Holder, in cash, an
amount per Trading Day for each Trading Day until such shares are delivered via DWAC or
certificates are delivered, together with interest on such amount at the Default Rate, accruing
until such amount and any accrued interest thereon is paid in full, equal to the greater of (A) (i)
1% of the aggregate Principal Installment Amount of the Notes being repaid for the first five (5)
Trading Days after the Principal Payment Date and (ii) 2% of the aggregate Principal Installment
Amount of the Notes being repaid for each Trading Day thereafter and (B) $2,000 per day (which
amount shall be paid as liquidated damages and not as a penalty). Nothing herein shall limit a
Holder’s right to pursue actual damages for the Maker’s failure to deliver certificates
representing shares of Common Stock within the period specified herein and such Holder shall have
the right to pursue all remedies available to it at law or in equity (including, without
limitation, a decree of specific performance and/or injunctive relief).



(c) Issue Taxes. The Maker shall pay any and all issue and other taxes, excluding
federal, state or local income taxes, that may be payable in respect of any issue or delivery of
shares of Common Stock in payment of this Note pursuant thereto.



(d) Fractional Shares. No fractional shares of Common Stock shall be issued in
payment of this Note. In lieu of any fractional shares to which the Holder would otherwise be
entitled, the Maker shall pay cash equal to the product of such fraction multiplied by the average
of the Volume Weighted Average Prices of the Common Stock for the five (5) consecutive Trading Days
immediately preceding the Principal Payment Date.



(e) Reservation of Common Stock. The Maker shall at all times when this Note shall be
outstanding, reserve and keep available out of its authorized but unissued Common Stock, six
million (6,000,000) shares of Common Stock as shall from time to time be sufficient to effect the
payment of this Note and all interest accrued thereon. The Maker shall, from time to time in
accordance with the Delaware General Corporation Law, increase the authorized number of shares of
Common Stock if at any time the unissued number of authorized shares shall not be sufficient to
satisfy the Maker’s obligations under this Section 3.1(e).



(f) Regulatory Compliance. If any shares of Common Stock to be reserved for the
purpose of repayment of this Note or any interest accrued thereon require registration or listing
with or approval of any governmental authority, stock exchange or other regulatory body under any
federal or state law or regulation or otherwise before such shares may be validly issued or
delivered upon conversion, the Maker shall, at its sole cost and expense, in good faith and as
expeditiously as possible, endeavor to secure such registration, listing or approval, as the case
may be.



Section 3.2 Ownership Cap and Certain Conversion Restriction. Notwithstanding anything
to the contrary set forth in Section 3 of this Note, at no time may the Maker issue shares of
Common Stock in payment of a quarterly Principal Installment Amount if the number of shares of
Common Stock to be issued would exceed, when aggregated with all other shares of Common Stock owned
by the Holder at such time, the number of shares of Common Stock which would result in the Holder
beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the
rules thereunder) more than 9.9% of all of the Common Stock outstanding at such time.




Section 3.3 Prepayment.



(a) Prepayment Upon an Event of Default. Notwithstanding anything to the contrary
contained herein, upon the occurrence of an Event of Default described in Sections 2.1(c)-(j)
hereof, the Holder shall have the right, at such Holder’s option, to require the Maker to prepay in
cash all or a portion of this Note at a price equal to the Triggering Event Prepayment Price (as
defined in Section 3.3(c) below) applicable at the time of such request (the “Event of Default
Prepayment Price”). Nothing in this Section 3.3(a) shall limit the Holder’s rights under
Section 2.2 hereof.



(b) Prepayment Option Upon Major Transaction. In addition to all other rights of the
Holder contained herein, simultaneous with the occurrence of a Major Transaction (as defined
below), the Holder shall have the right, at the Holder’s option, to require the Maker to prepay all
or a portion of the Holder’s Notes in cash at a price equal to one hundred percent (100%) of the
aggregate principal amount of this Note plus all accrued and unpaid interest (the “Major
Transaction Prepayment Price”).



