<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1997.
[_] OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
COMMISSION FILE NUMBER: 0-25356
___________________
P-COM, INC.
(Exact name of Registrant as specified in its charter)
___________________
Delaware 77-0289371
(State of Incorporation) (IRS Employer Identification No.)
3175 S. Winchester Boulevard, Campbell, California 95008
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (408) 866-3666
________________________________________________________________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock,
$0.0001 par value. Series A Junior Participating Preferred Stock $0.0001 par
value.
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _____
-----
Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, as of March 23, 1998, was approximately $608,324,698 (based upon
the closing price for shares of the Registrant's Common Stock as reported by the
Nasdaq National Market for the last trading date prior to that date). Shares of
Common Stock held by each executive officer, director and holder of 5% or more
of the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
On March 23, 1998, approximately 43,079,418 shares of the Registrant's
Common Stock, $0.0001 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the Registrant's Proxy Statement for the 1997 Annual Meeting of
Stockholders to be held on May 19, 1998 are incorporated by reference into Part
III.
================================================================================
<PAGE>
PART I
------
ITEM 1. BUSINESS
The following Business section contains forward-looking statements which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Certain Factors Affecting Operating Results" and elsewhere in this Annual Report
on Form 10-K. Unless otherwise indicated, all information relating to share
prices and number of shares in this Annual Report on Form 10-K reflect a 2-for-1
forward stock split in the form of a 100% stock dividend on September 26, 1997.
P-Com supplies equipment and services for access to worldwide
telecommunications and broadcast networks. The Company's Tel-Link(R) systems are
used as wireless digital links in applications that include interconnecting base
stations and mobile switching centers in microcellular and personal
communications services ("PCN/PCS") networks and for providing local telephone
company ("telco") connectivity in the local loop. The integrated architecture
and high software content of the Company's systems are designed to offer cost-
effective, high-performance products with a high degree of flexibility and
functionality. Additionally, the Company offers turnkey microwave relocation
services, engineering, program management, installation and maintenance of
communication systems to new licensees of radio spectrum who first remove
existing users from the frequencies before implementing new systems and provides
equipment for wireless network access applications. The Company is currently
field testing and further developing a range of point-to-multipoint radio
systems for use in both the telecommunications and broadcast industries.
P-Com's Tel-Link(R) wireless radios utilize a common architecture for
systems in multiple millimeter wave and spread spectrum microwave frequencies
including 2.4 GHz, 5.7 GHz, 7 GHz, 13 GHz, 14 GHz, 15 GHz, 18 GHz, 23 GHz, 24
GHz, 26 GHz, 38 GHz and 50 GHz. The Company's systems are designed to be highly
reliable, cost effective and simple to install and maintain. Software embedded
in the Company's systems allows the user to easily configure and adjust system
settings such as frequency, power and capacity with minimal manual tuning and
mechanical adjustments. The Company also markets a full line of Windows and
SNMP-based software products that are complementary to its systems as
sophisticated diagnostic, maintenance and system configuration tools.
The Company's radio systems are sold internationally through strategic
partners, system providers, original equipment manufacturers ("OEMs") and
distributors as well as directly to end-users, and domestically primarily
through its direct sales force. The Company's radio system customers include
Advanced Radio Telecom, Corp. ("ART"), Bosch Telecom GmbH, Grupo Iusacell S.A.
de C.V., Lucent Technologies, Inc. (including the entities formerly known as
AT&T Network Systems Deutschland GmbH and AT&T Network Systems Nederland BV),
Mercury Communications Ltd., Mercury Personal Communications, Orange Personal
Communications Ltd., Italtel S.p.A. (formerly known as Siemens
Telecommunicazioni, S.p.A.), Ericsson, Ltd., Fujitsu Limited, Northern Telecom,
Ltd. and WinStar Wireless, Inc. (collectively with its subsidiary WinStar
Equipment Corp., "WinStar"). The Company's customers for microwave relocation
services include Sprint Spectrum, AT&T Wireless, PrimeCo Personal
Communications, BellSouth, Omnipoint and South Carolina Public Service Authority
("SCPSA").
P-Com received in December 1993 its initial ISO 9001 registration, a
standard established by the International Organization for Standardization that
provides a methodology by which manufacturers can obtain quality certification.
In accordance with ISO 9001 requirements, the Company's ISO 9001 registration
was subsequently recertified. The Company also completed ISO 9001 registration
for its United Kingdom sales and customer support facility, Geritel facility in
Italy in 1996 and Technosystem facility in Italy in 1997. The Company is in the
process of obtaining ISO 9001 registration for its other facilities outside of
the United States.
BACKGROUND
In recent years, there has been an increase in demand for high performance
voice, data, facsimile and video communications. This trend, coupled with
regulatory changes in the United States and abroad and technological advances,
has led to significant growth in the number of users for existing
telecommunications capacity and the emergence of new wireless services for both
mobile and fixed applications.
In response to this increased demand, existing mobile wireless service
providers, such as cellular service providers, have begun upgrading their
networks to more effectively use their allocated frequency spectrum to
accommodate more users and provide enhanced additional features, such as paging
or facsimile service. One such method of increasing capacity involves dividing
existing coverage cells into several smaller radius cells, which allows the same
frequency of the
1.
<PAGE>
radio spectrum to be reused in adjacent cells. At the same time, other
telecommunications service providers are beginning to establish PCN/PCS networks
to provide a broad range of mobile wireless communications similar to these
enhanced cellular services. These microcellular upgrades to existing systems and
new PCN/PCS networks require the establishment of additional, interconnected
base stations.
Additionally, there has been a worldwide trend toward privatization of
public telephone operators ("PTOs") and deregulation of local loop services.
This trend has resulted in increased competition among companies seeking to
provide local access to the Public Switched Telephone Network ("PSTN"), which
has resulted in increased spending by existing PTOs and the emergence of new
companies providing fixed telecommunications services. As companies enter this
market, they must establish an infrastructure to deliver local fixed
telecommunications services and interconnect that infrastructure with the PSTN.
This local access and interconnect can often be implemented using wireless
technology at a cost and time advantage to wireline alternatives.
As competition among service providers intensifies, it is becoming
increasingly important for them to respond quickly to changes in user patterns
and preferences. This frequently involves increasing the coverage of their
networks but also involves adding additional features, functionality, and
service offerings to their customers. As time to market has become ever more
critical, network service providers have increasingly looked to outside
suppliers, including equipment suppliers, for services such as network design
and installation. These service providers have also come to expect their
equipment suppliers to develop and offer additional products for new service
offerings, such as point-to-multipoint product offerings and access devices for
connecting their networks with the customers end site. Point-to-multipoint
offerings are being driven by the need for greater flexibility and more
efficient use of spectrum allocations. Equipment providers with expertise in
these areas are becoming critical for the implementation of network upgrades and
next generation network buildout.
Millimeter wave radio systems are increasingly utilized for short-haul
wireless connections such as base station interconnect, local fixed
telecommunications access, and interconnect to the PSTN. The lower end of the
radio frequency spectrum, encompassing the traditional microwave frequency
bands, requires the use of more expensive equipment and has become increasingly
congested as compared to the millimeter wave frequency bands. Moreover, higher
frequencies allow a greater number of channels to be allocated in the same
percentage of spectrum compared to lower frequencies. The shorter transmission
distances of higher frequencies also allow these frequencies to be reused in
adjacent geographic areas whereas lower frequencies often propagate beyond the
desired locale into nearby areas. Therefore, regulatory authorities responsible
for the allocation of the radio wave spectrum are under increasing pressure to
assign millimeter wave frequency bands to those applications that can
effectively utilize this portion of the spectrum.
Most conventional millimeter wave radio systems have been introduced by
suppliers of microwave technology based on architectures that were originally
designed and optimized for microwave frequency bands. These conventional systems
often are expensive to install and configure, lack certain advanced features and
do not readily support remote system management and maintenance. The Company
believes that there is a significant market opportunity for short-haul
communications solutions that are optimized for millimeter wave applications and
offer high levels of functionality, ease of installation and a low cost of
ownership.
THE P-COM SOLUTION
Existing Products and Services
P-Com offers equipment and services necessary to access telecommunications
and broadcast networks worldwide. The Company's Tel-Link(R) millimeter wave
radio systems and proprietary software offer telecommunications service
providers wireless connections for short-haul applications. The Company also
utilizes both frequency shift keying ("FSK") and spread spectrum modulation
techniques in its products. These systems are designed to be highly reliable,
cost-effective and simple to install and maintain, thus lowering the service
provider's overall cost of ownership. Additionally, the Company offers complete
turnkey relocation services for new licensees of radio spectrum who must first
remove current users of the frequencies before building out new networks, and
also offers network design, construction, and maintenance services. P-Com also
offers frame relay and integrated access products for network service providers
to facilitate managed connections of end users to their network. The Company
markets its systems and services to cellular and PCN/PCS service providers
implementing microcellular networks and to companies offering local loop
telecommunications services.
2.
<PAGE>
The following diagram illustrates the use of the Company's radio systems to
connect base stations in a PCN/PCS application; the Company's systems are used
in a similar manner in cellular networks.
Diagram describing PCS and Cellular Applications.
The following diagram shows the use of the Company's systems in a PTO/local
loop application to establish short-haul radio connections for telco service
from a high capacity communications infrastructure.
Diagram describing Local Access Applications.
The Company believes its current solutions offer the following benefits:
Commonality of Architecture. The Company's Tel-Link(R) systems employ a
design architecture that is optimized for operation at millimeter wave and
microwave frequencies. In contrast to most conventional radio systems, the
Company's systems across this frequency range are identical in architecture,
functionality and features, except for the final stage of the system which
determines the transmit and receive frequencies. This degree of commonality
assists P-Com in providing a range of products to customers that operate
systems in numerous millimeter wave and microwave bands. Currently, the
Company is shipping 7GHz, 13 GHz, 14 GHz, 15 GHz, 18 GHz, 23 GHz, 26 GHz, 38
GHz and 50 GHz systems. The common architecture employed in the Company's
systems is designed to offer P-Com's customers lower overall cost of ownership
and ease of system implementation through such benefits as reduced spare part
inventories, common features and software across the family of systems,
reduced training and easy integration into a network management system. The
Tel-Link(R) systems employ a high level of circuit integration, with the
concomitant advantages of fewer components and connections, less heat
dissipation and reduced human involvement in production and testing.
Ease of Installation. The Company's systems were designed to lower
installation costs by minimizing the time and effort involved in system
implementation. The two primary assemblies of the systems, the outdoor unit
("ODU"), which is typically located on a tower or a rooftop, and the indoor unit
("IDU"), are connected with a single coaxial cable. Most conventional systems
require multiple cable connections between the IDU and the ODU, are manually
tuned and require numerous mechanical adjustments. The Company's systems are
smaller and lighter than conventional systems, and are software-configurable,
requiring minimal manual tuning and mechanical adjustments during installation.
3.
<PAGE>
High Level of Software Functionality. The Tel-Link(R) architecture is
designed to provide the Company's customers with a high level of functionality
to facilitate operation of the systems. The configuration of the Company's
systems, including setting the system's power and frequency and upgrading its
capacity, can be performed via the keypad located on the IDU. The Company also
offers proprietary Windows and SNMP-based software tools that permit a user to
perform system configuration from a personal computer attached directly to the
IDU or from any remote location accessed through a network management system.
The capacity of the Company's systems can be upgraded through software,
providing a greater degree of flexibility for customers. In contrast,
conventional millimeter wave systems typically require mechanical adjustments
and manual tuning on both the IDU and ODU, and their capacities cannot be
upgraded using software.
Cost-effective Maintenance. The ease of maintenance of the Tel-Link(R)
systems is primarily due to the software embedded in the system and its software
tools. The Company includes a significant amount of the system's circuitry in
the IDU where system reliability is increased due to less demanding temperature
extremes and maintenance is easier to perform. Most conventional systems contain
more circuitry in the ODU, which exposes the circuitry to a wider temperature
range. This may require that more maintenance take place in the ODU, which is
typically more difficult to access. Use of the Company's proprietary maintenance
software tools can be on-site at the IDU or from any remote location through a
network management system. These tools allow the user to read the status of
numerous radio parameters and to change settings and configurations if desired.
Maintenance tools offered with the Tel-Link(R) systems include in-service
performance monitoring and analysis, system alarm reporting and IDU and ODU
temperature readings.
Comprehensive Services. The Company provides turnkey microwave relocation,
engineering, installation and commissioning, and program management services to
the telecommunications industry. Such service packages assist in meeting the
critical cost and timeline objectives demanded by the wireless industry. The
Company's service division is designed to be involved in the aspects of system
build-out, including such tasks as: needs and objectives assessment, system and
program planning, network engineering, operations, maintenance, frequency
coordination and resolution of regulatory issues, management reporting,
training, installation, commissioning and acceptance, and preparation of
documentation. The Company provides these services either directly or through
approved subcontractors.
Products Under Development
Point-to-Multipoint Products. The re-allocation of spectrum in many bands
ranging from 2.4 GHz to 40 GHz is enabling the development of new services such
as local multipoint distribution service (LMDS) and local multipoint
communications service (LMCS). These services address the desire of service
providers for more efficient use of spectrum within a particular service area.
Certain bandwidth demand thresholds must be met before a customer can
economically justify the cost of a dedicated point-to-point system. Point-to-
multipoint provides the flexibility for a service provider to offer customers
wireless bandwidth on demand thereby creating the concept of a wireless central
office. The Company is currently developing a point-to-multipoint system to
provide service to end users from a hub station in a cell typically extending
from 1 to 10 kilometers. Cell size is based on frequency, traffic requirements,
and desired availability. The hub consists of one to 24 sector subsystems that
include sectorized antennae and their associated communications equipment. Each
sector subsystem covers from 15 to 90 degrees of azimuth with additional sector
subsystems providing up to 360 degrees of coverage. The diagram below
illustrates the potential use of the Company's point-to-multipoint system to
connect end-users to a hub station:
Diagram Describing Point-To-Multipoint Products
4.
<PAGE>
P-COM, INC. POINT-TO-MULTIPOINT PRODUCTS AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MODULATION SCHEME & ACCESS
FREQUENCY INTERFACES SUBSCRIBER DATA RATES METHOD
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10 GHZ SYSTEMS* E0 64 Kbps to 20 Mb/s Up to 64 QAM,
Hub Radius: up to 6 miles E1 TDM TDMA
E3
- ------------------------------------------------------------------------------------------------------------------------
24 GHZ SYSTEMS DS0 64 Kbps to 155 Mb/s Up to 64 QAM,
Hub Radius: up to 4 miles ISDN ATM & TDM FDMA, TDMA
DS1
Frame Relay
MPEG-2
10BaseT
DS-3
155 Mbps
- ------------------------------------------------------------------------------------------------------------------------
26 GHZ SYSTEMS* E0 64 Kbps to 20 Mb/s Up to 64 QAM,
Hub Radius: up to 3.5 miles E1 TDM TDMA
E3
- ------------------------------------------------------------------------------------------------------------------------
28 GHZ SYSTEMS* DS0 64 Kbps to 155 Mb/s Up to 64 QAM,
Hub Radius: up to 3.5 miles ISDN ATM & TDM FDMA, TDMA
DS1
Frame Relay
MPEG-2
10BaseT
DS-3
155 Mbps
- ------------------------------------------------------------------------------------------------------------------------
38 GHZ SYSTEMS* DS0 64 Kbps to 155 Mb/s Up to 64 QAM,
Hub Radius: up to 3 miles ISDN ATM & TDM FDMA, TDMA
DS1
Frame Relay
MPEG-2
10BaseT
DS-3
155 Mbps
- ------------------------------------------------------------------------------------------------------------------------
- -------------------
* Not currently available for shipment; prototypes under development.
</TABLE>
THE P-COM STRATEGY
The Company's goal is to become a leading supplier of high performance
radio systems operating in millimeter wave and spread spectrum microwave
frequency bands, as well as related service offerings such as microwave
relocation. The following are the key elements of its strategy to achieve this
objective:
Focus on Millimeter Wave and Spread Spectrum Microwave Market. The Company
is designing its products specifically for the millimeter wave and spread
spectrum microwave frequency band. The Company's core architecture is designed
to optimize its systems for operation at millimeter wave and microwave
frequencies. The Company currently ships 2.4 GHz, 5.7 GHz, 7 GHz, 13 GHz, 14
GHz, 15 GHz, 18 GHz, 23 GHz, 26 GHz, 38 GHz and 50 GHz systems. The Company is
selling its systems primarily to cellular and PCN/PCS service providers
implementing microcellular networks (Code Division Multiple Access (CDMA), Time
Division Multiple Access (TDMA) and Extended Time Division Multiple Access (E-
TDMA)), PTO companies offering local loop services and service companies
providing alternative access. The Company is developing systems which operate at
additional millimeter wave and spread spectrum microwave frequencies.
Provide Ancillary Services in RF Engineering and System Construction. The
Company recently entered the market for relocation services for new licensees of
radio frequency spectrum. These services, which move existing users of a
specific radio frequency in order to clear the path for a new user, allow the
new licensees to outsource the relocation effort to P-Com. The Company believes
this service business will provide it with many strategic advantages, including
allowing it to develop strong relationships with decision makers early in the
network buildout process
5.
<PAGE>
This business unit has expanded to also provide engineering, program management,
installation and maintenance of communications systems.
Continue to Expand Worldwide Presence. The Company is focused on expanding
its presence internationally and further establishing its market position in the
United States. To date, the market opportunities for the Company's systems have
been greater abroad, as the markets for PCN/PCS and microcellular networks and
local loop access have developed at a faster rate than in the United States. The
Company intends to continue its international focus by meeting international
telecommunications standards where appropriate and using strategic alliances to
penetrate international markets. The Company has met the standards established
by the European Telecommunications Standards Institute ("ETSI") and achieved
regulatory approval for certain of its systems in many countries including,
Australia, the Czech Republic, France, Germany, Greece, Hungary, Italy, Mexico,
Spain, the United Kingdom, and the United States. The process for additional
regulatory approvals for certain systems is underway in numerous other
countries, including Belgium, China and Switzerland. The Company's management
team consists of a group of highly-experienced telecommunications executives
from Italy, the United Kingdom and the United States. The Company maintains
offices throughout the world, has acquired numerous companies throughout the
world, and will continue to open offices in new geographic areas as needed in
order to support sales and customer support efforts.
Build and Sustain Manufacturing Cost Advantage. The Company has designed
its system architecture to reduce the number of components incorporated in each
system and to permit the use of common components across the range of the
Company's products. The Company believes this will assist in the reduction of
its manufacturing costs by permitting volume component purchases and enabling a
standardized manufacturing process. The Company utilizes contract manufacturers
to service its volume requirements, reserving its internal manufacturing
capabilities to produce initial quantities of new products prior to commencement
of volume shipments and to respond to special customer requirements regarding
specifications or delivery.
Leverage and Maintain Software Leadership. The Company seeks to
differentiate its systems through the proprietary software embedded in the IDU
and ODU and its Windows and SNMP-based software tools. This software is designed
to allow the Company to deliver to customers a high level of functionality in a
system that can be easily configured by the user to meet particular needs. In
addition, the embedded software enables the capacity of the Company's systems to
be easily upgraded. Software tools are also offered to facilitate network
management of the system. The Company intends to continue its focus on software
development in order to support increasing levels of functionality and ease of
configuration and use of the Company's systems.
Position P-Com for Emerging Applications and Markets. The Company intends
to market its systems for applications other than microcellular, PCN/PCS and
local loop services and to explore emerging geographic markets. Many growing
businesses and local government organizations are choosing to install, maintain
and manage their own telecommunications infrastructures and only interface with
a PTO where a connection to the public network is required. As the voice, data
and video traffic within an organization increases, this approach becomes more
cost-effective than leasing these intracompany services from a PTO. The Company
believes that additional markets may develop abroad, as the implementation of
the communications infrastructure upgrades in emerging countries increasingly
bypasses traditional wired networks and moves directly to a cost-effective
wireless network.
Acquire Companies with Complementary Products and Services. The Company
believes that acquisitions of companies with complementary products and services
will allow the Company to expand the products and services that it offers to
both its own customer base and to the customer bases of the acquired companies.
The Company has acquired companies that offer spread spectrum radios, point-to-
multipoint distribution systems currently under development, microwave
relocation and system construction, wire-line access systems including advanced
frame relay network management products and integrated services access
platforms, engineering, program management and installation of wireless
communications, cable and fiber optic systems. The Company recently acquired
RT Masts Limited ("RT Masts"), a company based in England and Telematics, Inc.
("Telematics"), a company based in Virginia that supply, install and maintain
telecommunications systems and services, including antennae covering high
frequency, medium frequency and microwave systems, and also manage the
construction of radio system sites, as well as the construction of towers and
the installation of radios and antennae at system sites. In addition, on March
28, 1998, the Company acquired substantially all of the assets of the Wireless
Communications Group of Cylink Corporation, a Sunnyvale, California-based
company. The Wireless Communications Group designs, manufactures and markets
spread spectrum radio products for voice and data applications in both
domestic and international markets.
Ongoing Development of Point-to-Multipoint Systems. The Company is
continuing to pursue development of point-to-multipoint radio systems for use in
both the telecommunications and broadcast industries. Incorporated into
networks, these systems are being designed to deliver broadband digital services
offering telephony, high-speed two-way data, video conferencing, Internet
access, and broadband video services. The systems are being designed to allow
alternative access to local circuit, packet and cell switching facilities within
metropolitan areas. The Company believes that the point-to-
6.
<PAGE>
multipoint solution will provide high-bandwidth alternatives to traditional
network access methods. It is intended that this capability, along with the
Company's cell modeling capability, will allow the wireless carriers to increase
traffic capacity and revenues.
TECHNOLOGY
The Company believes its approach to millimeter wave radio systems and
spread spectrum microwave is significantly different from most conventional
approaches. Through the use of its proprietary digital signal processing,
frequency converter and antenna interface technology, and its proprietary
software and custom application-specific integrated circuits, the Company offers
a highly-integrated, feature-rich system. This integration is designed to result
in reliability and cost advantages. The microprocessors and embedded software in
both the IDU and ODU enclosures enable flexible customization to the user's
specific telecommunications network requirements.
Millimeter Wave and Microwave Technology
Wireless transmission of voice, data and video traffic has become a
desirable alternative to wired solutions due to its advantages in the ease and
cost of implementation and maintenance. Since high frequency transmissions are
best suited for shorter distances, microwave radio frequencies are typically
used for communications links of 15 to 50 miles and millimeter wave radio
frequencies for transmissions of up to 15 miles. In addition, the cost of
millimeter wave radio systems is generally less than that of microwave radio
systems.
Most conventional millimeter wave radio systems use technology that is very
similar to microwave radio technology, except that a millimeter wave frequency
source is used at the final stage instead of a lower frequency microwave source.
As depicted below, when transmitting, the IDU, which is the radio system's
interface to the end-user's equipment, sends an unmodulated digital transmit
signal to the ODU. In the ODU, this signal directly modulates a transmit Gunn
oscillator which has its final frequency controlled by a synthesizer. The
signal, now at the desired millimeter wave frequency, is then routed to the
antenna for transmission to the millimeter wave radio system at the receiving
end. At the receiving end, the incoming signal is mixed in a receive converter
with a receive millimeter wave frequency source, typically a Gunn oscillator
which has its frequency controlled by a synthesizer. The signal is then routed
through an intermediate frequency (IF) converter, demodulated, and the resultant
signal is then sent to the IDU where it is directed to the end-user's equipment.
Diagram Describing Convention Technology and P-Com Technology
P-Com believes that its millimeter wave technology is significantly
different from that contained in most conventional systems. When transmitting,
the Company's IDU sends an already-modulated, IF transmit signal to the ODU
where it is received by the IF processor, routed to the transmit converter and
mixed with a synthesized frequency source. This signal is then amplified and
passed through to the Company's proprietary frequency converter to establish the
appropriate millimeter wave frequency. The signal is then routed to the antenna
for transmission to the millimeter wave radio system at
7.
<PAGE>
the receiving end. At the receiving end, the incoming signal is routed to the
frequency converter and mixed in the downconverter with the same frequency
source that was used when transmitting. The signal is passed through the same IF
processor to the IDU where it is demodulated and sent to the end-user's
equipment.
The spread spectrum products use quadrature phase shift keying ("QPSK") or
quadrature amplitude modulation ("QAM") in the IDU. This signal is upconverted
into a microwave or millimeter wave frequency in the ODU. This signal is then
routed to the antenna to be broadcast. The receiving antenna captures the signal
power and routes it to the ODU. The ODU down converts the signal to be
demodulated in the IDU.
P-Com's architecture is designed to achieve reliability, cost, installation
and maintenance benefits over conventional approaches. The Company employs a
common architecture in the ODU for all stages of the system other than the
frequency converter used to establish the millimeter wave frequency at which the
system operates. In contrast, conventional millimeter wave systems often use
different designs for several components of the ODU for each different frequency
band. Third, the final transmit and receive frequencies are electronically
tunable either from the IDU or from a remote location using a network management
system. In contrast, many conventional approaches employ a Gunn oscillator to
generate the transmit millimeter wave frequency source and a second Gunn
oscillator to receive the millimeter wave transmission from the remote end.
These devices must be manually tuned and adjusted to achieve proper operation.
The Company believes that the Gunn oscillator technology that is typically used
in conventional approaches is inherently less reliable than P-Com's proprietary
frequency converter technology. Finally, in P-Com's systems, the IDU and ODU are
connected with a single coaxial cable, in contrast to many conventional systems
that require multiple cable connections.
P-Com System Architecture
The Company's millimeter wave and spread spectrum microwave radios comprise
three primary assemblies: the IDU, the ODU and the antenna. The IDU houses the
digital signal processing and the modem functions, and interfaces to the ODU via
a single coaxial cable. The ODU, a radio frequency (RF) enclosure, establishes
the specific transmit and receive frequencies and houses the proprietary P-Com
frequency converter. The antenna interfaces directly to the ODU via a
proprietary P-Com waveguide transition technology. The following diagram
illustrates a typical P-Com Tel-Link(R) radio system:
Diagram Describing P-Com Tel-Link(R) Radio System.
Indoor Unit (IDU) and Software. The IDU is the interface to the user's
network. It is an indoor mounted assembly that contains baseband electronics,
including the functions of line interface, digital signal processing,
modulation/demodulation and intermediate frequency generation. The IDU also
includes the alarm and diagnostic, service channel and
8.
<PAGE>
telecommunications network management interfaces. Finally, the IDU contains the
capability to set the system capacity, frequency synthesizer and power output of
the radio; no access to the ODU is required.
The configuration of the Company's systems, including the setting of the
system's power, frequency and capacity, is performed via the keypad located on
the IDU. The Company also offers proprietary Windows and SNMP-based software
tools that permit a user to perform system configuration from a personal
computer attached directly to the IDU or from any remote location accessed
through a network management system. In contrast, conventional millimeter wave
systems typically require mechanical adjustments and manual tuning, which
involves sending maintenance personnel to the radio location. The software
embedded in the Company's systems also allows the easy upgrade of system
capacity; minimal hardware changes are required.
Outdoor Unit (ODU). The ODU consists of a lightweight, compact, integrated
RF electronics enclosure which attaches to an antenna. The RF enclosure contains
the electronics that convert and amplify the modulated signal received from the
IDU. Typically, the ODU is installed outdoors on a tower or rooftop. The RF
enclosure is connected to the antenna with the Company's proprietary waveguide
transition that requires no alignment, tools or special techniques. It is
secured to the antenna with quick release clips that typically allow an
installer to replace the complete unit in less than five minutes. In addition,
since the antenna mount is independent of the RF enclosure, replacement of the
RF enclosure requires no realignment of the antenna.
IDU-ODU Interconnection. The single coaxial cable connecting the Company's
IDU and ODU carries transmit and receive signals as well as DC power. This cable
can reach up to 1,000 feet without requiring additional amplification or a
setting for a specific length. No specific matching is required between the ODU
and IDU: any IDU within a particular capacity range will operate to full
specification with any ODU within that capacity range, irrespective of the
frequency band in which the ODU operates. Many conventional systems require
multiple cable connections, distance-specific settings and specific matching
between the IDU and the ODU.
PRODUCTS AND SERVICES
Current Products
Tel-Link(R) Products. The Company's products are based on a common system
architecture and are designed to carry various combinations of voice, data and
video traffic and to be easily configurable based on the needs of its customers.
The Tel-Link(R) systems operate at both E1 and T1/T3 data rates, as well as
lower data rates. E1 is an international standard data rate operating at 2.048
megabits per second that carries 30 duplex voice circuits and T1 is a U.S.
standard data rate operating at 1.544 megabits per second that carries 24 duplex
voice circuits. T3 is a U.S. standard data rate operating at 44.736 megabits per
second that carries 672 duplex voice circuits. The Company is also developing
prototypes for Tel-Link(R) systems that operate at E3 data rates. E3 is an
international standard data rate operating at 34.368 megabits per second that
carries 480 duplex voice circuits. Typical transmission distances for the
Company's systems range from one to fifty miles, depending on the specific
frequency at which the system operates, antenna size and local climate
conditions.
All of the Company's systems currently being shipped are designed to
operate in millimeter wave and spread spectrum microwave frequency bands. The
Company's systems have been shipped for network use or use in system trials in
Australia, Belgium, Bulgaria, Canada, Chile, China, Columbia, the Czech
Republic, England, France, Germany, Hong Kong, India, Indonesia, Ireland,
Israel, Italy, Japan, Malaysia, Mexico, Philippines, Saudi Arabia, Scotland,
South Africa, Spain, Switzerland, Taiwan, Thailand, Turkey, the United States,
Venezuela and Vietnam. The table on the following page provides certain
information about the systems currently being marketed by the Company, the list
price range of such systems, their transmission distances, the number of lines
each system is designed to offer and the maximum number of voice channels each
system is designed to support. List prices for each system are single quantity
prices for one radio link consisting of two radios. The Company typically offers
substantial volume price discounts. The higher end of the list prices represent
prices for higher capacity redundant radios. Most of these configurations are
currently being shipped to customers.
9.
<PAGE>
P-COM, INC. PRODUCTS AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF LINES; NUMBER OF
FREQUENCY STANDARD DATA RATES VOICE CHANNELS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SPREAD SPECTRUM:
- ----------------------------------------------
2.4 GHz SYSTEMS E1 1, 2*, 3*, 4* 30, 60, 90, 120
Distance: Up to 50 miles T1 1, 2*, 3*, 4* 24, 48, 72, 96
List Price: $15,000-$62,000 Data 56 Kbps-2 Mbps
- -----------------------------------------------------------------------------------------------------------------------
5.7 GHZ SYSTEMS E1 1, 2*, 3*, 4* 30, 60, 90, 120
Distance: Up to 35 miles T1 1, 2*, 3*, 4* 24, 48, 72, 96
List Price: $19,000-$70,000 Data 56 Kbps-2 Mbps
- -----------------------------------------------------------------------------------------------------------------------
LICENSED FREQUENCIES:
- ----------------------------------------------
7 GHz SYSTEMS E1 1, 2, 4, 8, 16 30, 60, 120, 240, 480
Distance: Up to 35 miles E3* 1 480
List Price: $32,000-$94,000 T1+ 1, 4, 8, 16 24, 96, 192, 384
T3+ 1 672
Data++ 3 x 64 Kbps
- -----------------------------------------------------------------------------------------------------------------------
13/14/15 GHZ SYSTEMS E1 1, 2, 4, 8, 16 30, 60, 120, 240, 480
Distance: Up to 15 miles E3* 1 480
List Price: $30,000-$93,000 T1+ 1, 4, 8, 16 24, 96, 192, 384
T3+ 1 672
Data++ 3 x 64 Kbps
- -----------------------------------------------------------------------------------------------------------------------
18/23/26 GHZ SYSTEMS E1 1, 2, 4, 8, 16 30, 60, 120, 240, 480
Distance: Up to 10 miles E3* 1 480
List Price: $27,000-$82,000 T1 1, 4, 8, 16 24, 96, 192, 384
T3 1 672
Data++ 3 x 64 Kbps
- -----------------------------------------------------------------------------------------------------------------------
38 GHZ SYSTEMS E1 1, 2, 4, 8, 16 30, 60, 120, 240, 480
Distance: Up to 6 miles E3* 1 480
List Price: $24,000-$73,000 T1 1, 4, 8, 16 24, 96, 192, 384
T3 1 672
Data 3 x 64 Kbps
- -----------------------------------------------------------------------------------------------------------------------
50 GHZ SYSTEMS E1 1, 2, 4, 8*, 16* 30, 60, 120, 240, 480
Distance: Up to 3 miles Data++ 3 x 64 Kbps
List Price: $30,000-$75,000
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Not currently available for shipment; prototypes under development.
+ Not currently available for shipment; prototypes to be developed based on
customer demand, if any.
++ Currently available for shipment; no orders yet received.
10.
<PAGE>
Wire-line Access Products. The Company's wire-line access products are
designed and manufactured by Control Resources Corporation. They are based on
advanced architectures to provide proactive management, real time and historic
performance data capture and flexible cost effective configurations for complex
network requirements. Current NetPath products operate from 56 Kbps DDS service
through 1.544 Mbps T1 service. The NetPath integrated access platform product
can support multiple high speed access links and can internally transfer data at
up to 1 Gbps. Products are managed using Telnet, VT100 and SNMP and have
integrated ISDN interfaces and analog modems. The following products are
currently being shipped, or are currently available for shipment:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PRODUCT APPLICATION ACCESS RATES
- ------------------------------------------------------------------------------------------------------------
<S> <C> <S>
NetPath 64 Managed Frame Relay Access 56 and 64 Kbps
NetPath 100 Managed Frame Relay Access F/T1 to T1
NetPath 400 Integrated Access 1 to 4 T1
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Technosystem Products. The Company also designs, manufactures and markets
equipment transmitters and transponders for television and radio broadcasting
through its subsidiary, Technosystem. The range of products include audio/video
modulators, converters, amplifiers, transponders, transmitters and microwave
links.
Products Under Development
Point-to-multipoint Communications Systems. P-Com is currently field
testing point-to-multipoint systems to provide bandwidth management, increased
spectral efficiency, high availability, comprehensive network management,
increased user and network interfaces, and lower cost. The system is being
developed to be highly scalable, and to accommodate hub and remote site growth.
The Company intends to offer cost effective, highly efficient modulation schemes
such as 32 and 64 QAM at millimeter wave frequencies. There can be no assurance
that the Company will be able to successfully develop the point-to-multipoint
systems or that such products will achieve market acceptance. To date, no point-
to-multipoint systems have been shipped for revenue.
Services
P-Com, through its P-Com Network Services subsidiary ("Network Services"),
provides turnkey relocation of microwave links from spectrum reallocated by the
FCC for emerging technologies and applications. The providers of these emerging
technologies and applications, which include PCS licensees, must first relocate
the existing user or users to a comparable location on the frequency spectrum.
This relocation process requires substantial attention from radio engineering
personnel, and many service providers lack sufficient personnel resources to
both relocate existing users and build out a new network. Many providers seek to
outsource this relocation responsibility to a third-party, such as Network
Services. Network Services, which (through its predecessor) signed its first PCS
microwave relocation contract in January 1995, to date has performed microwave
relocation services on more than 1,000 paths.
Network Services provides three principal microwave relocation services:
market and system analysis which involves the collection of data on the various
existing paths in a particular area, as well as the potential cost of comparable
paths for relocation; negotiation services which involves negotiations with
existing users of spectrum on behalf of the PCS licensee in order to agree on
the parameters of a new path; and program management which involves managing the
complete physical construction of a relocation path, including the procurement
of equipment and building permits, and installation and testing of the new
system; as well as turnkey relocation encompassing all of the above. Network
Services has expanded its service offerings through the acquisitions of RT Masts
and Telematics, which engage in the management of construction of radio system
sites, as well as construction of towers and the installment of radios and
antennae at system sites.
Network Services' principal service is turnkey microwave relocation
services in which Network Services conducts all system analysis, negotiation,
and implementation and delivers to its client fully cleared spectrum.
Network Services' customers include Sprint Spectrum, AT&T Wireless, PrimeCo
Personal Communications, BellSouth, Omnipoint, and SCPSA.
Additionally, P-Com is expanding its service offerings to include such
services as network and path design, installation, and maintenance of the
service provider's network.
11.
<PAGE>
SALES AND MARKETING
The Company's sales and marketing efforts are headquartered in the
Company's executive offices in Campbell, California. The Company has established
and staffed a sales and customer support facility in the United Kingdom that
serves as a base for the European market. Internationally, the Company uses a
variety of sales channels, including system providers, OEMs, dealers and local
agents, as well as selling directly to its customers. The Company has sales
offices or personnel located in China, England, France, Germany, Poland, Turkey,
Italy and Mexico, and has worldwide OEM agreements with Lucent Technologies,
Fujitsu and Italtel. In addition, the Company has established agent
relationships in numerous other countries in the Asia/Pacific region and in
South America and Europe. In the United States, the Company utilizes both direct
sales and OEM channels.
The Company currently engages in a lengthy sales process that commences
with the solicitation of bids by prospective customers. If the Company is
selected to proceed further, the Company may provide systems for incorporation
into system trials or may proceed directly to contract negotiations. If system
trials are required and successfully completed, the Company then negotiates a
contract with the customer to set technical and commercial terms of sale. These
terms of sale govern the purchase orders issued by the customer as the network
is deployed. The Company anticipates that it will increasingly rely upon OEMs
and system providers during the sales process, and will therefore have less
direct contact during this process with end-users.
The Company believes that due to the complexity of its radio systems, a
high level of technical sophistication is required on the part of the Company's
sales and marketing personnel. In addition, the Company believes that customer
service is fundamental to its success and potential for follow-on business. New
customers are provided engineering assistance for installation of the first
units as well as varying degrees of field training depending upon the customer's
technical aptitude. All customers are provided telephone support via a 24-hour
customer service help desk. The Company's customer service efforts are
supplemented by its system providers.
The Company believes that it must continue to expand its sales and
marketing organization worldwide. Any significant sales growth will be dependent
in part upon the Company's expansion of its marketing, sales and customer
support capabilities, which will require significant expenditures to build the
necessary infrastructure.
CUSTOMERS
The Company's principal customers currently include network operators,
which incorporate the Company's systems into networks to deliver communications
services directly to consumers, and system providers, which incorporate P-Com
systems into networks to be sold to network operators, that in turn provide
communications services directly to consumers. Certain customers may act as both
network operators and system providers depending on the circumstances.
Network Operators
These users include regulated and non-regulated providers of wireless
voice, data and video services to corporate and individual customers. Current
and potential applications include cellular and PCN/PCS networks (CDMA, TDMA and
E-TDMA), PTO/local loop service, network interconnections and access to long
distance networks. For cellular and PCN/PCS applications, users of P-Com's
systems in a single cellular service area may include multiple PCN/PCS
providers, wireline cellular service operators, non-wireline cellular service
operators and alternate service providers.
System Providers
These customers provide engineering and installation services for their
customers, which consist of cellular service providers, private corporations,
utilities and local government entities. Current and potential applications
include supervisory control systems for water, electric and gas companies, local
area networks for private corporations and educational institutions, and
voice/data/video networks for government users (police, fire, safety). These in-
country system providers accomplish the network design and provide the field
effort necessary to install, commission and maintain the Company's millimeter
wave and spread spectrum microwave systems. System providers are also
extensively used by PTOs and cellular and PCN companies in Eastern Europe,
Russia, China and other developing countries.
12.
<PAGE>
The following list represents certain customers from which the Company has
generated revenues since the beginning of 1997:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
INTERNATIONAL DOMESTIC
--------------------------------------------------------------------------------------
<S> <C>
Bosch Telecom GmbH Advanced Radio Telecom Corporation
Ericsson Limited AT&T Wireless
Esmartel House Bell Atlantic
Fareastone Bell South
Ficomp System, Inc. Telecom Securicor Cellular Radio
Fujitsu Limited Digital Transmission System
Gentec FM Associates
GMA Network Horizon Technologies
Grupo Iusacell S.A. de C.V. Omnipoint
Jonmag Group PrimeCo Personal Communications
Lucent Technologies Southwestern Bell Corp.
Mercury Communications Limited Sprint Spectrum
Mercury Personal Communications Teleport Communications Group
Northern Telecom Limited Tellabs Operations, Inc.
Orange Personal Communications WinStar Wireless, Inc.
Siemens (Italtel) Limited
Spectrum Network Systems
TSY Poland
--------------------------------------------------------------------------------------
</TABLE>
For the year ended December 31, 1997, approximately seventy-five customers
accounted for substantially all of the Company's sales, and two customers, each
of which individually accounted for over 10% of the Company's 1997 sales,
accounted for over 27% of the Company's sales. In 1996, the Company had five
customers which individually accounted for over 10% of the Company's sales.
Sales to Orange Personal Communications Ltd. and WinStar accounted for
approximately 16% and 11% of the Company's sales, respectively, in 1997. Sales
to Orange Personal Communications Ltd., WinStar, Bosch Telecom GmbH, Ericsson
Limited and ART accounted for approximately 18%, 12%, 11%, 11% and 11% of the
Company's sales, respectively, in 1996. As of December 31, 1997, seven customers
accounted for over 64% of the Company's backlog scheduled for shipment in the
twelve months subsequent to December 31, 1997. The Company anticipates that, at
least for the near term, it will continue to sell its radio systems to an
expanding but still relatively small, group of customers. Many of the Company's
customers are implementing new networks and may require additional capital to
implement fully their planned networks, e.g. Fareastone, Mercury Personal
Communications, Orange Personal Communications, Advanced Radio Telecom
Corporation and WinStar Wireless, Inc. The Company's ability to achieve or
increase its sales in the future will depend in significant part upon its
ability to obtain and fulfill orders from existing and new customers and
maintain relationships with and provide support to existing and new customers.
Equally important is its ability to manufacture systems on a timely and cost-
effective basis and to meet stringent customer performance and shipment delivery
dates. As a result, any cancellation, reduction or delay in orders by or
shipments to any customer, as a result of manufacturing difficulties or
otherwise, or the inability of any customer to finance its purchases of the
Company's radio systems may have a material adverse effect upon the Company's
business, financial condition and results of operations. There can be no
assurance that the Company's sales will increase in the future or that the
Company will be able to retain and support existing customers or to attract new
customers.
The Company's backlog was approximately $65.2 million as of December 31,
1997, as compared to approximately $58.4 million as of December 31, 1996. The
increase is primarily due to the expansion of the Company's international
market. The Company includes in backlog only those firm customer commitments to
be shipped within the following twelve months. A significant portion of the
Company's backlog scheduled for shipment in the twelve months subsequent to
December 31, 1997 can be canceled since orders are often made substantially in
advance of shipment, and some of the Company's contracts provide that orders may
be canceled with limited or no penalties up to a specified period (generally 60
to 90 days) before shipment, and in some cases at any time. Therefore, backlog
is not necessarily indicative of future sales for any particular period. In
addition, the Company's customers have increasingly been requiring shipment of
products at the time of ordering rather than submitting purchase orders far in
advance of expected dates of product shipment.
13.
<PAGE>
MANUFACTURING
The Company's manufacturing objective is to produce systems that conform to
P-Com's specifications at the lowest possible manufacturing cost. The Company
has designed its system architecture to reduce the number of components
incorporated in each system and to permit the use of common components across
the range of the Company's products. P-Com believes this will reduce its
manufacturing costs by permitting volume component purchases and enabling a
standardized manufacturing process. Where appropriate, the Company has developed
component designs internally to seek to obtain higher performance from its
systems at a lower cost. The Company is engaged in an effort to increase the
standardization of its manufacturing process in order to permit it to more fully
utilize contract manufacturers.
