P COM INC, S-8, 1998-04-07

P COM INC
S-8, 1998-04-07
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE>

As filed with the Securities and Exchange Commission on April 7, 1998
Registration No. 333-_______________________
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-----------------------
P-COM, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 77-0289371
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

3175 S. WINCHESTER BOULEVARD
CAMPBELL, CALIFORNIA 95008
(Address of principal executive offices) (Zip Code)
------------------------
P-COM, INC.
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(Full title of the Plans)
-----------------------
GEORGE P. ROBERTS
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
P-COM, INC.
3175 S. WINCHESTER BOULEVARD, CAMPBELL, CALIFORNIA 95008
(Name and address of agent for service)
(408) 866-3666
(Telephone number, including area code, of agent for service)
------------------------
<TABLE>
<CAPTION>

CALCULATION OF REGISTRATION FEE
=================================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
- --------------------------------------------------- ------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>

P-COM, INC. 1995 Stock Option/Stock Issuance Plan
- ---------------------------------------------------

Common Stock, $0.0001 par value 683,737 $19.5 $13,332,871.50 $3,933.20

=================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the P-COM, Inc. 1995 Stock
Option/Stock Issuance Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of the
outstanding shares of Common Stock of P-COM, Inc.

(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, (the "1933 Act") on the basis of the
fair market value per share of Common Stock of P-COM, Inc. on
April 2, 1998, as reported on the Nasdaq National Market.
<PAGE>

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference
---------------------------------------

P-COM, Inc. (the "Registrant") hereby incorporates by reference into this
Registration Statement the following documents previously filed with the
Securities and Exchange Commission (the "SEC"):

(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed with the SEC on March 31, 1998; and

(b) The Registrant's Registration Statement No. 0-25356 on Form 8-A, filed
with the SEC on January 12, 1995 pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the 1934 Act") in which
there is described the terms, rights and provisions applicable to the
Registrant's outstanding Common Stock.

All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date of this
Registration Statement and prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold or which de-
registers all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Registration Statement
to the extent that a statement contained herein or in any subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.

Item 4. Description of Securities
-------------------------

Not Applicable.

Item 5. Interests of Named Experts and Counsel
--------------------------------------

Not Applicable.

Item 6. Indemnification of Directors and Officers
-----------------------------------------

The Registrant's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that directors of a corporation will not be personally liable for monetary

II-1
<PAGE>

damages for breach of their fiduciary duties as directors, except for liability
(i) for any breach of their duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derives an improper personal benefit.

The Registrant's Bylaws provide that the Registrant shall indemnify its
directors and may indemnify its officers, employees and other agents to the
fullest extent permitted by law. The Registrant believes that indemnification
under its Bylaws covers at least negligence and gross negligence on the part of
an indemnified party in connection with the defense of any action or proceeding
arising out of such party's status or service as a director, officer, employee
or other agent of the Company upon an undertaking by such party to repay such
advances if it is ultimately determined that such party is not entitled to
indemnification.

The Registrant has entered into separate indemnification agreements with
each of its directors and officers. These agreements require the Registrant,
among other things, to indemnify such director or officer against expenses
(including attorneys' fees), judgments, fines and settlements (collectively,
"Liabilities") paid by such individual in connection with any action, suit or
proceeding arising out of such individual's status or service as a director or
officer of the Registrant (other than Liabilities arising from willful
misconduct or conduct that is knowingly fraudulent or deliberately dishonest)
and to advance expenses incurred by such individual in connection with any
proceeding against such individual with respect to which such individual may be
entitled to indemnification by the Registrant. The Registrant believes that its
Certificate of Incorporation and Bylaw provisions and indemnification agreements
are necessary to attract and retain qualified persons as directors and officers.

Item 7. Exemption from Registration Claimed
-----------------------------------

Not Applicable.

Item 8. Exhibits
--------

Exhibit
Number Exhibit
- ------- -------

4 Instruments Defining the Rights of Stockholders. Reference is made
to Registrant's Registration Statement No. 0-25356 on Form 8-A, and
the exhibits thereto, which are incorporated herein by reference
pursuant to Item 3(b).

5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 P-Com, Inc. 1995 Stock Option/Stock Issuance Plan.
99.2* Form of Notice of Grant of Stock Option.
99.3* Form of Stock Option Agreement.
99.4* Form of Addendum to Stock Option Agreement (Limited Stock
Appreciation Right).
99.5* Form of Addendum to Stock Option Agreement (Involuntary
Termination).
99.6* Form of Addendum to Stock Option Agreement (Financial Assistance).
99.7* Form of Addendum to Stock Option Agreement (Special Tax Elections).
99.8* Form of Stock Purchase Agreement.
99.9* Form of Stock Issuance Agreement.
99.10* Form of Addendum to Stock Issuance Agreement (Involuntary
Termination).
99.11* Form of Addendum to Stock Issuance Agreement (Special Tax
Elections).
99.12** Form of Notice of Grant of Automatic Stock Option (Initial Grant).
99.13** Form of Notice of Grant of Automatic Stock Option (Annual Grant).