(c) Prepayment Option Upon Triggering Event. In addition to all other rights of the
Holder contained herein, after a Triggering Event (as defined below), the Holder shall have the
right, at the Holder’s option, to require the Maker to prepay all or a portion of the Holder’s
Notes in cash at a price equal to one hundred percent (100%) of the aggregate principal amount of
this Note plus all accrued and unpaid interest (the “Triggering Event Prepayment Price,”
and, collectively with the “Major Transaction Prepayment Price,” the “Prepayment
Price”).




(d) Intentionally Omitted.



(e) "Major Transaction.” A “Major Transaction” shall be deemed to have
occurred at such time as any of the following events:



(i) the consolidation, merger or other business combination of the Maker with or into another
Person (as defined in Section 4.13 hereof) (other than (A) pursuant to a migratory merger effected
solely for the purpose of changing the jurisdiction of incorporation of the Maker or (B) a
consolidation, merger or other business combination in which holders of the Maker’s voting power
immediately prior to the transaction continue after the transaction to hold, directly or
indirectly, the voting power of the surviving entity or entities necessary to elect a majority of
the members of the board of directors (or their equivalent if other than a corporation) of such
entity or entities);



(ii) the sale or transfer of more than fifty percent (50%) of the Maker’s assets (based on the
fair market value as determined in good faith by the Maker’s Board of Directors) other than
inventory in the ordinary course of business in one or a related series of transactions; or



(iii) closing of a purchase, tender or exchange offer made to the holders of more than fifty
percent (50%) of the outstanding shares of Common Stock in which more than fifty percent (50%) of
the outstanding shares of Common Stock were tendered and accepted; or



(iv) the issuance by the Maker of shares of its Common Stock in one or a series of related
transactions in excess of forty percent (40%) of its shares of Common Stock outstanding on the
[Closing Date].



(f) "Triggering Event.” A “Triggering Event” shall be deemed to have occurred
at such time as any of the following events:



(i) so long as any Notes are outstanding, the effectiveness of the Registration Statement,
after it becomes effective, (i) lapses for any reason (including, without limitation, the issuance
of a stop order) or (ii) is unavailable to the Holder for sale of the shares of Common Stock, and
such lapse or unavailability continues for a period of twenty (20) consecutive Trading Days, and
the shares of Common Stock which may be issued in payment of the Holder’s Notes cannot be sold in
the public securities market pursuant to Rule 144(k), provided that the cause of such lapse or
unavailability is not due to factors primarily within the control of the Holder of the Notes; and
provided further that a Triggering Event shall not have occurred if and to the extent the Maker
exercised its rights set forth in Sections 3(m) or 3(n) of the Registration Rights Agreement; or



(ii) the suspension from listing, without subsequent listing on any one of, or the failure of
the Common Stock to be listed on at least one of the OTC Bulletin Board, Nasdaq National Market,
Nasdaq SmallCap Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc., for
a period of five (5) consecutive Trading Days.




(f) Intentionally Omitted.



(g) Mechanics of Prepayment at Option of Holder Upon Major Transaction. No sooner
than fifteen (15) days nor later than ten (10) days prior to the consummation of a Major
Transaction, but not prior to the public announcement of such Major Transaction, the Maker shall
deliver written notice thereof via facsimile and overnight courier (“Notice of Major
Transaction”) to the Holder of this Note. At any time after receipt of a Notice of Major
Transaction (or, in the event a Notice of Major Transaction is not delivered at least ten (10) days
prior to a Major Transaction, at any time within ten (10) days prior to a Major Transaction), any
holder of the Notes then outstanding may require the Maker to prepay, effective immediately prior
to the consummation of such Major Transaction, all of the holder’s Notes then outstanding by
delivering written notice thereof via facsimile and overnight courier (“Notice of Prepayment at
Option of Holder Upon Major Transaction”) to the Maker, which Notice of Prepayment at Option of
Holder Upon Major Transaction shall indicate (i) the number of Notes that such holder is electing
to prepay and (ii) the applicable Major Transaction Prepayment Price, as calculated pursuant to
Section 3.3(b) above.