As part of its program to reduce the cost of its radio systems and to
support an increase in the volume of orders, the Company first began to utilize
contract manufacturers to produce its systems, components and subassemblies in
the fourth quarter of 1994, and expects to rely increasingly on such
manufacturers in the future. Currently, these contract manufacturers are Remec,
Inc., Sanmina Corporation, SPC Electronics Corp., Senior Systems Technology,
Inc., GSS Array Technology and Celeritek, Inc.
The Company also relies on outside vendors to manufacture certain
components and subassemblies used in the production of the Company's radio
systems. Certain components, subassemblies and services necessary for the
manufacture of the Company's systems are obtained from a sole supplier or a
limited group of suppliers. In particular, Eltel Engineering S.r.L. and
Associates, Milliwave, Scientific Atlanta, and Xilinx, Inc. each are sole source
or limited source suppliers for critical components used in the Company's radio
systems. The Company intends to reserve its internal manufacturing capacity for
new products and products manufactured in accordance with a customer's custom
specifications or expedited delivery schedule. Therefore, the Company's internal
manufacturing capability for standard products is very limited, and the Company
intends to rely on contract manufacturers for high volume manufacturing. There
can be no assurance that the Company's internal manufacturing capacity and that
of its contract manufacturers will be sufficient to fulfill the Company's
orders. Failure to manufacture, assemble and ship systems and meet customer
demands on a timely and cost effective basis could damage relationships with
customers and have a material adverse effect on the Company's business,
financial condition and operating results.
The Company's reliance on contract manufacturers and on sole suppliers or a
limited group of suppliers and the Company's increasing reliance on
subcontractors involves several risks, including a potential inability to obtain
an adequate supply of finished radio systems and required components and
subassemblies, and reduced control over the price, timely delivery, reliability
and quality of finished radio systems, components and subassemblies. The Company
does not have long-term supply agreements with several of its manufacturers or
suppliers. In addition, the Company has from time to time experienced and may in
the future continue to experience delays in the delivery of and quality problems
with radio systems and certain components and subassemblies from vendors.
Manufacture of the Company's radio systems and certain of these components and
subassemblies is an extremely complex process, and there can be no assurance
that delays caused by contract manufacturers and suppliers will not occur in the
future. Certain of the Company's suppliers have relatively limited financial and
other resources. Although the Company intends to qualify alternative sources and
has the ability to manufacture its finished radio systems in limited quantities
and certain of such components internally, any inability to obtain timely
deliveries of components and subassemblies of acceptable quality or any other
circumstance that would require the Company to seek alternative sources of
supply, or to manufacture its finished radio systems or such components and
subassemblies internally could delay the Company's ability to ship its systems.
Any such delay could damage relationships with current or prospective customers
and could therefore have a material adverse effect on the Company's business,
financial condition and operating results.
RESEARCH AND DEVELOPMENT
The Company has a continuing research and development program in order to
enhance its existing systems and related software tools and to introduce new
systems. The Company invested approximately $29.1 million, $20.2 million and
$12.3 million in 1997, 1996 and 1995, respectively, in research and development
efforts and expects to continue to invest significant resources in research and
development, including new product development and acquisitions.
The Company's research and development efforts can be classified into three
distinct efforts: (1) increasing the functionality of its point-to-point radio
systems under development by adding additional frequencies and capacities to its
product portfolio, modifying its network management system software offering,
and developing other advancements to its point-to-point radio systems under
development; (2) developing new products based on its core technologies, such as
a point-to-multipoint product offering for applications such as cable or fiber
replacements; and (3) integrating new functionality to extend the reach of its
products into the customers' networks, such as access technology which allows
the
14.
<PAGE>
customer to manage telecommunications services at its site and integrate voice,
data, video and facsimile in one offering, such as the Company's NetPath
integrated access product. There can be no assurance that the Company will
continue to focus on these areas or that current efforts will result in new
product introductions or modifications to existing products.
The wireless communications market is subject to rapid technological
change, frequent new product introductions and enhancements, product
obsolescence, changes in end-user requirements and evolving industry standards.
The Company's ability to be competitive in this market will depend in
significant part upon its ability to develop successfully, introduce and sell
new systems and enhancements and related software tools on a timely and cost-
effective basis that respond to changing customer requirements. The Company has
experienced and may continue to experience delays from time to time in
completing development and introduction of new systems, enhancements or related
software tools. There can be no assurance that errors will not be found in the
Company's systems after commencement of commercial shipments, which could result
in the loss of or delay in market acceptance. The inability of the Company to
introduce in a timely manner new systems, enhancements or related software tools
that contribute to sales could have a material adverse effect on the Company's
business, financial condition and results of operations.
COMPETITION
The wireless communications market is intensely competitive. The Company's
wireless-based radio systems compete with other wireless telecommunications
products and alternative telecommunications transmission media, including copper
and fiber optic cable. The Company has experienced increasingly intense
competition worldwide from a number of leading telecommunications companies that
offer a variety of competitive products and services and broader
telecommunications product lines, including Adtran, Inc., Alcatel Network
Systems, California Microwave, Inc., Digital Microwave Corporation, Ericsson
Limited, Harris Corporation--Farinon Division, Nokia Telecommunications, Innova
Corp., Philips T.R.T., and Western Multiplex Corporation, many of which have
substantially greater installed bases, financial resources and production,
marketing, manufacturing, engineering and other capabilities than the Company.
The Company faces actual and potential competition not only from these
established companies, but also from start-up companies that are developing and
marketing new commercial products and services. The Company may also face
competition in the future from new market entrants offering competing
technologies. In addition, the Company's current and prospective customers and
partners, certain of which have access to the Company's technology or under some
circumstances are granted the right to use the technology for purposes of
manufacturing, have developed, are currently developing or could develop the
capability to develop or manufacture products competitive with those that have
been or may be developed or manufactured by the Company. The Company's results
of operations may depend in part upon the extent to which these customers elect
to purchase from outside sources rather than develop and manufacture their own
radio systems. There can be no assurance that such customers will rely on or
expand their reliance on the Company as an external source of supply for their
radio systems. The principal elements of competition in the Company's market and
the basis upon which customers may select the Company's systems include price,
performance, software functionality, ability to meet delivery requirements and
customer service and support. There can be no assurance that the Company will be
able to compete effectively with respect to such elements. Recently, certain of
the Company's competitors have announced the introduction of competitive
products, including related software tools, and the acquisition of other
competitors and competitive technologies. The Company expects its competitors to
continue to improve the performance and lower the price of their current
products and to introduce new products or new technologies that provide added
functionality and other features. New product introductions and enhancements by
the Company's competitors could cause a significant decline in sales or loss of
market acceptance of the Company's systems or intense price competition, or make
the Company's systems or technologies obsolete or noncompetitive. The Company
has experienced significant price competition and expects such price competition
to intensify, which may materially adversely affect its gross margins and its
business, financial condition and results of operations. The Company believes
that to be competitive, it will continue to be required to expend significant
resources on, among other items, new product development and enhancements. In
marketing its systems, the Company will face competition from vendors employing
other technologies that may extend the capabilities of their competitive
products beyond their current limits, increase their productivity or add other
features. There can be no assurance that the Company will be able to compete
successfully in the future.
GOVERNMENT REGULATION
Radio communications are subject to extensive regulation by the United
States and foreign laws and international treaties. The Company's systems must
conform to a variety of domestic and international requirements established to,
among other things, avoid interference among users of radio frequencies and to
permit interconnection of equipment. Each country has a different regulatory
process. Historically, in many developed countries, the limited availability of
frequency spectrum has inhibited the growth of wireless telecommunications
networks. In order for the Company to operate in a
15.
<PAGE>
foreign jurisdiction, it must obtain regulatory approval for its systems and
comply with different regulations in each jurisdiction. Regulatory bodies
worldwide are continuing the process of adopting new standards for wireless
communication products. The delays inherent in this governmental approval
process may cause the cancellation, postponement or rescheduling of the
installation of communications systems by the Company and its customers, which
in turn may have a material adverse effect on the sale of systems by the Company
to such customers. The failure to comply with current or future regulations or
changes in the interpretation of existing regulations could result in suspension
or cessation of operations. Such regulations or such changes could require the
Company to modify its products and incur substantial costs to comply with such
time-consuming regulations and changes. In addition, the Company is also
affected to the extent that domestic and international authorities regulate the
allocation and auction of the radio frequency spectrum. Equipment to support new
services can be marketed only if permitted by suitable frequency allocations,
auctions and regulations, and the process of establishing new regulations is
complex and lengthy. To the extent PCS operators and others are delayed in
deploying these systems, the Company could experience delays in orders. Failure
by the regulatory authorities to allocate suitable frequency spectrum could have
a material adverse effect on the Company's business, financial condition and
results of operations. In addition, delays in the radio frequency spectrum
auction process in the United States could delay the Company's ability to
develop and market equipment to support new services. These delays could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The regulatory environment in which the Company operates is subject to
significant change. Regulatory changes, which are affected by political,
economic and technical factors, could significantly impact the Company's
operations by restricting development efforts by the Company's customers, making
current systems obsolete or increasing the opportunity for additional
competition. Any such regulatory changes, including changes in the allocation of
available spectrum, could have a material adverse effect on the Company's
business and results of operations. The Company might deem it necessary or
advisable to modify its systems to operate in compliance with such regulations.
Such modifications could be extremely expensive and time-consuming.
INTELLECTUAL PROPERTY
The Company relies on a combination of patents, trademarks, trade secrets,
copyrights and a variety of other measures to protect its intellectual property
rights. The Company currently holds four U.S. patents, which number will
increase upon consummation of the acquisition of the wireless communications
group of Cylink Corporation. (See note 9 of Notes to Consolidated Financial
Statements.) The Company generally enters into confidentiality and nondisclosure
agreements with its service providers, customers and others, and attempts to
limit access to and distribution of its proprietary rights. The Company also
enters into software license agreements with its customers and others. However,
there can be no assurance that such measures will provide adequate protection
for the Company's trade secrets or other proprietary information, that disputes
with respect to the ownership of its intellectual property rights will not
arise, that the Company's trade secrets or proprietary technology will not
otherwise become known or be independently developed by competitors or that the
Company can otherwise meaningfully protect its intellectual property rights.
There can be no assurance that any patent owned by the Company will not be
invalidated, circumvented or challenged, that the rights granted thereunder will
provide competitive advantages to the Company or that any of the Company's
pending or future patent applications will be issued with the scope of the
claims sought by the Company, if at all. Furthermore, there can be no assurance
that others will not develop similar products or software, duplicate the
Company's products or software or design around the patents owned by the Company
or that third parties will not assert intellectual property infringement claims
against the Company. In addition, there can be no assurance that foreign
intellectual property laws will adequately protect the Company's intellectual
property rights abroad. The failure of the Company to protect its proprietary
rights could have a material adverse effect on its business, financial condition
and results of operations.
Litigation may be necessary to enforce the Company's patents, copyrights
and other intellectual property rights, to protect the Company's trade secrets,
to determine the validity of and scope of the proprietary rights of others or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that infringement, invalidity, right to
use or ownership claims by third parties or claims for indemnification resulting
from infringement claims will not be asserted in the future or that such
assertions will not materially adversely affect the Company's business,
financial condition and results of operations. If any claims or actions are
asserted against the Company, the Company may seek to obtain a license under a
third party's intellectual property rights. There can be no assurance, however,
that a license will be available under reasonable terms or at all. In addition,
should the Company decide to litigate such claims, such litigation could be
extremely expensive and time consuming and could materially adversely affect the
Company's business, financial condition and results of operations, regardless of
the outcome of the litigation.
16.
<PAGE>
EMPLOYEES
As of December 31, 1997, the Company had a total of 754 employees,
including 357 in operations, 171 in research and development, 77 in sales and
marketing, 45 in quality assurance and 104 in administration. The Company
believes its future results of operations will depend in large part on its
ability to attract and retain highly skilled employees. None of the Company's
employees are represented by a labor union, and the Company has not experienced
any work stoppages. The Company considers its employee relations to be good.
ITEM 2. PROPERTIES.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Location of Leased Functions Square Footage Date
Facility Lease Expires
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HEADQUARTERS Administration
Sales/Customer Support 61,000 November 2005
Campbell, CA Engineering
USA Manufacturing
-----------------------------------------------------------------------------------------------------------------------
Campbell, CA Manufacturing 25,000 August 2002
-----------------------------------------------------------------------------------------------------------------------
San Jose, CA Warehouse 34,000 December 1999
-----------------------------------------------------------------------------------------------------------------------
Ridditch, England Sales/Customer Support 5,500 June 2005
-----------------------------------------------------------------------------------------------------------------------
Ridditch, England Research/Development 3,000 October 1999
-----------------------------------------------------------------------------------------------------------------------
Ridditch, England Warehouse 6,800 September 1999
-----------------------------------------------------------------------------------------------------------------------
Ridditch, England Warehouse 4,000 June 1998
-----------------------------------------------------------------------------------------------------------------------
Solihull, England Customer Support 2,200 May 1998
-----------------------------------------------------------------------------------------------------------------------
September 2000
(may be canceled with a six
Frankfurt, Germany Warehouse 11,000 month advance notice)
-----------------------------------------------------------------------------------------------------------------------
Melbourne, Florida Research/Development 5,000 December 2001
-----------------------------------------------------------------------------------------------------------------------
Beijing, China Sales/Customer Support 2,300 August 1999
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
Geritel S.p.A. ("Geritel") owns and maintains its corporate headquarters in
Tortona, Italy. This facility, approximately 36,000 square feet, contains
design, test, manufacturing, mechanical and warehouse functions. Geritel also
maintains a sales and sales support facility in France. The French sales and
sales support facility is approximately 950 square feet.
Technosystem S.p.A. ("Technosystem") maintains its corporate headquarters
in Rome, Italy. This leased facility, totaling approximately 27,000 square feet,
contains corporate administration, sales and customer support, engineering and
manufacturing functions. The lease agreement for this headquarters facility
expires in October 2001. In addition, Technosystem leases an approximately 2,000
square feet warehouse located in Rome, Italy. The warehouse is held under a
lease agreement that expires in June 2001.
Network Services maintains its corporate headquarters in Vienna, Virginia.
This leased facility, totaling approximately 15,000 square feet, contains
corporate administration, sales and customer support functions. The lease
agreement for this headquarters facility expires in April 2002. Network Services
also maintains a sales and customer support facility in Harlow, Essex, UK. The
Harlow facility is approximately 8,000 square feet and is held under a lease
agreement that expires in September 2007.
17.
<PAGE>
Control Resources Corporation ("CRC") maintains its corporate headquarters
in Fair Lawn, New Jersey. This leased facility, totaling approximately 44,000
square feet, contains corporate administration, sales and customer support,
engineering and manufacturing functions. The lease agreement for this
headquarters facility expires in March, 2005.
Telematics, Inc. ("Telematics") maintains its facility in Sterling,
Virginia. This leased facility, totaling approximately 15,000 square feet,
contains administration, sales and customer support functions. The lease
agreement for this facility expires in December 1998. The lease will be
automatically renewable on a year-to-year basis after December 1998.
RT Masts maintains its facility in Northants England. This facility,
totaling approximately 10,000 square feet, contains administration, sales and
customer support functions. RT Masts owns half of the facility (approximately
5,000 square feet) and leases the other half (approximately 5,000 square feet).
The lease agreement will expire in August 2011.
The Company's facilities are fully utilized. The Company believes that
these facilities are adequate to meet its current and foreseeable requirements
or that suitable additional or substitute space will be available as needed.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in claims and disputes in the ordinary course of
business; however none of such matters is currently material to the Company's
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
None.
18.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages as of March 31, 1998, and
their positions and their backgrounds are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George P. Roberts...................... 65 Chairman of the Board and Chief Executive Officer
Pier Antoniucci........................ 56 President and Chief Operating Officer
Michael J. Sophie...................... 40 Chief Financial Officer, Vice President, Finance and
Administration
John R. Wood........................... 42 Senior Vice President, Advanced Technologies
Kenneth E. Bean, III................... 41 Senior Vice President, Quality Assurance
Alan Wright............................ 48 Executive Vice President, Operations
</TABLE>
BACKGROUND
The principal occupations of each executive officer of the Company for at
least the last five years are as follows:
Mr. Roberts is a founder of the Company and has served as Chief Executive
Officer and Director since October 1991. From October 1991 through December
1996, Mr. Roberts served as President of the Company. Since September 1993, he
has also served as Chairman of the Board of Directors. From May 1989 to August
1991, Mr. Roberts was Chief Operating Officer for Digital Microwave Corporation,
a wireless communications company. From October 1984 to May 1989, Mr. Roberts
was President of American Satellite Company, a wholly owned subsidiary of
Contel, an independent telecommunications company. Mr. Roberts holds a B.S. in
Electrical Engineering from the University of Arizona and has completed graduate
business studies at the University of Arizona and the University of California
at Los Angeles.
Mr. Antoniucci was appointed President of the Company in January 1997. Mr.
Antoniucci was also appointed and has served as Chief Operating Officer since
July 1996. From July 1995 to January 1997, Mr. Antoniucci served as Executive
Vice President of the Company. From December 1992 to June 1995, Mr. Antoniucci
served as Senior Vice President, Marketing and Sales of the Company. From
September 1992 to November 1992, Mr. Antoniucci was Vice President, Purchasing
for Alcatel-Telettra, a manufacturer of telecommunications products. From July
1986 to August 1992, Mr. Antoniucci was President of Granger-Telettra J.V., a
provider of digital microwave systems located in the United States that resulted
from the acquisition of Granger by Telettra. From October 1972 to June 1986, Mr.
Antoniucci served in various management positions at Telettra, including Vice
President of the E.F.I. Business Unit, Vice President of the Telecom
Infrastructure Business Unit and Project Manager at Telettra/Ford Aerospace.
Telettra was an Italian manufacturer of telecommunications products that was
subsequently acquired by Alcatel Network Systems. Mr. Antoniucci holds a
doctorate in Electrical Engineering from Bologna University in Bologna, Italy.
Mr. Sophie was appointed Chief Financial Officer of the Company in April
1996 and has served as Vice President, Finance and Administration of the Company
since September 1993. Mr. Sophie also served as Controller from September 1993
through December 1996. From December 1989 to August 1993, Mr. Sophie was Vice
President, Finance and Administration of the Loral Fairchild Imaging Sensors
Division, a manufacturer of CCDs and cameras. From December 1982 to December
1989, Mr. Sophie served in various financial positions at Avantek, a
telecommunications company, including Division Controller and Group Controller.
Prior to December 1982, Mr. Sophie held various financial positions for IBM and
Fairchild Semiconductor and Signetics, two semiconductor manufacturers. Mr.
Sophie holds an MBA from the University of Santa Clara and a B.S. in Business
Administration from California State University, Chico.
Mr. Wood was appointed Senior Vice President of Advanced Technologies of
the Company in January 1997. From April 1993 to January 1997, Mr. Wood served as
Vice President, Engineering for the Company. From August 1992 to March 1993, Mr.
Wood served as Director of Systems Engineering for the Company. From June 1990
to July 1992, Mr. Wood was Manager of Transmission Engineering for Mercury
Personal Communications, a British telecommunications company. From September
1976 to May 1990, Mr. Wood held various technical and management positions at
Marconi
19.
<PAGE>
Communications, a British telecommunications equipment manufacturing company.
Mr. Wood holds a B.Sc. in Physics and Electronics from Manchester University in
Manchester, England.
Mr. Bean was appointed Senior Vice President of Quality Assurance of the
Company in January 1997. From August 1995 to January 1997, Mr. Bean served as
Vice President, Manufacturing of the Company. From September 1992 to June 1995,
Mr. Bean was Director of Quality Assurance of the Company. From June 1989 to
March 1992, Mr. Bean was a Senior Quality Field Engineer at TRW Space and
Defense, a provider of satellite communications equipment. From January 1989 to
June 1989, Mr. Bean was a Senior Quality Engineer at Eaton, a manufacturer of
microwave components for various telecommunications applications, and from
October 1987 to January 1989, Mr. Bean was a Quality Manager at Gamma Microwave,
a wireless component manufacturer. Mr. Bean holds a B.A. in Industrial Arts with
a minor in Business from San Jose State University.
Mr. Wright was appointed Executive Vice President of Operations of the
Company in October 1997. From September 1993 to October 1997, Mr. Wright was a
private investor. From February 1992 to September 1993, Mr. Wright served as
Director of Product Integrity at StrataCom, Inc. From 1987 to 1991, Mr. Wright
was Vice President, Manufacturing at Digital Microwave Corporation. From 1977 to
1987, Mr. Wright served in various management positions at ROLM Corporation. Mr.
Wright holds a B.Sc. in Electrical/Electronic Engineering from Leeds University
in Leeds, England.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the Nasdaq National Market under
the symbol PCMS. The following table sets forth the range of high and low
closing sale prices, as reported on the Nasdaq National Market for each quarter
since the consummation of the Company's initial public offering on March 3,
1995. At March 23, 1998, the Company had approximately 327 holders of record of
its Common Stock and approximately 43,079,352 shares outstanding.
<TABLE>
<CAPTION>
Price Range of
Common Stock (1)
---------------
High Low
------- ------
<S> <C> <C>
Year Ending December 31, 1995
First Quarter (from March 3, 1995) $ 6.25 $ 4.69
Second Quarter 5.44 4.18
Third Quarter 11.32 4.63
Fourth Quarter 10.79 8.00
Year Ending December 31, 1996
First Quarter $ 10.07 $ 7.00
Second Quarter 18.00 9.75
Third Quarter 17.94 9.44
Fourth Quarter 16.88 10.16
Year Ending December 31, 1997
First Quarter $ 19.44 $13.00
Second Quarter 17.41 12.69
Third Quarter 26.13 16.13
Fourth Quarter 29.38 13.63
</TABLE>
____________________
(1) The price per share of Common Stock has been adjusted to reflect the 2-for-
1 stock split effected on October 27, 1995 and an additional 2-for-1 stock
split effected on September 26, 1997.
To date, the Company has not paid any cash dividends on shares of its
Common Stock. The Company currently anticipates that it will retain any
available funds for use in the operation of its business, and does not
anticipate paying any cash dividends in the foreseeable future. In addition, the
terms of the Company's line of credit agreement prohibit the Company from paying
any dividends without the prior approval of the bank.
On November 28, 1997, the Company completed the issuance of 248,215 shares
of its common stock (the "Shares") to the securityholders of Telematics Inc.
("Telematics"), a Virginia corporation in exchange for all the issued and
outstanding equity securities of Telematics. The Shares were issued pursuant to
the exemption from the registration requirements of the Securities Act of 1933,
as amended, provided by Rule 4(2). 24,822 of the Shares are being held in escrow
as collateral for all obligations of the security holders of Telematics pursuant
to the Purchase Agreement and the provisions of an escrow agreement.
20.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA: (1)
Sales $ 220,702 $ 120,953 $ 64,463 $ 29,600 $ 19,135
Cost of sales 129,235 74,058 37,456 18,814 12,045
--------------- --------------- -------------- -------------- --------------
Gross profit 91,467 46,895 27,007 10,786 7,090
--------------- --------------- -------------- -------------- --------------
Operating expenses:
Research and development 29,127 20,163 12,284 7,978 6,313
Selling and marketing 15,696 7,525 4,837 3,275 2,121
General and administrative 16,948 10,283 5,573 4,903 3,589
--------------- --------------- -------------- -------------- --------------
Total operating expenses 61,771 37,971 22,694 16,156 12,023
--------------- --------------- -------------- -------------- --------------
Income (loss) from operations 29,696 8,924 4,313 (5,370) (4,933)
Interest and other income (expense), net 247 906 167 (249) (169)
--------------- --------------- -------------- -------------- --------------
Income (loss) before income taxes 29,943 9,830 4,480 (5,619) (5,102)
Provision for income taxes 11,052 956 761 338 223
--------------- --------------- -------------- -------------- --------------
Net income (loss) $ 18,891 $ 8,874 $ 3,719 $ (5,957) $ (5,325)
=============== =============== ============== ============== ==============
Net income (loss) per share: (2)
Basic $ 0.45 $ 0.23 $ 0.11 $ (1.08) $ (0.98)
=============== =============== ============== ============== ==============
Diluted $ 0.43 $ 0.22 $ 0.11 $ (1.08) $ (0.98)
=============== =============== ============== ============== ==============
Shares used in per share computation:
Basic 42,175 38,762 32,645 5,521 5,432
=============== =============== ============== ============== ==============
Diluted 44,570 40,607 34,853 5,521 5,432
=============== =============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 88,145 $ 42,226 $ 8,871 $ 1,593 $ 3,686
Working capital 174,635 90,811 38,473 3,755 6,015
Total assets 305,521 155,452 62,964 18,393 11,794
Long-term debt 101,690 914 491 1,198 804
Retained earnings (accumulated deficit) 18,380 (511) (9,360) (13,119) (6,960)
Stockholders' equity 148,297 112,479 47,258 6,028 7,171
</TABLE>
____________
(1) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the pooling transactions.
(2) See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares used to compute share
and per share amounts.
21.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Management's Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements which involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "--Certain Factors Affecting Operating Results"
contained in this Item 7 and elsewhere in this Annual Report on Form 10-K.
RESULTS OF OPERATIONS
OVERVIEW
P-Com, Inc. (the "Company") supplies equipment and services for access to
worldwide telecommunications and broadcast networks. All financial information
presented in this Annual Report on Form 10-K has been restated to include the
operating results of Control Resources Corporation ("CRC"), which was acquired
in a pooling of interests transaction on May 29, 1997; and RT Masts Limited ("RT
Masts") and Telematics, Inc. ("Telematics"), which were acquired in pooling of
interests transactions on November 27, 1997. Currently, the Company ships 2.4
GHz and 5.7 GHz spread spectrum radio systems, as well as 7 GHz, 13 GHz, 14 GHz,
15 GHz, 18 GHz, 23 GHz, 26 GHz, 38 GHz and 50 GHz radio systems, all with
related software. The Company also provides related services for these products.
The Company was founded in August 1991 to develop, manufacture, market and
sell millimeterwave radio systems for wireless networks. The Company was in the
development stage until October 1993. From October 1993 through December 31,
1997, the Company generated sales of approximately $454.9 million, of which
$220.7 million, or 49% of such amount, was generated in the twelve months ended
December 31, 1997. From inception to the end of 1997, the Company had generated
cumulative profits of approximately $18.4 million. Although the Company has
experienced a significant percentage growth in sales and gross profit from 1993
through December 31, 1997, the Company does not believe prior growth rates are
indicative of future operating results. Due to the Company's limited operating
history and resources, among other factors, there can be no assurance that
profitability or significant revenues on a quarterly or annual basis will occur
in the future. There can be no assurance that the Company's revenues will
continue to remain at or increase from the levels experienced in recent
quarters, or that sales will not decline. The Company intends, however, to
continue to invest significant amounts in its operations, particularly to
support product development and the marketing and sales of recently introduced
products and services, and operating expenses will continue to increase
significantly in absolute dollars. If the Company's sales do not correspondingly
increase, the Company's results of operations would be materially adversely
affected. Accordingly, there can be no assurance that the Company will achieve
profitability in future periods.
Recently, the Company has significantly expanded the scale of its
operations to support the increases in its sales levels and to address critical
infrastructure and other requirements. This expansion has included the leasing
of additional space, the opening of branch offices and subsidiaries in the
United Kingdom, Germany and Singapore, the acquisitions of all or majority
interests in Geritel S.p.A. ("Geritel"), Atlantic Communication Sciences, Inc.
("ACS"), Technosystem S.p.A. ("Technosystem"), Columbia Spectrum Management L.P.
("CSM"), CRC, Telesys (UK) Limited ("Telesys"), RT Masts and Telematics,
significant investments in research and development to support product
development and services, and the hiring of additional personnel in all
functional areas, including in sales and marketing, finance, manufacturing and
operations. The Company anticipates that its operating expenses will continue to
increase significantly. If the Company's sales do not correspondingly increase,
the Company's results of operations would be materially adversely affected.
YEARS ENDED 1997, 1996 AND 1995
Sales. Sales consist of revenues from radio systems and related software
tools and service offerings. The Company generated revenues from the sale of its
38 GHz radio systems commencing in October 1993, 50 GHz radio systems commencing
in September 1994, 23 GHz radio systems commencing in January 1995, 15 GHz radio
systems commencing in June 1996, 2.4 and 5.7 GHz spread spectrum radio systems
commencing in September 1996 (through the acquisition of ACS), 13 GHz radio
systems commencing in November 1996, 26 GHz radio system commencing in July
1997, 7 and 18 GHz radio systems commencing in September 1997 and service
offerings in March 1997. In 1997, 1996 and 1995, sales were approximately $220.7
million, $121.0 million, and $64.5 million, respectively. The increase in sales
was primarily due to increased volume of 38 and 23 GHz radio systems to new and
existing customers and, to a lesser extent, sales from products acquired in
recent acquisitions, and from service offerings. There can be no assurance that
sales of the Company's
22.
<PAGE>
radio systems or service will increase or that such systems or service will
achieve market acceptance. The Company provides to its customers significant
volume price discounts, which are expected to lower the average selling price of
a particular product line as more units are sold. In addition, the Company
expects that the average selling price of a particular product line will also
decline as such product matures, and as competition increases in the future.
Accordingly, the Company's ability to maintain or increase sales will depend
upon many factors, including its ability to increase unit sales volumes of its
systems and to introduce and sell systems at prices sufficient to compensate for
reduced revenues resulting from declines in the average selling price of the
Company's more mature products. To date, most of the Company's sales have been
made to customers located outside the United States. For risk factors associated
with customer concentration, declining average selling prices, results of
operations and international sales, please see "Certain Factors Affecting
Operating Results -- Significant Customer Concentration," "--Declining Average
Selling Prices," "--Significant Fluctuations in Results of Operations" and "--
International Operations; Risks of Doing Business in Developing Countries."
Gross Profit. The Company's cost of sales consists primarily of costs
related to materials, labor and overhead. In 1997, 1996 and 1995, gross profit
was $91.5 million, $46.9 million and $27.0 million, respectively, or 41.4%,
38.8% and 41.9% of sales, respectively. The improvement in gross profit as a
percentage of sales from 1996 to 1997 was due to product design improvements and
economies of scale, but there can be no assurance that such improvements will
continue. The decrease of gross profit percentage from 1995 to 1996 was due to
new product introductions in the first and third quarters and related production
inefficiencies.
The Company has an ongoing program to reduce the costs of manufacturing its
radio systems. As part of this program, the Company has been attempting to
achieve cost reductions principally through engineering and manufacturing
improvements, production economies and utilization of third party subcontractors
for the manufacture of the Company's radio systems and certain components and
subassemblies used in the systems. The Company also is implementing other cost
reduction programs in an effort to maintain gross margins in the future. There
can be no assurance that the Company's ongoing or future programs can be
accomplished or that they will increase gross profits. For risk factors
associated with gross profit, please see "Certain Factors Affecting Operating
Results -- Significant Fluctuations in Results of Operations," "--Declining
Average Selling Prices" and "--No Assurance of Product Quality, Performance and
Reliability."
Research and Development. Expenses consist primarily of costs associated
with personnel and equipment. The Company's research and development activities
include the development of additional frequencies and varying operating features
and related software tools. In accordance with Financial Accounting Standards
Board Statement No. 86, the Company's policy is to capitalize internal software
development costs on a project at the time when the technological feasibility of
such project has been achieved. The Company's software development costs subject
to capitalization have not been significant to date and, as a result, have been
expensed during the periods incurred.
In 1997, 1996 and 1995, research and development expenses were
approximately $29.1 million, $20.2 million and $12.3 million, respectively. The
increase in research and development expenses was due to increased staffing as
the Company concentrated on new product development, including costs associated
with a new product development by CRC beginning in 1996. The Company intends to
continue to invest significant resources to continue the development of new
systems and enhancements (including additional frequencies and varying operating
features and related software tools) and expects that research and development
expenses in absolute dollars in 1998 will continue to increase as compared to
1997.
Selling and Marketing. Expenses consist of salaries of certain personnel,
investments in international operations, sales commissions, travel expenses,
customer service and support expenses and costs related to advertising and trade
shows. In 1997, 1996 and 1995, sales and marketing expenses were $15.7 million,
$7.5 million and $4.8 million, respectively. The increase in selling and
marketing expense is due to the expansion of the Company's domestic and
international markets. The Company intends to continue to invest significant
resources to expand its sales and marketing efforts, including the hiring of
additional personnel, and to establish the infrastructure necessary to support
future operations. The Company expects that such expenses in absolute dollars in
1998 will continue to increase as compared to 1997.
General and Administrative. Expenses consist primarily of salaries and
other expenses for management, finance, accounting, legal and other professional
services. In 1997, 1996 and 1995, general and administrative expenses were $16.9
million, $10.3 million and $5.6 million, respectively. The increase in general
and administrative expenses of $6.6 million from 1996 to 1997 is related to
expansion of the Company's business as well as goodwill amortization associated
with acquisitions of Geritel, ACS, Technosystem and CSM. The goodwill is
amortized over the estimated life of acquired assets. The Company expects
general and administrative expenses to continue to increase in absolute dollars
in 1998 as compared to 1997, as the Company continues to expand its operations
and acquire companies. The Company also has incurred and
23.
<PAGE>
expects to continue to incur additional significant ongoing expenses as a
publicly owned company related to legal, accounting and other administrative
services and expenses.
Interest and Other Income (Expense), Net. Interest and other income
(expense), net consists primarily of interest income generated from the
investment of cash received from financing activities in 1997, 1996 and 1995,
partially offset by interest expense accrued on the Company's bank line of
credit and equipment lease lines. In 1997, 1996 and 1995, interest and other
income (expense), net were $0.2 million, $0.9 million and $0.2 million,
respectively. Through fiscal 1997, contracts negotiated in foreign currencies
have been limited to British pound sterling contracts, and any impact due to
currency fluctuations has been insignificant. However, the Company may in the
future be exposed to the risk of foreign currency gains or losses depending upon
the magnitude of a change in the value of a local currency in an international
market. The Company has entered into foreign currency hedging transactions to
reduce exposure to foreign exchange risks. As of December 31, 1997, the Company
had forward exchange contracts valued at approximately $21.9 million.
Income Tax Provision. The Company's effective tax rates for 1997, 1996 and
1995 were 36.9%, 9.7% and 17.0% respectively. The Company's effective tax rate
is less than the combined federal and state statutory rate due principally to
net operating loss credit carryforwards available to offset taxable income. As
a result of exhausting the net operation loss and the credit carryover, as
well as the expansion of the operations into Europe where the Company is taxed
at a higher rate, the Company expects the 1997 effective tax rate to reflect
the future results.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception in August 1991, the Company has financed its operations
and met its capital requirements through net proceeds of approximately $89.5
million from the Company's initial and two follow-on public offerings of its
Common Stock, three preferred stock financings aggregating approximately $17.2
million, a convertible debt offering with net proceeds of approximately $97.5
million and borrowings under its bank lines of credit and equipment lease
arrangements.
In 1997, the Company used approximately $12.5 million in operating
activities, primarily due to increases in accounts receivable, prepaid expenses,
other accrued liabilities, other assets, and inventory of $19.4 million, $1.7
million, $4.7 million, $5.1 million and $20.8 million, respectively, and a
decrease in accounts payable, notes receivable, income taxes payable, and
accrued employee benefits of $4.4 million, $1.8 million, $3.9 million and $2.0
million, respectively. These uses of cash were partially offset by net income
of $18.9 million and depreciation and amortization expense of $8.2 million.
During 1997, the Company expended approximately $27.8 million in investing
activities consisting of approximately $3.1 million to purchase Technosystem and
$7.8 million to purchase CSM, and $16.9 million to acquire capital equipment.
In 1997, the Company generated approximately $88.1 million in financing its
activities. The Company received approximately $97.5 million from its
convertible debt offering, and approximately $4.0 million from issuing Common
Stock pursuant to the Company's stock option and employee stock purchase plans.
This was partially offset by payment of approximately $12.7 million to retire
borrowing under the bank line of credit and approximately $0.7 million to retire
a portion of the bank debt of Technosystem and Geritel.
At December 31, 1997, the Company had working capital of approximately
$174.6 million. In recent quarters, most of the Company's sales have been
realized near the end of each quarter, resulting in a significant investment in
accounts receivable at the end of the quarter. The Company expects that its
investments in accounts receivable and inventories will continue to represent a
significant portion of working capital. Significant investments in accounts
receivable and inventories may subject the Company to increased risks which
could materially adversely affect the Company's business, financial condition
and results of operations.
The Company's principal sources of liquidity as of December 31, 1997
consisted of approximately $88.1 million of cash and cash equivalents. In
addition, the Company had a $25.0 million line of credit facility with Union
Bank of California. Borrowings under the line was unsecured and bore interest at
either a base interest rate or a variable interest rate. The agreement required
the Company to comply with certain financial covenants including the maintenance
of specified minimum ratios. At November 10, 1997, the Company terminated the
line of credit. The Company's principal sources of liquidity as of December 31,
1996 consisted of approximately $42.2 million of cash and cash equivalents
At present, the Company does not have any material commitments for capital
equipment purchases. However, the Company's future capital requirements will
depend upon many factors, including the development of new radio systems and
related software tools, potential acquisitions, the extent and timing of
acceptance of the Company's radio systems in the market, requirements to
maintain adequate manufacturing facilities, working capital requirements for the
Company's
24.
<PAGE>
acquired entities, the progress of the Company's research and development
efforts, expansion of the Company's marketing and sales efforts, the Company's
results of operations and the status of competitive products. The Company
believes that cash and cash equivalents on hand, cash flow from operations, if
any, and funds available from the Company's bank line of credit will be adequate
to fund its operations in the ordinary course of business for at least the next
twelve months. There can be no assurance, however, that the Company will not
require additional financing prior to such date to fund its operations. The
Company has in the past and may from time to time in the future sell its
receivables, as part of an overall customer financing program, with immaterial
recourse to the Company. There can be no assurance that the Company will be able
to locate parties to purchase such receivables on acceptable terms, or at all.
To the extent that the Company's financial resources are insufficient to fund
the Company's activities, additional funds will be required. There can be no
assurance that any additional financing will be available to the Company on
acceptable terms, or at all, when required by the Company. If additional funds
are raised by issuing equity securities, further dilution to the existing
stockholders will result. If adequate funds are not available, the Company may
be required to delay, scale back or eliminate one or more of its research and
development or manufacturing programs, cease its acquisition activities or
obtain funds through arrangements with partners or others that may require the
Company to relinquish rights to certain of its technologies or potential
products or other assets that the Company would not otherwise relinquish.
Accordingly, the inability to obtain such financing could have a material
adverse effect on the Company's business, financial condition and results of
operations. For risk factors associated with the Company's future capital
requirements, please see "Certain Factors Affecting Operating Results -- Future
Capital Requirements."
ACQUISITIONS
On February 24, 1997, the Company acquired 100% of the equity of
Technosystem, a Rome, Italy-based company, with additional operations in Poland
for $3.3 million. The Company paid $2.6 million in cash and an additional
payment of $0.7 million will be due on March 31, 1998, subject to certain
indemnification obligations of the former Technosystem security holders as set
forth in the securities purchase agreement. Technosystem designs, manufactures
and markets equipment for transmitters and transponders for television and radio
broadcasting. The range of products include audio/video modulators, converters,
amplifiers, transponders, transmitters and microwave links. The Company
accounted for the acquisition based on the purchase method of accounting and the
results of operations of Technosystem are included in the Company's consolidated
results for all periods subsequent to the date of acquisition.
On March 7, 1997, the Company acquired substantially all of the assets of
CSM, a Vienna, Virginia-based company, for $8.0 million in cash and 796,612
shares of Common Stock valued at $14.5 million. In addition, the former partners
of CSM may receive up to an additional $1,500,000 in cash (as part of such $8.0
million amount) over the next two years, subject to the satisfaction of certain
indemnification obligations, and the 796,612 shares issued to the former
partners may either increase or decrease in an amount of up to 15%, as
determined pursuant to the terms of the asset purchase agreement. CSM provides
turnkey relocation services for microwave paths over spectrum allocated by the
Federal Communications Commission for Personal Communications Services and other
emerging technologies. The Company accounted for the acquisition based on the
purchase method of accounting, and the results of operations of CSM are included
in the Company's consolidated results for all periods subsequent to the date of
acquisition.
On May 29, 1997, the Company acquired all of the outstanding shares of
capital stock of CRC, a provider of integrated network access devices to network
service providers, in exchange for 1,502,956 shares of P-Com Common Stock that
were issued or are issuable to former CRC security holders in a stock-for-stock
merger. CRC, located in Fair Lawn, New Jersey, manufactures products used by the
communications industry to connect end user sites to a range of communications
services. CRC's NetPath product line enables network service providers to offer
their customers a migration path from entry-level data services to cost-
effective integrated delivery of voice, video and Internet access. The NetPath
product line also supports the network service provider's introduction of new
technologies including asynchronous transfer mode and frame relay.
On November 27, 1997, the Company acquired all of the outstanding shares of
capital stock of RT Masts, a United Kingdom-based company and Telematics, a
Virginia-based company, in exchange for 766,151 and 248,215 shares of P-Com
Common Stock, respectively. RT Masts, located in Wellingborough,
Northhamptonshire, U.K. and Telematics, located in Herndon, Virginia, supply,
install and maintain telecommunications systems and structures including
antennas covering high frequency, medium frequency and microwave systems. Both
companies manage the construction of radio system sites, as well as construction
of towers and install radios and antennas at system sites.
There can be no assurance that any operations of the Company's acquired
entities will be profitable after the acquisitions. Moreover, there can be no
assurance that the anticipated benefits of such acquisitions will be realized.
The
25.
<PAGE>
process of integrating the operations of the Company's acquired entities into
the Company's operations may result in unforeseen operating difficulties and
could absorb significant management attention, expenditures and reserves that
would otherwise be available for the ongoing development of the Company's
business.
CERTAIN FACTORS AFFECTING OPERATING RESULTS
SIGNIFICANT FLUCTUATIONS IN RESULTS OF OPERATIONS
The Company has experienced and will in the future continue to experience
significant fluctuations in sales, gross margins and operating results. The
procurement process for most of the Company's current and potential customers is
complex and lengthy, and the timing and amount of sales is difficult to predict
reliably. The sale and implementation of the Company's products and services
generally involves a significant commitment of the Company's senior management,
sales force and other resources. The sales cycle for the Company's products and
services typically involves a significant technical evaluation and commitment of
cash and other resources, with the attendant delays frequently associated with,
among other things: (i) existing and potential customers' seasonal purchasing
and budgetary cycles; (ii) educating customers as to the potential applications
of, and product-life cost savings associated with, using the Company's products
and services; (iii) complying with customers' internal procedures for approving
large expenditures and evaluating and accepting new technologies that affect key
operations; (iv) complying with governmental or other regulatory standards; (v)
difficulties associated with each customer's ability to secure financing; and
(vi) negotiating purchase and service terms for each sale. Orders for the
Company's products have typically been strongest towards the end of the calendar
year, with a reduction in shipments occurring during the summer months, as
evidenced in the third quarter of fiscal year 1997, due primarily to the
inactivity of the European market, the Company's major current customer base, at
such time. To the extent such seasonality continues, the Company's results of
operations will fluctuate from quarter to quarter.