II-2
<PAGE>

Exhibit
Number Exhibit
- ------- -------

99.14* Form of Automatic Stock Option Agreement.

* Exhibits 99.2 through 99.11 and 99.14 are incorporated herein by reference
to Exhibits 99.2 through 99.11 and 99.14 respectively, to Registrant's
Registration Statement No. 33-89908 on Form S-8, filed with the SEC on March 2,
1995.

** Exhibits 99.12 and 99.13 are incorporated herein by reference to Exhibits
99.12 and 99.13, respectively, to Registrant's Registration Statement No. 333-
07773 on Form S-8, filed with the SEC on July 8, 1996.

Item 9. Undertakings
------------

A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts
or events arising after the effective date of this Registration Statement (or
the most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
--------
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and (3) to remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the Registrant's 1995
Stock Option/Stock Issuance Plan.

B. The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

C. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the SEC, such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Campbell, State of California on this
6th day of April, 1998.

P-COM, INC.

By: /s/ George P. Roberts
____________________________________
George P. Roberts
Chairman of the Board and Chief Executive
Officer

POWER OF ATTORNEY
-----------------

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned officers and directors of P-COM, Inc., a Delaware
corporation, do hereby constitute and appoint George P. Roberts and Michael J.
Sophie and each of them, the lawful attorneys-in-fact and agents with full power
and authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, and any one of them, determine may
be necessary or advisable or required to enable said corporation to comply with
the Securities Act of 1933, as amended, and any rules or regulations or
requirements of the Securities and Exchange Commission in connection with this
Registration Statement. Without limiting the generality of the foregoing power
and authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below to this Registration Statement, to any and all amendments, both pre-
effective and post-effective, and supplements to this Registration Statement,
and to any and all instruments or documents filed as part of or in conjunction
with this Registration Statement or amendments or supplements thereof, and each
of the undersigned hereby ratifies and confirms that all said attorneys and
agents, or any one of them, shall do or cause to be done by virtue hereof. This
Power of Attorney may be signed in several counterparts.

IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

Signature Title Date
- --------- ----- ----
<S> <C> <C>

/s/ George P. Roberts Chairman of the Board and April 6, 1998
- ------------------------------------- Chief Executive Officer
George P. Roberts (Principal Executive Officer)

</TABLE>

II-4
<PAGE>

Signature Title Date
- --------- ----- ----
<S> <C> <C>

/s/ Michael J. Sophie Vice President, Finance April 6, 1998
_____________________________________ and Administration and Chief
Michael J. Sophie Financial Officer (Principal
Financial and Accounting Officer)

/s/ Gill Cogan Director April 6, 1998
_____________________________________
Gill Cogan

/s/ John A. Hawkins Director April 6, 1998
_____________________________________
John A. Hawkins

Director
_____________________________________
M. Bernard Puckett

/s/ James J. Sobczak Director April 6, 1998
_____________________________________
James J. Sobczak

</TABLE>

II-5
<PAGE>

EXHIBIT INDEX
-------------

Exhibit
Number Exhibit
- ------- -------

<PAGE>

EXHIBIT 5

OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP

April 6, 1998

P-COM, Inc.
3175 S. Winchester Blvd.
Campbell, CA 95008

Re: P-COM, Inc. - Registration Statement for Offering of
683,737 Shares of Common Stock
----------------------------------------------------

Dear Ladies and Gentlemen:

We refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 683,737 shares of
Common Stock of the Company available for issuance under the P-COM, Inc. 1995
Stock Option/Stock Issuance Plan ("the Plan"). We advise you that, in our
opinion, when such shares have been issued and sold pursuant to the applicable
provisions of the Plan, and in accordance with the Registration Statement, such
shares will be validly issued, fully paid and nonassessable shares of the
Company's Common Stock.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

Very truly yours,

/s/ Brobeck, Phleger & Harrison LLP

BROBECK, PHLEGER & HARRISON LLP

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 22, 1998 (except for Note 10
which is as of March 28, 1998) which appears on page 39 of P-COM, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1997.