(h) Mechanics of Prepayment at Option of Holder Upon Triggering Event. Within one (1)
business day after the occurrence of a Triggering Event, the Maker shall deliver written notice
thereof via facsimile and overnight courier (“Notice of Triggering Event”) to each holder
of the Notes. At any time after the earlier of a holder’s receipt of a Notice of Triggering Event
and such holder becoming aware of a Triggering Event, any holder of this Note and the Other Notes
then outstanding may require the Maker to prepay all of the Notes on a pro rata basis by delivering
written notice thereof via facsimile and overnight courier (“Notice of Prepayment at Option of
Holder Upon Triggering Event”) to the Maker, which Notice of Prepayment at Option of Holder
Upon Triggering Event shall indicate (i) the amount of the Note that such holder is electing to
have prepaid and (ii) the applicable Triggering Event Prepayment Price, as calculated pursuant to
Section 3.3(c) above. A holder shall only be permitted to require the Maker to prepay the Note
pursuant to Section 3.3 hereof for the greater of a period of ten (10) days after receipt by such
holder of a Notice of Triggering Event or for so long as such Triggering Event is continuing.




(i) Intentionally Omitted.



(j) Payment of Prepayment Price. Upon the Maker’s receipt of a Notice(s) of
Prepayment at Option of Holder Upon Triggering Event or a Notice(s) of Prepayment at Option of
Holder Upon Major Transaction from any holder of the Notes, the Maker shall immediately notify each
holder of the Notes by facsimile of the Maker’s receipt of such Notice(s) of Prepayment at Option
of Holder Upon Triggering Event or Notice(s) of Prepayment at Option of Holder Upon Major
Transaction and each holder which has sent such a notice shall promptly submit to the Maker such
holder’s certificates representing the Notes which such holder has elected to have prepaid. The
Maker shall deliver the applicable Triggering Event Prepayment Price, in the case of a prepayment
pursuant to Section 3.3(h), to such holder within five (5) business days after the Maker’s receipt
of a Notice of Prepayment at Option of Holder Upon Triggering Event and, in the case of a
prepayment pursuant to Section 3.3(g), the Maker shall deliver the applicable Major Transaction
Prepayment Price immediately prior to the consummation of the Major Transaction; provided that a
holder’s original Note shall have been so delivered to the Maker; provided further that if the
Maker is unable to prepay all of the Notes to be prepaid, the Maker shall prepay an amount from
each holder of the Notes being prepaid equal to such holder’s pro-rata amount (based on the number
of Notes held by such holder relative to the number of Notes outstanding) of all Notes being
prepaid. If the Maker shall fail to prepay all of the Notes submitted for prepayment (other than
pursuant to a dispute as to the arithmetic calculation of the Prepayment Price), in addition to any
remedy such holder of the Notes may have under this Note and the Purchase Agreement, the applicable
Prepayment Price payable in respect of such Notes not prepaid shall bear interest at the rate of
two percent (2%) per month (prorated for partial months) until paid in full. Until the Maker pays
such unpaid applicable Prepayment Price in full to a holder of the Notes submitted for prepayment,
such holder shall have the option (the “Void Optional Prepayment Option”) to, in lieu of
prepayment, require the Maker to promptly return to such holder(s) all of the Notes that were
submitted for prepayment by such holder(s) under this Section 3.3 and for which the applicable
Prepayment Price has not been paid, by sending written notice thereof to the Maker via facsimile
(the “Void Optional Prepayment Notice”). Upon the Maker’s receipt of such Void Optional
Prepayment Notice(s) and prior to payment of the full applicable Prepayment Price to such holder,
(i) the Notice(s) of Prepayment at Option of Holder Upon Triggering Event or the Notice(s) of
Prepayment at Option of Holder Upon Major Transaction, as the case may be, shall be null and void
with respect to those Notes submitted for prepayment and for which the applicable Prepayment Price
has not been paid, and (ii) the Maker shall immediately return any Notes submitted to the Maker by
each holder for prepayment under this Section 3.3(j) and for which the applicable Prepayment Price
has not been paid. A holder’s delivery of a Void Optional Prepayment Notice and exercise of its
rights following such notice shall not effect the Maker’s obligations to make any payments which
have accrued prior to the date of such notice. Payments provided for in this Section 3.3 shall
have priority to payments to other stockholders in connection with a Major Transaction.