In addition, a single customer's order scheduled for shipment in a quarter
can represent a significant portion of the Company's potential sales for such
quarter. There can be no assurance that the Company will be able to obtain such
large orders from single customers in the future. The Company has at times
failed to receive expected orders, and delivery schedules have been deferred as
a result of changes in customer requirements and commitments, among other
factors. As a result, the Company's operating results for a particular period
have in the past been and will in the future be materially adversely affected by
a delay, rescheduling or cancellation of even one purchase order. Much of the
anticipated growth in telecommunications infrastructure, if any, is expected to
result from the entrance of new service providers, many of which do not have the
financial resources of existing service providers. To the extent these new
service providers are unable to adequately finance their operations, they may
cancel orders. Moreover, purchase orders are often received and accepted
substantially in advance of shipment, and the failure to reduce actual costs to
the extent anticipated or an increase in anticipated costs before shipment could
materially adversely affect the gross margins for such orders, and as a result,
the Company's results of operations. Moreover, most of the Company's backlog
scheduled for shipment in the twelve months subsequent to December 31, 1997 can
be canceled since orders are often made substantially in advance of shipment,
and the Company's contracts typically provide that orders may be canceled with
limited or no penalties. As a result, backlog is not necessarily indicative of
future sales for any particular period. In addition, the Company's customers
have increasingly been requiring shipment of products at the time of ordering
rather than submitting purchase orders far in advance of expected dates of
product shipment. Furthermore, most of the Company's sales in recent quarters
have been realized near the end of each quarter. Accordingly, a delay in a
shipment near the end of a particular quarter, as the Company has been
experiencing recently, due to, for example, an unanticipated shipment
rescheduling, a cancellation or deferral by a customer, competitive or economic
factors, unexpected manufacturing or other difficulties, delays in deliveries of
components, subassemblies or services by suppliers, or the failure to receive an
anticipated order, may cause sales in a particular quarter to fall significantly
below the Company's expectations and may materially adversely affect the
Company's operating results for such quarter.
In connection with its efforts to ramp-up production of products and
services, the Company expects to continue to make substantial capital
investments in equipment and inventory, recruit and train additional personnel
and possibly invest in additional manufacturing facilities. The Company
anticipates that these expenditures will be made in advance of, and in
anticipation of, increased sales and, therefore, that its gross margins will be
adversely affected from time-to-time due to short-term inefficiencies associated
with the addition of equipment and inventory, personnel or facilities, and that
each cost category may increase as a percentage of revenues from time-to-time on
a periodic basis. In addition, as the Company's customers increasingly require
shipment of products at the time of ordering, the Company must forecast
26.
<PAGE>
demand for each quarter and build up inventory accordingly. Such increases in
inventory could materially adversely affect the Company's operations, if such
inventory were not utilized or becomes obsolete.
A large portion of the Company's expenses are fixed and difficult to reduce
should revenues not meet the Company's expectations, thus magnifying the
material adverse effect of any revenue shortfall. Furthermore, announcements by
the Company or its competitors of new products, services and technologies could
cause customers to defer or cancel purchases of the Company's systems and
services, which would materially adversely affect the Company's business,
financial condition and results of operations. Additional factors that have
caused and will continue to cause the Company's sales, gross margins and results
of operations to vary significantly from period to period include: new product
introductions and enhancements, including related costs; the Company's ability
to manufacture and produce sufficient volumes of systems and meet customer
requirements; manufacturing capacity, efficiencies and costs; mix of sales
through direct efforts or through distributors or other third parties; mix of
systems and related software tools sold and services provided; operating and new
product development expenses; product discounts; accounts receivable collection,
in particular those acquired in recent acquisitions, especially outside of the
United States; changes in pricing by the Company, its customers or suppliers;
inventory write-offs, as the Company recently experienced in the second and
third quarters for a relatively immaterial amount in each such quarter, which
the Company may experience again in the future; inventory obsolescence; natural
disasters; market acceptance by the Company's customers and the timing of
availability of new products and services by the Company or its competitors;
acquisitions, including costs and expenses; usage of different distribution and
sales channels; fluctuations in foreign currency exchange rates; delays or
changes in regulatory approval of its systems and services; warranty and
customer support expenses; customization of systems; and general economic and
political conditions. In addition, the Company's results of operations have been
and will continue to be influenced significantly by competitive factors,
including the pricing and availability of, and demand for, competitive products
and services. All of the above factors are difficult for the Company to
forecast, and these or other factors could materially adversely affect the
Company's business, financial condition and results of operations. As a result,
the Company believes that period-to-period comparisons are not necessarily
meaningful and should not be relied upon as indications of future performance.
Due to all of the foregoing factors, it is likely that in some future quarter
the Company's operating results will be below the expectations of public market
analysts and investors. In such event, the price of the Company's Common Stock
may be materially adversely affected.
SIGNIFICANT CUSTOMER CONCENTRATION
For the year ended December 31, 1997, approximately seventy-five customers
accounted for substantially all of the Company's sales, and two customers, each
of which individually accounted for over 10% of the Company's 1997 sales,
accounted for over 27% of the Company's sales. In 1996, the Company had five
customers which individually accounted for over 10% of the Company's sales.
Sales to Orange Personal Communications Ltd. and WinStar accounted for
approximately 16% and 11% of the Company's sales, respectively, in 1997. Sales
to Orange Personal Communications Ltd., WinStar, Bosch Telecom GmbH, Ericsson
Limited and ART accounted for approximately 18%, 12%, 11%, 11% and 11% of the
Company's sales, respectively, in 1996. As of December 31, 1997, seven customers
accounted for over 64% of the Company's backlog scheduled for shipment in the
twelve months subsequent to December 31, 1997. The Company anticipates that it
will continue to sell its products and services to a changing but still
relatively small group of customers. Several of the Company's subsidiaries are
dependent on one or a few customers. Some companies implementing new networks
are at early stages of development and may require additional capital to fully
implement their planned networks. The Company's ability to achieve sales in the
future will depend in significant part upon its ability to obtain and fulfill
orders from, maintain relationships with and provide support to existing and new
customers, to manufacture systems in volume on a timely and cost-effective basis
and to meet stringent customer performance and other requirements and shipment
delivery dates, as well as the condition, working capital availability and
success of its customers. As a result, any cancellation, reduction or delay in
orders by or shipments to any customer, as a result of manufacturing or supply
difficulties or otherwise, or the inability of any customer to finance its
purchases of the Company's products or services, as has been the case with
certain customers historically, may materially adversely affect the Company's
business, financial condition and results of operations. In addition, financial
difficulties of any existing or potential customers may limit the overall demand
for the Company's products and services (for example, certain potential
customers in the telecommunications industry have been reported to have
undergone financial difficulties and may therefore limit their future orders).
In addition, acquisitions in the communications industry are common, which
further concentrates the customer base and may cause orders to be delayed or
cancelled. There can be no assurance that the Company's sales will increase in
the future or that the Company will be able to support or attract customers.
27.
<PAGE>
ACQUISITIONS
Since April 1996, the Company has acquired eight complementary companies
and businesses. Integration of these companies into the Company's business is
currently ongoing, and no assurance may be made that the Company will be able to
successfully complete this process. Risks commonly encountered in such
transactions include the difficulty of assimilating the operations and personnel
of the combined companies, the potential disruption of the Company's ongoing
business, the inability to retain key technical and managerial personnel, the
inability of management to maximize the financial and strategic position of the
Company through the integration of acquired businesses, additional expenses
associated with amortization of acquired intangible assets, dilution of existing
stockholders, the maintenance of uniform standards, controls, procedures, and
policies, the impairment of relationships with employees and customers as a
result of any integration of new personnel, risks of entering markets in which
the Company has no or limited direct prior experience, and operating companies
in different geographical locations with different cultures. All of the
Company's acquisitions to date (the "Acquisitions"), except the acquisitions of
CRC, RT Masts, and Telematics have been accounted for under the purchase method
of accounting, and as a result, a significant amount of goodwill is being
amortized as set forth in the Company's consolidated financial statements. This
amortization expense may have a significant effect on the Company's financial
results. There can be no assurance that the Company will be successful in
overcoming these risks or any other problems encountered in connection with such
acquisitions, or that such transactions will not materially adversely affect the
Company's business, financial condition, or results of operations.
As part of its overall strategy, the Company plans to continue to acquire
or invest in complementary companies, products or technologies and to enter into
joint ventures and strategic alliances with other companies. The Company is
currently pursuing numerous acquisitions; however, except as set forth in this
Prospectus, no material acquisition has become the subject of any definitive
agreement, letter of intent or agreement in principle. The Company is unable to
predict whether and when any prospective acquisition candidate will become
available or the likelihood that any acquisition will be completed. The Company
competes for acquisition and expansion opportunities with many entities that
have substantially greater resources than the Company. There can be no assurance
that the Company will be able to successfully identify suitable acquisition
candidates, complete acquisitions, or expand into new markets. Once integrated,
acquired businesses may not achieve comparable levels of revenues,
profitability, or productivity as the existing business of the Company or
otherwise perform as expected. In addition, as commonly occurs with mergers of
technology companies, during the pre-merger and integration phases, aggressive
competitors may undertake formal initiatives to attract customers and to recruit
key employees through various incentives. If the Company proceeds with one or
more significant acquisitions in which the consideration consists of cash, a
substantial portion of the Company's available cash could be used to consummate
the acquisitions. Many business acquisitions must be accounted for as a purchase
for financial reporting purposes. Most of the businesses that might become
attractive acquisition candidates for the Company are likely to have significant
goodwill and intangible assets, and acquisition of these businesses, if
accounted for as a purchase, would typically result in substantial amortization
of goodwill charges to the Company. The occurrence of any of these events could
have a material adverse effect on the Company's workforce, business, financial
condition and results of operations.
DEPENDENCE ON CONTRACT MANUFACTURERS; RELIANCE ON SOLE OR LIMITED SOURCES OF
SUPPLY
The Company's internal manufacturing capacity is very limited. The Company
utilizes contract manufacturers such as Remec, Inc., Sanmina Corporation, SPC
Electronics Corp., GSS Array Technology, Celeritek, Inc. and Senior Systems
Technology, Inc. to produce its systems, components and subassemblies and
expects to rely increasingly on these and other manufacturers in the future. The
Company also relies on outside vendors to manufacture certain other components
and subassemblies. There can be no assurance that the Company's internal
manufacturing capacity and that of its contract manufacturers will be sufficient
to fulfill the Company's orders. Failure to manufacture, assemble and ship
systems and meet customer demands on a timely and cost-effective basis could
damage relationships with customers and have a material adverse effect on the
Company's business, financial condition and operating results. Certain necessary
components, subassemblies and services necessary for the manufacture of the
Company's systems are obtained from a sole supplier or a limited group of
suppliers. In particular, Eltel Engineering S.r.L. and Associates, Milliwave,
Scientific Atlanta and Xilinx, Inc. each are sole source or limited source
suppliers for critical components used in the Company's radio systems.
The Company's reliance on contract manufacturers and on sole suppliers or a
limited group of suppliers and the Company's increasing reliance on contract
manufacturers and suppliers involves several risks, many of which the Company
has been experiencing, including an inability to obtain an adequate supply of
finished products and required
28.
<PAGE>
components and subassemblies, and reduced control over the price, timely
delivery, reliability and quality of finished products, components and
subassemblies. The Company does not have long-term supply agreements with most
of its manufacturers or suppliers. Manufacture of the Company's products and
certain of these components and subassemblies is an extremely complex process,
and the Company has from time to time experienced and may in the future continue
to experience problems in the timely delivery and quality of products and
certain components and subassemblies from vendors. Certain of the Company's
suppliers have relatively limited financial and other resources. Any inability
to obtain timely deliveries of components and subassemblies of acceptable
quality or any other circumstance that would require the Company to seek
alternative sources of supply, or to manufacture its finished products or such
components and subassemblies internally, could delay the Company's ability to
ship its systems, which could damage relationships with current or prospective
customers and have a material adverse effect on the Company's business,
financial condition and results of operations.
NO ASSURANCE OF SUCCESSFUL EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH
Recently, the Company has significantly expanded the scale of its
operations to support increased sales and to address critical infrastructure and
other requirements. This expansion has included the leasing of additional space,
the opening of branch offices and subsidiaries in the United Kingdom, Italy,
Germany and Singapore, the opening of design centers and manufacturing
operations throughout the world, the acquisition of a significant amount of
inventory (the Company's inventory increased from approximately $32.9 million at
December 31, 1996 to approximately $58.0 million at December 31, 1997) and
accounts receivable, recent acquisitions, significant investments in research
and development to support product development and services, including the
recently introduced products and the development of point-to-multipoint systems,
and the hiring of additional personnel in all functional areas, including in
sales and marketing, manufacturing and operations and finance, and has resulted
in significantly higher operating expenses. Currently, the Company is devoting
significant resources to the development of new products and technologies and is
conducting evaluations of these products and will continue to invest significant
additional resources in plant and equipment, inventory, personnel and other
costs, to begin production of these products and to provide the marketing and
administration, if any, required to service and support these new products.
Accordingly, there can be no assurance that gross profit margin and inventory
levels will not be adversely impacted in the future by start-up costs associated
with the initial production and installation of these new products. These start-
up costs include, but are not limited to, additional manufacturing overhead,
additional allowance for doubtful accounts, inventory and warranty reserve
requirements and the creation of service and support organizations. In addition,
the increases in inventory on hand for new product development and customer
service requirements may increase the risk of inventory write-offs. As a result,
the Company anticipates that its operating expenses will continue to increase
significantly. If the Company's sales do not correspondingly increase, the
Company's results of operations would be materially adversely affected. See "--
Limited Operating History."
Expansion of the Company's operations and its acquisitions have caused and
are continuing to impose a significant strain on the Company's management,
financial, manufacturing and other resources and have disrupted the Company's
normal business operations. The Company's ability to manage the recent and any
possible future growth, should it occur, will depend upon a significant
expansion of its manufacturing, accounting and other internal management systems
and the implementation and subsequent improvement of a variety of systems,
procedures and controls, including improvements relating to inventory control.
For a number of reasons, the Company has not been able to fully consolidate and
integrate the operations of certain acquired businesses. This inability may
cause inefficiencies, additional operational complexities and expenses and
greater risks of billing delays, inventory write-offs and financial reporting
difficulties. The Company must establish and improve a variety of systems,
procedures and controls to more efficiently coordinate its activities in its
acquired (and to be acquired) companies and their facilities in Rome and Milan,
Italy, France, Poland, the United Kingdom, New Jersey, Florida, Virginia and
elsewhere. There can be no assurance that significant problems in these areas
will not re-occur. Any failure to expand these areas and implement and improve
such systems, procedures and controls, including improvements relating to
inventory control, in an efficient manner at a pace consistent with the
Company's business could have a material adverse effect on the Company's
business, financial condition and results of operations. In particular, the
Company must successfully manage the transition to higher internal and external
volume manufacturing, including the establishment of adequate facilities, the
control of overhead expenses and inventories, the development, introduction,
marketing and sales of new products, the management and training of its employee
base, the integration and coordination of a geographically and ethnically
diverse group of employees and the monitoring of its third party manufacturers
and suppliers. Although the Company has substantially increased the number of
its manufacturing personnel and significantly expanded its internal and external
manufacturing capacity, there can be no assurance that the
29.
<PAGE>
Company will not experience manufacturing or other delays or problems that could
materially adversely affect the Company's business, financial condition or
results of operations.
In this regard, any significant sales growth will be dependent in
significant part upon the Company's expansion of its marketing, sales,
manufacturing and customer support capabilities. This expansion will continue to
require significant expenditures to build the necessary infrastructure. There
can be no assurance that the Company's attempts to expand its marketing, sales,
manufacturing and customer support efforts will be successful or will result in
additional sales or profitability in any future period. As a result of the
expansion of its operations and the significant increase in its operating
expenses, as well as the difficulty in forecasting revenue levels, the Company
will continue to experience significant fluctuations in its revenues, costs, and
gross margins, and therefore its results of operations.
LIMITED OPERATING HISTORY
P-Com was founded in August 1991 and was in the development stage until
October 1993 when it began commercial shipments of its first product. From
inception to the end of fiscal 1997, the Company generated a cumulative net
profit of approximately $18.4 million. From October 1993 through December 31,
1997, the Company generated sales of approximately $454.9 million, of which
$220.7 million, or 49% of such amount, was generated in the year ended December
31, 1997. The Company does not believe recent growth rates are indicative of
future operating results. Due to the Company's limited operating history and
limited resources, among other factors, there can be no assurance that
profitability or significant revenues on a quarterly or annual basis will occur
in the future. During both 1996 and 1997, both the Company's sales and operating
expenses increased more rapidly than the Company had anticipated. There can be
no assurance that the Company's revenues will continue to remain at or increase
from the levels experienced in 1996 or 1997 or that sales will not decline. The
Company intends to continue to invest significant amounts in its operations,
particularly to support product development and the marketing and sales of
recently introduced products, and operating expenses will continue to increase
significantly in absolute dollars. If the Company's sales do not correspondingly
increase, the Company's results of operations would be materially adversely
affected. Accordingly, there can be no assurance that the Company will achieve
profitability in future periods. The Company is subject to all of the risks
inherent in the operation of a new business enterprise, and there can be no
assurance that the Company will be able to successfully address these risks.
DECLINING AVERAGE SELLING PRICES
The Company believes that average selling prices and gross margins for its
systems and services will decline in the long term as such systems mature, as
volume price discounts in existing and future contracts take effect and as
competition intensifies, among other factors. To offset declining average
selling prices, the Company believes that it must successfully introduce and
sell new systems on a timely basis, develop new products that incorporate
advanced software and other features that can be sold at higher average selling
prices and reduce the costs of its systems through contract manufacturing,
design improvements and component cost reduction, among other actions. To the
extent that new products are not developed in a timely manner, do not achieve
customer acceptance or do not generate higher average selling prices, and the
Company is unable to offset declining average selling prices, the Company's
gross margins will decline, and such decline will have a material adverse effect
on the Company's business, financial condition and results of operations.
TRADE ACCOUNT RECEIVABLES
The Company is subject to credit risk in the form of trade account
receivables. The Company may in certain circumstances be unable to enforce a
policy of receiving payment within a limited number of days of issuing bills,
especially in the case of customers that are in the early phases of business
development. In addition, many of the Company's foreign customers are granted
longer terms than those typically existing in the United States. The Company has
experienced difficulties in the past in receiving payment in accordance with the
Company's policies, particularly from customers awaiting financing to fund their
expansion and from customers outside of the United States and the days
outstanding of receivables have increased recently. There can be no assurance
that such difficulties will not continue in the future, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company typically does not require collateral or
other security to support customer receivables. The Company has in the past and
may from time to time in the future sell its receivables, as part of an overall
customer financing program, with immaterial recourse to the Company. There can
be no assurance that the Company will be able to locate parties to purchase such
receivables on acceptable terms, or at all. See "--Significant Fluctuations in
Results of Operations" and "--International Operations; Risks of Doing Business
in Developing Countries."
30.
<PAGE>
NO ASSURANCE OF PRODUCT QUALITY, PERFORMANCE AND RELIABILITY
The Company has limited experience in producing and manufacturing its systems
and contracting for such manufacture. The Company's customers require very
demanding specifications for quality, performance and reliability. There can be
no assurance that problems will not occur in the future with respect to the
quality, performance and reliability of the Company's systems or related
software tools. If such problems occur, the Company could experience increased
costs, delays in or cancellations or reschedulings of orders or shipments,
delays in collecting accounts receivable and product returns and discounts, any
of which would have a material adverse effect on the Company's business,
financial condition or results of operations. In addition, in order to maintain
its ISO 9001 registration, the Company periodically must undergo a
recertification assessment. Failure to maintain such registration could
materially adversely affect the Company's business, financial condition and
results of operations. The Company completed ISO 9001 registration for its
United Kingdom sales and customer support facility, its Geritel facility in
Italy in 1996, and its Technosystem facility in Italy in 1997 and other
facilities will also be attempting ISO 9001 registration. There can be no
assurance that such registration will be achieved.
UNCERTAINTY OF MARKET ACCEPTANCE
The future operating results of the Company depend to a significant extent
upon the continued growth and increased availability and acceptance of
microcellular, PCN/PCS and wireless local loop access telecommunications
services in the United States and internationally. There can be no assurance
that the volume and variety of wireless telecommunications services or the
markets for and acceptance of such services will continue to grow, or that such
services will create a demand for the Company's systems. Because these markets
are relatively new, it is difficult to predict which segments of these markets
will develop and at what rate these markets will grow, if at all. If the short-
haul millimeter wave or spread spectrum microwave wireless radio market and
related services for the Company's systems fails to grow, or grows more slowly
than anticipated, the Company's business, financial condition and results of
operations would be materially adversely affected. In addition, the Company has
invested a significant amount of time and resources in the development of point-
to-multipoint radio systems. Should the point-to-multipoint radio market fail to
develop, or should the Company's products fail to gain market acceptance, the
Company's business, financial condition and results of operations could be
materially adversely affected. Certain sectors of the communications market will
require the development and deployment of an extensive and expensive
communications infrastructure. In particular, the establishment of PCN/PCS
networks will require very large capital expenditures. There can be no assurance
that communications providers have the ability to or will make the necessary
investment in such infrastructure or that the creation of this infrastructure
will occur in a timely manner. Moreover, one potential application of the
Company's technology, use of the Company's systems in conjunction with the
provision by wireless telecommunications service providers of alternative
wireless access in competition with the existing wireline local exchange
providers, is dependent on the pricing of wireless telecommunications services
at rates competitive with those charged by wireline telephone companies. Rates
for wireless access are currently substantially higher than those charged by
wireline companies, and there can be no assurance that rates for wireless access
will generally be competitive with rates charged by wireline companies. If
wireless access rates are not competitive, consumer demand for wireless access
will be materially adversely affected. If the Company allocates its resources to
any market segment that does not grow, it may be unable to reallocate its
resources to other market segments in a timely manner, which may curtail or
eliminate its ability to enter such market segments.
Certain of the Company's current and prospective customers are currently
delivering products and technologies which utilize competing transmission media
such as fiber optic and copper cable, particularly in the local loop access
market. To successfully compete with existing products and technologies, the
Company must, among many actions, offer systems with superior price/performance
characteristics and extensive customer service and support, supply such systems
on a timely and cost-effective basis in sufficient volume to satisfy such
prospective customers' requirements and otherwise overcome any reluctance on the
part of such customers to transition to new technologies. Any delay in the
adoption of the Company's systems may result in prospective customers utilizing
alternative technologies in their next generation of systems and networks, which
would have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that prospective
customers will design their systems or networks to include the Company's
systems, that existing customers will continue to include the Company's systems
in their products, systems or networks in the future, or that the Company's
technology will to any significant extent replace existing technologies and
achieve widespread acceptance in the wireless telecommunications market. Failure
to achieve or sustain commercial acceptance of the Company's currently available
radio systems or to develop other commercially acceptable radio systems would
materially adversely affect the Company's business, financial condition and
results of operations. In addition, there can be no assurance that industry
technical standards will remain the same or, if emerging
31.
<PAGE>
standards become established, that the Company will be able to conform to these
new standards in a timely and cost-effective manner.
INTENSELY COMPETITIVE INDUSTRY
The wireless communications market is intensely competitive. The Company's
wireless-based radio systems compete with other wireless telecommunications
products and alternative telecommunications transmission media, including copper
and fiber optic cable. The Company has experienced increasingly intense
competition worldwide from a number of leading telecommunications companies that
offer a variety of competitive products and services and broader
telecommunications product lines, including Adtran, Inc., Alcatel Network
Systems, California Microwave, Inc., Digital Microwave Corporation, Ericsson
Limited, Harris Corporation-Farinon Division, Innova International Corp., Larus
Corporation, Nokia Telecommunications, Philips T.R.T. and Western Multiplex
Corporation, many of which have substantially greater installed bases, financial
resources and production, marketing, manufacturing, engineering and other
capabilities than the Company. The Company faces actual and potential
competition not only from these established companies, but also from start-up
companies that are developing and marketing new commercial products and
services. The Company may also face competition in the future from new market
entrants offering competing technologies. In addition, the Company's current and
prospective customers and partners, certain of which have access to the
Company's technology or under some circumstances are granted the right to use
the technology for purposes of manufacturing, have developed, are currently
developing or could develop the capability to manufacture products competitive
with those that have been or may be developed or manufactured by the Company.
The Company's results of operations may depend in part upon the extent to which
these customers elect to purchase from outside sources rather than develop and
manufacture their own radio systems. There can be no assurance that such
customers will rely on or expand their reliance on the Company as an external
source of supply for their radio systems. The principal elements of competition
in the Company's market and the basis upon which customers may select the
Company's systems include price, performance, software functionality, ability to
meet delivery requirements and customer service and support. Recently, certain
of the Company's competitors have announced the introduction of competitive
products, including related software tools and services, and the acquisition of
other competitors and competitive technologies. The Company expects its
competitors to continue to improve the performance and lower the price of their
current products and services and to introduce new products and services or new
technologies that provide added functionality and other features. New product
and service offerings and enhancements by the Company's competitors could cause
a significant decline in sales or loss of market acceptance of the Company's
systems, or make the Company's systems, services or technologies obsolete or
noncompetitive. The Company has experienced significant price competition, and
expects such competition to intensify, which may materially adversely affect its
gross margins and its business, financial condition and results of operations.
The Company believes that to be competitive, it will continue to be required to
expend significant resources on, among other items, new product development and
enhancements. In marketing its systems and services, the Company will face
competition from vendors employing other technologies and services that may
extend the capabilities of their competitive products beyond their current
limits, increase their productivity or add other features. There can be no
assurance that the Company will be able to compete successfully in the future.
REQUIREMENT FOR RESPONSE TO RAPID TECHNOLOGICAL CHANGE AND REQUIREMENT FOR
FREQUENT NEW PRODUCT INTRODUCTIONS
The communications market is subject to rapid technological change, frequent
new product introductions and enhancements, product obsolescence, changes in
end-user requirements and evolving industry standards. The Company's ability to
be competitive in this market will depend in significant part upon its ability
to successfully develop, introduce and sell new systems and enhancements and
related software tools, including its point-to-multipoint systems currently
under development, on a timely and cost-effective basis that respond to changing
customer requirements. Recently, the Company has been developing point-to-
multipoint radio systems. Any success of the Company in developing new and
enhanced systems, including its point-to-multipoint systems currently under
development, and related software tools will depend upon a variety of factors,
including new product selection, integration of the various elements of its
complex technology, timely and efficient completion of system design, timely and
efficient implementation of manufacturing and assembly processes and its cost
reduction program, development and completion of related software tools, system
performance, quality and reliability of its systems and development and
introduction of competitive systems by competitors. The Company has experienced
and is continuing to experience delays from time to time in completing
development and introduction of new systems and related software tools,
including products acquired in the acquisitions. Moreover, there can be no
assurance that the Company will be successful in selecting, developing,
manufacturing and marketing new systems or enhancements or related software
tools. There can be no assurance that errors will not be
32.
<PAGE>
found in the Company's systems after commencement of commercial shipments, which
could result in the loss of or delay in market acceptance, as well as
significant expenses associated with re-work of previously delivered equipment.
The inability of the Company to introduce in a timely manner new systems or
enhancements or related software tools that contribute to sales could have a
material adverse effect on the Company's business, financial condition and
results of operations.
INTERNATIONAL OPERATIONS; RISKS OF DOING BUSINESS IN DEVELOPING COUNTRIES
Most of the Company's sales to date have been made to customers located
outside of the United States. In addition, to date, the Company has acquired two
Italy-based companies and two United Kingdom-based companies and the acquisition
of a company with substantial international operations is currently pending.
These companies currently sell their products and services primarily to
customers in Europe, the Middle East and Africa. The Company anticipates that
international sales will continue to account for a majority of its sales for the
foreseeable future. Historically the Company's international sales have been
denominated in British pounds sterling or United States currencies. With recent
acquisitions of foreign companies, certain of the Company's international sales
may be denominated in other foreign currencies. A decrease in the value of
foreign currencies relative to the United States dollar could result in losses
from transactions denominated in foreign currencies. With respect to the
Company's international sales that are United States dollar-denominated, such a
decrease could make the Company's systems less price-competitive and could have
a material adverse effect upon the Company's business, financial condition and
results of operations. The Company has in the past mitigated its currency
exposure to the British pound sterling through hedging measures. However, any
future hedging measures may be limited in their effectiveness with respect to
the British pound sterling and other foreign currencies. Additional risks
inherent in the Company's international business activities include changes in
regulatory requirements, costs and risks of localizing systems in foreign
countries, delays in receiving components and materials, availability of
suitable export financing, timing and availability of export licenses, tariffs
and other trade barriers, political and economic instability, difficulties in
staffing and managing foreign operations, branches and subsidiaries,
difficulties in managing distributors, potentially adverse tax consequences,
foreign currency exchange fluctuations, the burden of complying with a wide
variety of complex foreign laws and treaties and the difficulty in accounts
receivable collections. Many of the Company's customer purchase and other
agreements are governed by foreign laws, which may differ significantly from
U.S. laws. Therefore, the Company may be limited in its ability to enforce its
rights under such agreements and to collect damages, if awarded. There can be no
assurance that any of these factors will not have a material adverse effect on
the Company's business, financial condition and results of operations.
International telephone companies are in many cases owned or strictly
regulated by local regulatory authorities. Access to such markets is often
difficult due to the established relationships between a government owned or
controlled telephone company and its traditional indigenous suppliers of
telecommunications equipment. The successful expansion of the Company's
international operations in certain markets will depend on its ability to
locate, form and maintain strong relationships with established companies
providing communication services and equipment in targeted regions. The failure
to establish regional or local relationships or to successfully market or sell
its products in international markets could significantly limit the Company's
ability to expand its operations and would materially adversely affect the
Company's business, financial condition and results of operations. The Company's
inability to identify suitable parties for such relationships, or even if such
parties are identified, to form and maintain strong relationships with such
parties could prevent the Company from generating sales of its products and
services in targeted markets or industries. Moreover, even if such relationships
are established, there can be no assurance that the Company will be able to
increase sales of its products and services through such relationships.
Some of the Company's potential markets consist of developing countries that
may deploy wireless communications networks as an alternative to the
construction of a limited wired infrastructure. These countries may decline to
construct wireless telecommunications systems or construction of such systems
may be delayed for a variety of reasons, in which event any demand for the
Company's systems in those countries will be similarly limited or delayed. In
doing business in developing markets, the Company may also face economic,
political and foreign currency fluctuations that are more volatile than those
commonly experienced in the United States and other areas.
33.
<PAGE>
EXTENSIVE GOVERNMENT REGULATION
Radio communications are subject to extensive regulation by the United States
and foreign laws and international treaties. The Company's systems must conform
to a variety of domestic and international requirements established to, among
other things, avoid interference among users of radio frequencies and to permit
interconnection of equipment. Each country has a different regulatory process.
Historically, in many developed countries, the unavailability of frequency
spectrum has inhibited the growth of wireless telecommunications networks. In
order for the Company to operate in a jurisdiction, it must obtain regulatory
approval for its systems and comply with different regulations in each
jurisdiction. Regulatory bodies worldwide are continuing the process of adopting
new standards for wireless communications products. The delays inherent in this
governmental approval process may cause the cancellation, postponement or
rescheduling of the installation of communications systems by the Company and
its customers, which in turn may have a material adverse effect on the sale of
systems by the Company to such customers. The failure to comply with current or
future regulations or changes in the interpretation of existing regulations
could result in the suspension or cessation of operations. Such regulations or
such changes in interpretation could require the Company to modify its products
and services and incur substantial costs to comply with such time-consuming
regulations and changes. In addition, the Company is also affected to the extent
that domestic and international authorities regulate the allocation and auction
of the radio frequency spectrum. Equipment to support new services can be
marketed only if permitted by suitable frequency allocations, auctions and
regulations, and the process of establishing new regulations is complex and
lengthy. To the extent PCS operators and others are delayed in deploying these
systems, the Company could experience delays in orders. Failure by the
regulatory authorities to allocate suitable frequency spectrum could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, delays in the radio frequency spectrum
auction process in the United States could delay the Company's ability to
develop and market equipment to support new services. These delays could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The regulatory environment in which the Company operates is subject to
significant change. Regulatory changes, which are affected by political,
economic and technical factors, could significantly impact the Company's
operations by restricting development efforts by the Company and its customers,
making current systems obsolete or increasing the opportunity for additional
competition. Any such regulatory changes, including changes in the allocation of
available spectrum, could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company might deem
it necessary or advisable to modify its systems and services to operate in
compliance with such regulations. Such modifications could be extremely
expensive and time-consuming.
FUTURE CAPITAL REQUIREMENTS
The Company's future capital requirements will depend upon many factors,
including the development of new products and related software tools, potential
acquisitions, requirements to maintain adequate manufacturing facilities and
contract manufacturing agreements, the progress of the Company's research and
development efforts, expansion of the Company's marketing and sales efforts, and
the status of competitive products. There can be no assurance that additional
financing will be available to the Company on acceptable terms, or at all. As a
result of the issuance of the Notes (as defined below), the Company may be
limited in its ability to raise additional debt financing. If additional funds
are raised by issuing equity securities, further dilution to the existing
stockholders will result. If adequate funds are not available, the Company may
be required to delay, scale back or eliminate its research and development,
acquisition or manufacturing programs or obtain funds through arrangements with
partners or others that may require the Company to relinquish rights to certain
of its technologies or potential products or other assets. Accordingly, the
inability to obtain such financing could have a material adverse effect on the
Company's business, financial condition and results of operations.
UNCERTAINTY REGARDING PROTECTION OF PROPRIETARY RIGHTS
The Company relies on a combination of patents, trademarks, trade secrets,
copyrights and a variety of other measures to protect its intellectual property
rights. The Company generally enters into confidentiality and nondisclosure
agreements with its service providers, customers and others, and attempts to
limit access to and distribution of its proprietary rights. The Company also
enters into software license agreements with its customers and others. However,
there can be no assurance that such measures will provide adequate protection
for the Company's trade secrets or other proprietary information, that disputes
with respect to the ownership of its intellectual property rights will not
arise, that the Company's trade secrets or proprietary technology will not
otherwise become known or be independently developed by competitors or that the
Company can otherwise meaningfully protect its intellectual property rights.
There can be no
34.
<PAGE>
assurance that any patent owned by the Company will not be invalidated,
circumvented or challenged, that the rights granted thereunder will provide
competitive advantages to the Company or that any of the Company's pending or
future patent applications will be issued with the scope of the claims sought by
the Company, if at all. Furthermore, there can be no assurance that others will
not develop similar products or software, duplicate the Company's products or
software or design around the patents owned by the Company or that third parties
will not assert intellectual property infringement claims against the Company.
In addition, there can be no assurance that foreign intellectual property laws
will adequately protect the Company's intellectual property rights abroad. The
failure of the Company to protect its proprietary rights could have a material
adverse effect on its business, financial condition and results of operations.
Litigation may be necessary to enforce the Company's patents, copyrights and
other intellectual property rights, to protect the Company's trade secrets, to
determine the validity of and scope of the proprietary rights of others or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, financial condition and results of
operations. There can be no assurance that infringement, invalidity, right to
use or ownership claims by third parties or claims for indemnification resulting
from infringement claims will not be asserted in the future or that such
assertions will not materially adversely affect the Company's business,
financial condition and results of operations. If any claims or actions are
asserted against the Company, the Company may seek to obtain a license under a
third party's intellectual property rights. There can be no assurance, however,
that a license will be available under reasonable terms or at all. In addition,
should the Company decide to litigate such claims, such litigation could be
extremely expensive and time consuming and could materially adversely affect the
Company's business, financial condition and results of operations, regardless of
the outcome of the litigation.
DEPENDENCE ON KEY PERSONNEL
The Company's future operating results depend in significant part upon the
continued contributions of its key technical and senior management personnel,
many of whom would be difficult to replace. The Company's future operating
results also depend in significant part upon its ability to attract and retain
qualified management, manufacturing, quality assurance, engineering, marketing,
sales and support personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be successful in attracting or
retaining such personnel. There may be only a limited number of persons with the
requisite skills to serve in these positions and it may be increasingly
difficult for the Company to hire such personnel over time. The loss of any key
employee, the failure of any key employee to perform in his or her current
position, the Company's inability to attract and retain skilled employees as
needed or the inability of the officers and key employees of the Company to
expand, train and manage the Company's employee base could materially adversely
affect the Company's business, financial condition and results of operations.
The Company has experienced and may continue to experience employee turnover
due to several factors, including an expanding economy within the geographic
area in which the Company maintains its principal business offices, making it
more difficult for the Company to retain its employees. Due to this and other
factors, the Company has experienced and may continue to experience high levels
of employee turnover, which could adversely impact the Company's business,
financial condition and results of operations. The Company is presently
addressing these issues and will pursue solutions designed to retain its
employees and to provide performance incentives.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and/or software used by many companies may need
to be upgraded to comply with such "Year 2000" requirements. The Company has
commenced, for all its information systems and software contained in the
products it sells, a year 2000 date conversion project to address necessary code
changes, testing and implementation. Significant uncertainty exists concerning
the potential effects associated with such compliance. The Company expects such
modifications will be made on a timely basis and does not believe that the cost
of such modifications will have a material effect on the Company's operating
results. There can be no assurance, however, that the Company and/or its vendors
will be able to modify timely and successfully such products, services and
systems to comply with year 2000 requirements, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
35.
<PAGE>
SUBSTANTIAL LEVERAGE
In connection with the initial private placement of promissory notes due 2002
(the "Notes") in November 1997, the Company incurred $100 million of
indebtedness. As a result, the Company's total indebtedness and stockholders'
equity, as of December 31, 1997, was approximately $101.7 million and
approximately $148.3 million, respectively. The Company's ability to make
scheduled payments of the principal of, or interest on, its indebtedness will
depend on its future performance, which is subject to economic, financial,
competitive and other factors beyond its control.
LIMITATIONS ON DIVIDENDS
Since its incorporation in 1991, the Company has not declared or paid cash
dividends on its Common Stock, and the Company anticipates that any future
earnings will be retained for investment in its business. Any payment of cash
dividends in the future will be at the discretion of the Company's Board of
Directors and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, extent of indebtedness and
contractual restrictions with respect to the payment of dividends.
VOLATILITY OF STOCK PRICE
The Company believes that factors such as announcements of developments
related to the Company's business, announcements of technological innovations or
new products or enhancements by the Company or its competitors, developments in
the Asia/Pacific region, sales by competitors, including sales to the Company's
customers, sales of the Company's Common Stock into the public market, including
by members of management, developments in the Company's relationships with its
customers, partners, lenders, distributors and suppliers, shortfalls or changes
in revenues, gross margins, earnings or losses or other financial results that
differ from analysts' expectations (as recently experienced upon announcement of
third quarter results), regulatory developments, fluctuations in results of
operations and general conditions in the Company's market or the markets served
by the Company's customers or the economy, could cause the price of the
Company's Common Stock to fluctuate, perhaps substantially. In recent years the
stock market in general, and the market for shares of small capitalization and
technology stocks in particular, have experienced extreme price fluctuations,
which have often been unrelated to the operating performance of affected
companies. Many companies in the telecommunications industry, including the
Company, have recently experienced historic highs in the market price of their
Common Stock. There can be no assurance that the market price of the Company's
Common Stock will not decline substantially from its historic highs, or
otherwise continue to experience significant fluctuations in the future,
including fluctuations that are unrelated to the Company's performance. Such
fluctuations could materially adversely affect the market price of the Company's
Common Stock.
GLOBAL MARKET RISKS
Countries in the Asia/Pacific region have recently experienced weaknesses in
their currency, banking and equity markets. These weaknesses could adversely
affect demand for the Company's products, the availability and supply of product
components to the Company and, ultimately, the Company's consolidated results of
operations.
CONTROL BY EXISTING STOCKHOLDERS; EFFECTS OF CERTAIN ANTI-TAKEOVER PROVISIONS
Members of the Board of Directors and the executive officers of the Company,
together with members of their families and entities that may be deemed
affiliates of or related to such persons or entities, beneficially own
approximately 5% of the outstanding shares of Common Stock of the Company.
Accordingly, these stockholders are able to influence the election of the
members of the Company's Board of Directors and influence the outcome of
corporate actions requiring stockholder approval, such as mergers and
acquisitions. This level of ownership, together with the Company's stockholder
rights agreement, certificate of incorporation, equity incentive plans, bylaws
and Delaware law, may have a significant effect in delaying, deferring or
preventing a change in control of the Company and may adversely affect the
voting and other rights of other holders of Common Stock. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company. Although the Company has no present plans to issue shares
of preferred stock, the Board of Directors has pre-approved the terms of a
Series A Junior Participating Preferred Stock that may be issued pursuant to the
stockholder rights agreement upon the occurrence of certain triggering events.
In general, the stockholder rights agreement provides a mechanism by which the
Board of Directors and stockholders may act to substantially dilute the share
position of any takeover bidder that acquires 15% or more of the Common Stock.
36.
<PAGE>
POSSIBLE ADVERSE EFFECT ON MARKET PRICE FOR COMMON STOCK OF SHARES ELIGIBLE FOR
FUTURE SALE
Sales of the Company's Common Stock into the market could materially
adversely affect the market price of the Company's Common Stock. Shares of
Common Stock sold in the initial public offering in March 1995 and follow-on
offerings in August 1995 and May 1996, 1,014,366 shares registered on a shelf
registration statement on Form S-3 effective in February 1998 covering shares of
Common Stock issued in the acquisitions of RT Masts and Telematics, 2,134,590
shares registered on a shelf registration statement on Form S-3 effective in
July 1997 covering shares of Common Stock issued in the acquisitions of Columbia
Spectrum Management L.P. and CRC, 140,000 shares issued in connection with the
acquisition of Atlantic Communication Sciences, Inc., and option shares
registered on the Company's registration statements covering employee
compensation plans are also, or will be in the near future, eligible for
immediate and unrestricted sale in the public market at any time. Substantially
all of the other shares of the Company's Common Stock are not restricted and are
freely tradeable in the public market.
37.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
P-COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants................................................. 39
Consolidated Balance Sheets at December 31, 1997 and 1996......................... 40
Consolidated Statements of Operations for the years ended December 31, 1997,
1996, and 1995................................................................... 41
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1997, 1996, and 1995............................................................. 42
Consolidated Statements of Cash Flows for the years ended December 31, 1997,
1996 and 1995.................................................................... 43
Notes to Consolidated Financial Statements........................................ 44
</TABLE>
38.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF P-COM, INC.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of P-COM, Inc.
and its subsidiaries at December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
San Jose, California
January 22, 1998 (except for Note 10
which is as of March 28, 1998)
39.
<PAGE>
P-COM, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA AND PER SHARE DATA)
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 88,145 $ 42,226
Accounts receivable, net of allowance for doubtful
accounts of $2,521 in 1997 and $580 in 1996 70,883 48,804
Notes receivable 205 2,013
Inventory 58,003 32,947
Prepaid expenses 12,329 6,261
------------ ------------
Total current assets 229,565 132,251
Property and equipment, net 32,313 20,585
Goodwill and other assets 43,643 2,616
------------ ------------
$305,521 $155,452
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,043 $ 27,633
Accrued employee benefits 3,930 1,378
Other accrued liabilities 6,255 7,819
Income taxes payable 6,409 2,494
Notes payable 293 2,116
------------ ------------
Total current liabilities 54,930 41,440
------------ ------------
Long-term debt 101,690 914
------------ ------------
Minority interest 604 619
------------ ------------
Commitments (Note 8)
Stockholders' equity:
Preferred stock, $0.0001 par value, 2,000,000 shares
authorized; no shares outstanding -- --
Common Stock, $0.0001 par value; 95,000,000 shares
authorized; 42,664,077 and 40,837,206 shares
issued and outstanding at December 31, 1997 and
1996, respectively 4 4
Additional paid-in capital 131,735 112,913
Retained earnings (accumulated deficit) 18,380 (511)
------------ ------------
Cumulative translation adjustment (1,822) 73
Total stockholders' equity 148,297 112,479
------------ ------------
$305,521 $155,452
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
40.