/s/ Price Waterhouse LLP

PRICE WATERHOUSE LLP
San Jose, California
April 3, 1998

<PAGE>

EXHIBIT 99.1
P-COM, INC. 1995 STOCK OPTION/STOCK ISSUANCE PLAN.
<PAGE>

P-COM, INC.
-----------
1995 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------

(As Amended and Restated Effective as of April 1997)

ARTICLE ONE

GENERAL PROVISIONS
------------------

I. PURPOSE OF THE PLAN

This 1995 Stock Option/Stock Issuance Plan is intended to promote the
interests of P-COM, Inc., a Delaware corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.

Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.

II. STRUCTURE OF THE PLAN

A. The Plan shall be divided into three separate equity programs:

(i) the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,

(ii) the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common
Stock directly, either through the immediate purchase of such shares or as
a bonus for services rendered the Corporation (or any Parent or
Subsidiary), and

(iii) the Automatic Option Grant Program under which Eligible
Directors shall automatically receive option grants at periodic intervals
to purchase shares of Common Stock.

B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.

III. ADMINISTRATION OF THE PLAN
<PAGE>

A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Except to the extent the Primary Committee is
granted sole and exclusive authority under one or more specific provisions of
the Plan, administration of the Discretionary Option Grant and Stock Issuance
Programs with respect to all other persons eligible to participate in these
programs may, at the Board's discretion, be vested in the Primary Committee or a
Secondary Committee, or the Board may retain the power to administer those
programs with respect to all such persons. The members of the Secondary
Committee may be individuals who are Employees eligible to receive discretionary
option grants or direct stock issuances under the Plan or any stock option,
stock appreciation, stock bonus or other stock plan of the Corporation (or any
Parent or Subsidiary).

B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and shall be subject to
removal by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.

C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant or Stock Issuance Program under its jurisdiction or
any option or stock issuance thereunder.

D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.

E. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.

IV. ELIGIBILITY

A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:

(i) Employees,

2.
<PAGE>

(ii) non-employee members of the Board or of the board of
directors of any Parent or Subsidiary, and

(iii) consultants or other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).

B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
to be paid by the Participant for such shares.

C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.

D. The individuals eligible to receive option grants under the
Automatic Option Grant Program shall be limited to (i) those individuals who
were serving as non-employee Board members on February 1, 1996, (ii) those
individuals who first become non-employee Board members after February 1, 1996,
whether through appointment by the Board or election by the Corporation's
stockholders, and (iii) those individuals who continue to serve as non-employee
Board members at one or more Annual Stockholders Meetings held after February 1,
1996. A non-employee Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be eligible to receive an
initial 20,000-share option grant under the Automatic Option Grant Program at
the time he or she first becomes a non-employee Board member, but such
individual shall be eligible to receive periodic option grants under the
Automatic Option Grant Program upon his or her continued service as a non-
employee Board member.

V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term

3.
<PAGE>

of the Plan shall not exceed 4,267,944/*/ shares. Such authorized share reserve
is comprised of (i) the number of shares which remained available for issuance,
as of the Plan Effective Date, under the Predecessor Plan as last approved by
the Corporation's stockholders prior to such date, including the shares subject
to the outstanding options incorporated into the Plan and any other shares which
would have been available for future option grants under the Predecessor Plan,
(ii) an additional increase of 320,000 shares of Common Stock previously
authorized by the Board and approved by the Corporation's stockholders prior to
the Plan Effective Date, (iii) an additional increase of 800,000 shares of
Common Stock authorized by the Board on February 1, 1996 and approved by the
Corporation's stockholders at the 1996 Annual Meeting, plus (iv) a further
increase of 1,500,000 shares of Common Stock, authorized by the Board in April
1997, subject to stockholder approval at the 1997 Annual Meeting.

B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of each calendar
year, beginning with the 1998 calendar year and continuing through calendar year
2001, by an amount equal to one and six-tenths percent (1.6%) of the total
number of shares of Common Stock outstanding on the last trading day of the
immediately preceding calendar year. No Incentive Options may be granted on the
basis of the additional shares of Common Stock resulting from such annual
increases.

C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 800,000 shares of Common Stock in the aggregate over the term of the
Plan.

D. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
Unvested shares issued under the Plan and subsequently cancelled or repurchased
by the Corporation, at the original option exercise or direct issue price paid
per share, pursuant to the Corporation's repurchase rights under the Plan shall
be added back to the number of shares of Common Stock reserved for issuance
under the Plan and shall accordingly be available for reissuance through one or
more subsequent option grants or direct stock issuances under the Plan. However,
should the exercise price of an option under the Plan (including any option
incorporated from the Predecessor Plan) be paid with shares of Common Stock or
should shares of Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an option or the vesting of a stock issuance under the
Plan, then the number of shares of Common Stock available for issuance under the
Plan shall be reduced by the gross number of shares for which the option

- -------------------
/*/ All share numbers in this Plan reflect (i) the 1-for-3 reverse split of the
Common Stock effected after the Board's adoption of the Plan but prior to the
Plan Effective Date and (ii) the 2-for-1 split of the Common Stock effected
October 27, 1995.