(k) Maker’s Prepayment Option. At any time and from time to time after the Issuance
Date, the Maker may prepay in cash all or any portion of the outstanding principal amount of this
Note, plus any accrued and unpaid interest thereon, upon ten (10) business days prior written
notice to the Holder (the “Maker Prepayment Notice”) at a cash price equal to one hundred
percent (100%) of the outstanding principal amount of this Note plus any interest accrued and
outstanding thereon (the “Maker Prepayment Price”). The Maker may not deliver a Maker
Prepayment Notice to the Holder unless the Maker has clear and good funds for a minimum of the
amount it intends to prepay in a bank account controlled by the Maker. The Maker Prepayment Notice
shall state the date of prepayment (the “Maker Prepayment Date”), the Maker Prepayment
Price, the amount of the Note of such Holder to be prepaid, the amount of accrued and unpaid
interest through the Maker Prepayment Date and shall call upon the Holder to surrender to the Maker
on the Maker Prepayment Date at the place designated in the Maker Prepayment Notice such Holder’s
Note. The Maker Prepayment Date shall be no more than ten (10) Trading Days after the date on
which the Holder is notified of the Maker’s intent to prepay the Note (the “Maker Prepayment
Notice Date”). If the Maker fails to pay the Maker Prepayment Price by the eleventh
(11th) trading day following the Maker Prepayment Notice Date, the prepayment will be
declared null and void and the Maker shall lose its right to deliver a Maker Prepayment Notice to
the Holder in the future. On or after the Maker Prepayment Date, the Holder shall surrender the
Notes called for prepayment to the Maker at the place designated in the Maker Prepayment Notice and
shall thereupon be entitled to receive payment of the Maker Prepayment Price.



Section 3.4 No Rights as Shareholder. Nothing contained in this Note shall be
construed as conferring upon the Holder, prior to the payment of this Note in shares of Common
Stock, the right to vote or to receive dividends or to consent or to receive notice as a
shareholder in respect of any meeting of shareholders for the election of directors of the Maker or
of any other matter, or any other rights as a shareholder of the Maker.



ARTICLE IV




MISCELLANEOUS




Section 4.1 Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be effective (a) upon
hand delivery by telex (with correct answer back received), telecopy or facsimile at the address or
number designated in the Purchase Agreement (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by express courier
service, fully prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The Maker will give written notice to the Holder at least ten (10)
days prior to the date on which the Maker takes a record (x) with respect to any dividend or
distribution upon the Common Stock, (y) with respect to any pro rata subscription offer to holders
of Common Stock or (z) for determining rights to vote with respect to any Organic Change,
dissolution, liquidation or winding-up and in no event shall such notice be provided to such holder
prior to such information being made known to the public. The Maker will also give written notice
to the Holder at least ten (10) days prior to the date on which any Organic Change, dissolution,
liquidation or winding-up will take place and in no event shall such notice be provided to the
Holder prior to such information being made known to the public. The Maker shall promptly notify
the Holder of this Note of any notices sent or received, or any actions taken with respect to the
Other Notes.



Section 4.2 Governing Law. This Note shall be governed by and construed in accordance
with the internal laws of the State of New York, without giving effect to any of the conflicts of
law principles which would result in the application of the substantive law of another
jurisdiction. This Note shall not be interpreted or construed with any presumption against the
party causing this Note to be drafted.



Section 4.3 Headings. Article and section headings in this Note are included herein
for purposes of convenience of reference only and shall not constitute a part of this Note for any
other purpose.



Section 4.4 Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Note shall be cumulative and in addition to all other
remedies available under this Note, at law or in equity (including, without limitation, a decree of
specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a
waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit
a holder’s right to pursue actual damages for any failure by the Maker to comply with the terms of
this Note. Amounts set forth or provided for herein with respect to payments, conversion and the
like (and the computation thereof) shall be the amounts to be received by the holder thereof and
shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or
the performance thereof). The Maker acknowledges that a breach by it of its obligations hereunder
will cause irreparable and material harm to the Holder and that the remedy at law for any such
breach may be inadequate. Therefore the Maker agrees that, in the event of any such breach or
threatened breach, the Holder shall be entitled, in addition to all other available rights and
remedies, at law or in equity, to seek and obtain such equitable relief, including but not limited
to an injunction restraining any such breach or threatened breach, without the necessity of showing
economic loss and without any bond or other security being required.