<PAGE>
P-COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
----------- ----------- ------------
<S> <C> <C> <C>
Sales $220,702 $120,953 $64,463
Cost of sales 129,235 74,058 37,456
----------- ----------- ------------
Gross profit 91,467 46,895 27,007
----------- ----------- ------------
Operating expenses:
Research and development 29,127 20,163 12,284
Selling and marketing 15,696 7,525 4,837
General and administrative 16,948 10,283 5,573
----------- ----------- ------------
Total operating expenses 61,771 37,971 22,694
----------- ----------- ------------
Income from operations 29,696 8,924 4,313
Interest and other income, net 247 906 167
----------- ----------- ------------
Income before income taxes 29,943 9,830 4,480
Provision for income taxes 11,052 956 761
----------- ----------- ------------
Net income $ 18,891 $ 8,874 $ 3,719
=========== =========== ============
Net income per share:
Basic $ 0.45 $ 0.23 $ 0.11
=========== =========== ============
Diluted $ 0.43 $ 0.22 $ 0.11
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
41.
<PAGE>
P-COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RETAINED
ADDITIONAL EARNINGS CUMULATIVE
PREFERRED STOCK COMMON STOCK PAID-IN (ACCUMULATED TRANSLATION
-------------------- ------------------
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT) ADJUSTMENT
------- ------ ------ ------ ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 19,206,344 $ 2 5,846,052 $ -- $ 19,144 $ (13,119) $ --
Issuance of Common Stock in public stock
offerings, net of issuance cost -- -- 9,260,000 1 36,950 -- --
Conversion of Preferred Stock into Common
Stock upon initial public offering (19,206,344) (2) 19,206,344 2 -- -- --
Issuance of Common Stock upon exercise of
stock options and warrants, net of
repurchases -- -- 945,460 -- 71 -- --
Issuance of Common Stock upon exercise of
warrants -- -- 217,304 -- -- -- --
Issuance of options and warrants in exchange
for services -- -- -- -- 284 -- --
Issuance of Common Stock under employee stock
purchase plan -- -- 51,868 -- 165 -- --
Distribution of retained earnings -- -- -- -- -- 40 --
Net income -- -- -- -- -- 3,719 --
---------- ----- ---------- ------ --------- ---------- -----------
Balance at December 31, 1995 -- -- 35,527,028 3 56,614 (9,360) --
Issuance of Common Stock in public offerings,
net of issuance costs -- -- 4,196,970 1 52,531 -- --
Issuance of Stock for the purchase of ACS -- -- 140,000 -- 1,698 -- --
Issuance of Stock upon exercise of stock
options and warrants, net of repurchases -- -- 784,408 -- 1,353 -- --
Issuance of Common Stock under employee stock
purchase plan -- -- 188,800 -- 717 -- --
Cumulative translation adjustment -- -- -- -- -- -- 73
Distribution of retained earnings (25)
Net income -- -- -- -- -- 8,874 --
---------- ----- ---------- ------ --------- ---------- -----------
Balance at December 31, 1996 -- -- 40,837,206 4 112,913 (511) 73
Conversion of shareholders' loan to equity
by Geritel -- -- -- -- 368 -- --
Issuance of Stock for the purchase of CSM -- -- 796,612 -- 14,500 -- --
Issuance of Common Stock upon exercise of
stock
options and warrants, net of repurchases -- -- 878,385 -- 2,912 -- --
Cumulative translation adjustment -- -- -- -- -- -- (1,895)
Issuance of Common Stock under employee stock
purchase plan -- -- 151,874 -- 1,042 -- --
Net income -- -- -- -- -- 18,891 --
---------- ----- ---------- ------ --------- ---------- -----------
Balance at December 31, 1997 -- $ -- 42,664,077 $ 4 $ 131,735 $ 18,380 $ (1,822)
===================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
42.
<PAGE>
P-COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 18,891 $ 8,874 $ 3,719
Adjustments to reconcile net income to net cash used in
operating activities, net of effect of acquisitions:
Depreciation 6,013 5,152 1,554
Amortization of goodwill 2,207 105 --
Change in minority interest (15) 619 --
Non-cash charges -- -- 284
Change in assets and liabilities:
Accounts receivable (19,375) (24,663) (14,301)
Notes receivable 1,808 (2,513) --
Inventory (20,807) (14,773) (13,519)
Prepaid expenses (1,698) (2,031) (3,693)
Other assets (5,097) 139 (1)
Accounts payable 4,443 14,499 6,743
Accrued employee benefits 1,967 526 12
Other accrued liabilities (4,746) 5,549 905
Income taxes payable 3,915 2,590 9
--------- --------- ---------
Net cash used in operating activities (12,494) (5,927) (18,288)
--------- --------- ---------
Cash flows from investing activities:
Acquisition of property and equipment (16,922) (14,078) (7,339)
Acquisitions, net of cash acquired (10,855) (2,714) --
--------- --------- ---------
Net cash used in investing activities (27,777) (16,792) (7,339)
--------- --------- ---------
Cash flows from financing activities:
Payments on capitalized lease obligations -- -- (1,229)
Proceeds (payments) of notes payable (12,651) 1,425 (3,091)
Proceeds from stock issuance, net of expenses 3,955 54,576 37,225
Payments of long term debt, net (719) -- --
Proceeds from convertible debt offering, net 97,500 -- --
--------- --------- ---------
Net cash provided by financing activities 88,085 56,001 32,905
--------- --------- ---------
Effect of exchange rate changes on cash (1,895) 73 --
--------- --------- ---------
Net increase in cash and cash equivalents 45,919 33,355 7,278
Cash and cash equivalents at the beginning of the period 42,226 8,871 1,593
--------- --------- ---------
Cash and cash equivalents at the end of the period $ 88,145 $ 42,226 $ 8,871
========= ========= =========
Supplemental cash flow disclosures:
Cash paid for income taxes $ 5,610 $ 217 $ 352
========= ========= =========
Cash paid for interest $ 656 $ 133 $ 171
========= ========= =========
Stock issued in connection with the acquisition of CSM & ACS $ 14,500 $ 1,698 $ --
========= ========= =========
Stock options and warrants for services $ -- $ -- $ 284
========= ========= =========
Conversion of shareholder's loan to equity by Geritel $ 368 $ -- $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
43.
<PAGE>
P-COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
P-Com, Inc. (the "Company") was incorporated in Delaware on August 23, 1991
to engage in the design, manufacture and marketing of millimeter wave radio
systems for use in the worldwide wireless telecommunications market. The Company
also markets diagnostic, maintenance and system configuration software tools
that are complementary to its radio systems.
On January 11, 1995, the Company effected a 1-for-3 reverse stock split. On
October 27, 1995, the Company effected a 2-for-1 forward stock split. On
September 25, 1997, the Company effected a 2-for-1 forward stock split. All
shares and per share amounts have been adjusted retroactively to reflect these
stock splits. In conjunction with an initial public offering of the Company's
Common Stock (the "Offering"), all outstanding shares of Preferred Stock were
converted into Common Stock at the closing of the Offering on March 9, 1995.
Effective May 29, 1997, the Company acquired Control Resources Corporation
("CRC"). Effective November 28, 1997, the Company acquired RT Masts Limited ("RT
Masts") and Telematics, Inc. ("Telematics"). These transactions were accounted
for as pooling of interests and accordingly, the consolidated financial
statements for all periods presented have included the results of the combined
companies as if they had been combined since inception.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Company's significant accounting policies:
Management's use of estimates and assumptions
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its majority-owned and wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Foreign currency translation
The functional currency of the Company's wholly-owned and majority-owned
foreign subsidiary are the local currencies. Assets and liabilities of these
subsidiaries are translated into U.S. dollars at exchange rates in effect at the
balance sheet date. Income and expense items are translated at average exchange
rates for the period. Accumulated net translation adjustments are recorded in
stockholders' equity. Foreign exchange transaction gains and losses are included
in the results of operations, and were not material in all periods presented.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. The estimated fair value of the
Company's convertible subordinated notes was $119 million at December 31, 1997.
The estimated fair value of all other financial instruments at December 31, 1997
and 1996 was not materially different from the values presented in the
consolidated balance sheets.
Cash and cash equivalents
The Company considers all highly liquid debt instruments with a maturity
when acquired of three months or less to be cash equivalents.
44.
<PAGE>
Revenue recognition
Revenue from product sales is recognized upon shipment of the product
provided no significant obligations remain and collectibility is probable.
Provisions for estimated warranty repairs, returns and allowances are recorded
at the time products are shipped.
Inventory
Inventory is stated at the lower of cost or market, cost being determined
on a first-in, first-out basis.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based upon the useful lives of the assets ranging from
three to seven years. Leasehold improvements are amortized using the straight-
line method based upon the shorter of the estimated useful lives or the lease
term of the respective assets.
Software development costs
The Company's software products are integrated into its hardware products.
Software development costs incurred prior to the establishment of technological
feasibility are expensed as incurred. Software development costs incurred
subsequent to the establishment of technological feasibility and before general
release to customers are capitalized, if material. To date, all software
development costs incurred subsequent to the establishment of technological
feasibility have been immaterial.
Goodwill
Goodwill, representing the excess of the purchase price over the fair value
of the net assets of the acquired entities, is being amortized on a straight-
line basis over the period of expected benefit ranging from five to twenty
years. The carrying value of goodwill will be reviewed periodically based on the
undiscounted cash flows of the entity acquired over the remaining amortization
period. Should this review indicate that goodwill will not be recoverable, the
Company's carrying value of the goodwill will be reduced to its discounted cash
flows value.
Impairment of long-lived assets
In the event that facts and circumstances indicate that the cost of assets
may be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the asset would be compared to the asset's carrying amount to determine if
a write-down to market value or discounted cash flow value is required.
Income taxes
The Company accounts for income taxes under the liability method, which
recognizes deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the tax bases of assets and
liabilities and their financial statement reported amounts. The measurement of
deferred tax assets is reduced, if necessary, by the amount of any tax benefits
that, based on available evidence, are not expected to be realized.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents,
and trade accounts receivable. The Company places its cash and cash equivalents
in a variety of financial instruments such as market rate accounts and U.S.
Government agency debt securities. The Company, by policy, limits the amount of
credit exposure to any one financial institution or commercial issuer.
To date, the Company has sold most of its products in international
markets. Sales to seven customers have been denominated in British pounds and at
December 31, 1997 and 1996 amounts due from these customers represented 30% and
47%, respectively, of accounts receivable. Any gains and/or losses incurred on
the settlement of these receivables are included in the financial statements as
they occur and have been immaterial to date.
The Company extends credit terms to international customers of up to 120
days, which is consistent with local business practices. The Company performs
on-going credit evaluations of its customers' financial condition and,
generally, requires no collateral from its customers.
45.
<PAGE>
At December 31, 1997 and 1996, approximately 47% and 56%, respectively, of
trade accounts receivable represents amounts due from four customers. The
Company has an agreement with a bank to sell, without recourse, certain of its
trade accounts receivable. During 1997 and 1996, the Company sold $12 million
and $4 million respectively, of its trade accounts receivable.
Off-balance sheet risk
The Company enters into foreign forward exchange contracts to reduce the
impact of currency fluctuations of anticipated sales to British customers. The
objectives of these contracts is to neutralize the impact of foreign currency
exchange rate movements on the Company's operating results. The gains and losses
on forward exchange contracts are included in earnings when the underlying
foreign currency denominated transaction is recognized.
The foreign exchange forward contracts described above generally require
the Company to sell foreign currencies for U.S. dollars at rates agreed to at
the inception of the contracts. The forward contracts generally have maturities
of six months or less. These contracts generally do not subject the Company to
significant market risk from exchange rate movements because the contracts are
designed to offset gains and losses on the balances and transactions being
hedged. At December 31, 1997 and 1996, the Company had forward contracts to sell
approximately $13.3 million and $25.0 million in British Pounds, respectively.
The fair value of forward exchange contracts approximates cost. The Company does
not anticipate any material adverse effect on its financial position resulting
from the use of these instruments.
Net income per share
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("SFAS 128"). SFAS 128 requires presentation of both
Basic EPS and Diluted EPS on the face of the income statement. Basic EPS, which
replaces primary EPS, is computed by dividing net income available to common
stockholders (numerator) by the weighted average number of common shares
outstanding (denominator) during the period. Unlike the computation of primary
EPS, Basic EPS excludes the dilutive effect of stock options. Diluted EPS
replaces fully diluted EPS and gives effect to all dilutive potential common
shares outstanding during a period. In computing Diluted EPS, the average stock
price for the period is used in determining the number of shares assumed to be
purchased from exercise of stock options rather than the higher of the average
or ending stock price as used in the computation of fully diluted EPS.
Following is a reconciliation of the numerators and denominators of the
Basic and Diluted EPS computations for the periods presented below (in
thousands):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------
- ---------------------------------------------------------------------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator for basic earnings per share - net income $ 18,891 $ 8,874 $ 3,719
- ---------------------------------------------------------------------------------------------------------------
Effect of dilutive securities:
- ---------------------------------------------------------------------------------------------------------------
Interest expense on convertible notes 397 - -
- ---------------------------------------------------------------------------------------------------------------
Numerator for diluted earnings per common share $ 19,288 $ 8,874 $ 3,719
============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------
Denominator for basic earnings per common share 42,175 38,762 32,645
- ---------------------------------------------------------------------------------------------------------------
Effect of dilutive securities:
- ---------------------------------------------------------------------------------------------------------------
Stock options and warrants 1,826 1,845 2,208
- ---------------------------------------------------------------------------------------------------------------
Convertible notes 569 - -
- ---------------------------------------------------------------------------------------------------------------
Denominator for diluted earnings per common share 44,570 40,607 34,853
============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------
Income from continuing operations before
- ---------------------------------------------------------------------------------------------------------------
extraordinary items per common share:
- ---------------------------------------------------------------------------------------------------------------
Basic $ 0.45 $ 0.23 $ 0.11
============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------
Diluted $ 0.43 $ 0.22 $ 0.11
============== ============== ==============
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
46.
<PAGE>
Stock-based Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of APB No. 25, "Accounting for Stock Issued to
Employees" and complies with the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Under APB No. 25, compensation cost
is recognized based on the difference, if any, on the date of grant between the
fair value of the Company's stock and the consideration received.
Recently issued accounting pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS 130,
"Reporting Comprehensive Income". SFAS 130 establishes the standards for
reporting comprehensive income and its components in a financial statement.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded form net income, include foreign
currency translation adjustment and unrealized gain or loss on available for
sale securities. The disclosures prescribed by the Statement must be made
beginning with the first quarter of 1998 and requires reclassification of prior
periods for comparative purposes. The Company has not yet determined the impact,
if any, of adopting this new standard.
In June 1997, the Financial Accounting Standards Board issued SFAS 131
"Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for the way companies report information about
operating segments in annual financial statements. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The disclosures prescribed by SFAS 131 are effective in 1998. In the
initial year of adoption, interim period financial reporting is not required.
The Company has not yet determined the impact, if any, of adopting this new
standard.
NOTE 2 -- BALANCE SHEET COMPONENTS (IN THOUSANDS):
<TABLE>
<CAPTION>
December 31,
1997 1996
---- ----
<S> <C> <C>
Inventory:
Raw materials $ 9,695 $ 8,681
Work-in-process 32,472 17,229
Finished goods 15,836 7,037
--------- --------
$ 58,003 $ 32,947
========= ========
Property and equipment:
Tooling and test equipment $ 31,603 $ 20,326
Computer equipment 4,950 2,754
Furniture and fixtures 4,979 2,573
Land and buildings 1,389 1,544
Construction-in-process 3,294 1,817
--------- --------
46,215 29,014
Less accumulated depreciation (13,902) (8,429)
--------- --------
$ 32,313 $ 20,585
========= ========
</TABLE>
NOTE 3 -- DEBT ARRANGEMENTS
On November 5, 1997, the Company issued $100,000,000 in 4 1/4% Convertible
Subordinated Notes (The "Notes") due November 1, 2002. The Notes are convertible
at the option of the holder into shares of the Company's Common Stock at a
conversion price of $27.46 per share at any time. The Notes are redeemable by
the Company, beginning on November 5, 2000, upon 30 days notice, subject to a
declining redemption price. Interest on the Notes will be paid semi-annually on
May 1 and November 1 of each year. The Notes are subordinated to $0.8 million of
indebtedness outstanding at December 31, 1997.
47.
<PAGE>
The Company had a revolving line-of-credit agreement, as amended and
restated on October 31, 1997, that provided for borrowings of up to $25.0
million. Borrowings under the line were unsecured and bore interest at either a
base interest rate or a variable interest rate. The agreement required the
Company to comply with certain financial covenants including the maintenance of
specified minimum ratios. On November 10, 1997 the Company paid the outstanding
balance and terminated the line of credit.
NOTE 4 -- CAPITAL STOCK:
Preferred Stock Under the Company's Restated Certificate of Incorporation,
the Company is authorized to issue 2,000,000 shares of Preferred Stock, par
value $0.0001 per share. The Board of Directors has the authority, without
action by the stockholders, to designate and issue preferred stock in one or
more series and to designate the dividend rate, voting rights and other rights,
preferences and restrictions of each series. In connection with the Stockholder
Rights Agreement described below, the Board of Directors designated 750,000 of
such shares as Series A Junior Participating Preferred Stock.
Common Stock In March 1995, the Company received net proceeds of $26.1
million from the sale of 7,820,000 shares of Common Stock in the Offering, which
was declared effective by the Securities and Exchange Commission on March 2,1
995. In September 1995, the Company received net proceeds of $10.8 million from
the sale of 1,440,000 shares of Common Stock in a follow-on public offering. In
May 1996, the Company received net proceeds of $52.5 million from the sale of
4,196,970 shares of Common Stock in a follow-on public offering. Earnings per
share for the year ended December 31, 1996 reflects the shares issued on a
weighted average computation from the date of their issuance and therefore does
not include the full dilutive effect of these shares.
STOCKHOLDER RIGHTS AGREEMENT
On September 26, 1997, the Board of Directors of the Company adopted a
Stockholder Rights Agreement (the "Agreement"). Pursuant to the Agreement,
rights (the "Rights") will be distributed as a dividend a the rate of one
preferred share purchase right on each outstanding share of its Common Stock
held by stockholders of record as of the close of business on November 3, 1997.
Each Right will entitle stockholders to buy one-hundredth of one share of Series
A Preferred at an exercise price of $125.00 upon certain events. The Rights will
expire ten (10) years from the date of the Agreement is executed by the Company
and BankBoston, N.A., the Rights agent.
The Rights will be exercisable only if a person or group acquires 15% or
more of the Company's Common Stock or announces a tender offer, the consummation
of which would result in ownership by a person or group of 15% or more of the
Company's Common Stock. If, after the Rights become exercisable, P-Com is
acquired in a merger or other business combination transaction, or sells 50% or
more of its assets or earning power, each unexercised Right will entitle its
holder to purchase, at the Right's then-current exercise price, a number of the
acquiring company's common shares having a market value at the time of twice the
Right's exercise price. In addition, if a person or group acquires 15% or more
of the Company's common Stock (or cash, other securities or property, at the
discretion of the Board of Directors) having a market value of twice the Right's
exercise price. At any time within ten days after the public announcement that a
person or group has acquired beneficial ownership of 15% of more of the
Company's Common Stock, the Board, in its sole discretion, my redeem the Rights
for $0.0001 per Right.
NOTE 5 -- ACQUISITIONS:
On February 24, 1997, the Company acquired 100% of the outstanding stock of
Technosystem S.p.A. ("Technosystem"), a Rome, Italy-based company, with
additional operations in Poland, for aggregate proceeds of $3.3 million and the
assumption of long-term debt of approximately $12.7 million in addition to other
liabilities. The Company paid $2.6 million in cash and an additional payment of
$0.7 million will be due on March 31, 1998, subject to certain indemnification
obligations of the former Technosystem security holders, as set forth in the
securities purchase agreement. Technosystem designs, manufactures and markets
equipment for transmitters and transponders for television and radio
broadcasting. The range of products include audio/video modulators, converters,
amplifiers, transponders, transmitters and microwave links.
On March 7, 1997, the Company acquired substantially all of the assets of
Columbia Spectrum Management, L.P. ("CSM"), a Vienna, Virginia-based company,
for $7.8 million in cash and 796,612 net shares of Common Stock valued at
48.
<PAGE>
approximately $14.5 million. CSM provides turnkey relocation services for
microwave paths over spectrum allocated by the Federal Communications Commission
for Personal Communications Services and other emerging technologies.
The Company accounted for its acquisitions of Technosystem and CSM based on
the purchased method of accounting. The results of these acquired entities are
included from the date of acquisition and are not material to the Company's
results of operations.
The total purchase price of the acquisitions of CSM and Technosystem was as
follows (in thousands):
<TABLE>
<CAPTION>
Technosystem CSM Total
------------ ----------- -----------
<S> <C> <C> <C>
Cash payment ....................................................... $2,600 $ 8,000 $10,600
Contingent consideration ........................................... 700 -- 700
Issuance of common stock ........................................... -- 14,500 14,500
Expenses ........................................................... 471 128 599
------ ------- -------
Total .......................................................... $3,771 $22,628 $26,399
====== ======= =======
</TABLE>
The allocation of the purchase price of the acquisitions of CSM and
Technosystem is as follows (in thousands):
<TABLE>
<CAPTION>
Technosystem CSM Total
------------------ -------------- ----------------
<S> <C> <C> <C>
Cash and cash equivalents ........................ $ 14 $ 330 $ 344
Accounts receivable .............................. 2,704 -- 2,704
Inventory ........................................ 4,196 53 4,249
Other current assets ............................. 1,870 -- 1,870
Property and equipment ........................... 597 222 819
Non-current assets ............................... 129 5 134
Intangible assets ................................ 15,775 22,228 38,003
Current liabilities assumed ...................... (8,824) (210) (9,034)
Long-term debt ................................... (12,690) -- (12,690)
------------------- --------------- -----------------
Total ...................................... $ 3,771 $22,628 $ 26,399
=================== =============== =================
</TABLE>
The unaudited pro forma combined results of operations of the Company,
Technosystem and CSM for the year ended December 31, 1997 and 1996 after giving
effect to certain pro forma adjustments are as follows (in thousands, except per
share amount):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Sales $233,412 $147,802
======== ========
Net income $ 18,031 $ 12,158
======== ========
Net income per share
Basic $ 0.43 $ 0.31
======== ========
Diluted $ 0.41 $ 0.30
======== ========
</TABLE>
The foregoing unaudited pro forma results of operations reflect one
year's amortization of goodwill for 1996 and one quarter's amortization of
goodwill for 1997 resulting from the acquisition of CSM and Technosystem.
On May 29, 1997, the Company acquired all of the outstanding shares of
capital stock of CRC a provider of integrated network access devices to network
service providers, in exchange for 1,502,956 shares of P-Com Common Stock that
were issued or are issuable to former CRC security holders in a stock-for-stock
merger. CRC, located in Fair Lawn, New Jersey, manufactures products used by the
communications industry to connect end user sites to a range of communications
services. CRC's NetPath product line enables network service providers to offer
their customers a migration path from entry-level data services to cost-
effective integrated delivery of voice, video and Internet access. The NetPath
product line also supports the network service provider's introduction of new
technologies including asynchronous transfer mode and frame relay.
On November 27, 1997, the Company acquired all of the outstanding shares of
capital stock of RT Masts, a United Kingdom-based company and Telematics, a
Virginia-based company, in exchange for 766,151 and 248,215 shares of P-Com
Common Stock, respectively. RT Masts, located in Wellingborough,
Northhamptonshire, U.K. and Telematics, located in Herndon, Virginia, supply,
install and maintain telecommunications systems and structure including antennas
covering high frequency, medium frequency and microwave systems. Both companies
manage the construction of radio system sites, construction of towers and
installation of radios and antennas at system sites.
The Company accounted for its acquisitions of CRC, RT Masts and Telematics
as pooling of interests and, therefore, all prior period financial statements
presented have been restated to present the results of the combined companies
as if they had been combined since inception. The sales and net income (loss)
shown below combine the historical sales and net income (loss) of P-Com, CRC, RT
Masts and Telematics for the years ended December 31, 1997, 1996, and 1995.
49.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Sales:
P-Com $ 202,757 $ 97,515 $ 42,805
CRC 713 4,338 10,041
RT Masts 12,035 15,472 5,168
Telematics 5,197 3,628 6,449
----------------- ----------------- ---------------
$ 220,702 $ 120,953 $ 64,463
================= ================= ===============
Net income (loss):
P-Com $ 20,375 $ 14,068 $ 2,585
CRC (1,254) (5,196) 237
RT Masts (537) 101 133
Telematics 307 (99) 764
----------------- ----------------- ---------------
$ 18,891 $ 8,874 $ 3,719
================= ================= ===============
</TABLE>
NOTE 6 -- EMPLOYEE BENEFIT PLANS:
At December 31, 1997, the Company had two stock-based compensation plans
which are described below. The Company has adopted the disclosure-only provision
of Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock Based Compensation". Accordingly, no compensation expense has been
recognized for its stock option plan or its stock purchase plan. Had
compensation costs for the Company's two stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans, consistent with the method of SFAS 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C>
Net income As reported $ 18,891 $ 8,874 $ 3,719
Pro forma $ 14,655 $ 4,883 $ 2,100
Net income per share As reported-Basic $ 0.43 $ 0.22 $ 0.11
As reported-Dilutive $ 0.45 $ 0.23 $ 0.00
Pro-forma-Basic $ 0.35 $ 0.13 $ 0.06
Pro forma-Dilutive $ 0.33 $ 0.12 $ 0.06
</TABLE>
Stock Option Plans On January 11, 1995, the Company's Board of Directors adopted
the 1995 Stock Option/Stock Issuance Plan (the "1995 Plan") as a successor to
its 1992 Stock Option Plan (the "1992 Plan"). In addition to the 3,295,888
shares of Common Stock authorized for issuance under the 1992 Plan, the 1995
Plan authorizes the Board of Directors to issue an additional 640,000 shares of
Common Stock in 1995, 1,600,000 shares of Common Stock in 1996 and 3,000,000
shares of Common Stock in 1997. As of January 11, 1995, no further option grants
or stock issuances were made under the 1992 Plan, and all option grants and
stock issuances made during the remainder of 1995 were made under the 1995 Plan.
All outstanding options under the 1992 Plan were incorporated into the 1995
Plan.
50.
<PAGE>
Options granted under the 1992 plan are generally exercisable for a period
not to exceed ten years, and generally must be issued with exercise prices not
less than 100% and 85%, for incentive and non-qualified stock options,
respectively, of the estimated fair market value of the Common Stock on the date
of grant as determined by the Board of Directors. Options granted under the 1992
Plan are exercisable immediately upon grant. Options granted under the 1992 Plan
generally vest 25% on the first anniversary from the date of grant, and ratably
each month over the remaining thirty-six month period. Unvested shares purchased
through the exercise of stock options are subject to repurchase by the Company.
The 1995 Plan contains three equity incentive programs: a Discretionary
Option Grant Program, a Stock Issuance Program for officers and employees of the
Company and independent consultants and advisors to the Company and an Automatic
Option Grant Program for non-employee members of the Company's Board of
Directors.
Options under the Discretionary Option Grant Program may be granted at not
less than 85% of the fair market value per share of Common Stock on the grant
date with exercise periods not to exceed ten years. The Plan Administrator is
authorized to issue tandem stock appreciation rights and limited stock
appreciation rights in connection with the option grants.
The Stock Issuance Program provides for the sale of Common Stock at a price
not less than 85% of fair market value. Shares may also be issued solely for
services. The administrator has discretion as to vesting provisions, including
accelerations, and may institute a loan program to assist participants with
financing stock purchases. The program also provides certain alternatives to
satisfy tax liabilities incurred by participants in connection with the program.
Under the Automatic Option Grant Program, as amended at the May 1997 Annual
Meeting of Stockholders, participants will automatically receive an option to
purchase 40,000 shares of Common Stock upon initially joining the Board of
Directors and will receive an additional automatic grant each year at each
annual stockholders' meeting for 4,000 shares. Each option will have an exercise
price per share equal to 100% of the fair market value of the Common Stock on
the grant date. The shares subject to the initial share option and the annual
4,000 share option will vest in eight successive equal quarterly installments
upon the optionee's completion of each successive 3-month period of Board
service over the 24-month period measured from the grant date.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following assumptions used
for grants in 1997, 1996 and 1995, respectively: expected volatility of 57
percent for all years; weighted average risk-free interest rates of 6.1%, 6.0%
and 6.4%, and weighted average expected lives of 3.16, 4.11 and 2.88 years.
The following table summarizes stock option activity under the Company's 1992
and 1995 Plans.
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------- ---------------------------- -----------------------------
Weighted Weighted Weighted
Shares Average Shares Average Shares Average
Exercise Exercise Exercise
Price Price Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 3,778,688 $ 7.14 2,854,872 $3.08 2,034,924 $0.24
Granted 3,317,712 16.73 2,164,500 9.97 1,742,044 5.05
Exercised (878,385) 3.31 (784,408) 1.73 (632,584) 0.12
Forfeited (211,976) 11.41 (456,276) 4.74 (289,512) 1.38
------------ ------------ ------------
Outstanding at end of year 6,006,039 12.65 3,778,688 7.14 2,854,872 3.08
============ ============ ============
Options exercisable at year-end 2,970,244 3,524,284 2,833,672
Weighted-average fair value of
options granted during the year $ 7.54 $ 4.78 $ 2.11
</TABLE>
51.
<PAGE>
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ----------------------------------
WEIGHTED-
AVERAGE
REMAINING WEIGHTED- WEIGHTED-
RANGE OF CONTRACTUAL AVERAGE AVERAGE
EXERCISE PRICES SHARES LIFE EXERCISE PRICE SHARES EXERCISE PRICE
<S> <C> <C> <C> <C> <C> <C>
$ 0.05 - 4.75 707,239 7.0 $ 2.33 678,667 $ 2.34
6.56 - 9.75 1,634,836 8.3 8.66 1,007,095 8.19
10.06 - 14.88 845,378 8.9 12.94 423,300 12.66
15.13 - 19.44 2,562,936 9.4 16.95 860,970 17.73
21.09 - 25.75 255,650 9.8 22.69 -- --
---------- -----------
6,006,039 2,970,244
========== ===========
</TABLE>
Employee Stock Purchase Plan On January 11, 1995, the Company's Board of
Directors adopted the Employee Stock Purchase Plan (the "Purchase Plan"), which
was approved by stockholders in February 1995. The Purchase Plan permits
eligible employees to purchase Common Stock at a discount through payroll
deductions during successive offering periods with a maximum duration of 24
months. Each offering period shall be divided into consecutive semi-annual
purchase periods. The price at which the Common Stock is purchased under the
Purchase Plan is equal to 85% of the fair market value of the Common Stock on
the first day of the offering period or the last day of the purchase period,
whichever is lower. The initial offering period commenced on the effectiveness
of the Offering. A total of 900,000 shares of Common Stock has been reserved for
issuance under the Purchase Plan, as amended at the May 1997 Annual Meeting of
Stockholders. Awards and terms are established by the Company's Board of
Directors. The Purchase Plan may be canceled at any time at the discretion of
the Company's Board of Directors prior to its expiration in December 2004. Under
the Plan, the Company sold 151,874, 188,800 and 51,868 shares in 1997, 1996 and
1995, respectively.
The fair value of the employees' purchase rights was estimated using the
Black-Scholes model with the following assumptions for 1997, 1996 and 1995,
respectively: expected volatility of 57 percent for all years; weighted-average
risk-free interest rates of 5.3%, 5.0% and 6.4%; and weighted-average expected
lives of 0.7, 0.7 and 1.2 years. The weighted-average fair value of those
purchase rights granted in 1997, 1996 and 1995 was $3.65, $1.55 and $1.10,
respectively.
NOTE 7 -- INCOME TAXES:
Income before income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
--- ---- ----
<S> <C> <C> <C>
Domestic $26,390 $9,962 $4,286
Foreign 3,553 (132) 194
-------- -------- --------
$29,943 $9,830 $4,480
======== ======== ========
</TABLE>
52.
<PAGE>
The provision for income taxes comprises the following (in thousands):
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 7,850 $ 2,543 $ 597
State 268 27 104
Foreign 2,920 97 60
-------- -------- -------
11,038 2,667 761
-------- -------- -------
Deferred:
Federal (217) (1,617) --
State 231 (94) --
-------- -------- -------
14 (1,711) --
-------- -------- -------
Total $11,052 $ 956 $ 761
======== ======== =======
</TABLE>
Deferred tax assets consist of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net operating loss carryforwards $ 2,032 $ 1,897 $ 3,146
Credit carryforwards 615 615 1,364
Capitalized research and development costs 156 335 482
Start-up costs 202 376 429
Reserves and other 1,339 1,000 494
-------- -------- --------
4,344 4,223 5,915
Valuation allowance (2,647) (2,512) (5,915)
-------- -------- --------
$ 1,697 $ 1,711 $ --
======== ======== ========
</TABLE>
Reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996
---- ----
<S> <C> <C>
U.S. federal statutory rate 35.0% 35.0%
State income taxes, net of federal tax benefit 1.1 6.0
Change in valuation allowance -- (36.6)
Benefit from foreign sales corporation (2.3) --
Research and development tax credit (7.3) --
Foreign income taxed at different rate 4.8 --
Other, net 5.6 5.0
-------- -------
36.9% 9.4%
======== =======
</TABLE>
NOTE 8 -- COMMITMENTS:
LEASE OBLIGATIONS
The Company leases its facilities under non-cancelable operating leases. The
leases require the Company to pay taxes, maintenance and repair costs. Future
minimum lease payments under the Company's operating leases at December 31, 1997
are as follows (in thousands):
53.
<PAGE>
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1998...................... $ 2,934
1999...................... 2,972
2000...................... 2,672
2001...................... 1,813
Thereafter................ 3,690
-------
$14,081
=======
</TABLE>
Rent expense for all operating leases was approximately$2,205,000, $1,369,000
and $467,000 in 1997, 1996, and 1995, respectively.
NOTE 9 -- GEOGRAPHIC SALES AND MAJOR CUSTOMERS:
The following is a summary of the Company's sales by geographic area:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Europe 52% 64% 78%
North America 33 33 22
Asia 9 3 --
Africa 3 -- --
Australia 1 -- --
Middle East 1 -- --
Central and South America 1 -- --
------- ------- -------
100% 100% 100%
======= ======= =======
</TABLE>
The following table summarizes the percentage of sales accounted for by the
Company's significant customers with sales of 10% or more:
<TABLE>
<CAPTION>
Year ended December 31,
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Customer A 11% 12% 14%
Customer B 16 18 14
Customer C -- 11 --
Customer D -- 11 --
Customer E -- 11 --
Customer F -- -- 10
</TABLE>
NOTE 10 -- SUBSEQUENT EVENTS:
On March 28, 1998, the Company acquired substantially all of the assets of
the Wireless Communications Group of Cylink Corporation, a Sunnyvale,
California-based company, for $46 million in cash and $14.5 million in a short-
term, non interest bearing unsecured subordinated promissory note. The Wireless
Communications Group designs, manufactures and markets spread spectrum radio
products for voice and data applications in both domestic and international
markets. Upon closing of the transaction, the Company will account for the
acquisition based on the purchase method of accounting. The Company expects to
incur acquisition expenses and a one time research and development charge of
approximately $35 million.
54.
<PAGE>
Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 June 30 March 31
1997 1997 1997 1997 1996 1996 1996 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 64,226 $ 51,473 $ 48,914 $ 38,144 $ 33,743 $ 26,432 $ 19,788 $ 17,552
Gross profit $ 27,892 $ 22,304 $ 20,537 $ 15,408 $ 14,570 $ 11,144 $ 11,388 $ 7,127
Net income $ 8,065 $ 5,096 $ 4,201 $ 3,014 $ 6,177 $ 4,149 $ 2,384 $ 1,358
Income per share:
Basic $ 0.19 $ 0.12 $ 0.10 $ 0.08 $ 0.16 $ 0.11 $ 0.07 $ 0.04
Diluted $ 0.18 $ 0.12 $ 0.10 $ 0.07 $ 0.15 $ 0.10 $ 0.06 $ 0.04
</TABLE>
The above financial information does not include the effects of the pooling-of-
interests transactions with CRC, RT Masts and Telematics, except for the effect
of CRC for the three months ended June 30, September 30 and December 31, 1997
and the effect of RT Masts and Telematics for the three months ended December
31, 1997. If those transactions had been included, the quarterly results would
have been as follows:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------------------------------------
Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 June 30 March 31
1997 1997 1997 1997 1996 1996 1996 1996
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 64,226 $ 57,191 $ 55,058 $ 44,227 $ 41,587 $ 31,780 $ 25,161 $ 22,425
Gross profit $ 27,892 $ 24,117 $ 22,683 $ 16,775 $ 16,357 $ 12,690 $ 9,672 $ 8,176
Net income $ 8,065 $ 4,036 $ 5,111 $ 1,679 $ 4,892 $ 2,827 $ 1,061 $ 94
Income per share:
Basic $ 0.19 $ 0.10 $ 0.12 $ 0.04 $ 0.12 $ 0.07 $ 0.03 $ -
Diluted $ 0.18 $ 0.09 $ 0.12 $ 0.04 $ 0.11 $ 0.07 $ 0.03 $ -
</TABLE>
ITEM 10. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
55.
<PAGE>
PART III
--------
ITEM 11. DIRECTORS AND OFFICERS OF THE REGISTRANT.
The information required by this item relating to the Company's directors
and nominees and disclosure relating to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is included under the captions "Election of
Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of
1934" in the Company's Proxy Statement for the 1998 Annual Meeting of
Stockholders and is incorporated herein by reference. The information required
by this item relating to the Company's executive officers is included under the
caption "Executive Officers" in Part I of this Form 10-K Annual Report.
ITEM 12. EXECUTIVE COMPENSATION.
The information required by this item is included under the caption
"Executive Compensation and Related Information" in the Company's Proxy
Statement for the 1998 Annual Meeting of Stockholders and is incorporated herein
by reference.
ITEM 13. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item is included under the caption
"Ownership of Securities" in the Company's Proxy Statement for the 1998 Annual
Meeting of Stockholders and is incorporated herein by reference.
ITEM 14. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is included under the caption
"Certain Transactions" in the Company's Proxy Statement for the 1998 Annual
Meeting of Stockholders and is incorporated herein by reference.
56.
<PAGE>
PART IV
-------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Annual Report on Form 10-
K:
1. Financial Statements. The following Consolidated Financial Statements of
P-COM, Inc. and its subsidiaries are included in Item 8 of this Annual
Report on Form 10-K:
Form 10K
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Report of Independent Accountants.................................. 39
Consolidated Balance Sheets at December 31, 1997 and 1996.......... 40
Consolidated Statements of Operations for the
years ended December 31, 1997, 1996 and 1995....................... 41
Consolidated Statements of Stockholders'
Equity for the years ended December 31,
1997, 1996, and 1995............................................... 42
Consolidated Statements of Cash Flows for
the years ended December 31, 1997, 1996 and 1995................... 43
Notes to Consolidated Financial Statements......................... 44
</TABLE>
Schedules have been omitted since they are either not required, are not
applicable, or the required information is shown in the financial
statements or related notes.
(b) Reports on Form 8-K
Report on Form 8-K dated September 26, 1997, regarding the Company's
adoption of a Rights Plan, as filed with the Securities and Exchange
Commission on October 14, 1997.
Report on Form 8-K on October 14, 1997, regarding the Company's press
release announcing the acquisition of RT Masts Limited, as originally filed
with the Securities and Exchange Commission on October 14, 1997.
Report on Form 8-K dated October 16, 1997, regarding the Company's press
releases announcing a proposed private placement of convertible
subordinated notes; the Company's earnings for the quarter ended September
30, 1997; an order for its Italian subsidiary, Technosystem S.p.A. to
construct a broadcast network in Papua-New Guinea valued at $20 million and
the Company's release of restated selected consolidated financial data to
reflect its merger with Control Resources Corporation, as originally filed
with the Securities and Exchange Commission on October 17, 1997.
Report on Form 8-K/A dated October 16, 1997, regarding the Consent of
Independent Accountants, as originally filed with the Securities and
Exchange Commission on October 30, 1997.
Report on Form 8-K dated November 5, 1997, regarding the Company's press
release announcing a private placement of convertible subordinated notes,
as originally filed with the Securities and Exchange Commission on November
5, 1997.
57.
<PAGE>
Report on Form 8-K dated November 10, 1997, regarding the Company's
completion of a private placement of convertible subordinated notes, as
originally filed with the Securities and Exchange Commission on November
21, 1997.
Report on Form 8-K dated November 28, 1997, regarding the Company's press
release regarding the acquisitions of Telematics, Inc. and RT Masts
Limited, as originally filed with the Securities and Exchange Commission on
December 10, 1997.
(c) Exhibits - See Exhibit list below.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
2.1(6) Agreement dated April 15, 1996, by and among the Company, Mr.
Giovanni Marciano and certain other parties named thereunder.
2.2(7) Asset Purchase Agreement dated as of August 2, 1996, by and
between the Company, Atlantic Communication Sciences, Inc. and
Edward c. Gerhardt, L. Roger Sanders, Charles W. Richards, IV,
Grover W. Brower, William M. Koos, Jr., Larry W. Koos, Koos
Technical Services, Inc., the Edward C. Gerhardt Trust. U/A dated
June 22, 1988 and the L. Roger Sanders Revocable Trust, U/A dated
June 18, 1991.
2.2A(8) Asset Purchase Agreement revised as of August 23, 1996 by and
between the Company, Atlantic Communication Sciences, Inc. and
Edward C. Gerhardt, L. Roger Sanders, Charles W. Richards, IV,
Grover W. Brower, William M. Koos, Jr., Larry W. Koos, Koos
Technical Services, Inc., the Edward C. Gerhardt Trust, U/A dated
June 22, 1988 and the L. Roger Sanders Revocable Trust, U/A dated
June 18, 1991.
2.3(19) Escrow Agreement dated November 28, 1997, by and among P-Com,
Inc., P-Com Field Services Inc., Telematics Inc. and Daniel N.
Carter.
2.4(19) Registration Rights Agreement, dated November 17, 1997, by and
among P-Com Field Services Inc., Telematics Inc. and Daniel N.
Carter.
2.5(19) Escrow Agreement, dated November 28, 1997, by and among P-Com,
Inc., P-Com Services (UK) Limited and R T Masts Limited.
2.6(19) Securities Purchase Agreement, dated November 17, 1997, by and
among P-Com, Inc., P-Com Field Services Inc., Telematics Inc. and
Daniel N. Carter.
2.7(19) Share Purchase Agreement, dated October 14, 1997, by and among P-
Com, Inc., P-Com Services (UK) Limited and R T Masts Limited.
3.2(3) Restated Certificate of Incorporation filed on March 9, 1995.
3.2A(14) Certificate of Amendment of Restated Certificate of Incorporation
filed on June 16, 1997.
3.2B(16) Certificate of Designation for the Series A Junior Participating
Preferred Stock, as filed with the Delaware Secretary of State on
October 8, 1997.
3.3(1) Bylaws of the Company.
4.1(1) Form of Common Stock Certificate. 4.2(18) Indenture, dated as of
November 1, 1997, between the Registrant and State Street Bank
and Trust Company of California, N.A., as Trustee.
4.4(18) Registration Rights Agreement, dated as of November 1, 1997 by
and among the Registrant and PaineWebber Incorporated,
BancAmerica Robertson Stephens, NationsBanc Montgomery
Securities, Inc. and Pacific Growth Equities, Inc.
4.5(17) Rights Agreement, dated as of October 1, 1997, between the
Company and BankBoston, N.A., which includes the form of
Certificate of Designation for the Series A Junior Participating
Preferred Stock as Exhibit A, the form of Right Certificate as
Exhibit B and the Summary of Rights to Purchase Preferred Shares
as Exhibit C.