4.
<PAGE>

is exercised or which vest under the stock issuance, and not by the net number
of shares of Common Stock issued to the holder of such option or stock issuance.

E. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan, (ii) the number and/or class of securities for which any one
person may be granted options, separately exercisable stock appreciation rights
and direct stock issuances over the term of the Plan, (iii) the number and/or
class of securities for which automatic option grants are to be subsequently
made per Eligible Director under the Automatic Option Grant Program and (iv) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option (including any option incorporated from the
Predecessor Plan) in order to prevent the dilution or enlargement of benefits
thereunder. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.

5.
<PAGE>

ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------

I. OPTION TERMS

Each granted option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
--------
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

A. Exercise Price.
--------------

1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.

2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option grant, be payable in one or
more of the forms specified below:

(i) cash or check made payable to the Corporation,

(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date, or

(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which
the Optionee shall concurrently provide irrevocable written instructions to
(A) a Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (B) the
Corporation to deliver the certificates for the purchased shares directly
to such broker age firm in order to complete the sale transaction.

Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

B. Exercise and Term of Options. Each option shall be exercisable at
----------------------------
such time or times, during such period and for such number of shares as shall be
determined by the

6.
<PAGE>

Plan Administrator and set forth in the documents evidencing the option.
However, no option shall have a term in excess of ten (10) years measured from
the option grant date.

C. Effect of Termination of Service.
--------------------------------

1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:

(i) Any option outstanding at the time of the Optionee's
cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator
and set forth in the documents evidencing the option, but no such option
shall be exercisable after the expiration of the option term.

(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom
the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution.

(iii) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number
of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding to the extent it is not exercisable for vested shares on
the date of suc h cessation of Service.

(iv) Should the Optionee's Service be terminated for
Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.

2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from the
period otherwise in effect for that option to such greater period of time
as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the option term, and/or

7.
<PAGE>

(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the Optionee
would have vested had the Optionee continued in Service.

D. Stockholder Rights. The holder of an option shall have no
------------------
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.

E. Repurchase Rights. The Plan Administrator shall have the
-----------------
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall be
established by the Plan Administrator and set forth in the document evidencing
such repurchase right.

F. Limited Transferability of Options. During the lifetime of the
----------------------------------
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. However, a Non-Statutory
Option may, in connection with the Optionee's estate plan, be assigned in whole
or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate.

II. INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
---

A. Eligibility. Incentive Options may only be granted to Employees.
-----------

B. Exercise Price. The exercise price per share shall not be less
--------------
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.

8.
<PAGE>

C. Dollar Limitation. The aggregate Fair Market Value (determined
-----------------
as of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee under the Plan (or any other option plan
of the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability of
such options as Incentive Options shall be applied on the basis of the order in
which such options are granted.

D. 10% Stockholder. If any Employee to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall NOT so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.

B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such
Corporate Transaction or (ii) such accelerated vesting is precluded by other
limitations imposed by the Plan Administrator at the time the repurchase right
is issued.

C. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options upon the occurrence of a Corporate Transaction, whether or
not those options are to be assumed or replaced in the Corporate Transaction.

9.
<PAGE>

D. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
--------
payable for such securities shall remain the same. In addition, appropriate
adjustments to reflect the Corporate Transaction shall be made to (i) the class
and number of securities available for issuance over the remaining term of the
Plan and (ii) the maximum number and/or class of securities for which any one
person may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances in the aggregate over the remaining term of
the Plan.

F. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time shall automatically
accelerate (and any of the Corporation's outstanding repurchase rights which do
not otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for fully-
vested shares until the earlier of (i) the expiration of the option term or (ii)
-------
the expiration of the one (1)-year period measured from the effective date of
the Involuntary Termination.

G. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or (ii)
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent Involuntary Termination of the
Optionee's Service within a specified period following the effective date of
such Change in Control. Any options accelerated in connection with a Change in
Control shall remain fully exercisable until the expiration of the option term.

H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a Non-
Statutory Option under the Federal tax laws.

10.
<PAGE>

I. The grant of options under the Discretionary Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

IV. CANCELLATION AND REGRANT OF OPTIONS

The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new option grant date.

V. STOCK APPRECIATION RIGHTS

A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.

B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:

(i) One or more Optionees may be granted the right, exercisable
upon such terms as the Plan Administrator may establish, to elect between
the exercise of the underlying option for shares of Common Stock and the
surrender of that option in exchange for a distribution from the
Corporation in an amount equal to the excess of (A) the Fair Market Value
(on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (B) the aggregate exercise price payable for such
shares.