Section 4.5 Enforcement Expenses. The Maker agrees to pay all costs and expenses of
enforcement of this Note, including, without limitation, reasonable attorneys’ fees and expenses.



Section 4.6 Binding Effect. The obligations of the Maker and the Holder set forth
herein shall be binding upon the successors and assigns of each such party, whether or not such
successors or assigns are permitted by the terms hereof.



Section 4.7 Amendments. This Note may not be modified or amended in any manner except
in writing executed by the Maker and the Holder.



Section 4.8 Compliance with Securities Laws. The Holder of this Note acknowledges
that this Note is being acquired solely for the Holder’s own account and not as a nominee for any
other party, and for investment, and that the Holder shall not offer, sell or otherwise dispose of
this Note. This Note and any Note issued in substitution or replacement therefor shall be stamped
or imprinted with a legend in substantially the following form:



"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES
LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL IN THE
FORM, SUBSTANCE AND SCOPE REASONABLY SATISFACTORY TO THE MAKER THAT
THIS NOTE MAY BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
SUCH STATE SECURITIES LAWS.”



Section 4.9 Consent to Jurisdiction. Each of the Maker and the Holder (i) hereby
irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in
the Southern District of New York and the courts of the State of New York located in New York
county for the purposes of any suit, action or proceeding arising out of or relating to this Note
and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such court, that the suit, action or
proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding
is improper. Each of the Maker and the Holder consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address in effect for notices
to it under the Purchase Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this Section 4.9 shall affect or
limit any right to serve process in any other manner permitted by law. Each of the Maker and the
Holder hereby agree that the prevailing party in any suit, action or proceeding arising out of or
relating to this Note shall be entitled to reimbursement for reasonable legal fees from the
non-prevailing party.



Section 4.10 Parties in Interest. This Note shall be binding upon, inure to the
benefit of and be enforceable by the Maker, the Holder and their respective successors and
permitted assigns.



Section 4.11 Failure or Indulgence Not Waiver. No failure or delay on the part of the
Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.



Section 4.12 Maker Waivers. Except as otherwise specifically provided herein, the
Maker and all others that may become liable for all or any part of the obligations evidenced by
this Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands’
and notices in connection with the delivery, acceptance, performance and enforcement of this Note,
and do hereby consent to any number of renewals of extensions of the time or payment hereof and
agree that any such renewals or extensions may be made without notice to any such persons and
without affecting their liability herein and do further consent to the release of any person liable
hereon, all without affecting the liability of the other persons, firms or Maker liable for the
payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.



(a) No delay or omission on the part of the Holder in exercising its rights under this Note,
or course of conduct relating hereto, shall operate as a waiver of such rights or any other right
of the Holder, nor shall any waiver by the Holder of any such right or rights on any one occasion
be deemed a waiver of the same right or rights on any future occasion.



(b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL
TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND
HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY
DESIRE TO USE.



Section 4.13 Definitions. For the purposes hereof, the following terms shall have the
following meanings:



"Person” means an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint stock company,
government (or an agency or political subdivision thereof) or other entity of any kind.



"Trading Day” means (a) a day or which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (b) if the Common Stock is not
quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, however, that in
the event that the Common Stock is not listed or quoted as set forth in (a) and (b) hereof, then
Trading Day shall mean any day except Saturday, Sunday and any day which shall be a legal holiday
or a day on which banking institutions in the State of New York are authorized or required by law
or other government action to close.




P-COM, INC.




By: /s/ Daniel W. Rumsey




	 	•	 	—






Daniel W. Rumsey



Chief Restructuring Officer





1






EXHIBIT A




WIRE INSTRUCTIONS.




Payee:



Bank:



Address:



Bank No.:



Account No.:



Account Name:



DWAC INSTRUCTIONS.




Payee:



Bank:



Address:



Bank No.:



Account No.:



Account Name:




2