*10.1(1) Purchase Order issued by AT&T Network Systems Deutschland GmbH,
dated December 7, 1994.
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
*10.2(1) Purchase Order issued by AT&T Network Systems Deutschland GmbH,
dated December 19, 1994.
*10.3(1) Master OEM Agreement dated January 1, 1995, by and between the
Company and AT&T Corp.
*10.4(1) Purchase Order issued by AT&T Network Systems Nederland BV,
dated Decemb er 9, 1994.
*10.5(1) Amendment to Purchase Order issued by AT&T Network Systems
Nederland BV, dated December 22, 1994.
*10.6(1) NSD Master Purchase Order issued by AT&T Network Systems
Deutschland GmbH, dated December 23, 1994.
*10.7(1) Purchase Agreement dated August 29, 1994, by and between the
Company and Harris Corporation -- Farinon Division.
*10.8(1) Contract for Supply of 50 GHz Radio dated June 4, 1994, by and
between the Registrant and Mercury Communications Ltd.
*10.9(1) Manufacturing Agreement dated July 13, 1994, by and between the
Company and SPC.
*10.10(1) Manufacturing Agreement dated April 20, 1994, by and between the
Company and Comptronix Corporation (assigned to Sanmina
Corporation).
*10.11(1) Agreement dated November 11, 1994, by and between the Company
and WinStar Wireless, Inc.
10.12(1) Master Lease Agreement dated November 9, 1992, by and between
the Company and Dominion; First Amendment to Master Lease
Agreement dated June 23, 1993, by and between the Company and
Dominion.
10.13(1) Master Equipment Lease entered into by and between the Company
and Phoenix Leasing Incorporated on August 10, 1994.
10.14(1) Commitment Letter dated January 10, 1995, by and between the
Company and Applied Telecommunications Technologies, Inc.
("ATTI"), including form of Master Lease to be entered into
between the Company and ATTI.
10.15D Accounts Receivable Purchase Agreement dated December 31, 1997
by and between the Company and Wells Fargo MCBC Trade Bank N.A.
10.16A(7) 1995 Stock Option/Stock Issuance Plan, including forms of
Notices of Grant of Automatic Stock Option for initial grant and
annual grants and Automatic Stock Option Agreement, as amended.
10.16B(13) 1995 Stock Option/Stock Issuance Plan, including forms of
Notices of Grant of Automatic Stock Option for initial grant and
annual grants and Automatic Stock Option Agreement, as amended.
10.17(1) Employee Stock Purchase Plan, including forms of Stock Purchase
Agreement and Enrollment/Change Form.
10.17B(13) Employee Stock Purchase Plan, as amended.
10.18(1) Form of Indemnification Agreement by and between the Company and
each of its officers and directors and a list of signatories.
10.19A Service Agreement dated December 15, 1997 by and between the
Company and Mr. George P. Roberts.
10.19B Service Agreement dated December 15, 1997 by and between the
Company and1 0.19B Mr. Michael J. Sophie.
10.19C Service Agreement dated December 15, 1997 by and between the
Company and Mr. Pier Antoniucci.
10.21(1) Real Property Lease dated December 10, 1993, by and between the
Company and Bryan T.D. Trust, pertaining to 3175 S. Winchester
Boulevard, Campbell, California 95008.
*10.22(1) Low Capacity Digital Radio Product Agreement dated February 13,
1995 by and between the Company and Siemens.
*10.22A Low Capacity Digital Radio Agreement dated February 13, 1995
band between the Company and Itatel.
</TABLE>
59.
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.23(3) Sublease dated May 1, 1995 by and between the Company and
Medallion Mortgage Company.
10.24(4) Lease dated August 4, 1995 by and between P-COM United Kingdom,
Inc. and Capital Counties plc; Rent Deposit Deed dated August 4,
1995, by and between P-Com United Kingdom, Inc. and Capital
Counties plc.
10.25(2) Underwriting Agreement dated March 2, 1995 by and between the
Company and the underwriters named therein.
10.26(5) Underwriting Agreement dated August 17, 1995 by and between the
Company and the underwriters named therein.
10.27(9) Lease dated November 11, 1995 by and between the Company, Inc.
and Johann Birkart, Internationale Spedition GmbH & Co.
10.30A(11) Loan Agreement dated March 3, 1997 by and between the Company
and Union Bank of California, N.A.
10.30B(11) Amendment dated May 7, 1997 to the Loan Agreement dated March 3,
1997 by and between the Company and Union Bank of California,
N.A.
10.30C(13) Amended and Restated Loan Agreement dated September 17, 1997 by
and between the Company and Union Bank of California, N.A.
11.1 Computation of Pro Forma Net Income (Loss) Per Share.
21.1 List of subsidiaries of the Registrant.
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
24.1 Power of Attorney (see page 63).
27 Financial Data Schedule
</TABLE>
________________
(1) Incorporated by reference to identically numbered exhibits included in the
Company's Registration Statement on Form S-1 (File No. 33-88492) declared
effective with the Securities and Exchange Commission on March 2, 1995.
(2) Incorporated by reference to Exhibit 1.1 to the Company's Registration
Statement on Form S-1 (File No. 33-88492) declared effective with the
Securities and Exchange Commission on March 2, 1995.
(3) Incorporated by reference to identically numbered exhibits included in the
Company's Registration Statement on Form S-1 (File No. 33-95392) declared
effective with the Securities and Exchange Commission on August 17, 1995.
(4) Incorporated by reference to identically numbered exhibits included in the
Company's Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on November 1, 1996.
(5) Incorporated by reference to Exhibit 1.1 to the Company's Registration
Statement on Form S-1 (File No. 33-95392) declared effective with the
Securities and Exchange Commission on August 17, 1995.
(6) Incorporated by reference to identically numbered exhibits included in the
Company's Registration Statement on Form S-3 declared effective with the
Securities and Exchange Commission on May 16, 1996 (File No. 333-3558).
(7) Incorporated by reference to identically numbered exhibits to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1996.
(8) Incorporated by reference to identically numbered exhibits to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30,
1996.
(9) Incorporated by reference to identically numbered exhibits to the Company's
Annual Report on Form 10-K for the annual period ended December 31, 1995.
60
<PAGE>
(10) Incorporated by reference to Exhibit 1.1 to the Company's Registration
Statement on Form S-3 declared effective with the Securities and Exchange
Commission on May 16, 1996 (File No. 333-3558).
(11) Incorporated by reference to identically numbered exhibits to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1996.
(12) Incorporated by reference to identically numbered exhibits to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1997.
(13) Incorporated by reference to identically numbered exhibits to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997.
(14) Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1996.
(15) Incorporated by reference to identically numbered exhibits to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 30,
1997.
(16) Incorporated by reference to Exhibit 3 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1997.
(17) Incorporated by reference to Exhibit 4 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1997.
(18) Incorporated by reference to identically numbered exhibits included in the
Company's Registration Statement on Form S-3 (File No. 333-45463) filed
with the Securities and Exchange Commission on February 2, 1998.
(19) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated December 10, 1997 as filed with the Securities and Exchange
Commission on November 28, 1997 (File No. 001-13475).
* Confidential treatment granted as to certain portions of these exhibits.
61
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March __, 1998.
P-COM, INC.
Date: March 31,1998 By: /s/ George P. Roberts
---------------------
George P. Roberts
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Date: March 31,1998 By: /s/ Michael Sophie
--------------------
Michael Sophie
Chief Financial Officer and Vice President, Finance
and Administration (Principal Financial and
Accounting Officer)
62
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints George P. Roberts and Michael Sophie and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Report on Form 10-K, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 31,1998 By /s/ George P. Roberts
------------------------------
George P. Roberts
Chairman of the Board and
Chief Executive Officer
Date: March 31, 1998 By: /s/ Michael Sophie
------------------------------
Michael Sophie
Chief Financial Officer, Vice President,
Finance and Administration
Date: March 31, 1998 By: /s/ Gill Cogan
-----------------------------
Gill Cogan
Director of the Company
Date: March 31,1998 By: /s/ John A. Hawkins
-----------------------------
John A. Hawkins
Director of the Company
Date: March 31,1998 By: /s/ M. Bernard Puckett
-----------------------------
M. Bernard Puckett
Director of the Company
Date: March 31, 1998 By: /s/ M. James J. Sobczak
------------------------------
M. James J. Sobczak
Director of the Company
63
<PAGE>
EXHIBIT 10.15D
RECEIVABLES PURCHASE AGREEMENT
THIS RECEIVABLES PURCHASE AGREEMENT (this "Agreement") dated as of December
31, 1997 by and between P-COM, INC., a Delaware corporation ("Seller"), and
WELLS FARGO HSBC TRADE BANK N.A., a national banking association ("Buyer"),
W I T N E S S E T H:
WHEREAS, Seller and Buyer desire to enter into a receivables purchase
arrangement whereby Buyer will purchase from Seller certain receivables owned by
Seller; and
WHEREAS, Seller and Buyer are willing to enter into a receivables purchase
arrangement with each other on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Seller and Buyer agree as follows:
ARTICLE 1
DEFINITIONS
-----------
The following terms shall have the respective meanings set forth below:
"Agreement" shall mean this Receivables Purchase Agreement dated as of
December 31, 1997, by and between Seller and Buyer as amended, modified or
supplemented from time to time.
"Approved Country" shall mean those countries listed in Part A of Exhibit
A.
"Approved Customers" shall mean those account debtors of Receivables
generated by Seller listed in Part B of Exhibit A.
"Approved Insurance Policy" shall mean one or more irrevocable trade credit
insurance policies or foreign credit insurance policies, in form and substance
satisfactory to Buyer in its absolute and sole discretion, which shall insure
Seller against any Buyer-approved risk or any non-payment by a Customer of any
Receivables and under which Buyer shall be the loss payee, a form of which is
attached hereto as Exhibit B.
"Average Collection Days" shall mean the number obtained by dividing the
Aggregate Collection Amounts by the Aggregate Purchased Receivables Payments
Received. If the number is not an integral number it shall be rounded up or
down, as appropriate, to the closest integral number. "Aggregate Collection
Amounts" is the sum of the Collection Amounts for all of the Purchased
Receivables Payments Received. The "Collection Amount" with respect to a
Purchased Receivables Payment Received is the amount obtained by multiplying
such Purchased Receivable Payment Received (expressed in number, not dollar,
form) by the number of days from the Purchase Date to the date that Buyer
received such Purchased Receivable Payment Received. "Purchased Receivables
Payments Received" are the payments that Buyer receives with respect to the
amounts owed by the
-1-
<PAGE>
Approved Customers with respect to the Purchased Receivables, whether such
payments are (i) the payments made by or on behalf of the Approved Customers,
(ii) the payments made with respect to the Purchased Receivables under the
Approved Insurance Policy, or (iii) the payments made by Seller hereunder with
respect to the Purchased Receivables.
"Bankruptcy Event" shall mean the occurrence of any of the following:
Seller shall generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors (or the equivalent); or any
proceeding shall be instituted by or against Seller seeking to adjudicate it a
bankrupt or insolvent (or the equivalent), or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, moratorium or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or the like, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property, or Seller shall
take any corporate action to authorize any of the actions set forth above in
this subparagraph.
"Buyer" shall mean Wells Fargo HSBC Trade Bank N.A.
"Business Day" shall mean any day that is not a Saturday, Sunday or other
day on which banks in California are required or permitted to close.
"Collateral" shall have the meaning given such term in Section 8.3 hereof.
"Customers" shall mean account debtors of Receivables.
"Dispute" shall mean any dispute, deduction, claim, offset, defense or
counterclaim of any kind relating to the Purchased Receivables, regardless of
whether the same (i) is in an amount greater than, equal to or less than the
Purchased Receivables concerned, (ii) is bona fide or not, or (iii) arises by
reason of an act of God, civil, strife, war, currency restrictions, foreign
political restrictions or regulations or any other circumstance beyond the
control of Seller or the applicable Approved Customer, provided, however, that
"Dispute" shall not mean a dispute between Buyer and Seller with respect to
their rights and obligations under this Agreement.
"Eligible Receivables" shall mean Receivables owing by Approved Customers
that are located in Approved Countries, with a term of less than one hundred
twenty (120) days and standard sales terms, that are insured for their full face
value (less deductibles and risk retention) under an Approved Insurance Policy,
the terms of which shall remain in effect through the first anniversary of the
date hereof.
"Events of Repurchase" shall have the meaning given such term in Article 9
hereof.
"Facility Letter" shall mean that certain letter agreement addressed to the
Seller from Buyer and dated December 29, 1997.
"Foreign Currency Eligible Receivables" shall mean Eligible Receivables
denominated in a currency other than the U.S. Dollar.
"Generally Accepted Accounting Principles" shall mean United States
generally accepted accounting principles as in effect from time to time.
-2-
<PAGE>
"Net Invoice Amount" shall mean the amount of the applicable Purchased
Receivable shown on the invoice for such Purchased Receivable as the total
amount payable by the Approved Customers (net of any discounts, credits or other
allowances shown on such invoice).
"Purchase Date" shall mean the date of purchase by Buyer of one or more
Eligible Receivables.
"Purchased Receivables" shall mean those Eligible Receivables which have
been sold by Seller to Buyer pursuant to the terms of this Agreement.
"Receivables" shall mean all accounts, instruments, documents, contract
rights, general intangibles, chattel paper and all other forms of obligations
owing to Seller, whether now existing or hereafter created that represent bona
fide obligations of Customers arising out of the sale and delivery of goods and
services by Seller in the ordinary course of business and all tax refunds,
proceeds of insurance and other proceeds thereof.
"Required Tax" shall mean any stamp, registration or similar transaction
tax necessary in order to ensure the legality, validity, enforceability or
admissibility in evidence of the assignment, delivery and sale of the Eligible
Receivables by Seller to Buyer.
"Sales Contracts" shall mean any and all contracts or agreements between
Approved Customers and Seller for the sale of goods or services by Seller to
Approved Customers.
"UCC" shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Buyer's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
Code in effect in such other jurisdiction for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of
definitions related to such provisions.
"U.S. Dollar" shall mean the lawful currency of the United States of
America.
"U.S. Dollar Equivalent" shall have the meaning given such term in Section
2.2 hereof.
"U.S. Dollar Equivalent Schedule" shall have the meaning given such term in
Section 2.2 hereof.
"Wells Fargo" shall mean Wells Fargo Bank N.A.
Terms defined in the UCC shall have the same meanings when used in this
Agreement unless otherwise defined herein.
ARTICLE 2
THE PURCHASE FACILITY
---------------------
2.1 The Facility. Buyer will provide a purchase facility to Seller on the
------------
terms and subject to the conditions set forth herein, up to a maximum aggregate
amount of fifteen million
-3-
<PAGE>
Dollars ($15,000,000) outstanding.
2.2 Purchase of Eligible Receivables. On the date hereof, Seller shall
--------------------------------
submit to Buyer a request to purchase particular Eligible Receivables hereunder
in a minimum amount of one million dollars ($1,000,000), together with all such
supporting documentation as Buyer shall request, including, without limitation,
in the case of Foreign Currency Eligible Receivables, a schedule ("U.S. Dollar
Equivalent Schedule") setting forth the equivalent amount in U.S. Dollars of
each such Foreign Eligible Receivable ("U.S. Dollar Equivalent"), as calculated
on the date hereof at the prevailing exchange rate agreed upon by Buyer and
Seller. Subject to Section 2.1 and upon satisfaction of the conditions
precedent set forth in Section 5.1, Seller shall assign and sell such Eligible
Receivables to Buyer as absolute owner thereof. Following the calculation of
the U.S. Dollar Equivalent on the date hereof in accordance with this Section,
Seller shall be solely responsible for any failure of Buyer to receive the U.S.
Dollar Equivalent as a result of fluctuations in the foreign currency in which
any Purchased Receivable may be denominated.
ARTICLE 3
PURCHASE PRICE
--------------
3.1 Purchase Price. The purchase price for each Purchased Receivable
--------------
shall be ninety-six percent (96%) of the Net Invoice Amount of such Purchased
Receivable. The purchase price of any Purchased Receivable shall be credited to
Seller's account on the Purchase Date for such Purchased Receivable and shall be
denominated in U.S. Dollars.
3.2 Fees. Seller shall pay or cause to be paid to Buyer all fees
----
specified in the Facility Letter, including, without limitation, legal fees and
related disbursements.
ARTICLE 4
COLLECTION OF PURCHASED RECEIVABLES AND DELIVERY OF
---------------------------------------------------
COLLECTED FUNDS
---------------
4.1 Collection; Delivery of Funds.
-----------------------------
(a) Collection. Promptly upon receipt of any payment by a Customer with
----------
respect to a Purchased Receivable, Seller, in its capacity as collection agent
hereunder, shall deposit such payment, or, in the case of Purchased Receivables
that are denominated in a currency other than the U.S. Dollar, the U.S. Dollar
Equivalent, into a separate trust account maintained by Seller at Wells Fargo
for Buyer's exclusive benefit.
(b) Delivery of Funds. On the last Business Day of each calendar month,
-----------------
all amounts collected from Approved Customers of Purchased Receivables and
deposited into the account referred to in Section 4.1(a) above shall be
transferred to Buyer. Seller hereby authorizes Buyer and Wells Fargo to debit
such account for such purposes.
(c) Rebate. Upon Buyer's receipt of all payments due with respect to the
------
Purchased Receivables, whether through payments made by or on behalf of
Customers and/or payments made under the Approved Insurance Policy and payments
made by Seller hereunder, Buyer and Seller
-4-
<PAGE>
shall determine the Average Collection Days for the Purchased Receivables. If
the Average Collection Days is less than one hundred ninety-two (192) days (the
"Projected Collection Days"), then Buyer shall pay to Seller the amount equal to
the sum obtained by multiplying) 0.0182% of the Net Invoice Amount of the
Purchased Receivables by the number obtained by deducting the Average Collection
Days from the Projected Collection Days.
4.2 Seller as Collection Agent.
--------------------------
(a) Appointment. Buyer hereby appoints Seller, and Seller hereby accepts
-----------
such appointment, as a collection agent for Buyer with respect to collection and
administration of the Purchased Receivables. As agent, Seller shall cause all
payments and other collection proceeds owing on the Purchased Receivable by
Approved Customers paid to Seller, to be held and applied for Buyer's benefit.
Such funds shall be Buyer's exclusive property, and upon receipt thereof, Seller
shall promptly deposit such funds as specified in Section 4.1(a) above. Seller
shall not, directly or indirectly, utilize any of such funds for its own
purposes, and shall not have any right to pledge any of such funds as collateral
for any obligations of Seller or any other party. In addition to Seller's
obligations under Section 10.3, Seller shall use its best efforts to collect all
Purchased Receivables as promptly as possible after they become due.
(b) Resignation and Removal; Procedure. Seller may resign from the
----------------------------------
performance of all its functions and duties hereunder as collection agent at any
time by giving at least thirty (30) Business Days' prior written notice to
Buyer. Such resignation shall take effect upon the successor collection agent's
acceptance of its appointment by Buyer and upon notice to Customers of Purchased
Receivables as to the appointment of a new collection agent. Buyer, at its sole
and absolute discretion and upon thirty (30) Business Days' prior written notice
(or immediately upon written notice if an Event of Repurchase has occurred or is
continuing or upon any Bankruptcy Event) to Seller, may remove Seller as
collection agent hereunder, which removal shall take effect on the date
specified in Buyer's notice.
4.3 Withholding of Taxes.
--------------------
(a) Payment to Be Free and Clear. Seller represents and warrants to Buyer
----------------------------
that all payments by Seller, in its capacity as collection agent, and by
Approved Customers in respect of Purchased Receivables will be paid free and
clear of and (except to the extent required by law) without any deduction or
withholding on account of any tax imposed, levied, collected, withheld or
assessed by or within the United States of America or any political subdivisions
in or of the United States of America or any political subdivision in or of the
United States of America, any Approved Country, or any other jurisdiction from
or to which a payment is made by or on behalf of Seller or an Approved Customer
or by any federation or organization of which the United States of America, or
any such jurisdiction is a member at the time of payment.
(b) Grossing-up of Payments. If, notwithstanding Seller's representation
-----------------------
and warranty under subsection (a) of this Section 4.3, Seller in its capacity as
collection agent hereunder, an Approved Customer or any other person or entity
is required by law to make any deduction or withholding on account of any such
tax from any sum paid or payable by Seller or an Approved Customer to Buyer
hereunder:
(i) Seller shall notify Buyer of any such requirement or any change
in any requirement as soon as Seller becomes aware of it;
-5-
<PAGE>
(ii) Seller shall pay, for itself and on behalf of Approved
Customers, any such tax before the date on which penalties attach thereto,
such payment to be made (if the liability to pay is imposed on Seller or
Approved Customers) for its or their own account or (if that liability is
imposed on Buyer on behalf of and in the name of Buyer);
(iii) The sum payable by Seller for itself on behalf of Approved
Customers, in respect of which the relevant deduction, withholding or
payment is required shall be increased to the extent necessary to ensure
that, after the making of that deduction, withholding or payment, Buyer
receives on the due date and retains (free from any liability in respect of
any such deduction, withholding or payment) a net sum equal to what it
would have received and so retained had no such deduction, withholding or
payment been required or made; and
(iv) Within thirty (30) days after payment of any sum from which it
is required by law to make any deductions or withholding and within thirty
(30) days after the due date of payment of any tax which it is required by
this subsection (b) above to pay, Seller shall deliver to Buyer any
original vouchers or receipts, or certified copies of such vouchers or
receipts, evidencing payment of such withholding tax and any other
documents or information relating to such payments received by Seller from
governmental authorities in the country levying such withholding taxes.
ARTICLE 5
CONDITIONS PRECEDENT
--------------------
Buyer's obligation to purchase any Eligible Receivable is conditional upon:
(a) Buyer having received the following:
(i) the facility fee payable pursuant to the Facility Letter;
(ii) the documents listed on Exhibit C hereto in form and substance
satisfactory to Buyer in its absolute and sole discretion;
(iii) the original invoice for the Eligible Receivable, which invoice
shall incorporate the Standard Terms and Conditions of Sale by Seller as in
effect on the date hereof;
(iv) evidence that the UCC financing statements have been filed with
respect to the Collateral; and
(v) such other supporting documentation for the Eligible Receivable
as Buyer shall have requested;
(b) the purchase of the Eligible Receivables not resulting in the total
outstanding amount of all Purchased Receivables exceeding fifteen million
Dollars ($15,000,000);
(c) each representation and warranty and covenant made by Seller in this
Agreement and with respect to each invoice delivered by Seller pursuant to this
Agreement being true and accurate in all material respects on the Purchase Date;
-6-
<PAGE>
(d) no Event of Repurchase by Seller having occurred hereunder; and
(e) there being no material adverse change in the financial condition,
business or prospects of Seller as determined by Buyer in its sole judgment.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
------------------------------
Seller hereby represents and warrants to Buyer that:
(a) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was incorporated, and is
qualified to do business and is in good standing as a foreign corporation in
each other state or jurisdiction where the character of the property owned or
the nature of its business requires it to be so qualified;
(b) neither the execution nor delivery of this Agreement or any of the
other documents related hereto nor performance of nor compliance with the terms
and provisions hereof or thereof will conflict with or result in a breach of any
laws, statutes, codes, rules, ordinance, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses, authorizations or orders of
any governmental department, commission, board, courts, authority or agency, or
any other agreement or instrument binding upon Seller or any of its property, or
conflict with or result in a breach of any provision of the charter documents or
by-laws of Seller. No authorization, consent or approval or other action by,
and no notice to or filing with, any governmental authority is required to be
obtained or made by Seller for the due execution, delivery and performance by
Seller of this Agreement;
(c) Seller has the requisite power to enter into and deliver this
Agreement and to endorse, deliver, assign and sell Eligible Receivables and
Purchased Receivables in the manner herein contemplated and has taken all
necessary corporate or other action required to authorize the execution,
delivery and performance of this Agreement and Seller has taken all necessary
corporate or other action required to authorize the assignment, delivery and
sale of the Eligible Receivables and Purchased Receivables;
(d) all Eligible Receivables are, and at the time of presentation to Buyer
and acceptance by Buyer will be, bona fide and existing and enforceable
obligations of Approved Customers in the country of origin of such Approved
Customers arising out of the sale of goods and rendition of services in the
ordinary course of Seller's business, and are and will be sold by Seller to
Buyer in the ordinary course of business, free and clear of all liens, security
interests and encumbrances, and upon acceptance shall be owned by Buyer and
owing to Buyer without any Dispute; no note, account, instrument, document,
contract right, general intangible, chattel paper or other form of obligation
other than that which has been delivered to Buyer exists that evidences any
Purchased Receivable; and no Approved Customer is an affiliate of Seller;
(e) this Agreement and the acceptance of assignment, delivery and sale by
Seller to Buyer of (i) each invoice and (ii) every other document and instrument
representing the Eligible Receivables will constitute legal, valid and binding
obligations enforceable against Seller in accordance with its terms, and its
execution and performance will not cause a breach, or an act which will the
passage of time or the giving of notice, or both, would constitute a breach, of
any
-7-
<PAGE>
other agreement to which Seller is a party or to which any of its respective
properties is subject;
(f) Seller is now, and at all times during the term of this Agreement
shall be, solvent and Seller is fully authorized to assign and sell the Eligible
Receivables to Buyer as contemplated by this Agreement without any restriction
of any kind, and shall be authorized to grant to Buyer the security interests
granted herein;
(g) the sale of the Eligible Receivables to Buyer under this Agreement
qualifies for accounting treatment as a sale of assets under FASB Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities";
(h) Seller maintains a positive vendor relationship with each of the
Approved Customers for each Purchased Receivable, and there are no actions,
claims or proceedings now pending between Seller and any Approved Customer with
respect to any Purchased Receivable;
(i) Seller has complied with all terms, provisions and obligations under
any and all Approved Insurance Policies with respect to any Purchased Receivable
and all premiums under any Approved Insurance Policy with respect to any
Purchased Receivable have been fully paid and Buyer is entitled to the benefits
as a loss payee under any and all such Approved Insurance Policies with respect
to any Purchased Receivable in accordance with the terms therein;
(j) Buyer has and at all times during the term of this Agreement will have
a perfected, first priority security interest in all of the Collateral, but only
to the extent that Buyer has not acquired title thereto in accordance with the
terms hereof; and
(k) the principal place of business of Seller is located at 3175 South
Winchester Blvd., Campbell, California 95008.
ARTICLE 7
COVENANTS OF SELLER
-------------------
Seller agrees to:
(a) from time to time, upon the request of Buyer, promptly and duly
execute and deliver any and all such further documents and instruments and
render all such (or such further) assistance as Buyer may require for the
purpose of enabling Buyer to obtain the full benefit of this Agreement;
(b) duly perform and comply with all terms, provisions and obligations
under each contract relating to the Purchased Receivables and promptly inform
Buyer of any breach or default by Seller or any Approved Customer of any of the
terms or provisions thereof;
(c) refrain from any action or omission which might in any way prejudice
or limit Buyer's rights under any of the Purchased Receivables or this
Agreement, including, without limitation, any extension to any Customer under a
Purchased Receivable of any payment terms under such Purchased Receivables and
from time to time, upon the request of Buyer, promptly and duly execute and
deliver any and all such further documents and instruments and render all such
(or further) assistance as Buyer may require for the purpose of enabling Buyer
to obtain the full benefit
-8-
<PAGE>
of each Purchased Receivable;
(d) make all disclosures required by any applicable law or regulation with
respect to the sale of the Purchased Receivables to Buyer, and account for such
sale in accordance with Generally Accepted Accounting Principles;
(e) maintain at all times one or more Approved Insurance Policies with
respect to the Purchased Receivables in full force and effect (and not amend or
alter the same without Buyer's prior written consent) with an aggregate coverage
amount of at least fifteen million Dollars ($15,000,000) (less any deductible or
risk retention which has been approved by Buyer) and comply with all
requirements thereunder, including, without limitation, the payment in full of
all premiums thereunder and the compliance with any and all actions, either
directly or indirectly, that prevent the creation of an exclusion under such
Approved Insurance Policy;
(f) in the event of any non-payment by a Customer of any Purchased
Receivable, promptly file a claim in respect thereof under an Approved Insurance
Policy, and concurrently therewith deliver to Buyer a copy of such notice of
claim;
(g) deliver to Buyer on the fifteenth (15th) day of each month, a report
summarizing, as of the last day of the previous month a certificate of an
authorized representative of Seller summarizing the aging of the Purchased
Receivables and including (i) copies of all reports submitted to any insurance
company that has issued an Approved Insurance Policy which reports shall include
the status of any and all pending claims under such approved Insurance Policies;
and (ii) such other information in summary form as may be requested by Buyer, as
well as a certification as to the compliance by Seller of all terms and
provisions contained in this Agreement;
(h) to the extent that it is necessary in order to ensure the legality,
validity, enforceability or admissibility in evidence of the assignment,
delivery and sale by Seller to Buyer of the invoices and other documents or
instruments representing the Eligible Receivables and Purchased Receivables, pay
any Required Tax with any required stamps affixed;
(i) except as expressly provided herein, not create or permit to subsist
any mortgage, charge, pledge, security interest, lien or other encumbrance over
all or any of Seller's or Buyer's rights, title and interest in and to any of
the Purchased Receivables;
(j) permit representatives of Buyer to examine records and documents of
the Seller relating to the Purchased Receivables and any Approved Insurance
Policies and to make copies thereof or abstracts therefrom, and at any time
during normal business hours upon reasonable advance notice to Seller; provided,
however, that if an Event of Repurchase has occurred hereunder and is
continuing, Buyer shall be permitted to examine the relevant corporate,
financial and operating records of Seller, including, without limitation, all
documents and reports related to any Approved Insurance Policy, and make copies
thereof or abstracts therefrom, and to discuss their affairs, finances and
accounts with Seller's directors, officers, employees and independent public
accountants, at any time during normal business hours;
(k) duly perform and comply with all material terms, provisions and
obligations of any Sales Contracts;
(l) immediately notify Buyer of the occurrence of any event that
constitutes, or any event that with the giving of notice or the passage of time
would constitute, an Event of Repurchase;
-9-
<PAGE>
and
(m) give notice in writing to Buyer within ten (10) days of any change in
the principal place of business of Seller to a location outside the County of
Santa Clara.
ARTICLE 8
EXPENSES; CHARGEBACKS; SETOFF AND SECURITY
------------------------------------------
8.1 Expenses. Seller shall reimburse Buyer for (a) any and all reasonable
--------
costs or expenses incurred by or on behalf of Buyer, including legal fees and
expenses in the preparation and consummation of this Agreement, (b) any and all
reasonable costs or expenses incurred by or on behalf of Buyer, including legal
fees and expenses in the protection of rights under, and/or enforcement of, this
Agreement, (c) all Required Taxes at any time payable in connection herewith,
and (d) all other taxes (other than those measured by income) or penalties or
other charges which Buyer may be required to pay in connection with this
Agreement or any transaction carried out in connection herewith; all such
amounts being due and payable upon posting to Seller's accounts by Buyer.
8.2 Chargebacks. So long as Seller is collection agent hereunder, Seller
-----------
will promptly notify Buyer of, and promptly settle, all Disputes with Approved
Customers. However, if any Dispute is not settled by Seller during the Waiting
Period (as such term is defined in an approved Insurance Policy) or within such
shorter period as Buyer may determine, in its sole discretion, Buyer may settle,
compromise or litigate such dispute in Buyer's or Seller's name, upon such terms
as Buyer in its sole discretion deems advisable and for Buyer's account and
risk.
8.3 Setoff; Security.
----------------
(a) Upon the occurrence of an event giving rise to a right of
indemnification under Section 10.2(b) or an Event of Repurchase, Buyer is
irrevocably authorized to setoff and charge to the accounts of Seller maintained
at Wells Fargo (and against any credit balance on the books of Buyer in Seller's
favor, whether matured or unmatured) the amount of any and all of the
obligations owed by Seller under this Agreement.
(b) In the event that notwithstanding the intention of the parties that
this transaction be treated as a purchase and sale of the Purchased Receivables,
Seller hereby grants to Buyer a security interest in, and right of set-off with
respect to, certain property which shall be identified on a schedule (the
"Collateral Schedule") at the time of Buyer's purchase of Eligible Receivables,
to the extent that Seller has any right, title or interest therein
(collectively, the "Collateral"), which property shall include those present or
future accounts, instruments, documents, chattel paper and general intangibles
(other than intellectual property) specifically listed on the Collateral
Schedule. All of the Collateral shall secure payment and performance of all of
Seller's obligations at any time owing to Buyer, fixed or contingent, arising
under this Agreement or by operation of law or otherwise, including, without
limitation, charges or chargebacks arising from Disputes or otherwise; costs and
expenses (including attorneys' fee and expenses) incurred in enforcing,
protecting or administering any of Buyer's rights under this Agreement, or in
the prosecution or defense of any action relating to this Agreement or to any
Purchased Receivable; amounts recovered from Buyer on account of payments
previously made by Approved Customers on Purchased Receivables (other than any
disgourgement of payments required as a preference under the Bankruptcy Code);
and any taxes
-10-
<PAGE>
(other than those measured by income) or penalties or other charges which Buyer
may be required to pay in connection with this Agreement or any transaction
carried out in connection herewith.
ARTICLE 9
EVENTS OF REPURCHASE
--------------------
If any of the following events ("Events of Repurchase") shall occur and be
continuing:
(a) any representation or warranty made or deemed made or repeated by
Seller in connection with this Agreement (other than those specified in
subclause (c) below) shall prove to have been incorrect in any material respect
when made or deemed made or repeated or Seller shall fail to pay any amount
payable by it under this Agreement when due; or
(b) Seller shall fail to perform or observe any other material term,
covenant or agreement contained in this Agreement (other than those specified in
subclause (d) below) or its part to be performed or observed, or
(c) any representation or warranty made or deemed made or repeated by
Seller in connection with Sections 6(d), (h) or (i) of this Agreement shall
prove to have been incorrect in any material respect when made or deemed made or
repeated or Seller shall fail to pay any amount payable by it under this
Agreement when due; or
(d) Seller shall fail to perform or observe any other material term,
covenant or agreement contained in Sections 7(c), (e), (f), (h) or (i) of this
Agreement or its part to be performed or observed, or
(e) there is any material Dispute as to any Purchased Receivable; or
(f) Buyer shall not have received payment in full of any Purchased
Receivable within the time period required by the Purchased Receivable (i) from
the account debtor or (ii) if such amount is payable under any Approved
Insurance Policy, under an Approved Insurance Policy;
then, (i) in any such event listed in subclauses (a) and (b) Seller will, at the
time, in the manner and otherwise as hereinafter set forth, repurchase and pay
for the Purchased Receivables then outstanding but only at the option and upon
the demand of Buyer to the extent that Buyer has not received payment with
respect to such Purchased Receivables whether from or on behalf of the Customer
with respect thereto or under one or more Approved Insurance Policies; and (ii)
in the events listed in subclauses (c) through (f), Seller will, at the time, in
the manner and otherwise as hereinafter set forth, repurchase and pay for the
Purchased Receivable(s) to which such event relates at the option and upon the
demand of Buyer to the extent that Buyer has not received payment with respect
to such Purchased Receivable(s) whether from or on behalf of the Customer with
respect thereto or under one or more Approved Insurance Policies.
Notwithstanding any other term hereof, (A) except as provided in subclause (B)
of this sentence the aggregate amount of the payments made by Seller to Buyer as
a result of an event listed in subclause (f) shall not exceed in the aggregate
for all such events the sum of (i) five percent (5%) of the Net Invoice amount
of the Purchased Receivable(s) on the Purchase Date for such Purchased
Receivable, and (ii) five hundred thousand Dollars ($500,000) (such sum the
"Repurchase Limit"), and in any case in which such non-payment of Purchased
Receivable(s) exceeds the Repurchase Limit, then Buyer, in its sole and absolute
-11-
<PAGE>
discretion, shall determine which particular Purchased Receivable(s) as to which
an Event of Repurchase has occurred are to be repurchased and paid for by Seller
in an amount not to exceed the Repurchase Limit; and (B) to the extent that any
insurance company that has issued an Approved Insurance Policy fails to make
payment under such Approved Insurance Policy for any reason (x) arising from (i)
any failure of the Seller to perform any of its obligations under any Approved
Insurance Policy, (ii) any material misstatement by the Seller in any
communication by the Seller to the issuer of any Approved Insurance Policy,
(iii) any other act or omission by the Seller in violation of any Approved
Insurance Policy that results in the issuer of such Approved Insurance Policy
failing to pay a claim thereunder or (iv) any exclusion under an Approved
Insurance Policy that results from any event or action caused or under the
control of Seller, and (y) such item in subclauses (i), (ii), (iii) or (iv)
above constitutes a breach by Seller of any representation, warranty or covenant
under this Agreement, then the Repurchase Limit shall not apply and the Buyer
may require the Seller to repurchase each of the Purchased Receivables for which
payment under an Approved Insurance Policy was not made for the reasons stated
above. Such purchase shall be made at the time specified by Buyer at a
repurchase price equal to the unpaid aggregate principal amount then outstanding
plus unpaid interest and any other amount payable in accordance with the terms
of such Purchased Receivables accrued to the date of repurchase or with the
terms of this Agreement. The repurchase price of the Purchased Receivables
repurchased by Seller pursuant to this article shall be paid in immediately
available funds without recourse to or warranty by Buyer. Upon any such
repurchase, the Buyer shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as shall be necessary to vest in the
Seller title to any Purchased Receivable that is repurchased hereunder.
Notwithstanding any other term hereof, in the case of the occurrence of an event
listed in subclause (f), and to the extent that an insurance company that has
issued an Approved Insurance Policy is declared bankrupt or insolvent and does
not pay a claim as the result thereof, then Seller shall have no obligation to
repurchase and pay for the Purchased Receivables to the extent such insurance
company is obligated to pay such amount under such Approved Insurance Policy but
has not done so as a result of its bankruptcy or insolvency.
ARTICLE 10
MISCELLANEOUS
-------------
10.1 Assignment and Transfer. Seller may not assign or otherwise transfer
-----------------------
any of its rights, benefits or obligations under this Agreement. Buyer may
assign or otherwise transfer all or any part of its rights, benefits and
obligations under this Agreement and all or any part of the Purchased
Receivables and it may disclose to each potential assignee or other transferee
such information about this transaction as Buyer may consider appropriate.
Buyer agrees to promptly notify Seller in writing of any such assignment or
transfer.
10.2 Indemnification.
---------------
(a) Currency Indemnities. If Buyer receives an amount in respect of any
--------------------
Purchased Receivable, or if any liability relating to any Purchased Receivable
is converted into a claim, proof, judgment or order in Buyer's favor, in a
currency other than the U.S. Dollar or in a U.S. Dollar amount less than the
U.S. Dollar amount payable in respect thereof,
(i) Seller shall indemnify Buyer as an independent obligation
against any loss or liability arising out of or as a result of the
conversion into U.S. Dollars of such amount received;
-12-
<PAGE>
(ii) if the amount received by Buyer is less than the U.S. Dollar
Equivalent for such Purchased Receivable as calculated in accordance with
Section 2.2 above and set forth on the U.S. Dollar Equivalent Schedule,
Seller shall forthwith on demand pay to Buyer an amount in U.S. Dollars
that is equal to the difference between such amount received and the U.S.
Dollar Equivalent for such Purchased Receivable; and
(iii) Seller shall pay to Buyer forthwith on demand any exchange
costs and taxes payable in connection with any such conversion.
The foregoing amounts payable to Buyer shall bear interest at a rate of
6.5625% to the date such amounts are paid to Buyer.
(b) Other indemnities. Seller shall indemnify on demand and hold Buyer
-----------------
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever, including the fees and disbursements of
counsel, and including, without limitation, in connection with any
investigative, administrative or judicial proceeding, whether or not Buyer shall
be designated a party thereto and including due to a dispute between Seller and
any Approved Customer, imposed on, incurred by, or asserted against Buyer in any
manner relating to or arising out of this Agreement, or the transactions
contemplated hereby, except to the extent caused by Buyer's gross negligence or
willful misconduct.
10.3 Assistance. In case of non-payment of any of the Purchased
----------
Receivables for any reason, Seller undertakes to assist Buyer and use its best
efforts to collect the outstandings, and if necessary to seize on behalf of
Buyer any assets belonging to Approved Customers.
10.4 Waivers in Writing. No waiver, alteration, modification or
------------------
termination of this Agreement or any of the provisions hereof shall be binding
unless made in writing and duly executed by each Seller and Buyer.
10.5 Notices. Any notice that Buyer or Seller may be required or may
-------
desire to give to the other parties under any provision of this Agreement shall
be in writing and sent by electronic facsimile transmission, hand delivery or
first class mail, certified or registered and postage prepaid, and shall be
deemed to have been given or made when transmitted with receipt confirmed in the
case of electronic facsimile transmission, when received if sent by hand
delivery or five (5) days after deposit in the U.S. Mail if mailed, and in each
case addressed to Buyer or Seller as set forth below. Either Buyer or Seller
may change the address to which all notices, requests and other communications
are to be sent to it by giving written notice of such address change to the
other in conformity with this paragraph, but such change shall not be effective
until notice of such change has been received by the other.
If to Buyer: Wells Fargo HSBC Trade Bank N.A.
525 Market Street, 25th Floor
San Francisco, California 94105
Facsimile: (415) 541-0299
Attention: Virginia Adams
If to Seller: P-COM, INC.
3175 South Winchester Blvd.
Campbell, California 95008
Facsimile: (408) 866-3655
-13-
<PAGE>
Attention: Chief Financial Officer
10.6 Exercise of Rights. No failure on the part of Buyer to exercise, no
------------------
course of dealing with respect to, and to delay in exercising, any right, power
or privilege under this Agreement shall operate as a waiver thereof nor shall
any single or partial exercise of any such right, power or privilege preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege.
10.7 Headings. The headings of Articles and Sections have been included
--------
herein for convenience only and shall not be considered in interpreting this
Agreement.
10.8 Prohibited Provisions. Any provision of this Agreement which is
---------------------
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
10.9 Counterparts. This Agreement may be signed in any number of
------------
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument.
10.10 Entire Agreement. This Agreement constitutes and contains the
----------------
entire agreement of the parties with respect to the subject matter hereof and
thereof, and supersedes any and all prior negotiations, correspondence,
understandings and agreements respecting the subject matter hereof and thereof.
10.11 Cumulative Rights and Remedies. All rights and remedies of Buyer or
------------------------------
Seller provided for in this Agreement are cumulative and are not exclusive of
any other rights and remedies provided by law or in equity or under any other
agreement.
ARTICLE 11
LAW AND JURISDICTION
--------------------
This Agreement is made in the State of California and shall be interpreted
according to the internal laws of said State without regard to the laws
concerning conflicts of law. Seller waives the right to trial by jury, and
consent to the nonexclusive jurisdiction of the courts of the State of
California with respect to any controversy arising out of or relating to this
Agreement or to any transaction in connection herewith, and irrevocably submit
to the jurisdiction of such courts and
-14-
<PAGE>
agrees that any right, judgment or other notice of legal process shall be
sufficiently served on Seller if sent to Seller at the address provided above.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by its duly authorized officers as of the date first
above written.
P-COM, INC.
By ____________________________
Its ____________________________
WELLS FARGO HSBC TRADE BANK N.A.