(ii) No such option surrender shall be effective unless it is
approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall be entitled may be made in
shares of Common Stock valued at Fair Market Value on the option surrender
date, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.

(iii) If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee
had under the surrendered option (or surrendered portion thereof) on the
option surrender date and may exercise such rights at any time prior to the

later of (A) five (5) business days after the receipt of the rejection
-----
notice or (B) the last day on which the option is otherwise exercisable in
accordance with the terms of the

11.
<PAGE>

documents evidencing such option, but in no event may such rights be
exercised more than ten (10) years after the option grant date.

C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:

(i) One or more Section 16 Insiders may be granted limited stock
appreciation rights with respect to their outstanding options.

(ii) Upon the occurrence of a Hostile Take-Over, each such
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender each
such option to the Corporation, to the extent the option is at the time
exercisable for vested shares of Common Stock. In return for the
surrendered option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over Price of
the shares of Common Stock which are at the time vested under each
surrendered option (or surrendered portion thereof) over (B) the aggregate
exercise price payable for such shares. Such cash distribution shall be
paid within five (5) days following the option surrender date.

(iii) The Plan Administrator shall pre-approve, at the time the
limited right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section
V. No additional approval of the Plan Administrator or the Board shall be
required at the time of the actual option surrender and cash distribution.

(iv) The balance of the option (if any) shall continue in full
force and effect in accordance with the documents evidencing such option.

12.
<PAGE>

ARTICLE THREE

STOCK ISSUANCE PROGRAM
----------------------

I. STOCK ISSUANCE TERMS

Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.

A. Purchase Price.
--------------

1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the stock issuance date.

2. Subject to the provisions of Section I of Article Five, shares
of Common Stock may be issued under the Stock Issuance Program for one or both
of the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:

(i) cash or check made payable to the Corporation, or

(ii) past services rendered to the Corporation (or any Parent
or Subsidiary).

B. Vesting Provisions.
------------------

1. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. The elements of the vesting schedule applicable to any unvested
shares of Common Stock issued under the Stock Issuance Program, namely:

(i) the Service period to be completed by the Participant or
the performance objectives to be attained,

(ii) the number of installments in which the shares are to
vest,

(iii) the interval or intervals (if any) which are to lapse
between installments, and

13.
<PAGE>

(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting
schedule,

shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement.

2. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to his or her unvested
shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

3. The Participant shall have full stockholder rights with respect to
any shares of Common Stock issued to him or her under the Stock Issuance
Program, whether or not his or her interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.

4. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the surrendered shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase-money indebtedness), the Corporation shall repay to the Participant the
cash consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to such surrendered shares.

5. The Plan Administrator may in its discretion waive the surrender
and cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of the
vesting schedule applicable to such shares. Such waiver shall result in the
immediate vesting of the Participant's interest in the shares of Common Stock as
to which the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant's cessation of Service or the attainment or non-
attainment of the applicable performance objectives.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all the shares of
Common Stock subject to

14.
<PAGE>

those terminated rights shall immediately vest in full, in the event of any
Corporate Transaction, except to the extent (i) those repurchase rights are
assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed in the Stock Issuance Agreement.

B. The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's repurchase right remains outstanding, to provide for the automatic
termination of one or more of those outstanding rights and the immediate vesting
of the shares of Common Stock subject to such rights upon the occurrence of a
Corporate Transaction.

C. Any repurchase rights that are assigned in the Corporate
Transaction shall automatically terminate, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
the Optionee's Service should subsequently terminate by reason of an Involuntary
Termination within eighteen (18) months following the effective date of such
Corporate Transaction.

D. The Plan Administrator shall have the discretion, exercisable
either at the time the unvested shares are issued or at any time while the
Corporation's repurchase right remains outstanding, to (i) provide for the
automatic termination of one or more of those outstanding rights and the
immediate vesting of the shares subject to such rights upon the occurrence of a
Change in Control or (ii) condition any such accelerated vesting upon the
subsequent Involuntary Termination of the Participant's Service within a
specified period following the effective date of such Change in Control.

III. SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.

15.
<PAGE>

ARTICLE FOUR

AUTOMATIC OPTION GRANT PROGRAM
------------------------------

I. OPTION TERMS

A. Grant Dates. Pursuant to the provisions of the February 1, 1996
-----------
restatement of this Article Four, option grants shall be made to Eligible
Directors in accordance with the grant date provisions specified below:

1. Each individual serving as an Eligible Director on February 1,
1996 was automatically granted on such date a Non-Statutory Option to purchase
20,000 shares of Common Stock.