By ____________________________
Its ____________________________
-15-
<PAGE>
EXHIBIT A
Receivables Purchase Agreement
PART A - APPROVED COUNTRIES
1. United Kingdom
2. Germany
3. Italy
PART B - APPROVED CUSTOMERS
1. Italtel SPA
2. Fujitsu Limited
3. Bosch Telecom Gmbh
4. Lucent Technologies
5. Ericsson Limited
6. Mercury Communications Ltd.
<PAGE>
EXHIBIT B
Receivables Purchase Agreement
APPROVED INSURANCE POLICY OR POLICIES
<PAGE>
EXHIBIT C
Receivables Purchase Agreement
SCHEDULE OF DOCUMENTS
1. Duly executed copies of this Agreement.
2. Duly executed copy of the Facility Letter.
3. Schedule of Accounts, including U.S. Dollar Equivalent Schedule.
4. Collateral Schedule.
5. Incumbency certificate and certified resolutions from the Secretary or
Assistant Secretary of Seller, in form and substance satisfactory to Buyer.
6. Good standing certificates from the California and Delaware Secretaries of
State, certifying that Seller is in good standing and has paid all
franchise taxes.
7. Duly executed copies of all Approved Insurance Policies.
8. A signed legal opinion of Brobeck, Phleger & Harrison LLP, counsel to
Seller, in form and substance satisfactory to Buyer, including, without
limitation, a legal opinion as to the characterization of the transaction
as a true sale.
<PAGE>
EXHIBIT 10.19A
December 15, 1997
Mr. George Roberts
P-COM, Inc.
3175 S. Winchester Blvd.
Campbell, CA 95008
Dear George:
We are pleased to inform you that the Board of Directors of P-Com, Inc.
(the "Company") has recently authorized and approved a special benefit program
for you and the other key executives. The purpose of this letter agreement is
to set forth the terms and conditions of your benefit package and to explain the
limitations which will govern the overall value of your benefits.
Your benefits will become payable in the event your employment terminates,
either voluntarily or involuntarily for any reason, within twenty-four (24)
months following certain changes in ownership or control of the Company. To
understand the full scope of your benefits, you should familiarize yourself with
the definitional provisions of Section I of this letter agreement. The benefits
comprising your package are detailed in Section II. Section III addresses the
treatment of any excise tax imposed in the event that any of your benefits
constitute excess parachute payments for purposes of the Federal tax laws and
Section IV deals with ancillary matters affecting your arrangement.
SECTION I - DEFINITIONS
For purposes of this letter agreement the following definitions will be in
effect:
1.1 AVERAGE COMPENSATION means the average of your W-2 wages from the
Company for the five (5) calendar years completed immediately prior to the
calendar year in which the Change of Control is effected. Any W-2 wages for a
partial year of employment will be annualized, in accordance with the frequency
which such wages are paid during such partial year, before inclusion in your
Average Compensation. If any of your compensation from the Company during such
five (5)-year or shorter period was not included in your W-2 wages for U.S.
income tax purposes, either because you were not a U.S. citizen or resident or
because such compensation was excludible from income as foreign earned income
under Code Section 911 or
<PAGE>
Page 2
as pre-tax income under Code Section 125 or 402(g), then such compensation will
nevertheless be included in your Average Compensation to the same extent as if
it were part of your W-2 wages.
1.2 BASE SALARY means the annual rate of base salary in effect for you
immediately prior to the Change in Control or (if greater) the annual rate of
base salary in effect at the time of your Termination.
1.3 BOARD means the Company's Board of Directors.
1.4 CHANGE IN CONTROL means any of the following transactions effecting a
change in ownership or control of the Company:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Company in complete liquidation or dissolution
of the Company,
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing fifty percent (50%) or more of
the total combined voting power of the Company's outstanding securities
are transferred to person or persons different from the persons holding
those securities immediately prior to such merger,
(iv) a Hostile Take-Over, or
(v) the acquisition, directly or indirectly by any person or
related group of persons (other than the Company or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Company), of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than thirty
percent (30%) of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made
directly to the Company's stockholders.
<PAGE>
Page 3
1.5 CODE means the Internal Revenue Code of 1986, as amended.
1.6 COMMON STOCK means the Company's common stock.
1.7 DISABILITY shall mean your inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of
twelve (12) months or more.
1.8 FAIR MARKET VALUE means, with respect to any shares of Common Stock
subject to any of your Options, the closing selling price per share of Common
Stock on the date in question, as reported on the Nasdaq National Market. If
there is no reported sale of Common Stock on such date, then the closing
selling price on the Nasdaq National Market on the next preceding day for
which there does exist such quotation shall be determinative of Fair Market
Value.
1.9 HEALTH CARE COVERAGE means the continued health care coverage to
which you and your eligible dependents may become entitled under Section II of
this letter agreement upon the Termination of your employment.
1.10 HOSTILE TAKE-OVER means either of the following transactions:
(i) the successful acquisition by a person or a group of related
persons, other than the Company or a person controlling, controlled by or
under common control with the Company, of beneficial ownership (as
determined pursuant to the provisions of Rule 13d-3 under the 1934 Act) of
securities possessing more than twenty-five percent (25%) of the total
combined voting power of the Company's outstanding securities pursuant to a
transaction or series of related transactions which the Board does not at
any time recommend the Company's stockholders to accept or approve, or
(ii) a change in the composition of the Board over a period of
twenty-four (24) consecutive months or less such that a majority of the
Board ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (I) have been members
of the Board continuously since the beginning of such period or (II) have
been elected or nominated for election as Board members during such period
by at least a two-thirds majority of the Board members described in clause
(I) who were still in office at the time such election or nomination was
approved by the Board.
<PAGE>
Page 4
1.11 INVOLUNTARY TERMINATION means the termination of your employment
with the Company (or successor):
(i) involuntarily upon your discharge or dismissal,
(ii) voluntarily upon your resignation following (I) a change in
your position with the Company (or successor) which reduces your duties or
level of responsibility or otherwise changes the level of management to
which you report, (II) a reduction in your level of compensation (including
base salary, fringe benefits and target bonus under any incentive
performance plan) or (III) a change in your place of employment which is
more than fifty (50) miles from your place of employment prior to the
Change in Control, provided and only if such change or reduction is
--------------------
effected without your written concurrence, or
(iii) by reason of your death or Disability.
1.12 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
1.13 OPTION means any option granted to you under the Plans which
is outstanding at the time of the Change in Control or your subsequent
Termination. Your Options will be divided into two (2) separate categories as
follows:
Acquisition-Accelerated Options: any outstanding Option (or
-------------------------------
installment thereof) which automatically accelerates, pursuant to the
acceleration provisions of the agreement evidencing that Option, upon a
change in control or ownership of the Company under certain specified
circumstances.
Severance-Accelerated Options: any outstanding Option (or
-----------------------------
installment thereof) which accelerates upon your Termination pursuant to
Section II of this letter agreement.
1.14 OPTION PARACHUTE PAYMENT means, with respect to any Acquisition-
Accelerated Option or any Severance-Accelerated Option, the portion of that
Option deemed to be a parachute payment under Code Section 280G and the
Treasury Regulations issued thereunder. The portion of such Option which is
categorized as an Option Parachute Payment will be calculated in accordance
with the valuation provisions established under Code Section 280G and the
applicable Treasury Regulations and will include an appropriate dollar
adjustment to reflect the lapse of your obligation to remain in the Company's
employ as a condition to the vesting of the accelerated installment. In no
event, however, will the Option Parachute Payment attributable to any
Acquisition-Accelerated Option or Severance-Accelerated Option (or
<PAGE>
Page 5
accelerated installment) exceed the spread (the excess of the Fair Market Value
of the accelerated option shares over the option exercise price payable for
those shares) existing at the time of acceleration.
1.15 OTHER PARACHUTE PAYMENT means any payment in the nature of
compensation (other than the benefits to which you become entitled under Section
II of this letter agreement) which are made to you in connection with the Change
in Control and which accordingly qualify as parachute payments within the
meaning of Code Section 280G(b)(2) and the Treasury Regulations issued
thereunder. Your Other Parachute Payments will include (without limitation) the
Present Value, measured as of the Change in Control, of the aggregate Option
Parachute Payment attributable to your Acquisition-Accelerated Options (if any).
1.16 PLANS means (i) the Company's 1992 Stock Option Plan, (ii)
the Company's 1995 Stock Option/Stock Issuance Plan, as amended or restated from
time to time, and (iii) any successor stock incentive plan subsequently
implemented by the Company.
1.17 PRESENT VALUE means the value, determined as of the date of
the Change in Control, of any payment in the nature of compensation to which you
become entitled in connection with the Change in Control or the subsequent
Termination of your employment, including (without limitation) the Option
Parachute Payment attributable to your Severance-Acceleration Options, your
Severance Payments under Section II of this letter agreement and the Option
Parachute Payment attributable to your Acquisition-Accelerated Options. The
Present Value of each such payment will be determined in accordance with the
provisions of Code Section 280G(d)(4), utilizing a discount rate equal to one
hundred twenty percent (120%) of the applicable Federal rate in effect at the
time of such determination, compounded semi-annually to the effective date of
the Change in Control.
1.18 SEVERANCE PAYMENTS means the severance payments to which you
may become entitled under Section II in the event of a Termination following a
Change in Control, subject, however, to the dollar limitations of Section III.
1.19 TERMINATION means a Voluntary Resignation or an Involuntary
Termination of your employment.
1.20 VOLUNTARY RESIGNATION means a resignation by you other than
one which constitutes an Involuntary Termination.
<PAGE>
Page 6
SECTION II - BENEFITS
Upon the Termination of your employment within twenty-four (24) months
following a Change in Control, you will become entitled to receive the special
benefits provided in this Section II.
2.1 PAYMENTS
--------
(A) BASE SALARY
You will be entitled to a Severance Payment in an amount equal to two
(2) times your Base Salary.
(B) BONUS
You will be entitled to an additional Severance Payment in an amount
equal to the GREATER of the following bonus amounts: (a) two (2) times the full
amount of the target bonus payable to you with respect to the fiscal year in
which the Termination occurs or (b) two (2) times the full amount of the target
bonus payable to you with respect to the fiscal year in which the Change in
Control occurs.
(C) PAYMENT OF SEVERANCE PAYMENTS
In the absence of a Hostile Take-Over, your Severance Payments will be
made at bi-weekly intervals following your Termination. However, these payments
will immediately terminate in the event you fail to abide by the restrictive
covenants set forth in Paragraph 2.4.
Should your Termination occur in connection with a Hostile Take-Over,
the Severance Payments will be made to you in a lump sum payment within thirty
(30) days after your Termination and the provisions of Paragraph 2.4 will not
apply.
All Severance Payments will be subject to the Company's collection of
all applicable federal and state income and employment withholding taxes.
2.2 OPTION ACCELERATION
-------------------
Each of your outstanding Options will (to the extent not then
otherwise fully exercisable) automatically accelerate so that each such Option
will become fully vested and immediately exercisable for the total number of
shares of Common Stock at the time subject to that Option. Each such
accelerated Option, together with all your other vested Options, will
<PAGE>
Page 7
remain exercisable for fully-vested shares until the earlier of (i) the
expiration date of the ten (10)-year option term or (ii) the end of two (2) full
years measured from the date of your Termination or greater if set forth in the
Option.
2.3 ADDITIONAL BENEFITS
-------------------
(A) HEALTH CARE COVERAGE
The Company will, at its expense, provide you and your eligible
dependents with continued health care coverage (including dental and vision
benefits) at the level enjoyed by you at the time of the Change in Control until
the earlier of (i) your death and the death of those individuals who are your
-------
eligible dependents at the time of the Change in Control. You and your spouse
shall also be entitled to all health care coverage as approved by the Company's
Compensation Committee on July 17, 1997. The coverage so provided you and your
eligible dependents will be in full and complete satisfaction of the continued
health care coverage to which you or your eligible dependents would otherwise,
at your own expense, be entitled under Code Section 4980B by reason of your
termination of employment.
(B) UNPAID BENEFITS
You will receive an immediate lump sum payment of all unpaid vacation
days which you have accrued through the date of your Termination.
2.4 RESTRICTIVE COVENANTS
---------------------
For the twenty-four (24)-month period following your Termination, you
will not:
(i) directly or indirectly, whether for your own account or as an
employee, director, consultant or advisor, provide services to any business
enterprise which is at the time in competition with any of the Company's
then-existing or formally planned product lines and which is located
geographically in an area where the Company maintains substantial business
activities;
(ii) directly or indirectly encourage or solicit any individual
to leave the Company's employ for any reason or interfere in any other
manner with the employment relationships at the time existing between the
Company and its current or prospective employees; or
(iii) induce or attempt to induce any customer, supplier,
distributor, licensee or other business affiliate of the Company to cease
doing
<PAGE>
Page 8
business with the Company or in any way interfere with the existing
business relationship between any such customer, supplier, distributor,
licensee or other business affiliate and the Company.
You acknowledge that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
your breach of the foregoing restrictive covenants. Accordingly, in the event
of any such breach, the Company will, in addition to the cessation of the
severance benefits provided under this agreement and any remedies available to
the Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding you from continuing to engage in such breach.
None of the foregoing restrictive covenants will be applicable in the
event your Termination occurs in connection with a Hostile Take-Over.
SECTION III - PARACHUTE PAYMENTS
3.1 PARACHUTE TAX GROSS-UP
----------------------
Should the aggregate Present Value (measured as of the Change in
Control) of (i) the benefits to which you become entitled under Section II at
the time of your Termination (namely the Severance Payments, the Option
Parachute Payment attributable to your Severance-Accelerated Options and your
Health Care Continuation) and (ii) all Other Parachute Payments to which you are
entitled, exceed 2.99 times your Actual Average Compensation (the "Parachute
Limit") and thereby result in an excise tax liability under Section 4999 of the
Code, then the Company will provide you with a full tax gross-up with respect to
such excise tax liability. The amount of such tax gross-up will be determined
pursuant to the following formula:
X = Y / 1 - (A + B + C), where
X is the total dollar payment (the "Tax Gross-Up") required to be
paid under this letter agreement,
Y is the total excise tax (the "Parachute Tax") imposed on you
pursuant to Section 4999 of the Code (or any successor provision)
with respect to the Severance Payments, the Option Parachute
Payment attributable to your Severance-Accelerated Options, your
Health Care Continuation and all Other Parachute Payments,
A is the excise tax rate in effect under Section 4999 of the Code
for excess parachute payments,
<PAGE>
Page 9
B is the highest combined marginal federal income and
applicable state income tax rate in effect for you, after
taking into account the deductibility of state income taxes
against federal income taxes to the extent allowable, for the
calendar year in which the Tax Gross-Up is paid, and
C is the applicable Hospital Insurance (Medicare) Tax Rate in
effect for you for the calendar year in which the Tax Gross-Up is
paid.
3.2 INITIAL PAYMENT
---------------
Within ninety (90) days after each determination is made by the
Internal Revenue Service or your tax advisor that you have received a parachute
payment for which you are liable for a Parachute Tax, you will identify the
nature of such parachute payment to the Company and submit to the Company the
calculation of the Parachute Tax attributable to that payment and the Tax Gross-
Up to which you are entitled with respect to such tax liability. The Company
will pay such Tax Gross-Up to you (net of all applicable withholding taxes,
including any taxes required to be withheld under Section 4999 of the Code)
within ten (10) business days after your submission of the calculation of such
Parachute Tax and the resulting Tax Gross-Up, provided such calculations
represent a reasonable interpretation of the applicable law and regulations.
3.3 FINAL DETERMINATION
-------------------
In the event that your actual Parachute Tax liability is determined by
a Final Determination to be greater than the Parachute Tax liability taken into
account for purposes of the Tax-Gross-Up paid pursuant to this Section, then
within ninety (90) days following the Final Determination, you will submit to
the Company a new Parachute Tax calculation based upon the Final Determination.
Within ten (10) business days after receipt of such calculation, the Company
will pay you the additional Tax Gross-Up attributable to such excess Parachute
Tax liability.
3.4 REFUND
------
In the event that your actual Parachute Tax liability is determined by
a Final Determination to be less than the Parachute Tax liability taken into
account for purposes of the Tax Gross-Up paid to you pursuant to this Section,
then you will refund to the Company, promptly upon receipt, any federal or state
tax refund attributable to the Parachute Tax overpayment.
<PAGE>
Page 10
3.5 DEFINITION
----------
For purposes of this section, a Final Determination means an audit
adjustment by the Internal Revenue Service that is either agreed to by you or
your estate or an adjustment that is sustained by a court of competent
jurisdiction in a decision with which you concur or with respect to which the
period within which an appeal may be filed has lapsed without a notice of appeal
being filed.
SECTION IV - MISCELLANEOUS PROVISIONS
4.1 DEATH
-----
In the event of your death, the Severance Payments (including the
Parachute Payments) to which you become entitled under this letter agreement
will be made, on the due date hereunder, to the executors or administrators of
your estate. Should you die before you exercise all your outstanding Options,
then such Options may be exercised, within twelve (12) months after your death,
by the executors or administrators of your estate or by persons to whom the
Options are transferred pursuant to your will or in accordance with the laws of
inheritance. In no event, however, may any such Option be exercised after the
specified expiration date of the option term.
4.2 GENERAL CREDITOR STATUS
-----------------------
The payments and benefits to which you become entitled hereunder will
be paid, when due, from the general assets of the Company, and no trust fund,
escrow arrangement or other segregated account will be established as a funding
vehicle for such payment. Accordingly, your right (or the right of the personal
representatives or beneficiaries of your estate) to receive any payments or
benefits hereunder will at all times be that of a general creditor of the
Company and will have no priority over the claims of other general creditors.
4.3 INDEMNIFICATION
---------------
The indemnification provisions for officers and directors under the
Company certificate of incorporation, indemnification agreement, Bylaws and
insurance policies will (to the maximum extent permitted by law) be extended to
you with respect to any and all matters, events or transactions occurring or
effected during your employment with the Company.
<PAGE>
Page 11
4.4 MISCELLANEOUS
-------------
This letter agreement will be binding upon the Company, its successors
and assigns (including, without limitation, the surviving entity in any Change
in Control) and is to be construed and interpreted under the laws of the State
of California. Except as set forth herein, this letter agreement supersedes all
prior agreements between you and the Company relating to the subject of
severance benefits payable upon a change in control or ownership of the Company,
including the Plans and the agreements evidencing the Options, and may only be
amended by written instrument signed by you and an authorized officer of the
Company. If any provision of this letter agreement as applied to any party or
to any circumstance should be adjudged by a court of competent jurisdiction to
be void or unenforceable for any reason, the invalidity of that provision will
in no way affect (to the maximum extent permissible by law) the application of
such provision under circumstances different from those adjudicated by the
court, the application of any other provision of this letter agreement, or the
enforceability or invalidity of this letter agreement as a whole. Should any
provision of this letter agreement become or be deemed invalid, illegal or
unenforceable in any jurisdiction by reason of the scope, extent or duration of
its coverage, then such provision will be deemed amended to the extent necessary
to conform to applicable law so as to be valid and enforceable or, if such
provision cannot be so amended without materially altering the intention of the
parties, then such provision will be stricken and the remainder of this letter
agreement will continue in full force and effect.
4.5 ATTORNEY FEES
-------------
In the event legal proceeding should be initiated by you or by the
Company with respect to any controversy, claim or dispute relating to the
interpretation or application of the provisions of this letter agreement or any
benefits payable hereunder, the prevailing party in such proceedings will be
entitled to recover from the losing party reasonable attorney fees and costs
incurred in connection with such proceedings or in the enforcement or collection
of any judgment or award rendered in such proceedings. For purposes of this
provision, the prevailing party means the party determined by the court to have
most nearly prevailed in the proceedings, even if that party does not prevail in
all matters, and does not necessarily mean the party in whose favor the judgment
is actually rendered. If the Company materially breaches any of its obligations
under this letter agreement and fails to cure that breach within thirty (30)
days after written notice from you, you will then be entitled to reimbursement
from the Company for any reasonable expenses and attorney fees you incur in
having the Company subsequently cure that breach, whether or not legal
proceedings are actually commenced in connection with such breach.
<PAGE>
Page 12
4.6 INDEPENDENT LEGAL COUNSEL
-------------------------
By executing this letter agreement, you acknowledge that (i) this
agreement has been prepared by Brobeck, Phleger & Harrison LLP ("Brobeck")
acting it its capacity as legal counsel to the Company and (ii) you have had an
opportunity to seek advice from your own legal counsel with respect to the
matters contained herein and such individual counsel is not Brobeck.
Please indicate your acceptance of the foregoing provisions of this
letter agreement by signing the enclosed copy of this agreement and returning it
to the Company.
P-COM, INC.
BY: /s/ Warren T. Lazarow
--------------------------------------------
TITLE: Secretary
_________________________________________
ACCEPTANCE
I hereby agree to all the terms and provisions of the foregoing letter
agreement governing the special benefits to which I may become entitled in
connection with certain changes in control or ownership of P-Com, Inc..
Signature: /s/ George Roberts
-------------------------------------
Dated: December 15, 1997
<PAGE>
EXHIBIT 10.19B
December 15, 1997
Mr. Michael Sophie
P-COM, Inc.
3175 S. Winchester Blvd.
Campbell, CA 95008
Dear Mike:
We are pleased to inform you that the Board of Directors of P-Com, Inc.
(the "Company") has recently authorized and approved a special benefit program
for you and the other key executives. The purpose of this letter agreement is
to set forth the terms and conditions of your benefit package and to explain the
limitations which will govern the overall value of your benefits.
Your benefits will become payable in the event your employment terminates,
either voluntarily or involuntarily for any reason, within twenty-four (24)
months following certain changes in ownership or control of the Company. To
understand the full scope of your benefits, you should familiarize yourself with
the definitional provisions of Section I of this letter agreement. The benefits
comprising your package are detailed in Section II. Section III addresses the
treatment of any excise tax imposed in the event that any of your benefits
constitute excess parachute payments for purposes of the Federal tax laws and
Section IV deals with ancillary matters affecting your arrangement.
SECTION I - DEFINITIONS
For purposes of this letter agreement the following definitions will be in
effect:
1.1 AVERAGE COMPENSATION means the average of your W-2 wages from the
Company for the five (5) calendar years completed immediately prior to the
calendar year in which the Change of Control is effected. Any W-2 wages for a
partial year of employment will be annualized, in accordance with the frequency
which such wages are paid during such partial year, before inclusion in your
Average Compensation. If any of your compensation from the Company during such
five (5)-year or shorter period was not included in your W-2 wages for U.S.
income tax purposes, either because you were not a U.S. citizen or resident or
because such compensation was excludible from income as foreign earned income
under Code Section 911 or
<PAGE>
Page 2
as pre-tax income under Code Section 125 or 402(g), then such compensation will
nevertheless be included in your Average Compensation to the same extent as if
it were part of your W-2 wages.
1.2 BASE SALARY means the annual rate of base salary in effect for you
immediately prior to the Change in Control or (if greater) the annual rate of
base salary in effect at the time of your Termination.
1.3 BOARD means the Company's Board of Directors.
1.4 CHANGE IN CONTROL means any of the following transactions effecting a
change in ownership or control of the Company:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company,
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing fifty percent (50%) or more of
the total combined voting power of the Company's outstanding securities are
transferred to person or persons different from the persons holding those
securities immediately prior to such merger,
(iv) a Hostile Take-Over, or
(v) the acquisition, directly or indirectly by any person or
related group of persons (other than the Company or a person that directly
or indirectly controls, is controlled by, or is under common control with,
the Company), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than thirty percent (30%) of
the total combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the Company's
stockholders.
<PAGE>
Page 3
1.5 CODE means the Internal Revenue Code of 1986, as amended.
1.6 COMMON STOCK means the Company's common stock.
1.7 DISABILITY shall mean your inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more.
1.8 FAIR MARKET VALUE means, with respect to any shares of Common
Stock subject to any of your Options, the closing selling price per share of
Common Stock on the date in question, as reported on the Nasdaq National Market.
If there is no reported sale of Common Stock on such date, then the closing
selling price on the Nasdaq National Market on the next preceding day for which
there does exist such quotation shall be determinative of Fair Market Value.
1.9 HEALTH CARE COVERAGE means the continued health care coverage to
which you and your eligible dependents may become entitled under Section II of
this letter agreement upon the Termination of your employment.
1.10 HOSTILE TAKE-OVER means either of the following transactions:
(i) the successful acquisition by a person or a group of related
persons, other than the Company or a person controlling, controlled by or
under common control with the Company, of beneficial ownership (as
determined pursuant to the provisions of Rule 13d-3 under the 1934 Act) of
securities possessing more than twenty-five percent (25%) of the total
combined voting power of the Company's outstanding securities pursuant to a
transaction or series of related transactions which the Board does not at
any time recommend the Company's stockholders to accept or approve, or
(ii) a change in the composition of the Board over a period of
twenty-four (24) consecutive months or less such that a majority of the
Board ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (I) have been members
of the Board continuously since the beginning of such period or (II) have
been elected or nominated for election as Board members during such period
by at least a two-thirds majority of the Board members described in clause
(I) who were still in office at the time such election or nomination was
approved by the Board.
<PAGE>
Page 4
1.11 INVOLUNTARY TERMINATION means the termination of your employment
with the Company (or successor):
(i) involuntarily upon your discharge or dismissal,
(ii) voluntarily upon your resignation following (I) a change in
your position with the Company (or successor) which reduces your duties or
level of responsibility or otherwise changes the level of management to
which you report, (II) a reduction in your level of compensation (including
base salary, fringe benefits and target bonus under any incentive
performance plan) or (III) a change in your place of employment which is
more than fifty (50) miles from your place of employment prior to the
Change in Control, provided and only if such change or reduction is
--------------------
effected without your written concurrence, or
(iii) by reason of your death or Disability.
1.12 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
1.13 OPTION means any option granted to you under the Plans which
is outstanding at the time of the Change in Control or your subsequent
Termination. Your Options will be divided into two (2) separate categories as
follows:
Acquisition-Accelerated Options: any outstanding Option (or
-------------------------------
installment thereof) which automatically accelerates, pursuant to the
acceleration provisions of the agreement evidencing that Option, upon a
change in control or ownership of the Company under certain specified
circumstances.
Severance-Accelerated Options: any outstanding Option (or
-----------------------------
installment thereof) which accelerates upon your Termination pursuant to
Section II of this letter agreement.
1.14 OPTION PARACHUTE PAYMENT means, with respect to any
Acquisition-Accelerated Option or any Severance-Accelerated Option, the portion
of that Option deemed to be a parachute payment under Code Section 280G and the
Treasury Regulations issued thereunder. The portion of such Option which is
categorized as an Option Parachute Payment will be calculated in accordance with
the valuation provisions established under Code Section 280G and the applicable
Treasury Regulations and will include an appropriate dollar adjustment to
reflect the lapse of your obligation to remain in the Company's employ as a
condition to the vesting of the accelerated installment. In no event, however,
will the Option Parachute Payment attributable to any Acquisition-Accelerated
Option or Severance-Accelerated Option (or
<PAGE>
Page 5
accelerated installment) exceed the spread (the excess of the Fair Market Value
of the accelerated option shares over the option exercise price payable for
those shares) existing at the time of acceleration.
1.15 OTHER PARACHUTE PAYMENT means any payment in the nature of
compensation (other than the benefits to which you become entitled under Section
II of this letter agreement) which are made to you in connection with the Change
in Control and which accordingly qualify as parachute payments within the
meaning of Code Section 280G(b)(2) and the Treasury Regulations issued
thereunder. Your Other Parachute Payments will include (without limitation) the
Present Value, measured as of the Change in Control, of the aggregate Option
Parachute Payment attributable to your Acquisition-Accelerated Options (if any).
1.16 PLANS means (i) the Company's 1992 Stock Option Plan, (ii)
the Company's 1995 Stock Option/Stock Issuance Plan, as amended or restated from
time to time, and (iii) any successor stock incentive plan subsequently
implemented by the Company.
1.17 PRESENT VALUE means the value, determined as of the date of the
Change in Control, of any payment in the nature of compensation to which you
become entitled in connection with the Change in Control or the subsequent
Termination of your employment, including (without limitation) the Option
Parachute Payment attributable to your Severance-Acceleration Options, your
Severance Payments under Section II of this letter agreement and the Option
Parachute Payment attributable to your Acquisition-Accelerated Options. The
Present Value of each such payment will be determined in accordance with the
provisions of Code Section 280G(d)(4), utilizing a discount rate equal to one
hundred twenty percent (120%) of the applicable Federal rate in effect at the
time of such determination, compounded semi-annually to the effective date of
the Change in Control.
1.18 SEVERANCE PAYMENTS means the severance payments to which you may
become entitled under Section II in the event of a Termination following a
Change in Control, subject, however, to the dollar limitations of Section III.
1.19 TERMINATION means a Voluntary Resignation or an Involuntary
Termination of your employment.
1.20 VOLUNTARY RESIGNATION means a resignation by you other than
one which constitutes an Involuntary Termination.
<PAGE>
Page 6
SECTION II - BENEFITS
Upon the Termination of your employment within twenty-four (24) months
following a Change in Control, you will become entitled to receive the special
benefits provided in this Section II.
2.1 PAYMENTS
--------
(A) BASE SALARY
You will be entitled to a Severance Payment in an amount equal to two
(2) times your Base Salary.
(B) BONUS
You will be entitled to an additional Severance Payment in an amount
equal to the GREATER of the following bonus amounts: (a) two (2) times the full
amount of the target bonus payable to you with respect to the fiscal year in
which the Termination occurs or (b) two (2) times the full amount of the target
bonus payable to you with respect to the fiscal year in which the Change in
Control occurs.
(C) PAYMENT OF SEVERANCE PAYMENTS
In the absence of a Hostile Take-Over, your Severance Payments will be
made at bi-weekly intervals following your Termination. However, these payments
will immediately terminate in the event you fail to abide by the restrictive
covenants set forth in Paragraph 2.4.
Should your Termination occur in connection with a Hostile Take-Over,
the Severance Payments will be made to you in a lump sum payment within thirty
(30) days after your Termination and the provisions of Paragraph 2.4 will not
apply.
All Severance Payments will be subject to the Company's collection of
all applicable federal and state income and employment withholding taxes.
2.2 OPTION ACCELERATION
-------------------
Each of your outstanding Options will (to the extent not then
otherwise fully exercisable) automatically accelerate so that each such Option
will become fully vested and immediately exercisable for the total number of
shares of Common Stock at the time subject to that Option. Each such
accelerated Option, together with all your other vested Options, will
<PAGE>
Page 7
remain exercisable for fully-vested shares until the earlier of (i) the
expiration date of the ten (10)-year option term or (ii) the end of two (2) full
years measured from the date of your Termination or greater if set forth in the
Option.
2.3 ADDITIONAL BENEFITS
-------------------
(A) HEALTH CARE COVERAGE
The Company will, at its expense, provide you and your eligible
dependents with continued health care coverage under the Company's
medical/dental/vision plan until the earlier of (i) twenty-four (24) months
-------
after the date of your Termination or (ii) the first date that you are covered
under another employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical conditions.
The coverage so provided you and your eligible dependents will be in full and
complete satisfaction of the continued health care coverage to which you or your
eligible dependents would otherwise, at your own expense, be entitled under Code
Section 4980B by reason of your termination of employment.
(B) UNPAID BENEFITS
You will receive an immediate lump sum payment of all unpaid vacation
days which you have accrued through the date of your Termination.
2.4 RESTRICTIVE COVENANTS
---------------------
For the twenty-four (24)-month period following your Termination, you
will not:
(i) directly or indirectly, whether for your own account or as an
employee, director, consultant or advisor, provide services to any business
enterprise which is at the time in competition with any of the Company's
then-existing or formally planned product lines and which is located
geographically in an area where the Company maintains substantial business
activities;
(ii) directly or indirectly encourage or solicit any individual
to leave the Company's employ for any reason or interfere in any other
manner with the employment relationships at the time existing between the
Company and its current or prospective employees; or
(iii) induce or attempt to induce any customer, supplier,
distributor, licensee or other business affiliate of the Company to cease
doing
<PAGE>
Page 8
business with the Company or in any way interfere with the existing
business relationship between any such customer, supplier, distributor,
licensee or other business affiliate and the Company.
You acknowledge that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
your breach of the foregoing restrictive covenants. Accordingly, in the event
of any such breach, the Company will, in addition to the cessation of the
severance benefits provided under this agreement and any remedies available to
the Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding you from continuing to engage in such breach.
None of the foregoing restrictive covenants will be applicable in the
event your Termination occurs in connection with a Hostile Take-Over.
SECTION III - PARACHUTE PAYMENTS
3.1 PARACHUTE TAX GROSS-UP
----------------------
Should the aggregate Present Value (measured as of the Change in
Control) of (i) the benefits to which you become entitled under Section II at
the time of your Termination (namely the Severance Payments, the Option
Parachute Payment attributable to your Severance-Accelerated Options and your
Health Care Continuation) and (ii) all Other Parachute Payments to which you are
entitled, exceed 2.99 times your Actual Average Compensation (the "Parachute
Limit") and thereby result in an excise tax liability under Section 4999 of the
Code, then the Company will provide you with a full tax gross-up with respect to
such excise tax liability. The amount of such tax gross-up will be determined
pursuant to the following formula:
X = Y / 1 - (A + B + C), where
X is the total dollar payment (the "Tax Gross-Up") required to be
paid under this letter agreement,
Y is the total excise tax (the "Parachute Tax") imposed on you
pursuant to Section 4999 of the Code (or any successor provision)
with respect to the Severance Payments, the Option Parachute
Payment attributable to your Severance-Accelerated Options, your
Health Care Continuation and all Other Parachute Payments,
A is the excise tax rate in effect under Section 4999 of the Code
for excess parachute payments,
<PAGE>
Page 9
B is the highest combined marginal federal income and applicable
state income tax rate in effect for you, after taking into
account the deductibility of state income taxes against federal
income taxes to the extent allowable, for the calendar year in
which the Tax Gross-Up is paid, and
C is the applicable Hospital Insurance (Medicare) Tax Rate in
effect for you for the calendar year in which the Tax Gross-Up is
paid.
3.2 INITIAL PAYMENT
---------------
Within ninety (90) days after each determination is made by the
Internal Revenue Service or your tax advisor that you have received a parachute
payment for which you are liable for a Parachute Tax, you will identify the
nature of such parachute payment to the Company and submit to the Company the
calculation of the Parachute Tax attributable to that payment and the Tax Gross-
Up to which you are entitled with respect to such tax liability. The Company
will pay such Tax Gross-Up to you (net of all applicable withholding taxes,
including any taxes required to be withheld under Section 4999 of the Code)
within ten (10) business days after your submission of the calculation of such
Parachute Tax and the resulting Tax Gross-Up, provided such calculations
represent a reasonable interpretation of the applicable law and regulations.
3.3 FINAL DETERMINATION
-------------------
In the event that your actual Parachute Tax liability is determined by
a Final Determination to be greater than the Parachute Tax liability taken into
account for purposes of the Tax-Gross-Up paid pursuant to this Section, then
within ninety (90) days following the Final Determination, you will submit to
the Company a new Parachute Tax calculation based upon the Final Determination.
Within ten (10) business days after receipt of such calculation, the Company
will pay you the additional Tax Gross-Up attributable to such excess Parachute
Tax liability.
3.4 REFUND
------
In the event that your actual Parachute Tax liability is determined by
a Final Determination to be less than the Parachute Tax liability taken into
account for purposes of the Tax Gross-Up paid to you pursuant to this Section,
then you will refund to the Company, promptly upon receipt, any federal or state
tax refund attributable to the Parachute Tax overpayment.
<PAGE>
Page 10
3.5 DEFINITION
----------
For purposes of this section, a Final Determination means an audit
adjustment by the Internal Revenue Service that is either agreed to by you or
your estate or an adjustment that is sustained by a court of competent
jurisdiction in a decision with which you concur or with respect to which the
period within which an appeal may be filed has lapsed without a notice of appeal
being filed.
SECTION IV - MISCELLANEOUS PROVISIONS
4.1 DEATH
-----
In the event of your death, the Severance Payments (including the
Parachute Payments) to which you become entitled under this letter agreement
will be made, on the due date hereunder, to the executors or administrators of
your estate. Should you die before you exercise all your outstanding Options,
then such Options may be exercised, within twelve (12) months after your death,
by the executors or administrators of your estate or by persons to whom the
Options are transferred pursuant to your will or in accordance with the laws of
inheritance. In no event, however, may any such Option be exercised after the
specified expiration date of the option term.
4.2 GENERAL CREDITOR STATUS
-----------------------
The payments and benefits to which you become entitled hereunder will
be paid, when due, from the general assets of the Company, and no trust fund,
escrow arrangement or other segregated account will be established as a funding
vehicle for such payment. Accordingly, your right (or the right of the personal
representatives or beneficiaries of your estate) to receive any payments or
benefits hereunder will at all times be that of a general creditor of the
Company and will have no priority over the claims of other general creditors.
4.3 INDEMNIFICATION
---------------
The indemnification provisions for officers and directors under the
Company certificate of incorporation, indemnification agreement, Bylaws and
insurance policies will (to the maximum extent permitted by law) be extended to
you with respect to any and all matters, events or transactions occurring or
effected during your employment with the Company.
<PAGE>
Page 11
4.4 MISCELLANEOUS
-------------
This letter agreement will be binding upon the Company, its successors
and assigns (including, without limitation, the surviving entity in any Change
in Control) and is to be construed and interpreted under the laws of the State
of California. Except as set forth herein, this letter agreement supersedes all
prior agreements between you and the Company relating to the subject of
severance benefits payable upon a change in control or ownership of the Company,
including the Plans and the agreements evidencing the Options, and may only be
amended by written instrument signed by you and an authorized officer of the
Company. If any provision of this letter agreement as applied to any party or
to any circumstance should be adjudged by a court of competent jurisdiction to
be void or unenforceable for any reason, the invalidity of that provision will
in no way affect (to the maximum extent permissible by law) the application of
such provision under circumstances different from those adjudicated by the
court, the application of any other provision of this letter agreement, or the
enforceability or invalidity of this letter agreement as a whole. Should any
provision of this letter agreement become or be deemed invalid, illegal or
unenforceable in any jurisdiction by reason of the scope, extent or duration of
its coverage, then such provision will be deemed amended to the extent necessary
to conform to applicable law so as to be valid and enforceable or, if such
provision cannot be so amended without materially altering the intention of the
parties, then such provision will be stricken and the remainder of this letter
agreement will continue in full force and effect.
4.5 ATTORNEY FEES
-------------
In the event legal proceeding should be initiated by you or by the
Company with respect to any controversy, claim or dispute relating to the
interpretation or application of the provisions of this letter agreement or any
benefits payable hereunder, the prevailing party in such proceedings will be
entitled to recover from the losing party reasonable attorney fees and costs
incurred in connection with such proceedings or in the enforcement or collection
of any judgment or award rendered in such proceedings. For purposes of this
provision, the prevailing party means the party determined by the court to have
most nearly prevailed in the proceedings, even if that party does not prevail in
all matters, and does not necessarily mean the party in whose favor the judgment
is actually rendered. If the Company materially breaches any of its obligations
under this letter agreement and fails to cure that breach within thirty (30)
days after written notice from you, you will then be entitled to reimbursement
from the Company for any reasonable expenses and attorney fees you incur in
having the Company subsequently cure that breach, whether or not legal
proceedings are actually commenced in connection with such breach.
<PAGE>
Page 12
4.6 INDEPENDENT LEGAL COUNSEL
-------------------------
By executing this letter agreement, you acknowledge that (i) this
agreement has been prepared by Brobeck, Phleger & Harrison LLP ("Brobeck")
acting it its capacity as legal counsel to the Company and (ii) you have had an
opportunity to seek advice from your own legal counsel with respect to the
matters contained herein and such individual counsel is not Brobeck.
Please indicate your acceptance of the foregoing provisions of this
letter agreement by signing the enclosed copy of this agreement and returning it
to the Company.
P-COM, INC.
By: /s/ Warren T. Lazarow
___________________________________________
TITLE: Secretary
________________________________________
ACCEPTANCE
I hereby agree to all the terms and provisions of the foregoing letter
agreement governing the special benefits to which I may become entitled in
connection with certain changes in control or ownership of P-Com, Inc.
Signature: /s/ Michael Sophie
____________________________________
Dated: December 15, 1997
<PAGE>
December 15, 1997
Mr. Pier Antoniucci
P-COM, Inc.
3175 S. Winchester Blvd.
Campbell, CA 95008
Dear Pier:
We are pleased to inform you that the Board of Directors of P-Com, Inc.
(the "Company") has recently authorized and approved a special benefit program
for you and the other key executives. The purpose of this letter agreement is
to set forth the terms and conditions of your benefit package and to explain the
limitations which will govern the overall value of your benefits.
Your benefits will become payable in the event your employment terminates,
either voluntarily or involuntarily for any reason, within twenty-four (24)
months following certain changes in ownership or control of the Company. To
understand the full scope of your benefits, you should familiarize yourself with
the definitional provisions of Section I of this letter agreement. The benefits
comprising your package are detailed in Section II. Section III addresses the
treatment of any excise tax imposed in the event that any of your benefits
constitute excess parachute payments for purposes of the Federal tax laws and
Section IV deals with ancillary matters affecting your arrangement.
SECTION I - DEFINITIONS
For purposes of this letter agreement the following definitions will be in
effect:
1.1 AVERAGE COMPENSATION means the average of your W-2 wages from the
Company for the five (5) calendar years completed immediately prior to the
calendar year in which the Change of Control is effected. Any W-2 wages for a
partial year of employment will be annualized, in accordance with the frequency
which such wages are paid during such partial year, before inclusion in your
Average Compensation. If any of your compensation from the Company during such
five (5)-year or shorter period was not included in your W-2 wages for U.S.
income tax purposes, either because you were not a U.S. citizen or resident or
because such compensation was excludible from income as foreign earned income
under Code Section 911 or
<PAGE>
as pre-tax income under Code Section 125 or 402(g), then such compensation will
nevertheless be included in your Average Compensation to the same extent as if
it were part of your W-2 wages.
1.2 BASE SALARY means the annual rate of base salary in effect for you
immediately prior to the Change in Control or (if greater) the annual rate of
base salary in effect at the time of your Termination.
1.3 BOARD means the Company's Board of Directors.
1.4 CHANGE IN CONTROL means any of the following transactions effecting a
change in ownership or control of the Company:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in complete liquidation or
dissolution of the Company,
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing fifty percent (50%) or more of
the total combined voting power of the Company's outstanding securities are
transferred to person or persons different from the persons holding those
securities immediately prior to such merger,
(iv) a Hostile Take-Over, or
(v) the acquisition, directly or indirectly by any person or
related group of persons (other than the Company or a person that directly
or indirectly controls, is controlled by, or is under common control with,
the Company), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than thirty percent (30%) of
the total combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the Company's
stockholders.
<PAGE>
1.5 CODE means the Internal Revenue Code of 1986, as amended.
1.6 COMMON STOCK means the Company's common stock.
1.7 DISABILITY shall mean your inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous duration of
twelve (12) months or more.
1.8 FAIR MARKET VALUE means, with respect to any shares of Common
Stock subject to any of your Options, the closing selling price per share of
Common Stock on the date in question, as reported on the Nasdaq National Market.
If there is no reported sale of Common Stock on such date, then the closing
selling price on the Nasdaq National Market on the next preceding day for which
there does exist such quotation shall be determinative of Fair Market Value.
1.9 HEALTH CARE COVERAGE means the continued health care coverage
to which you and your eligible dependents may become entitled under Section II
of this letter agreement upon the Termination of your employment.
1.10 HOSTILE TAKE-OVER means either of the following
transactions:
(i) the successful acquisition by a person or a group of related
persons, other than the Company or a person controlling, controlled by or
under common control with the Company, of beneficial ownership (as
determined pursuant to the provisions of Rule 13d-3 under the 1934 Act) of
securities possessing more than twenty-five percent (25%) of the total
combined voting power of the Company's outstanding securities pursuant to a
transaction or series of related transactions which the Board does not at
any time recommend the Company's stockholders to accept or approve, or
(ii) a change in the composition of the Board over a period of
twenty-four (24) consecutive months or less such that a majority of the
Board ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (I) have been members
of the Board continuously since the beginning of such period or (II) have
been elected or nominated for election as Board members during such period
by at least a two-thirds majority of the Board members described in clause
(I) who were still in office at the time such election or nomination was
approved by the Board.
<PAGE>
1.11 INVOLUNTARY TERMINATION means the termination of your employment
with the Company (or successor):
(i) involuntarily upon your discharge or dismissal,
(ii) voluntarily upon your resignation following (I) a change in
your position with the Company (or successor) which reduces your duties or
level of responsibility or otherwise changes the level of management to
which you report, (II) a reduction in your level of compensation (including
base salary, fringe benefits and target bonus under any incentive
performance plan) or (III) a change in your place of employment which is
more than fifty (50) miles from your place of employment prior to the
Change in Control, provided and only if such change or reduction is
--------------------
effected without your written concurrence, or
(iii) by reason of your death or Disability.
1.12 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
1.13 OPTION means any option granted to you under the Plans which
is outstanding at the time of the Change in Control or your subsequent
Termination. Your Options will be divided into two (2) separate categories as
follows:
Acquisition-Accelerated Options: any outstanding Option (or
-------------------------------
installment thereof) which automatically accelerates, pursuant to the
acceleration provisions of the agreement evidencing that Option, upon a
change in control or ownership of the Company under certain specified
circumstances.
Severance-Accelerated Options: any outstanding Option (or
-----------------------------
installment thereof) which accelerates upon your Termination pursuant to
Section II of this letter agreement.
1.14 OPTION PARACHUTE PAYMENT means, with respect to any
Acquisition-Accelerated Option or any Severance-Accelerated Option, the portion
of that Option deemed to be a parachute payment under Code Section 280G and the
Treasury Regulations issued thereunder. The portion of such Option which is
categorized as an Option Parachute Payment will be calculated in accordance with
the valuation provisions established under Code Section 280G and the applicable
Treasury Regulations and will include an appropriate dollar adjustment to
reflect the lapse of your obligation to remain in the Company's employ as a
condition to the vesting of the accelerated installment. In no event, however,
will the Option Parachute Payment attributable to any Acquisition-Accelerated
Option or Severance-Accelerated Option (or
<PAGE>
accelerated installment) exceed the spread (the excess of the Fair Market Value
of the accelerated option shares over the option exercise price payable for
those shares) existing at the time of acceleration.
1.15 OTHER PARACHUTE PAYMENT means any payment in the nature of
compensation (other than the benefits to which you become entitled under Section
II of this letter agreement) which are made to you in connection with the Change
in Control and which accordingly qualify as parachute payments within the
meaning of Code Section 280G(b)(2) and the Treasury Regulations issued
thereunder. Your Other Parachute Payments will include (without limitation) the
Present Value, measured as of the Change in Control, of the aggregate Option
Parachute Payment attributable to your Acquisition-Accelerated Options (if any).
1.16 PLANS means (i) the Company's 1992 Stock Option Plan, (ii) the
Company's 1995 Stock Option/Stock Issuance Plan, as amended or restated from
time to time, and (iii) any successor stock incentive plan subsequently
implemented by the Company.
1.17 PRESENT VALUE means the value, determined as of the date of
the Change in Control, of any payment in the nature of compensation to which you
become entitled in connection with the Change in Control or the subsequent
Termination of your employment, including (without limitation) the Option
Parachute Payment attributable to your Severance-Acceleration Options, your
Severance Payments under Section II of this letter agreement and the Option
Parachute Payment attributable to your Acquisition-Accelerated Options. The
Present Value of each such payment will be determined in accordance with the
provisions of Code Section 280G(d)(4), utilizing a discount rate equal to one
hundred twenty percent (120%) of the applicable Federal rate in effect at the
time of such determination, compounded semi-annually to the effective date of
the Change in Control.
1.18 SEVERANCE PAYMENTS means the severance payments to which you may
become entitled under Section II in the event of a Termination following a
Change in Control, subject, however, to the dollar limitations of Section III.
1.19 TERMINATION means a Voluntary Resignation or an Involuntary
Termination of your employment.
1.20 VOLUNTARY RESIGNATION means a resignation by you other than
one which constitutes an Involuntary Termination.
<PAGE>
SECTION II - BENEFITS
Upon the Termination of your employment within twenty-four (24) months
following a Change in Control, you will become entitled to receive the special
benefits provided in this Section II.
2.1 PAYMENTS
--------
(A) BASE SALARY
You will be entitled to a Severance Payment in an amount equal to two
(2) times your Base Salary.
(B) BONUS
You will be entitled to an additional Severance Payment in an amount
equal to the GREATER of the following bonus amounts: (a) two (2) times the full
amount of the target bonus payable to you with respect to the fiscal year in
which the Termination occurs or (b) two (2) times the full amount of the target
bonus payable to you with respect to the fiscal year in which the Change in
Control occurs.
(C) PAYMENT OF SEVERANCE PAYMENTS
In the absence of a Hostile Take-Over, your Severance Payments will be
made at bi-weekly intervals following your Termination. However, these payments
will immediately terminate in the event you fail to abide by the restrictive
covenants set forth in Paragraph 2.4.
Should your Termination occur in connection with a Hostile Take-Over,
the Severance Payments will be made to you in a lump sum payment within thirty
(30) days after your Termination and the provisions of Paragraph 2.4 will not
apply.
All Severance Payments will be subject to the Company's collection of
all applicable federal and state income and employment withholding taxes.
2.2 OPTION ACCELERATION
-------------------
Each of your outstanding Options will (to the extent not then
otherwise fully exercisable) automatically accelerate so that each such Option
will become fully vested and immediately exercisable for the total number of
shares of Common Stock at the time subject to that Option. Each such
accelerated Option, together with all your other vested Options, will
<PAGE>
remain exercisable for fully-vested shares until the earlier of (i) the
expiration date of the ten (10)-year option term or (ii) the end of two (2) full
years measured from the date of your Termination or greater if set forth in the
Option.
2.3 ADDITIONAL BENEFITS
-------------------
(A) HEALTH CARE COVERAGE
The Company will, at its expense, provide you and your eligible
dependents with continued health care coverage under the Company's
medical/dental/vision plan until the earlier of (i) twenty-four (24) months
-------
after the date of your Termination or (ii) the first date that you are covered
under another employer's health benefit program which provides substantially the
same level of benefits without exclusion for pre-existing medical conditions.
The coverage so provided you and your eligible dependents will be in full and
complete satisfaction of the continued health care coverage to which you or your
eligible dependents would otherwise, at your own expense, be entitled under Code
Section 4980B by reason of your termination of employment.
(B) UNPAID BENEFITS
You will receive an immediate lump sum payment of all unpaid vacation
days which you have accrued through the date of your Termination.
2.4 RESTRICTIVE COVENANTS
---------------------
For the twenty-four (24)-month period following your Termination, you
will not:
(i) directly or indirectly, whether for your own account or as an
employee, director, consultant or advisor, provide services to any business
enterprise which is at the time in competition with any of the Company's
then-existing or formally planned product lines and which is located
geographically in an area where the Company maintains substantial business
activities;
(ii) directly or indirectly encourage or solicit any individual
to leave the Company's employ for any reason or interfere in any other
manner with the employment relationships at the time existing between the
Company and its current or prospective employees; or
(iii) induce or attempt to induce any customer, supplier,
distributor, licensee or other business affiliate of the Company to cease
doing
<PAGE>
business with the Company or in any way interfere with the existing
business relationship between any such customer, supplier, distributor,
licensee or other business affiliate and the Company.
You acknowledge that monetary damages may not be sufficient to
compensate the Company for any economic loss which may be incurred by reason of
your breach of the foregoing restrictive covenants. Accordingly, in the event
of any such breach, the Company will, in addition to the cessation of the
severance benefits provided under this agreement and any remedies available to
the Company at law, be entitled to obtain equitable relief in the form of an
injunction precluding you from continuing to engage in such breach.
None of the foregoing restrictive covenants will be applicable in the
event your Termination occurs in connection with a Hostile Take-Over.
SECTION III - PARACHUTE PAYMENTS
3.1 PARACHUTE TAX GROSS-UP
----------------------
Should the aggregate Present Value (measured as of the Change in
Control) of (i) the benefits to which you become entitled under Section II at
the time of your Termination (namely the Severance Payments, the Option
Parachute Payment attributable to your Severance-Accelerated Options and your
Health Care Continuation) and (ii) all Other Parachute Payments to which you are
entitled, exceed 2.99 times your Actual Average Compensation (the "Parachute
Limit") and thereby result in an excise tax liability under Section 4999 of the
Code, then the Company will provide you with a full tax gross-up with respect to
such excise tax liability. The amount of such tax gross-up will be determined
pursuant to the following formula:
X = Y / 1 - (A + B + C), where
X is the total dollar payment (the "Tax Gross-Up") required to be
paid under this letter agreement,
Y is the total excise tax (the "Parachute Tax") imposed on you
pursuant to Section 4999 of the Code (or any successor provision)
with respect to the Severance Payments, the Option Parachute
Payment attributable to your Severance-Accelerated Options, your
Health Care Continuation and all Other Parachute Payments,
A is the excise tax rate in effect under Section 4999 of the Code
for excess parachute payments,
<PAGE>
B is the highest combined marginal federal income and applicable
state income tax rate in effect for you, after taking into
account the deductibility of state income taxes against federal
income taxes to the extent allowable, for the calendar year in
which the Tax Gross-Up is paid, and
C is the applicable Hospital Insurance (Medicare) Tax Rate in
effect for you for the calendar year in which the Tax Gross-Up is
paid.
3.2 INITIAL PAYMENT
---------------
Within ninety (90) days after each determination is made by the
Internal Revenue Service or your tax advisor that you have received a parachute
payment for which you are liable for a Parachute Tax, you will identify the
nature of such parachute payment to the Company and submit to the Company the
calculation of the Parachute Tax attributable to that payment and the Tax Gross-
Up to which you are entitled with respect to such tax liability. The Company
will pay such Tax Gross-Up to you (net of all applicable withholding taxes,
including any taxes required to be withheld under Section 4999 of the Code)
within ten (10) business days after your submission of the calculation of such
Parachute Tax and the resulting Tax Gross-Up, provided such calculations
represent a reasonable interpretation of the applicable law and regulations.
3.3 FINAL DETERMINATION
-------------------
In the event that your actual Parachute Tax liability is determined by
a Final Determination to be greater than the Parachute Tax liability taken into
account for purposes of the Tax-Gross-Up paid pursuant to this Section, then
within ninety (90) days following the Final Determination, you will submit to
the Company a new Parachute Tax calculation based upon the Final Determination.
Within ten (10) business days after receipt of such calculation, the Company
will pay you the additional Tax Gross-Up attributable to such excess Parachute
Tax liability.
3.4 REFUND
------
In the event that your actual Parachute Tax liability is determined by
a Final Determination to be less than the Parachute Tax liability taken into
account for purposes of the Tax Gross-Up paid to you pursuant to this Section,
then you will refund to the Company, promptly upon receipt, any federal or state
tax refund attributable to the Parachute Tax overpayment.
<PAGE>
3.5 DEFINITION
----------
For purposes of this section, a Final Determination means an audit
adjustment by the Internal Revenue Service that is either agreed to by you or
your estate or an adjustment that is sustained by a court of competent
jurisdiction in a decision with which you concur or with respect to which the
period within which an appeal may be filed has lapsed without a notice of appeal
being filed.
SECTION IV - MISCELLANEOUS PROVISIONS
4.1 DEATH
-----
In the event of your death, the Severance Payments (including the
Parachute Payments) to which you become entitled under this letter agreement
will be made, on the due date hereunder, to the executors or administrators of
your estate. Should you die before you exercise all your outstanding Options,
then such Options may be exercised, within twelve (12) months after your death,
by the executors or administrators of your estate or by persons to whom the
Options are transferred pursuant to your will or in accordance with the laws of
inheritance. In no event, however, may any such Option be exercised after the
specified expiration date of the option term.
4.2 GENERAL CREDITOR STATUS
-----------------------
The payments and benefits to which you become entitled hereunder will
be paid, when due, from the general assets of the Company, and no trust fund,
escrow arrangement or other segregated account will be established as a funding
vehicle for such payment. Accordingly, your right (or the right of the personal
representatives or beneficiaries of your estate) to receive any payments or
benefits hereunder will at all times be that of a general creditor of the
Company and will have no priority over the claims of other general creditors.
4.3 INDEMNIFICATION
---------------
The indemnification provisions for officers and directors under the
Company certificate of incorporation, indemnification agreement, Bylaws and
insurance policies will (to the maximum extent permitted by law) be extended to
you with respect to any and all matters, events or transactions occurring or
effected during your employment with the Company.
<PAGE>
4.4 MISCELLANEOUS
-------------
This letter agreement will be binding upon the Company, its successors
and assigns (including, without limitation, the surviving entity in any Change
in Control) and is to be construed and interpreted under the laws of the State
of California. Except as set forth herein, this letter agreement supersedes all
prior agreements between you and the Company relating to the subject of
severance benefits payable upon a change in control or ownership of the Company,
including the Plans and the agreements evidencing the Options, and may only be
amended by written instrument signed by you and an authorized officer of the
Company. If any provision of this letter agreement as applied to any party or
to any circumstance should be adjudged by a court of competent jurisdiction to
be void or unenforceable for any reason, the invalidity of that provision will
in no way affect (to the maximum extent permissible by law) the application of
such provision under circumstances different from those adjudicated by the
court, the application of any other provision of this letter agreement, or the
enforceability or invalidity of this letter agreement as a whole. Should any
provision of this letter agreement become or be deemed invalid, illegal or
unenforceable in any jurisdiction by reason of the scope, extent or duration of
its coverage, then such provision will be deemed amended to the extent necessary
to conform to applicable law so as to be valid and enforceable or, if such
provision cannot be so amended without materially altering the intention of the
parties, then such provision will be stricken and the remainder of this letter
agreement will continue in full force and effect.
4.5 ATTORNEY FEES
-------------
In the event legal proceeding should be initiated by you or by the
Company with respect to any controversy, claim or dispute relating to the
interpretation or application of the provisions of this letter agreement or any
benefits payable hereunder, the prevailing party in such proceedings will be
entitled to recover from the losing party reasonable attorney fees and costs
incurred in connection with such proceedings or in the enforcement or collection
of any judgment or award rendered in such proceedings. For purposes of this
provision, the prevailing party means the party determined by the court to have
most nearly prevailed in the proceedings, even if that party does not prevail in
all matters, and does not necessarily mean the party in whose favor the judgment
is actually rendered. If the Company materially breaches any of its obligations
under this letter agreement and fails to cure that breach within thirty (30)
days after written notice from you, you will then be entitled to reimbursement
from the Company for any reasonable expenses and attorney fees you incur in
having the Company subsequently cure that breach, whether or not legal
proceedings are actually commenced in connection with such breach.
<PAGE>
4.6 INDEPENDENT LEGAL COUNSEL
-------------------------
By executing this letter agreement, you acknowledge that (i) this
agreement has been prepared by Brobeck, Phleger & Harrison LLP ("Brobeck")
acting it its capacity as legal counsel to the Company and (ii) you have had an
opportunity to seek advice from your own legal counsel with respect to the
matters contained herein and such individual counsel is not Brobeck.
Please indicate your acceptance of the foregoing provisions of this
letter agreement by signing the enclosed copy of this agreement and returning it
to the Company.
P-COM, INC.
BY: /s/ Warren T. Lazarow
___________________________________________
TITLE: Secretary
________________________________________
ACCEPTANCE
I hereby agree to all the terms and provisions of the foregoing letter
agreement governing the special benefits to which I may become entitled in
connection with certain changes in control or ownership of P-Com, Inc.
Signature: /s/ Pier Antonincci
____________________________________
Dated: December 15, 1997
<PAGE>
EX-10.22(A)
SIEMENS
Notwithstanding the forecast attachment to the agreement, first deliveries and
relevant P.O.'s are agreed as follows:
<TABLE>
<CAPTION>
P.O. Number STI Internal Quantity
- ----------- ------------ --------
working order reference and eqt. type
----------------------- -------------
<S> <C> <C>
C059/07301 51KK59 23 38
C059/07302 711417 * *
C059/07303 51G807 * *
C059/07304 51G770 ** **
*
</TABLE>
Deliveries: - All of the 23 GHz type eqt. Will be delivered during
- ----------
***** **** at an expected rate of ** eqt./week.
- The 38 GHz type are **** ********** and for delivery before
***** **** ***** with the expection of last P.O. C059//07304
for which * *** eqt. Are requested, subject to final customer
acceptance, and for delivery *** ******** end of ********
*****
Detail configuration of the above orders will be transmitted as soon as ****
****** ** *** ******** will be communicated to Siemens Telecomicazioni S.p.A
Milano, 13/02/1995
[SIGNATURE ILLEGIBLE] /s/ Pier Antoniucci
- -------------------------- ----------------------------
For STI For P-COM
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
P_Com Tel-Link Forecast Rev. D1 2/13/1995
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
ITEM DESCRIPTION [*] [*] [*] [*] [*] [*] [*] [*]
23 28 23 28 23 28 23 28 23 28 23 28 23 28 23 28
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
1.10 3X64 kb/s 1 + O (23 G)
- -------------------------------------------------------------------------------------------------------------------------
1.11 3x64 kb/s 1 + O (38G)
- -------------------------------------------------------------------------------------------------------------------------
1.20 2Mb/s 1 + O (23G) [*] [*] [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
1.21 2Mb/s 1 + 0 (38G)
- -------------------------------------------------------------------------------------------------------------------------
1.30 2x2Mb/s 1 + 0 (23G) [*] [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
1.31 2x2Mb/s 1 + 0 (38G) [*] [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
1.40 4x2Mb/s 1 + 0 (23G) [*] [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
1.41 4x2Mb/s 1 + 0 (38G) [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
1.50 Universal 1 + 0 (23G) [*] [*] [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
1.51 Universal 1 + 0 (38G) [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
1.60 Univ. Cap & Mod. 1 + 0 (23G)
- -------------------------------------------------------------------------------------------------------------------------
1.61 Univ. Cap & Mod. 1 + 0 (38G)
- -------------------------------------------------------------------------------------------------------------------------
2.10 2Mb/s 1 + 1 (23G)
- -------------------------------------------------------------------------------------------------------------------------
2.11 2Mb/s 1 + 1 (38G)
- -------------------------------------------------------------------------------------------------------------------------
2.20 2x2Mb/s 1 + 1 (23G)
- -------------------------------------------------------------------------------------------------------------------------
2.21 2x2Mb/s 1 + 1 (38G)
- -------------------------------------------------------------------------------------------------------------------------
2.30 4x2Mb/s 1 + 1 (23G) [*] [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
2.31 4x2Mb/s 1 + 1 (38G) [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
2.40 Universal 1 + 1 (2/4) 23G [*] [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
2.41 Universal 1 + 1 (2/4)(38G) [*] [*] [*]
- -------------------------------------------------------------------------------------------------------------------------
2.50 Univ. Cap & Mod. 1 + 1 (23G)
- -------------------------------------------------------------------------------------------------------------------------
2.51 Univ. Cap & Mod. 1 + 1 (38G)
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
All the configuration of items 1,2,7,8 include: 48V PSU, Antenna (30cm-38G/60cm-
23G) w/pole mount, link manager port, FEC, 4 FSK modulation, inat. material and
manual
*CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
P_Com Tel-Link Forecast Rev.01 2/13/1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Item Description [*] [*] [*] [*] [*] [*] [*] TOTAL T/R
23 38 23 38 23 38 23 38 23 38 23 38 23 38 23 38
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
7.10 8X2Mb/s 1+0 (23G)
- --------------------------------------------------------------------------------------------------------------------------------
7.11 8X2Mb/s 1+0 (38G)
- --------------------------------------------------------------------------------------------------------------------------------
7.20 16X2Mb/s 1+0 (23G)
- --------------------------------------------------------------------------------------------------------------------------------
7.21 16X2Mb/s 1+0 (38G)
- --------------------------------------------------------------------------------------------------------------------------------
7.30 Universal 1+0 (8/16) 23G
- --------------------------------------------------------------------------------------------------------------------------------
7.31 Universal 1+0 (8/16) 38G
- --------------------------------------------------------------------------------------------------------------------------------
8.10 8X2Mb/s 1+1 (23G)
- --------------------------------------------------------------------------------------------------------------------------------
8.11 8X2Mb/s 1+1 (38G)
- --------------------------------------------------------------------------------------------------------------------------------
8.20 16X2Mb/s 1+1 (23G) [*] [*]
- --------------------------------------------------------------------------------------------------------------------------------
8.21 16x2Mb/s 1+1 (38G) [*] [*]
- --------------------------------------------------------------------------------------------------------------------------------
8.30 Universal 1+1 (8/16) 23G
- --------------------------------------------------------------------------------------------------------------------------------
8.31 Universal 1+1 (8/16) 38G
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL T/R [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------------------------
4.10 24 V PSU
- --------------------------------------------------------------------------------------------------------------------------------
4.20 EOW - Bridging [*] [*]
- --------------------------------------------------------------------------------------------------------------------------------
4.30 EOW PT - PT [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------------------------
4.40 dat channel
- --------------------------------------------------------------------------------------------------------------------------------
4.70 120 OHM I/O
- --------------------------------------------------------------------------------------------------------------------------------
4.01 H.P. Amplifier 23G [*] [*] [*] [*]
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
All the configurations of items 1,2,7,8 include: 48v PSU, Antenna
(30cm-38G/80cm-23G) w/pole mount, link manager port, FEC, 4 FSK modulation, ??,
material and manual.
<PAGE>
LOW CAPACITY DIGITAL RADIO
PRODUCT AGREEMENT
This Agreement is made by and between:
P-COM INC. a corporation under the law of Delaware and having its registered
office at 200 E. Hacienda Ave. Campbell, CA 95008, hereinafter referred to as
"P-COM"
and
SIEMENS TELECOMUNICAZIONI S.P.A. a corporation under the law of Italy and having
its registered office at 20060 Cassina de' Pecchi, Italy, S.S. Padana Superiore
km. 158, hereinafter referred to as "Siemens"
(P-COM and Siemens are hereinafter referred to jointly as the "Parties" and
individually as a "Party")
whereas P-COM has developed the Tel-Link radio Product Line presently covering
the 23, 38 and 50 GHz frequency bands and allowing the transport of one or more
1.5 (T1) or 2 (E1) Mbit/s traffic signals;
whereas Siemens is willing to introduce the products of the Tel-Link Product
Line into its own catalogue and to place orders to buy certain amounts of these
products;
being the recitals hereinabove integral part of the present Agreement
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS
ARTICLE 1. PURPOSE OF THE AGREEMENT
1.1 The purpose of this Agreement is to set forth rules that allow Siemens to
include the Tel-Link Product Line (hereinafter "the Products", which terms shall
also be construed as designating equipment, subset, assembly or part of the Tel-
Link Product Line where The context so admits) in its products catalogue.
1.2 As a consequence P-COM agrees to Sell and Siemens agrees to buy the Products
in accordance with purchase orders that may be issued from time to time by
Siemens to The price, terms and conditions herein contained.
ARTICLE 2. SPECIFICATIONS OF THE PRODUCTS AND RELEVANT SIEMENS ACCEPTANCE TEST
2.1 P-COM grants that the characteristics and specifications of the Products at
the date of the Agreement are those listed in the Attachment I hereto.
Page 1 of 9
<PAGE>
2.2 In the spirit of the present Agreement, should P-COM decide to modify the
Products with enhancements or extensions, P-COM is willing to make available to
Siemens the above mentioned enhancements and extensions and to timely provide
Siemens with sufficient information and documentation in order to promote the
enhanced and extended Products in the market.
2.3 if the enhanced Products should not grant full backword compatibility, P-
COM undertakes to produce the previous version of the Products for Siemens for a
minimum period of 24 months after the commercial availability of the enhanced
Products.
2.4 The characteristics and conditions related with the Quality Assurance are
detailed in the Attachment 2 hereto.
ARTICLE 3. MARKETING RIGHTS
3.1 Siemens will have the non exclusive right to promote, sell or lease, as a
single equipment or together with other products or systems, the Products in any
market freely and with no limitations.
3.2 Siemens will have the right to include the Products in its catalogue with
Siemens trade-mark and brand name. To this purpose P-COM agrees to deliver to
Siemens the Products properly marked and externally coloured in accordance with
Siemens' instructions, provided that such instructions will not be in conflict
with the production process of the Products.
3.3 P-COM warrants that it does not have nor will undertake any obligation with
anybody conflicting with the rights granted to Siemens pursuant to this
Agreement
ARTICLE 4. PRICES
4.1 The prices from P-COM to Siemens of the Product are given in the Attachment
3 to this Agreement. Prices are fixed throughout each calendar year and will be
revised annually in a joint meeting to be held by the Parties by 30th of
September of the previous year. Basic criterion adopted in defining price is to
allow Siemens to withhold a reasonable margin, estimated by the Parties in
approximately *** on the most competitive market price recognized by the Parties
provided P-COM can also obtain a reasonable margin.
4.2 Price vs. quantity matrix is given in the Attachment 3, based on the total
number of transmitters/receivers of the Products ordered by Siemens for delivery
within the year.
The initial price level of each year will be defined during the annual meeting
according to the quantity objective indicated by Siemens.
In case after six months of each year the total ordered transmitter/receiver do
not reach *** **** ****** of the minimum quantity of the initial price level,
The purchase order price for the second six months will automatically switch to
the lower quantity level.
Viceversa, whenever during a year Siemens inform P-COM that the total expected
ordered quantity for the same year would exceed the minimum of the initial price
level agreed for that year, the purchase order price will switch to the higher
quantity level three months after the notification by Siemens of the higher
volume.
For year 1995 the initial price level will be level * while the quantities in
Attachment 3 have to be considered reduced by *** **** ******.
Page 2 of 9
*CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
4.3 In the event that during the one year time frame of validity of certain
price levels, the competitive market price - which is used as reference in
defining price - reduces considerably, the Parties agree to meet and jointly
review the price in accordance with such modified market conditions and
following the basic criterion indicated at point 4.1.
ARTICLE 5. CONDITIONS OF SUPPLY
5.1 Unless otherwise agreed in relation with a specific project the following
terms and conditions shall be applicable to all orders for the purchase of the
Products (or portion thereof) to be supplied by P-COM to Siemens and such terms
and conditions shall take preference over any conflicting or inconsistent terms
of Siemens' purchase orders or P-COM conditions of sale.
5.2 Siemens, shall purchase the Products by issuing a written purchase order, to
be transmitted by fax, identifying the transmitters/receivers of the Products to
be purchased, the quantity, price, total purchase order price, shipping
instructions (if any), delivery dates and place and any other specific
information impacting on the equipment delivery schedule. P-COM shall confirm,
by confirmed telefax, any purchase order within one (1) week of P-COM's receipt
thereof, provided its terms are in accordance with those of this Agreement or
better ones, if so agreed by the Parties.
5.3 Price, ** **** ******* are defined in the Attachment 3 to this Agreement.
Price shall include the full cost of ordered products, suitably packed.
5.4 Depending of the specific indications of the purchase order, the ordered
Products will be delivered, at the price indicated in Attachment 3, in one of
the following ways:
- - for European Communities and E.F.T.A. Countries and other European Countries
with equivalent import custom duties, *** ******* ** ************ ******
****** ****** **** (in accordance with Incoterms 1990);
- - for other European Countries with import custom duties higher than E.E.C.
(7.5%) *** ******* ** ************ ****** ****** ****** **** in accordance
with Incoterms 1990), *** ***** **** ***** *** *** ****** ***********
********** ** ********
- - for all the other Countries, *** ******** ****** (in accordance with
Incoterms 1990). Delivery dates will be those specified in the order and in
any case the lead time will not be less than the standard lead time declared
by P-COM with the exception of different lead time accepted by P-COM in
writing for specific orders.
P-COM declares that standard lead time from the reception of purchase order to
delivery *** is * ***** provided that the order is within the boundaries of the
monthly rolling forecast covering the subsequent * months as defined herebelow;
any variations in standard lead time will be promptly notified by written notice
to Siemens.
5.5 Siemens will issue monthly a rolling forecast (with the best possible
indications of frequency, bit rate and configurations) indicating requested
deliveries for the coming six months - divided in months - of which the first
month is covered by firm orders and the subsequent two months are binding in
terms of quantities and configurations.
It is understood that the binding forecast of the subsequent two months allow
Siemens to reduce actual orders of *** in the second month and of *** in the
third month.
First forecast is in Attachment 4; next forecast will be issued by Siemens on
the last working day of the month that follows the date of signature of the
Agreement.
*CONFIDENTIAL TREATMENT REQUESTED.
Page 3 of 9
<PAGE>
5.6 Unless otherwise agreed by the Parties in relation with a specific project,
Siemens' payment to P-COM shall be made for 100% of the relevant price of each
delivered batch, ****** **** days end of the month date of invoice after
shipment of each complete batch of supply and issuance of relevant invoice.
5.7 In the event that P-COM fails for reasons other than causes of force majeure
to deliver FCA each batch of the Products or parts thereof at the respective
dates accepted in the relevant purchase order, Siemens may claim from P-COM
penalties equivalent to ** *** **** ***** of the corresponding price of the
delayed batch per week of delay without exceeding *** **** ******** of said
price. P-COM shall inform immediately Siemens in the event it anticipates any
delay in its deliveries and the Parties shall make their best efforts to
minimise the consequences thereof.
If due to joint efforts of the Parties, the delay in P-COM deliveries does not
delay Siemens' performance of its obligation towards its customer and therefore
no penalties are charged to Siemens, P-COM may elect to reimburse in full to
Siemens all extra or special costs incurred by Siemens during above mentioned
joint efforts instead of being charged penalties hereunder.
In the event Siemens cancels or delays by more than three months any shipment
firmed up in the first three months of the rolling forecast, P-COM will make its
best efforts to redirect the shipment elsewhere to the extent possible. Failing
that P-COM shall inform Siemens in writing within 1 week and Siemens will be
under the obligation to buy and pay for the equipment as follows:
. **** of the equipment scheduled to ship in the month following cancellation;
. *** of the equipment scheduled to ship in the period contained between 1
month and 2 months from the date of cancellation;
. *** of the equipment scheduled to ship in the period contained between 2
months and 3 months from the date of cancellation.
Upon Siemens request P-COM cooperate in safely storing the equipment and will
advise Siemens of the cost to be born.
5.8 Notwithstanding the article 11 (Duration), P-COM undertakes to supply, for *
year after the expiration of the present Agreement, equipment to Siemens for all
the expansions of the contracts signed by Siemens during the validity of the
present Agreement.
5.9 If specific market opportunities pursued by Siemens in relation with the
Products require a local content (either explicitly or as a competitive
advantage), P-COM and Siemens will jointly analyse and decide the best strategy
to be followed with respect to the granting of the manufacturing rights to the
third party addressed in the specific project. Terms and conditions for the
above manufacturing transfer will be negotiated in good faith by the Parties.
ARTICLE 6. INSPECTION ON THE PRODUCTS MANUFACTURING PROCESS.
6.1 In order to certify the quality of the Products and of its manufacturing
process and to allow Siemens to fulfill its contractual obligations with the
customer, Siemens may at any reasonable time inspect, in P-COM' and/or P-COM'
subcontractors' facilities, the various manufacturing steps of the products
which will or may be used in the performance of this Agreement and inspect and
test material and workmanship related to the Products
*CONFIDENTIAL TREATMENT REQUESTED.
Page 4 of 9
<PAGE>
purchased hereunder Siemens shall give P-COM reasonable prior notice of the
dates on which the inspections will take place. All inspections and tests shall
be performed in such a manner as not to delay the work unduly.
The Parties will jointly define specific procedures to carry out the
inspections.
ARTICLE 7. WARRANTY AND SPARE PARTS
7.1 The Products to be supplied by P-COM hereunder shall be warranted to
conform to the specification which are or will become applicable as a result of
this Agreement and its Attachment 1 and to be free from design errors and
defects in materials and workmanship under normal use and service for a period
of ****** **** **** months after the date of the *** ******* by P-COM provided
always that:
1. said warranty shall not extend to natural wear and tear or to any damage
arising in consequence of negligence in handling the Products by Siemens or
Siemens' customer;
2. Siemens shall have notified P-COM of the defects in writing or by confirmed
telefax promptly after Siemens was informed of the defects.
7.2 The defect will be made good at P-COM expenses by repair or replacement at
P-COM option. P-COM shall warrant repaired or replaced items under the same
conditions as above, for a period expiring either simultaneously with the
initial warranty of the delivered product or *** months after installation of
such replaced item, whichever is later. Transportation and insurance cost for
defective or deficient parts returned to P-COM Shall be at Siemens' charge and
transportation and insurance costs for parts replaced or repaired by P-COM shall
be at P-COM charge.
The Parties agree that standard turnaround time for repair ** *** *** weeks.
7.3 P-COM warranty is limited to the repair or replacement of defective or
deficient parts. Labour cost relating to the reinstallation of items repaired or
replaced under the above warranty shall be borne by Siemens.
7.4 P-COM shall furnish to Siemens, in accordance to orders that Siemens may
issue from time to time, any and all spare parts for the Products supplied to
Siemens under this Agreement. P-COM' commitment shall be valid for the term of
** years after the sale of the last Products, and shall survive the termination
of this Agreement.
7.5 Terms and conditions set forth in this Agreement for the purchase of the
Products will be applied as well to the purchase of spare-parts
ARTICLE 8. TRAINING AND DOCUMENTATION
8.1 P-COM agrees to and will provide to Siemens all updated technical
documentation necessary for the correct installation, operation and maintenance
of the Products and to be delivered to the customer together with the Products.
The documentation will be issued in English and will be printed under Siemens
label and brand name. Siemens request for different languages will be evaluated
and, if approved by P-COM, quoted.
*CONFIDENTIAL TREATMENT REQUESTED.
Page 5 of 9
<PAGE>
8.2 Notwithstanding above article 8.1, P-COM will provide to Siemens all
updated technical information that allow Siemens to prepare a complete
documentation to be supplied to the customer together with the Products.
8.3 P-COM agrees to provide to Siemens, during 1995, a training course for
Siemens's personnel on installation, operation, maintenance and repair at no
cost for Siemens. The training course will take place in P-COM' facilities and
each Party will be responsible for costs and living expenses of its own
personnel.
ARTICLE 9. DETAILED PROVISIONS IN RELATION WITH THE INTEGRATION OF THE
PRODUCTS WITH OTHER SIEMENS PRODUCTS.
9.1 Whereas Siemens needs to incorporate the Products into its own TMN systems,
P-COM undertakes to modify its TMN interfaces and protocols in order to
correctly match the Siemens TMN systems.
P-COM and Siemens will cooperate in defining responsibilities and cost for
developing the above interfaces and protocols.
9.2 Whereas Siemens needs to incorporate the Products into their offering for
mobile radio networks, P-COM agrees to do its best efforts to ease mechanical
and electrical integration of the Products into Siemens Base Station (SBS)
equipment and related OMC.
9.3 For the purpose of integration into SBS and for other market requirements,
the ********** **** presently available at prototype level, may be of interest
to Siemens, which will define in due time the requirements.
P-COM hereby agrees to start production delivery of the ********** *** * months
after a firm order of *** units.
9.4 Siemens will also be allowed to mechanically and electrically integrate the
Products or parts thereof; into other products of the Siemens telecommunication
catalogue, in order to provide the customer with integrated network solutions.
ARTICLE 10. CONFIDENTIAL INFORMATION
10.1 Subject to the conditions of this paragraph 10.1 P-COM agrees that it will
defend Siemens, at its cost and expense, and will indemnify and hold harmless
Siemens, from and against all suits, claims, losses, damages and expenses
arising from any actual infringement of any third party's patent right based on
the sale or use of the Products purchased under this Agreement.
Siemens shall give P-COM prompt written notice of any such claim or action upon
Siemens become aware of same. In addition Siemens shall, at P-COM' cost, provide
all reasonable assistance in P-COM' defense or settlement efforts and P-COM
shall have sole authority to defend or settle such claim.
In the event that a final injunction is obtained against the sale or use of an
infringing product of the Products by Siemens and/or its customer, P-COM will,
at its expenses, obtain for Siemens and/or its customers:
1. the right to continue using the Products,
2. the right to replace or modify the Products so that it becomes non
infringing or
*CONFIDENTIAL TREATMENT REQUESTED.
Page 6 of 9
<PAGE>
3 if such remedies are not reasonably available, grant to Siemens a refund or
credit equal to the amount paid by Siemens to P-COM for the infringing
product.
P-COM shall not be liable for any infringement of patent rights if such
infringement is based upon the use of the product in combination with other
equipment, software, products or devices not furnished by P-COM if such claim
would have been avoided in the absence of such combination.
The foregoing states the entire warranty and liability of P-COM with respect to
any alleged or actual patent rights infringement.
10.2 Each Party will hold in confidence as it does for its own confidential
information of the same importance, and use only for purposes of this Agreement,
all technical and commercial information (oral or written) provided by the other
Party and designated as confidential. Each Party warrants that the measures it
takes with respects to its own confidential information are reasonably
calculated to protect its confidentiality. These obligations will be subject to
exceptions for information which:
. is in the public domain, or enters the public domain through no fault of the
receiving Party;
. is disclosed to third Parties by the disclosing Party without similar
obligations of confidentiality;
. the receiving Party learns from a third Party without violation of the
disclosing Party's rights with respect to the information;
. is already known to the receiving Party at the time of disclosure;
. is disclose with the prior written consent of the disclosing Party;
. is required to be disclosed by a court or other governmental body or to a
prospective or current customer in the context of a tender offer or the
execution of a supply contract.
ARTICLE 11. DURATION
11.1 This Agreement shall become effective at the date of signature by the
Parties and shall have an initial *****-year term, automatically renewable for
successive one-year term, unless terminated by any Party upon written notice to
the other Party given at least *** *** months prior to the end of the initial
term or any subsequent one year period, or unless terminated as provided in the
Article 12 below.
ARTICLE 12. EARLY TERMINATION
12.1 Notwithstanding anything contained in the Article 11 of this Agreement as
far as the term is concerned, each Party hereto reserves and shall have the
right and option to terminate, by written notice, this Agreement at any time as
follows:
(a) in the event of breach of a material term of this Agreement (including non-
payments of amounts due and the unability to fulfill obligations as per
article 2.1, 7.1 and 7.2), this Agreement may be terminated by the Party not
in breach by giving a 60 days' notice to the Party in-breach, except in the
event such breach is remedied within such 60 days notice period or an agreed
plan to remedy has been worked out by the Parties within the same 60 days
period;
*CONFIDENTIAL TREATMENT REQUESTED.
Page 7 of 9
<PAGE>
(b) in the event the other Party shall make an assignment for the benefit of
creditors, shall admit in writing its inability to pay its debts as they
become due, or shall file a voluntary petition for relief under applicable
bankruptcy laws, or shall file any other petition or similar request with a
court having competent jurisdiction for voluntary relief, looking to
reorganisation, arrangement, composition, readjustment, liquidation,
custodianship, dissolution, winding-up or similar relief under bankruptcy
laws or any similar laws or regulations, or shall file any answer admitting
or not contesting the material allegations of a petition filed against it in
any such proceeding, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver, custodian or liquidator of such party
with result to all or any substantial part of its properties.
12.1 In case of early termination generated by P-COM under the clause 12.1 (b)
Siemens will be granted the licence to manufacture and sale the Products without
any limitations and P-COM undertakes to promptly disclose to Siemens all
technical information, drawings, and manufacturing details that will allow
Siemens to exercise the above licence rights.
ARTICLE 13. FORCE MAJEURE
13.1 Neither of the Parties shall be liable for delays or failure in the
performance of this Agreement arising from any of the following causes, which
are beyond the control of the Party affected:
. acts of God, or public enemy or war (declared or undeclared);
. acts of governmental or quasigovernmental authorities or any department or
agency thereof, or regulations or restrictions imposed by law or by court
actions, including without limitations
1. acts of persons engaged in subversive activities or sabotage;
2. fires, flood, explosions, earthquakes, or other catastrophes;
3. epidemics or quarantines;
4. strikes, slowdowns, lock outs or labour stoppages or disputes of any
kind;
5. freight embargoes or interruptions of transportation;
6. any other cause similar or dissimilar beyond the control of the Party
concerned or its subcontractors.
ARTICLE 14. APPLICABLE LAW AND ARBITRATION
14.1 This Agreement shall be governed by and construed in accordance with the
Swiss Federal code of obligations excluding however any reference to the "1980,
Wien Sale Convention".
14.2 The Parties hereto agree that they shall use their best efforts to settle
amicably any disputes arising between them out of or in connection with this
Agreement. Failing that, any and all such disputes shall be finally and
exclusively settled through arbitration in Geneva Switzerland, by three
Arbitrators appointed and acting in accordance with the Rules of Conciliation
and Arbitration of the International Chamber of Commerce. Arbitration
proceedings shall be conducted in the English language.
Performance by the Parties relevant to this Agreement shall not be suspended
during the pendency of any dispute or arbitration hereunder.
Page 8 of 9
<PAGE>
ARTICLE 15. LIMITATION OF LIABILITY
15.1 Except is otherwise expressely provided for in this Agreement, any Party
shall in no circumstances be liable to the other Party for any loss which is in
form or substances a loss of profits or loss of opportunity of earning profits
or for any consequential loss whatsoever.
ARTICLE 16. COMING INTO FORCE
16.1 The present Agreement will come into force when the two following events
have occured:
1. signature by the Parties;
2. approval by Siemens' Board.
The latter is considered given in absence of any written notice of non approval
within 30 days after the signature of the Agreement.
ARTICLE 17. NON DISCLOSURE CLAUSE
17.1 The Parties shall not disclose to any third party, in any form, the
existence and the contents of the present Agreement until its coming into force,
in accordance with the Art 16 hereabove.
IN WITNESS HEREOF this Agreement has been executed in duplicate
For and on behalf of For and on behalf of
Siemens Telecomunicazioni P-COM
by [SIGNATURE ILLEGIBLE] by /s/ George Roberts
-------------------------- ---------------------------
on 13 Feb. 1995 on Feb. 13, 1995
Page 9 of 9
<PAGE>
SIDE LETTER
Whereas P-COM and Siemens Telecomunicazioni (jointly the Parties) have signed on
February 13, 1995 a Product Agreement;
notwithstanding the fact that such Agreement has not yet come into force, per
Art.16, the Parties undertake to immediately operate in accordance with the
provisions of the Agreement, with particular reference to forecast, orders and
deliveries.
In case the Agreement shall not come into force as per its Art. 16, the Parties
commit themselves to completely fulfill the obligations accepted in the period
from the date of signature to the date of non approval.
In case the Agreement shall come into force the obligations above will become
integral part of the Agreement.
Milan (Italy), the 13th of February 1995
For and on behalf of Siemens Telecomunicazioni For and on behalf of P-COM
[SIGNATURE ILLEGIBLE] /s/ George Roberts
- ------------------------ -------------------------
?????? Feb. 13, 1995
- ------------------------ -------------------------
<PAGE>
SIDE LETTER
With reference to the Agreement signed on February 13th 1995, Siemens and P-
Com agree on the level [*] of price discounts to be applied for orders to be
delivered within end [**** *****].
By that date Siemens will either confirm the level for the whole year or
indicate a new level, based on the results of the promotion activities.