2. Each individual who first becomes an Eligible Director after
February 1, 1996 shall automatically be granted, on the date such individual is
first elected or appointed as a non-employee Board member, a Non-Statutory
Option to purchase 20,000 shares of Common Stock.

3. On the date of each Annual Stockholders Meeting, beginning
with the 1997 Annual Meeting, each individual who is to continue as an Eligible
Director shall automatically be granted, whether or not he or she is standing
for re-election as a Board member at that Annual Meeting, a Non-Statutory Option
to purchase an additional 2,000 shares of Common Stock, provided such individual
has not received an option grant pursuant to this Automatic Option Grant Program
within six (6) months prior to the date of such Annual Meeting. There shall be
no limit on the number of such 2,000-share option grants any one Eligible
Director may receive over his or her period of Board service. The number of
shares for which the automatic option grants are to be made to each newly-
elected or continuing Eligible Director shall be subject to periodic adjustment
pursuant to the applicable provisions of Section V.D. of Article One.

Stockholder approval of this 1997 Restatement at the 1997 Annual
Stockholders Meeting will constitute pre-approval of each option subsequently
granted pursuant to the express terms of this Automatic Option Grant Program and
the subsequent exercise of that option in accordance with its terms.

B. Exercise Price.
--------------

1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.

2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale

16.
<PAGE>

and remittance procedure specified thereunder is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise Date.

C. Option Term. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.

D. Exercise and Vesting of Options. Each option shall be
-------------------------------
immediately exercisable for any or all of the option shares. However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares. The shares subject to each
option, whether the initial 20,000-share grant or any annual 2,000-share grant,
shall vest, and the Corporation's repurchase right with respect to those shares
shall lapse, in a series of eight (8) successive equal quarterly installments
upon the Optionee's completion of each three (3) months of continued service as
a Board member over the twenty-four (24)-month period measured from the option
grant date.

E. Effect of Termination of Board Service. The following provisions
--------------------------------------
shall govern the exercise of any options held by the Optionee at the time the
Optionee ceases to serve as a Board member:

(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution) shall have a twelve
(12)-month period following the date of such cessation of Board service in
which to exercise each such option.

(ii) During the twelve (12)-month exercise period, the option may
not be exercised in the aggregate for more than the number of vested shares
of Common Stock for which the option is exercisable at the time of the
Optionee's cessation of Board service.

(iii) Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of such shares as fully-
vested shares of Common Stock.

(iv) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the twelve (12)-
month exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised. However, the option
shall, immediately upon the

17.
<PAGE>

Optionee's cessation of Board service, terminate and cease to be
outstanding to the extent it is not exercisable for vested shares at that
time.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of such shares as fully-
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, each automatic option grant shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).

B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of such shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for the fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
automatic option held by him or her. The Optionee shall in return be entitled
to a cash distribution from the Corporation in an amount equal to the excess of
(i) the Take-Over Price of the shares of Common Stock at the time subject to the
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. Stockholder approval of the Plan
shall constitute pre-approval of the grant of each such option surrender right
under this Automatic Option Grant Program and the subsequent exercise of such
right in accordance with the terms and provisions of this Section II.C. No
additional approval or consent of the Plan Administrator or the Board shall be
required at the time of the actual option surrender and cash distribution.

D. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

III. REMAINING TERMS

18.
<PAGE>

The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.

19.
<PAGE>

ARTICLE FIVE

MISCELLANEOUS
-------------

I. FINANCING

A. The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program or
the purchase price of shares issued under the Stock Issuance Program by
delivering a promissory note payable in one or more installments. The terms of
any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.

B. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.

II. TAX WITHHOLDING

A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or stock appreciation rights or upon the issuance
or vesting of such shares under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income and employment tax withholding
requirements.

B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:

(i) Stock Withholding: The election to have the Corporation
-----------------
withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.

20.
<PAGE>

(ii) Stock Delivery: The election to deliver to the Corporation,
--------------
at the time the Non-Statutory Option is exercised or the shares vest, one
or more shares of Common Stock previously acquired by such holder (other
than in connection with the option exercise or share vesting triggering the
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Taxes (not to exceed one hundred percent (100%)) designated by the holder.

III. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan became effective on the date on which the Underwriting
Agreement was executed and the initial public offering price of the Common Stock
was established. The Plan serves as the successor to the Predecessor Plan, and
no further option grants shall be made under the Predecessor Plan after the Plan
Effective Date. All options outstanding under the Predecessor Plan on the Plan
Effective Date have been incorporated into the Plan and treated as outstanding
options under the Plan. However, each outstanding option so incorporated shall
continue to be governed solely by the terms of the documents evidencing such
option, and no provision of the Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of Common Stock.

B. The Plan was amended and restated by the Board, effective
February 1, 1996 (the "February 1996 Restatement") to effect the following
revisions: (i) increase the maximum number of shares of Common Stock authorized
for issuance over the term of the Plan by an additional 800,000 shares to
2,767,944 shares and (ii) enhance the benefit and eligibility provisions of the
Automatic Option Grant Program in order to (A) effect an automatic option grant
for 20,000 shares of Common Stock on February 1, 1996 to each individual serving
as a non-employee Board member at that time, (B) increase the number of shares
for which an initial option grant is to be made under the Automatic Option Grant
Program to each newly-elected non-employee Board member to 20,000 shares, (C)
authorize a series of automatic option grants to be made annually to each non-
employee Board member, in the amount of 2,000 shares per annual grant, over that
individual's period of continued service as a Board member and (D) allow non-
employee Board members who joined the Board prior to the implementation of the
Plan to qualify for such annual option grants. The February 1996 Restatement
became effective immediately upon adoption by the Board and was approved by the
Corporation's stockholders at the 1996 Annual Meeting. All option grants made
under the Plan prior to the February 1996 Restatement shall remain outstanding
in accordance with the terms and conditions of the respective instruments
evidencing those options, and nothing in the February 1996 Restatement shall be
deemed to modify or in any way affect those outstanding options.

C. In April 1997, the Board further amended and restated the Plan
(the "April 1997 Restatement") to effect the following revisions: (i) increase
the number of shares of Common Stock reserved for issuance over the term of the
Plan by an additional 1,500,000 shares to 4,267,944 shares, (ii) implement an
automatic share increase feature pursuant to which the number of shares
available for issuance under the 1995 Plan shall automatically increase on the

21.
<PAGE>

first trading day of each calendar year, beginning with the 1998 calendar year
and continuing through calendar year 2001, by an amount equal to one and six
tenths percent (1.6%) of the total number of shares of Common Stock outstanding
on the last trading day of the immediately preceding calendar year, (iii) render
the non-employee Board members eligible to receive option grants under the
Discretionary Option Grant and Stock Issuance Programs, (iv) allow unvested
shares issued under the Plan and subsequently repurchased by the Corporation at
the option exercise or direct issue price paid per share to be reissued under
the Plan, (v) remove certain restrictions on the eligibility of non-employee
Board members to serve as Plan Administrator and (vi) effect a series of
additional changes to the provisions of the Plan (including the stockholder
approval requirements) in order to take advantage of the recent amendments to
Rule 16b-3 of the Securities and Exchange Commission which exempts certain
officer and director transactions under the Plan from the short-swing liability
provisions of the federal securities laws.

The April 1997 Restatement is subject to stockholder approval at the
1997 Annual Meeting, and no option grants made on the basis of the 1,500,000-
share increase under the April 1997 Restatement shall become exercisable in
whole or in part unless and until the April 1997 Restatement is approved by the
stockholders. Should such stockholder approval not be obtained, then each
option grant made pursuant to the 1,500,000-share increase shall terminate and
cease to remain outstanding without ever becoming exercisable for those shares,
and no additional option grants shall be made on the basis of that share
increase. In addition, the automatic annual share increase feature shall not be
implemented. However, the provisions of the Plan as in effect immediately prior
to the April 1997 Restatement shall automatically be reinstated, and option
grants and direct stock issuances may thereafter continue to be made pursuant to
the reinstated provisions of the Plan. All option grants and stock issuances
made prior to the April 1997 Restatement shall remain outstanding in accordance
with the terms and conditions of the respective instruments evidencing those
options or issuances, and nothing in the April 1997 Restatement shall be deemed
to modify or in any way affect those outstanding options or issuances. Subject
to the foregoing limitations, the Plan Administrator may make option grants and
direct stock issuances under the Plan at any time before the date fixed herein
for the termination of the Plan.

D. The option/vesting acceleration provisions of Article Two
relating to Corporate Transactions and Changes in Control may, in the Plan
Administrator's discretion, be extended to one or more options incorporated from
the Predecessor Plan which do not otherwise provide for such acceleration.

E. The Plan shall terminate upon the earliest of (i) January 10,
--------
2005, (ii) the date on which all shares available for issuance under the Plan
shall have been issued pursuant to the exercise of the options or the issuance
of shares (whether vested or unvested) under the Plan or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Upon
such Plan termination, all options and unvested stock issuances outstanding on
such date shall thereafter continue to have force and effect in accordance with
the provisions of the documents evidencing such options or issuances.

22.
<PAGE>

IV. AMENDMENT OF THE PLAN

A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, (i) no such
amendment or modification shall adversely affect the rights and obligations with
respect to options, stock appreciation rights or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant consents
to such amendment or modification, and (ii) any amendment made to the Automatic
Option Grant Program (or any options outstanding thereunder) shall be in
compliance with the limitations of that program. In addition, certain
amendments may require stockholder approval pursuant to applicable laws or
regulations.

B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs are held in escrow until there is
obtained stockholder approval of an amendment sufficiently increasing the number
of shares of Common Stock available for issuance under the Plan. If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess grants or issuances are made, then (i) any unexercised
options granted on the basis of such excess shares shall terminate and cease to
be outstanding and (ii) the Corporation shall promptly refund to the Optionees
and the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.

V. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.

VI. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any option or
stock appreciation right under the Plan and the issuance of any shares of Common
Stock (i) upon the exercise of any option or stock appreciation right or (ii)
under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options and stock appreciation rights
granted under it and the shares of Common Stock issued pursuant to it.

B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable

23.
<PAGE>

listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.

VII. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

24.
<PAGE>

APPENDIX
--------

The following definitions shall be in effect under the Plan:

A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
------------------------------
program in effect under the Plan.

B. BOARD shall mean the Corporation's Board of Directors.
-----

C. CHANGE IN CONTROL shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders, or

(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time such election or nomination was approved
by the Board.

D. CODE shall mean the Internal Revenue Code of 1986, as amended.
----

E. COMMON STOCK shall mean the Corporation's common stock.
------------

F. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction; or

A-1.
<PAGE>

(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.

G. CORPORATION shall mean P-COM, Inc., a Delaware corporation.
-----------

H. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
----------------------------------
grant program in effect under the Plan.

I. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
-----------------
participate in the Automatic Option Grant Program in accordance with the
provisions of Section IV.E of Article One.

J. EMPLOYEE shall mean an individual who is in the employ of the
--------
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

K. EXERCISE DATE shall mean the date on which the Corporation shall have
-------------
received written notice of the option exercise.

L. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.

M. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
-----------------
by any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than

A-2.
<PAGE>

fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.

N. INCENTIVE OPTION shall mean an option which satisfies the requirements
----------------
of Code Section 422.

O. INVOLUNTARY TERMINATION shall mean the termination of the Service of
-----------------------
any individual which occurs by reason of:

(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or

(ii) such individual's voluntary resignation following (A) a
change in his or her position with the Corporation which materially reduces
his or her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any non-
discretionary and objective-standard incentive payment or bonus award) by
more than fifteen percent (15%) or (C) a relocation of such individual's
place of employment by more than fifty (50) miles, provided and only if
such change, reduction or relocation is effected by the Corporation without
the individual's consent.

P. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
----------
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary) or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee, Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary).

Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------

R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.

S. OPTIONEE shall mean any person to whom an option is granted under the
--------
Discretionary Option Grant or Automatic Option Grant Program.

T. PARENT shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

A-3.
<PAGE>

U. PARTICIPANT shall mean any person who is issued shares of Common Stock
-----------
under the Stock Issuance Program.

V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
--------------------------------------------
of the Optionee or the Participant 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.

W. PLAN shall mean the Corporation's 1995 Stock Option/Stock Issuance
----
Plan, as set forth in this document and as amended from time to time.

X. PLAN ADMINISTRATOR shall mean the particular entity, whether the
------------------
Primary Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

Y. PLAN EFFECTIVE DATE shall mean the date on which the Underwriting
-------------------
Agreement was executed and the initial public offering price was established.

Z. PREDECESSOR PLAN shall mean the Corporation's 1992 Stock Option Plan.
----------------

AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more non-
-----------------
employee Board members appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders.

AB. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
-------------------
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.

AC. SECTION 16 INSIDER shall mean an officer or director of the
------------------
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

AD. SECTION 12(G) REGISTRATION DATE shall mean the first date on which the
-------------------------------
Common Stock is registered under Section 12(g) of the 1934 Act.

AE. SERVICE shall mean the provision of services to the Corporation (or
-------
any Parent or Subsidiary) by a person in the capacity of an Employee, a non-
employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.

AF. STOCK EXCHANGE shall mean either the American Stock Exchange or the
--------------
New York Stock Exchange.

A-4.
<PAGE>

AG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
------------------------
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

AH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
----------------------
under the Plan.

AI. SUBSIDIARY shall mean any corporation (other than the Corporation) in
----------
an unbroken chain of corporations beginning with the Corporation, provided each
corporation in the unbroken chain (other than the last corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

AJ. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
--------------- -------
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.

AK. 10% STOCKHOLDER shall mean the owner of stock (as determined under
---------------
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

AL. TAXES shall mean the Federal, state and local income and employment
-----
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of such holder's options
or the vesting of his or her shares.

AM. UNDERWRITING AGREEMENT shall mean the agreement executed between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

A-5.