Milan (Italy), the 13th of February 1995
For and on behalf of Siemens Telecomunicazioni For and on behalf of P-COM
[SIGNATURE ILLEGIBLE] /s/ George Roberts
- ------------------------ -------------------------
________________________ _________________________
*CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
SIDE LETTER
This is to confirm the commitment of Siemens Telecomunicazioni to purchase from
P-COM, in the period between the date of the OEM Agreement and the end of ***
**** **** a minimum of ** ******** Tel Link 38 GHz radio terminals equipped with
30 cm antenna, **** modulation and *** capacity. The price, ********* ** *******
*** ****** will be *** ******
It is understood that, during this period ST will do its best efforts to sell
the ** terminals in the above mentioned configuration. However, should ST fail
this respect, P-COM undertakes to reconfigure the equipment at * *** **** ** ***
****** at its own expenses.
Milan (Italy), the 13th of February 1995
For and on behalf of Siemens Telecomunicazioni For and on behalf of P-COM
[SIGNATURE ILLEGIBLE] /s/ George Roberts
- ------------------------- -------------------------
??????? Feb. 13, 1995
- ------------------------- -------------------------
*CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
ATTACHMENT 1
PRODUCT SPECIFICATIONS AND DESCRIPTION
<PAGE>
Siemens Specification for 23GHz Radios
WARNING
The information contained in this document is the exclusive property of P-Com
Inc. and should not be disclosed to any third party without the written consent
of P-Com.
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1 General Specifications Page 2
Section 2 Digital Interface Specifications Page 3
Section 3 Transmitter Specifications Page 4
Section 4 Receiver Specifications Page 5
Section 5 Miscellaneous Specifications Page 6
Section 6 Service Channel Specifications Page 6
Section 7 Alarms Specifications Page 7
Section 8 Loopback Specifications Page 7
Section 9 Power Supply Specifications Page 7
Section 10 Environmental Specifications Page 8
Section 11 Mechanical Specifications Page 8
Section 12 Shock Specifications Page 8
Section 13 Vibration Specifications Page 8
Section 14 IDU to ODU Interconnect Specifications Page 9
Section 15 Antenna Specification Page 9
Section 16 Protection Configuration Specification Page 9
Section 17 EMC and Transient Specifications Page 10
Section 18 Relaibility Specifications Page 10
</TABLE>
Appendices
Appendix "A" Input Jitter Tolerance Mark Page 11
Appendix "B" Jitter Gain Mask Page 12
Appendix "C" Transmit Spectrum Page 13-17
Appendix "D" Channel Plans Page 18-23
The specifications listed in the following sections are the minimum or
guaranteed specifications, over the environmental ranges specified, for the
P-Com Tel-Link 23 E1 radio system provided to Siemens. As a minimum, the
Tel-Link 23 E1 radio system compiles with prETS 300 198 November 1993. The
specifications apply to both unprotected (1+0) and protected (1+1) systems
except where otherwise specified.
Issue 1.1 1
<PAGE>
Siemens Specification for 23GHz Radios
Section 1: General:
Operating Frequency: 21.2 to 23.6 GHz
23A option; (Germany)
- ---------------------
ODU Bands Tx frequencies: Low Band [***** * *****] MHz
High Band [**** * *****] MHz
Frequency Agility: [***] MHz
Transmit/Receive Spacing 1008 MHz
23B option; (U.K.)
- ------------------
ODU Bands Tx frequencies: Low Band [***** * *****] MHz
High Band [***** * *****] MHz
Frequency Agility: [***] MHz
Transmit/Receive Spacing 1232 MHz
RF Channel Spacing: 1E1 & 2E1 = [***] MHz, 4E1 = [*] MHz
Tuning Step Size:
Minimum [****] MHz
1E1 & 2E1 [* ** ***] channels per ODU band
4E1 [* ** **] channels per ODU band
Modulation Type: [* *** ***] systems will use [****] due to
bandwidth)
Flexibility: Any IDU (any capacity) to be used with any ODU
Connectors: Front Access IDU, [**] High. Rear access
option.
DC Power 2 position plug with screw terminals
Digital 1/0 (2.048 Mb/s) 120 ohm DB-25 Female or 75 ohm BNC.
IDU to ODU 50 ohm "N" Female
Alarms Port DB-25 Male
Computer DB-9 Female
EOW RJ-11, 4 pin
EOW Bridge RJ-11, 8 pin
Data Channels 1 & 2 (East) DB-9 Female
Data Channels 1 & 2 (West) DB-9 Male
*CONFIDENTIAL TREATMENT REQUESTED.
Issue 1.1 2
<PAGE>
Siemens Specification for 23GHz Radios
Section 2: Digital Interface:
Digital Capacity: Complies with CCITT G.703
1 x 2.048 Mb/s
2 x 2.048 Mb/s
4 x 2.048 Mb/s
Universal Bit Rate (1,2, or 4 x 2.048 Mb/s
selectable by P.C. Software)
Digital I/O Tolerence +/- 50ppm
Digital I/O Connectors: 120 Ohm Balanced - DB-25 Female
or 75ohm Unbalanced-BNC
Digital Line Code: HDB3
Alarm Indication Signal: AIS inserted with the following conditions;
1. Loss of signal from the Multiplexer to
radio will transmit AIS to the far and over
the radio link. 2. Receiver failure or
B.E.R. greater than 1 x10-4 less than 1x10-
3 will send AIS to the receiver
multiplexer. AIS is adjustable, OFF, 1x10-
3, or 1x10-4
AIS Delay:
Loss of input from multiplexer *ms
Receiver failure *ms
Defection of 1x10-3 B.E.R *ms
Defection of 1x10-4 B.E.R *ms
Scrambling: Digital signals are scrambled to ensure the
radiated RF spectrum does not contain
discrete spectral components as a result of
repetitive patterns in the input data
stream or carrying internally generated
AIS.
Input Jitter Tolerance: per CCITT G.823/G921. See appendix "A" for
mask. No errors when using a PRBS 215-1
signal.
Output Jitter Tolerance: When using a PRBS 215-1 signal:
* UI p-p * Hz to * KHz
* UI p-p * KHz to * KHz
Jitter Gain per CCITT G.823/G921. See appendix "B" for
mask. No errors when using a PRBS 215-1
signal.
*CONFIDENTIAL TREATMENT REQUESTED.
3
<PAGE>
Siemens Specification for 23GHz Radios
Section 3: Transmitter
Power Output:
Standard Power +* dBm minimum * mW) at antenna port
High Power +* dBm minimum * mW) at antenna port
Frequency Stability:
Over Temperature: * ppm
Years 1 to 4 * ppm
Years 5 to 10 * ppm
10 year period total * ppm
Transmitter Mute: * dB when loss of lock Modulator or
Synthesizer
Attenuation Range: * dB via P.C. software
Intermediate Frequency: * MHz
Composite Data Rate:
1 x 2.048 Mb/s * Mb/s
2 x 2.048 Mb/s * Mb/s
4 x 2.048 Mb/s * Mb/s
Occupied Bandwidth:
1 x 2.048 Mb/s * MHz (using * level FSK modulation)
2 x 2.048 Mb/s * MHz
4 x 2.048 Mb/s * MHz
Spectrum Efficiency:
1 x 2.048 Mb/s * bit/sec/Hz (using * level FSK
modulation
2 x 2.048 Mb/s * bit/sec/Hz
4 x 2.048 Mb/s * bit/sec/Hz
TX Spurious Emissions:
30 MHz to 21.2 GHz * dBW
21.1 GHz to 55 GHz * dBW
TX Spectrum Mask: Refer to Appendix "C"
*CONFIDENTIAL TREATMENT REQUESTED.
4
<PAGE>
Siemens Specification for 23GHz Radios
Section 4: Receiver:
Type: Dual Conversion
Intermediate Frequencies: * MHz & * MHz
RX Noise Bandwidth:
1 x 2.048 Mb/s * MHz
2 x 2.048 Mb/s * MHz
4 x 2.048 Mb/s * MHz
Maximum RSL for 1x10-6 B.E.R -15 dBm
Maximum RSL for 1x10-3 B.E.R -13 dBm
Receiver Sensitivity, Dynamic Range, and System Gain specifications reflect 2
FSK modulation for 1x2 Mb/s systems, while 2x2 Mb/s and 4x2 Mb/s specifications
reflect 4 FSK modulation.
Sensitivity for 1x10-6 B.E.R. with F.E.C.
1 x 2.048 Mb/s * dBm
2 x 2.048 Mb/s * dBm
4 x 2.048 Mb/s * dBm
Dynamic Range for 1x10-6 B.E.R. with F.E.C.
1 x 2.048 Mb/s * dB
2 x 2.048 Mb/s * dB
4 x 2.048 mb/s * dB
Standard PowerHigh Power
System Gain for 1x10-6 B.E.R. with F.E.C. with F.E.C.
1 x 2.048 Mb/s * dB * dB
2 x 2.048 Mb/s * dB * dB
4 x 2.048 Mb/s * dB * dB
Sensitivity for 1x10-3 B.E.R. with F.E.C.
1 x 2.048 Mb/s * dBm
2 x 2.048 Mb/s * dBm
4 x 2.048 Mb/s * dBm
Dynamic Range for 1x10-3 B.E.R. with F.E.C.
1 x 2.048 Mb/s * dB
2 x 2.048 Mb/s * dB
4 x 2.048 Mb/s * dB
Standard PowerHigh Power
System Gained for 1x10-3 B.E.R. with F.E.C. with F.E.C.
1 x 2.048 Mb/s * dB * dB
2 x 2.048 Mb/s * dB * dB
4 x 2.048 Mb/s * dB * dB
RX Spurious Emissions:
30 MHz to 21.2 GHz * dBW
21.2 GHz to 55 GHz * dBW
Unfaded B.E.R. *
*CONFIDENTIAL TREATMENT REQUESTED.
Issue 1.1 5
<PAGE>
Siemens Specification for 23GHz Radios
Section 5: Miscellaneous:
Co-Channel Interference: * dB for one decade B.E.R. degradation
referenced to 1x10-6 B.E.R thresholds.
This applies to all bit rates.
Adjacent Channel Interference: For one decade B.E.R. degradation
referenced to 1x10-6 thresholds B.E.R.,
using a modulated carrier similar to
the wanted RX signal.
1 x 2.048 Mb/s * dB with a 3.5 MHz separation
2 x 2.048 Mb/s * dB with a 3.5 MHz separation
4 x 2.048 Mb/s * dB with a 7 MHz separation
Forward Error Correction: Standard Feature * Type,
corrects five bytes per frame.
Link ID's 1-100. Eliminates the possibility of an
unwanted transmitter locking up a wanted
receiver in densely populated areas of
radios.
Section 8: Service Channels:
Number of Service Channels: Three
One EOW (Engineering Orderwire) -
Optional One Data Channel
One NMS Channel - equipped as a second
data channel
Service Channel #1 EOW (Engineering Orderwire) - optional
Type: Analog
Impedance: 600 ohms Balanced
Coding Scheme: A-Law PCM
Frequency Response: 300-3400 Hz
Bridge Input Level: -14dBm to +1 dBm adjustable through
keypad
Bridge Output Level: -11dBm to +4 dBm adjustable through
keypad
Signalling: E&M type-E lead to ground. "Call" button
on front panel of IDU.
I/O Connector RJ-11, 4 pin modular
Bridge: 2 way, 4 wire balance bridge
Bridge connector: RJ-45, 8 pin modular
Service Channel #2 Digital Data Channel
Type: Digital
Mode: Asynchronous
Interface: RS-233C, RS-422/RS-423
Speed: 0-9600 bit/s
I/O Connector: DB-9
Service Channel #3 NMS Channel or Digital Data Channel #2
Type: Digital
Mode: Asynchronous
Interface: RS-232C, RS-422/RS-423
Speed: 0-9600 bit/s
I/O Connector: DB-9
Issue 1.1 8
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Siemens Specification for 23GHz Radios
Section 7: Alarms:
Front Panel indicators:
On-Line LED Green indicates power is applied to
unit.
IDU LED Green indicates normal. Flashes or
solid red in alarm.
ODU LED Green indicates normal. Flashes or
solid red in alarm.
CBL (Cable) LED Green indicates normal. Red when
cable short or open.
RMT (Remote) LED Green indicates normal. Flashes or
solid yellow when far end terminal
is not normal operation.
External Alarms: Up to eight external alarms can be
used per IDU for site alarms such
as Open door, Temperature, A/C
Fail, ect.
Alarm Relays: Five form "C" relays. These alarm
relays can be "mapped" using the
optional P.C. software.
Transmit Mute: The alarms that will cause the
transmitter to mute are:
Modulator
LO/Synthesizer
Time Delay for TX Mute:
Alarm recognition to TX Mute: less than ** millseconds
Alarm Clearing to TX Output Restoral: * seconds
Resuiting Power Reduction ** dB
Section 8: Loopbacks: Three types of loopbacks are
offered:
IDU Loopback: Loops the aggregate date before the
"N" connector of the IDU. Tests all
circuits in the IDU for operation.
An external BERT set is needed to
test for error performance. Traffic
affecting on all tributaries.
ODU Loopback: Used only with the Loopback Test
Transistor (LBT) to allow testing
of an entire terminal. The LBT
consists of a number and a 1008 or
1232 MHz oscillator.
Link Loopback: Loops the far end tributary at the
line driver and returns the E1
signal to the local end. Affects
only the tributary selected. An
external BERT set is needed to
perform error rate tests.
* CONFIDENTIAL TREATMENT REQUESTED
Issue 1.1 7
<PAGE>
Siemens Specification for 23GHz Radios
Section 9: Power Supply:
Input Voltage:
Standard: -48 VDC
Range: -38.4 VDC to -62.4 VDC
Optional: +24/-24V DC. (-20%, +30%)
Power Consumption:
Standard Power ** watts includes service channel
options installed
High Power ** watts includes service channel
options installed
Section 10: Environment:
Temperature Range - Operational:
Outdoor Unit -30 degrees C to +60 degrees C
Indoor Unit -10 degrees C to +55 degrees C
Temperature Range - Storage: -40 degrees C to +70 degrees C for
both IDU and ODU
Relative Humidity:
Outdoor Unit up to 100% for all weather
operation
Indoor Unit 95% at +55 degrees C
Altitude: 4,500 meters (15,000 feet)
Section 11. Mechanical:
Dimensions:
Outdoor Unit 250mm dia x 200 mm depth (10" dia x
8" depth)
Indoor Unit 89 mm H, x 483 mm W. x 267 mm D
(3.5" H, X 19" W, x 10.5" D)
Specification are listed in
attachment 61.
Weight:
Outdoor Unit 4.5 kg (10lbs)
Indoor Unit 3.6 kg (8 lbs)
Section 12: Shock: per ETS 300 019-1-3
IDU: 5g Operational, 10g Survival
ODU: 5g Operational, 10g Survival
Section 13: Vibration: per ETS 300 019-1-3
IDU: 0.25g random, 5 Hz to 200 Hz
Operational
0.25g random, 5 Hz to 200 Hz
Survival
ODU 0.9g random, 5 Hz to 500 Hz
Operational
2.4g random, 5 Hz to 500 Hz
Survival
*CONFIDENTIAL TREATMENT REQUESTED.
Issue 1.1 8
<PAGE>
Siemens Specification for 23GHz Radios
Section 14: IDU to ODU Interconnection:
Number of Cables: One
Type: RG-8/U - Belden 9913 or equivalent
Impedance: 50 ohms unbalanced
Maximum Distance: 300 meters
IDU Connector Type: "N" type Female
ODU Connector Type: "N" type Female
Cable Length Criteria:
DC Resistance: 4 ohms
AC Resistance: 27 DB at [*] MHz for 300 meter run
Shielding 100%
Signals on Interconnect Cable: Frequency Level
TX IF [*] MHz + 13 dBm +/-2 dB
RX IF [*] MHz -25 to -5 dBm
Telemetry, TX [*] MHz 0 dBm nominal
Telemetry, RX [*] MHz -20 to 0 dBm
Power DC -48 VDC @ 1 amp max
Section 15: Antenna Specification.
Diameter: 60 cm
Frequency Band: 21.2-23.6 GHz
Gain, min 39 dBi
Radiation Pattern: As per ETS 300 198 Figure 3
3dB beamwidth: 1.5 degrees
Cross polarisation discrimination As per ETS 300 198 Figure 3
Section 16: Protected Configuration (1+1) Specifications.
Number of tributaries: Up to four
Impedance: 120 ohm balanced
or 75 ohm unbalanced
PSS Indicators: "A" On Line, "B" On Line
PSS Manual Switch: "A" On Line, "B" On Line, Auto
Switching Type: Combined Tx and Rx.
RF Branching losses:
Dual antenna system None
Single antenna system:
Equal loss splitter. Main [*] dB, Standby [*] dB
Unequal loss splitter. Main [*] dB, Standby [*] dB
Total switching time [*] sec
Muting level [*] dB hour operational
Mechanical dimension [*]
Issue 1.1 9
* CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
Siemens Specification for 23GHz Radios
Section 17: EMC and Transient Specifications.
Conducted Emissions: * kHz, * MHz, average peak
CISPR-22
Radiated Emissions: * MHz - * GHz, 3m and 10m ranges
EN55022
DIN VDE 0876
Conducted Immunity: IEC 801-2 ESD
Radiated Immunity: IEC 801-3
Lightning Protection: IEC 801-5 Class 2 & 4 with optional arrestors.
Section 18: Reliability Specifications.
IDU MTBF: * hours (* years)
ODU MTBF: * hours (* years)
Calculated using MIL-HDBK-217 Rev F
Issue 1.1
*CONFIDENTIAL TREATMENT REQUESTED.
10
<PAGE>
Siemens Specifications for 23GHz Radios
Input Jitter Tolerance Mask
Appendix "A"
[GRAPH APPEARS HERE]
---------------------------------------------
E1 Jitter Tolerance Mask
CCITT G.823 (Above Curve = in Spec)
Corner Points:
-------------------------------
1Hz 2.9IU
20 1.5
2.4K 1.5
18K .2
100K .2
---------------------------------------------
FREQUENCY (Hz)
Issue 1.0 10 bis
<PAGE>
Siemens Specification for 23GHz Radios
Appendix "B"
Jitter Gain Mask
[GRAPH APPEARS HERE]
----------------------------------------------
E1 Jitter Transfer Mask
CCITT G.823/1.431 (Below Curve = in Spec)
Corner Points:
---------------------
1Hz +0.5dB
40 +0.5
400 -19.5
15K -19.5
---------------------------------------
[GRAPH APPEARS HERE]
FREQUENCY (HZ)
Issue 1.0 11
<PAGE>
Siemens Specifications for 23GHz Radios
Appendix "C"
Transmit Spectrum Mask
per BAPT 211 ZV 02/23 GHz
Issue 1.0
12
<PAGE>
Spektrumsmaske A fur 3,5 MHz Kanalabstand
[GRAPH APPEARS HERE]
Spektrale Leistungsdichte / (dB) bezogen auf den Maximalwert
--------------------------------------
0,0 MHz 0 dB
--------------------------------------
+ or -1.25 MHz 0 dB
--------------------------------------
+ or -2.125 MHz -18 dB
--------------------------------------
+ or -2.875 MHz -18 dB
--------------------------------------
+ or -4.0 MHz -45 dB
--------------------------------------
+/-5.0 MHz -45 dB
---------------------------------
Ausgabe: August 1993
13
<PAGE>
Spektrumsmaske B fur 3,5 MHz Kanalabstand
[GRAPH APPEARS HERE]
-----------------------------------
0.0 MHz 0 dB
-----------------------------------
+/-1.4 MHz 0 dB
-----------------------------------
+/-2.8 MHz -23 dB
-----------------------------------
+/-3.4 Mhz -23 dB
-----------------------------------
+/-7.0 MHz -45 dB
-----------------------------------
+/-10.0 MHz -45 dB
-----------------------------------
Ausgabe: August 1993
14
<PAGE>
Spektrumsmaske A fur 7 MHz Kanalabstand
[GRAPH APPEARS HERE]
-----------------------------------
0.0 MHz 0 dB
-----------------------------------
+/-3.0 MHz 0 dB
-----------------------------------
+/-4.75 MHz -18 dB
-----------------------------------
+/-6.25 Mhz -18 dB
-----------------------------------
+/-8.5 MHz -45 dB
-----------------------------------
+/-10.0 MHz -45 dB
-----------------------------------
Ausgabe: August 1993
15
<PAGE>
Speltrunsmaske B fur 7 MHz Kanalabstand
[Spektrate Leistungsdichte / (dB) bezogen auf den Maximailwert]
[GRAPH APPEARS HERE]
0.0 MHz 0dB
+2.8 MHz 0dB
+5.6 MHz -23dB
+6.8 Mhz -23dB
+14.0 MHz -45dB
+20.0 MHz -45dB
Augusabe: August 1993
16
<PAGE>
Siemens Specification for 23GHz Radios
Appendix "D"
23 GHz Channel Plans
Issue 1.0 17
<PAGE>
23B, Out Door Unit 13566 Rev.01
- --------------------------------------------------------------------------------
10.0 Frequency Plan
3.5 MHz Plan
<TABLE>
<CAPTION>
BAND 1
RX Freq
BAND 1 BAND 1 BAND I BAND 2 BAND 2 BAND 2 BAND 2
CHAN TX - LO LOx2 TX FREQ LO LOx2 RX
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21897.75 12786.375 25572.75 23129.75 9727.375 19454.75 21897.75
2 21901.25 12788.125 25576.25 23133.25 9729.125 19458.25 21901.25
3 21904.75 12789.875 25579.75 23136.75 9730.875 19461.75 21904.75
4 21908.25 12791.625 25583.25 23140.25 9732.625 19465.25 21908.25
5 21911.75 12793.375 25586.75 23143.75 9734.375 19468.75 21911.75
6 21915.25 12795.125 25590.25 23147.25 9736.125 19472.25 21915.25
7 21918.75 12796.875 25593.75 23150.75 9737.875 19475.75 21918.75
8 21922.25 12798.625 25597.25 23154.25 9739.625 19479.25 21922.25
9 21925.75 12800.375 25600.75 23157.75 9741.375 19482.75 21925.75
10 21929.25 12802.125 25604.25 23161.25 9743.125 19486.25 21929.25
11 21932.75 12803.875 25607.75 23164.75 9744.875 19489.75 21932.75
12 21936.25 12805.625 25611.25 23168.25 9746.625 19493.25 21936.25
13 21939.75 12807.375 25614.75 23171.75 9748.375 19496.75 21939.75
14 21943.25 12809.125 25618.25 23175.25 9750.125 19500.25 21943.25
15 21946.75 12810.875 25621.75 23178.75 9751.875 19503.75 21946.75
16 21950.25 12812.625 25625.25 23182.25 9753.625 19507.25 21950.25
17 21953.75 12814.375 25628.75 23185.75 9755.375 19510.75 21953.75
18 21957.25 12816.125 25632.25 23189.25 9757.125 19514.25 21957.25
19 21960.75 12817.875 25635.75 23192.75 9758.875 19517.75 21960.75
20 21964.25 12819.625 25639.25 23196.25 9760.625 19521.25 21964.25
21 21967.75 12821.375 25642.75 23199.75 9762.375 19524.75 21967.75
22 21971.25 12823.125 25646.25 23203.25 9764.125 19528.25 21971.25
23 21974.75 12824.875 25649.75 23206.75 9765.875 19531.75 21974.75
24 21978.25 12826.625 25653.25 23210.25 9767.625 19535.25 21978.25
25 21981.75 12828.375 25656.75 23213.75 9769.375 19538.75 21981.75
26 21985.25 12830.125 25660.25 23217.25 9771.125 19542.25 21985.25
27 21988.75 12831.875 25663.75 23220.75 9772.875 19545.75 21988.75
28 21992.25 12833.625 25667.25 23224.25 9774.625 19549.25 21992.25
29 21995.75 12835.375 25670.75 23227.75 9776.375 19552.75 21995.75
30 21999.25 12837.125 25674.25 23231.25 9778.125 19556.25 21999.25
31 22002.75 12838.875 25677.75 23234.75 9779.875 19559.75 22002.75
32 22006.25 12840.625 25681.25 23238.25 9781.625 19563.25 22006.25
33 22009.75 12842.375 25684.75 23241.75 9783.375 19566.75 22009.75
34 22013.25 12844.125 25688.25 23245.25 9785.125 19570.25 22013.25
35 22016.75 12845.875 25691.75 23248.75 9786.875 19573.75 22016.75
36 22020.25 12847.625 25695.25 23252.25 9788.625 19577.25 22020.25
37 22023.75 12849.375 25698.75 23255.75 9790.375 19580.75 22023.75
38 22027.25 12851.125 25702.25 23259.25 9792.125 19584.25 22027.25
39 22030.75 12852.875 25705.75 23262.75 9793.875 19587.75 22030.75
40 22034.25 12854.625 25709.25 23266.25 9795.625 19591.25 22034.25
41 22037.75 12856.375 25712.75 23269.75 9797.375 19594.75 22037.75
42 22041.25 12858.125 25716.25 23273.25 9799.125 19598.25 22041.25
</TABLE>
- --------------------------------------------------------------------------------
P-Com, Inc. Confidential Page 25 of 29
<PAGE>
23B, Out Door Unit 13566 Rev.01
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
43 22044.75 12859.875 25719.75 23276.75 9800.875 19601.75 22044.75
44 22048.25 12861.625 25723.25 23280.25 9802.625 19605.25 22048.25
45 22051.75 12863.375 25726.75 23283.75 9804.375 19608.75 22051.75
46 22055.25 12865.125 25730.25 23287.25 9806.125 19612.25 22055.25
47 22058.75 12866.875 25733.75 23290.75 9807.875 19615.75 22058.75
48 22062.25 12868.625 25737.25 23294.25 9809.625 19619.25 22062.25
49 22065.75 12870.375 25740.75 23297.75 9811.375 19622.75 22065.75
50 22069.25 12872.125 25744.25 23301.25 9813.125 19626.25 22069.25
51 22072.75 12873.875 25747.75 23304.75 9814.875 19629.75 22072.75
52 22076.25 12875.625 25751.25 23308.25 9816.625 19633.25 22076.25
53 22079.75 12877.375 25754.75 23311.75 9818.375 19636.75 22079.75
54 22083.25 12879.125 25758.25 23315.25 9820.125 19640.25 22083.25
55 22086.75 12880.875 25761.75 23318.75 9821.875 19643.75 22086.75
56 22090.25 12882.625 25765.25 23322.25 9823.625 19647.25 22090.25
57 22093.75 12884.375 25768.75 23325.75 9825.375 19650.75 22093.75
58 22097.25 12886.125 25772.25 23329.25 9827.125 19654.25 22097.25
59 22100.75 12887.875 25775.75 23332.75 9828.875 19657.75 22100.75
60 22104.25 12889.625 25779.25 23336.25 9830.625 19661.25 22104.25
61 22107.75 12891.375 25782.75 23339.75 9832.375 19664.75 22107.75
62 22111.25 12893.125 25786.25 23343.25 9834.125 19668.25 22111.25
63 22114.75 12894.875 25789.75 23346.75 9835.875 19671.75 22114.75
64 22118.25 12896.625 25793.25 23350.25 9837.625 19675.25 22118.25
65 22121.75 12898.375 25796.75 23353.75 9839.375 19678.75 22121.75
66 22125.25 12900.125 25800.25 23357.25 9841.125 19682.25 22125.25
67 22128.75 12901.875 25803.75 23360.75 9842.875 19685.75 22128.75
68 22132.25 12903.625 25807.25 23364.25 9844.625 19689.25 22132.25
69 22135.75 12905.375 25810.75 23367.75 9846.375 19692.75 22135.75
70 22139.25 12907.125 25814.25 23371.25 9848.125 19696.25 22139.25
71 22142.75 12908.875 25817.75 23374.75 9849.875 19699.75 22142.75
72 22146.25 12910.625 25821.25 23378.25 9851.625 19703.25 22146.25
73 22149.75 12912.375 25824.75 23381.75 9853.375 19706.75 22149.75
74 22153.25 12914.125 25828.25 23385.25 9855.125 19710.25 22153.25
75 22156.75 12915.875 25831.75 23388.75 9856.875 19713.75 22156.75
76 22160.25 12917.625 25835.25 23392.25 9858.625 19717.25 22160.25
77 22163.75 12919.375 25838.75 23395.75 9860.375 19720.75 22163.75
78 22167.25 12921.125 25842.25 23399.25 9862.125 19724.25 22167.25
79 22170.75 12922.875 25845.75 23402.75 9863.875 19727.75 22170.75
80 22174.25 12924.625 25849.25 23406.25 9865.625 19731.25 22174.25
81 22177.75 12926.375 25852.75 23409.75 9867.375 19734.75 22177.75
82 22181.25 12928.125 25856.25 23413.25 9869.125 19738.25 22181.25
83 22184.75 12929.875 25859.75 23416.75 9870.875 19741.75 22184.75
84 22188.25 12931.625 25863.25 23420.25 9872.625 19745.25 22188.25
85 22191.75 12933.375 25866.75 23423.75 9874.375 19748.75 22191.75
86 22195.25 12935.125 25870.25 23427.25 9876.125 19752.25 22195.25
87 22198.75 12936.875 25873.75 23430.75 9877.875 19755.75 22198.75
88 22202.25 12938.625 25877.25 23434.25 9879.625 19759.25 22202.25
89 22205.75 12940.375 25880.75 23437.75 9881.375 19762.75 22205.75
90 22209.25 12942.125 25884.25 23441.25 9883.125 19766.25 22209.25
91 22212.75 12943.875 25887.75 23444.75 9884.875 19769.75 22212.75
92 22216.25 12945.625 25891.25 23448.25 9886.625 19773.25 22216.25
</TABLE>
- --------------------------------------------------------------------------------
P-Com, Inc. Confidential Page 26 of 29
<PAGE>
23B, Out Door Unit 13566 Rev.01
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
93 22219.75 12947.375 25894.75 23451.75 9888.375 19776.75 22219.75
94 22223.25 12949.125 25898.25 23455.25 9890.125 19780.25 22223.25
95 22226.75 12950.875 25901.75 23458.75 9891.875 19783.75 22226.75
96 22230.25 12952.625 25905.25 23462.25 9893.625 19787.25 22230.25
97 22233.75 12954.375 25908.75 23465.75 9895.375 19790.75 22233.75
98 22237.25 12956.125 25912.25 23469.25 9897.125 19794.25 22237.25
99 22240.75 12957.875 25915.75 23472.75 9898.875 19797.75 22240.75
100 22244.25 12959.625 25919.25 23476.25 9900.625 19801.25 22244.25
101 22247.75 12961.375 25922.75 23479.75 9902.375 19804.75 22247.75
102 22251.25 12963.125 25926.25 23483.25 9904.125 19808.25 22251.25
103 22254.75 12964.875 25929.75 23486.75 9905.875 19811.75 22254.75
104 22258.25 12966.625 25933.25 23490.25 9907.625 19815.25 22258.25
105 22261.75 12968.375 25936.75 23493.75 9909.375 19818.75 22261.75
106 22265.25 12970.125 25940.25 23497.25 9911.125 19822.25 22265.25
107 22268.75 12971.875 25943.75 23500.75 9912.875 19825.75 22268.75
108 22272.25 12973.625 25947.25 23504.25 9914.625 19829.25 22272.25
109 22275.75 12975.375 25950.75 23507.75 9916.375 19832.75 22275.75
110 22279.25 12977.125 25954.25 23511.25 9918.125 19836.25 22279.25
111 22282.75 12978.875 25957.75 23514.75 9919.875 19839.75 22282.75
112 22286.25 12980.625 25961.25 23518.25 9921.625 19843.25 22286.25
113 22289.75 12982.375 25964.75 23521.75 9923.375 19846.75 22289.75
114 22293.25 12984.125 25968.25 23525.25 9925.125 19850.25 22293.25
115 22296.75 12985.875 25971.75 23528.75 9926.875 19853.75 22296.75
116 22300.25 12987.625 25975.25 23532.25 9928.625 19857.25 22300.25
117 22303.75 12989.375 25978.75 23535.75 9930.375 19860.75 22303.75
118 22307.25 12991.125 25982.25 23539.25 9932.125 19864.25 22307.25
119 22310.75 12992.875 25985.75 23542.75 9933.875 19867.75 22310.75
120 22314.25 12994.625 25989.25 23546.25 9935.625 19871.25 22314.25
121 22317.75 12996.375 25992.75 23549.75 9937.375 19874.75 22317.75
122 22321.25 12998.125 25996.25 23553.25 9939.125 19878.25 22321.25
123 22324.75 12999.875 25999.75 23556.75 9940.875 19881.75 22324.75
124 22328.25 13001.625 26003.25 23560.25 9942.625 19885.25 22328.25
125 22331.75 13003.375 26006.75 23563.75 9944.375 19888.75 22331.75
126 22335.25 13005.125 26010.25 23567.25 9946.125 19892.25 22335.25
127 22338.75 13006.875 26013.75 23570.75 9947.875 19895.75 22338.75
128 22342.25 13008.625 26017.25 23574.25 9949.625 19899.25 22342.25
</TABLE>
- --------------------------------------------------------------------------------
P-Com, Inc. Confidential Page 27 of 29
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
BAND 1 7MHz Plan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Chan. Tx LO LOx2 Rx Freq LO LOx2 Rx Freq
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 21899.50 12787.25 25574.50 23131.50 9728.25 19456.50 21899.50
2 21906.50 12790.75 25581.50 23138.50 9731.75 19463.50 21906.50
3 21913.50 12794.25 25588.50 23145.50 9735.25 19470.50 21913.50
4 21920.50 12797.75 25595.50 23152.50 9738.75 19477.50 21920.50
5 21927.50 12801.25 25602.50 23159.50 9742.25 19484.50 21927.50
6 21934.50 12804.75 25609.50 23166.50 9745.75 19491.50 21934.50
7 21941.50 12808.25 25616.50 23173.50 9749.25 19498.50 21941.50
8 21948.50 12811.75 25623.50 23180.50 9752.75 19505.50 21948.50
9 21955.50 12815.25 25630.50 23187.50 9756.25 19512.50 21955.50
10 21962.50 12818.75 25637.50 23194.50 9759.75 19519.50 21962.50
11 21969.50 12822.25 25644.50 23201.50 9763.25 19526.50 21969.50
12 21976.50 12825.75 25651.50 23208.50 9766.75 19533.50 21976.50
13 21983.50 12829.25 25658.50 23215.50 9770.25 19540.50 21983.50
14 21990.50 12832.75 25665.50 23222.50 9773.75 19547.50 21990.50
15 21997.50 12836.25 25672.50 23229.50 9777.25 19554.50 21997.50
16 22004.50 12839.75 25679.50 23236.50 9780.75 19561.50 22004.50
17 22011.50 12843.25 25686.50 23243.50 9784.25 19568.50 22011.50
18 22018.50 12846.75 25693.50 23250.50 9787.75 19575.50 22018.50
19 22025.50 12850.25 25700.50 23257.50 9791.25 19582.50 22025.50
20 22032.50 12853.75 25707.50 23264.50 9794.75 19589.50 22032.50
21 22039.50 12857.25 25714.50 23271.50 9798.25 19596.50 22039.50
22 22046.50 12860.75 25721.50 23278.50 9801.75 19603.50 22046.50
23 22053.50 12864.25 25728.50 23285.50 9805.25 19610.50 22053.50
24 22060.50 12867.75 25735.50 23292.50 9808.75 19617.50 22060.50
25 22067.50 12871.25 25742.50 23299.50 9812.25 19624.50 22067.50
26 22074.50 12874.75 25749.50 23306.50 9815.75 19631.50 22074.50
27 22081.50 12878.25 25756.50 23313.50 9819.25 19638.50 22081.50
28 22088.50 12881.75 25763.50 23320.50 9822.75 19645.50 22088.50
29 22095.50 12885.25 25770.50 23327.50 9826.25 19652.50 22095.50
30 22102.50 12888.75 25777.50 23334.50 9829.75 19659.50 22102.50
31 22109.50 12892.25 25784.50 23341.50 9833.25 19666.50 22109.50
32 22116.50 12895.75 25791.50 23348.50 9836.75 19673.50 22116.50
33 22123.50 12899.25 25798.50 23355.50 9840.25 19680.50 22123.50
34 22130.50 12902.75 25805.50 23362.50 9843.75 19687.50 22130.50
35 22137.50 12906.25 25812.50 23369.50 9847.25 19694.50 22137.50
36 22144.50 12909.75 25819.50 23376.50 9850.75 19701.50 22144.50
37 22151.50 12913.25 25826.50 23383.50 9854.25 19708.50 22151.50
38 22158.50 12916.75 25833.50 23390.50 9857.75 19715.50 22158.50
39 22165.50 12920.25 25840.50 23397.50 9861.25 19722.50 22165.50
40 22172.50 12923.75 25847.50 23404.50 9864.75 19729.50 22172.50
41 22179.50 12927.25 25854.50 23411.50 9868.25 19736.50 22179.50
42 22186.50 12930.75 25861.50 23418.50 9871.75 19743.50 22186.50
43 22193.50 12934.25 25868.50 23425.50 9875.25 19750.50 22193.50
44 22200.50 12937.75 25875.50 23432.50 9878.75 19757.50 22200.50
45 22207.50 12941.25 25882.50 23439.50 9882.25 19764.50 22207.50
46 22214.50 12944.75 25889.50 23446.50 9885.75 19771.50 22214.50
47 22221.50 12948.25 25896.50 23453.50 9889.25 19778.50 22221.50
48 22228.50 12951.75 25903.50 23460.50 9892.75 19785.50 22228.50
49 22235.50 12955.25 25910.50 23467.50 9896.25 19792.50 22235.50
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
50 22242.50 12958.75 25917.50 23474.50 9899.75 19799.50 22242.50
- --------------------------------------------------------------------------------
51 22249.50 12962.25 25924.50 23481.50 9903.25 19806.50 22249.50
- --------------------------------------------------------------------------------
52 22256.50 12965.75 25931.50 23488.50 9906.75 19813.50 22256.50
- --------------------------------------------------------------------------------
53 22263.50 12969.25 25938.50 23495.50 9910.25 19820.50 22263.50
- --------------------------------------------------------------------------------
54 22270.50 12972.75 25945.50 23502.50 9913.75 19827.50 22270.50
- --------------------------------------------------------------------------------
55 22277.50 12976.25 25952.50 23509.50 9917.25 19834.50 22277.50
- --------------------------------------------------------------------------------
56 22284.50 12979.75 25959.50 23516.50 9920.75 19841.50 22284.50
- --------------------------------------------------------------------------------
57 22291.50 12983.25 25966.50 23523.50 9924.25 19848.50 22291.50
- --------------------------------------------------------------------------------
58 22298.50 12986.75 25973.50 23530.50 9927.75 19855.50 22298.50
- --------------------------------------------------------------------------------
59 22305.50 12990.25 25980.50 23537.50 9931.25 19862.50 22305.50
- --------------------------------------------------------------------------------
60 22312.50 12993.75 25987.50 23544.50 9934.75 19869.50 22312.50
- --------------------------------------------------------------------------------
61 22319.50 12997.25 25994.50 23551.50 9938.25 19876.50 22319.50
- --------------------------------------------------------------------------------
62 22326.50 13000.75 26001.50 23558.50 9941.75 19883.50 22326.50
- --------------------------------------------------------------------------------
63 22333.50 13004.25 26008.50 23565.50 9945.25 19890.50 22333.50
- --------------------------------------------------------------------------------
64 22340.50 13007.75 26015.50 23572.50 9948.75 19897.50 22340.50
- --------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
Siemens Specification for 38 GHz Radios
WARNING
The information contained in this document is the exclusive property of P-Com
Inc. and should not be disclosed to any third party without the written consent
of P-Com.
Table of Contents
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1 General Specifications Page 2
Section 2 Digital Interface Specifications Page 3
Section 3 Transmitter Specifications Page 4
Section 4 Receiver Specifications Page 5
Section 5 Miscellaneous Specifications Page 6
Section 6 Service Channel Specifications Page 6
Section 7 Alarms Specifications Page 7
Section 8 Loopback Specifications Page 7
Section 9 Power Supply Specifications Page 7
Section 10 Environmental Specifications Page 8
Section 11 Mechanical Specifications Page 8
Section 12 Shock Specifications Page 8
Section 13 Vibration Specifications Page 8
Section 14 IDU to ODU Interconnect Specifications Page 9
Section 15 Antenna Specification Page 9
Section 16 Protection Configuration Specification Page 9
Section 17 EMC and Transient Specifications Page 10
Section 18 Relaibility Specifications Page 10
</TABLE>
Appendices
Appendix "A" Input Jitter Tolerance Mark Page 11
Appendix "B" Jitter Gain Mask Page 12
Appendix "C" Transmit Spectrum Page 13
Appendix "D" Channel Plans Page 14-20
The specifications listed in the following sections are the minimum or
guaranteed specifications, over the environmental ranges specified, for the
P-Com Tel-Link 38 E1 radio system provided to Siemens. As a minimum, the
Tel-Link 38 E1 radio system compiles with prETS 300 197 November 1993. The
specifications apply to both unprotected (1+0) and protected (1+1) systems
except where otherwise specified.
Issue 1.1 1
<PAGE>
SIEMENS SPECIFICATION FOR 38 GHZ RADIOS
Section 1: General:
Operating Frequency: 37.0 GHz to 39.5 GHz
ODU Bands TX: Band 1 [***** - *****] MHz
Band 2 [***** - *****] MHz
Band 3 [***** - *****] MHz
Band 4 [***** - *****] MHz
ODU Bands RX: Band 1 [***** - *****] MHz
Band 2 [***** - *****] MHz
Band 3 [***** - *****] MHz
Band 4 [***** - *****] MHz
Transmit/Receive Spacing 1260 MHz
RF Channel Spacing: 1E1 & 2E1 = [**] MHz, 4E1 = [*] MHz
Frequency Agility: 560 MHz
Turning Step Size:
Minimum [*.**] MHz
1E1 & 2E1 [*] to [***] channels per ODU band
4E1 [*] to [**] channels per ODU band
Modulation Type: [* ***(***] systems will use [* ***]
due to bandwidth)
Flexibility: Any IDU (any capacity to be used with
any ODU
Connectors: Front Access IDU, [*.*] high. Rear
access option
DC Power 2 position plug with screw terminals
Digital 1/O (2.048 mb/s) 120 ohm DB-25 Female or 75 ohm BNC.
IDU to ODU 50 ohm "N" Female
Alarms Port DB-25 Male
Computer DB-9 Female
EOW RJ-11.4 pin
EOW Bridge RJ-11.5 pin
Data Channels 1 & 2 (East) DB-9 Female
Data Channels 1 & 2 (West) DB-9 Male
Issue 1.1. 2
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Siemens Specification for 38 GHz Radios
Section 2: Digital Interface:
Digital Capacity: Complies with CCITT G.703
1 x 2.048 Mb/s
2 x 2.048 Mb/s
4 x 2.048 Mb/s
Universal Bit Rate (1, 2, or 4 x 2.048 Mb/s
selectable by P.C. software)
Digital I/O Tolerance +/- 50 ppm
Digital I/O Connectors: 120 Ohm Balanced - DB-25 Female
or 75 ohm Unbalance-BNC
Digital Line Code: HDB3
Alarm Indication Signal: AIS will be inserted with the following
conditions:
1. Loss of signal from the Multiplexer to
radio will transmit AIS to the far and over
the radio link.
2. Receiver failure or B.E.R. greater than
1x10-4 and less than 1x10-3 will send AIS
to the receive multiplexer.
AIS is adjustable, OFF, 1x10-3, or 1x10-4
AIS Delay:
Loss of Input from multiplexer (*) ms
Receiver failure (*) ms
Detection of 1x10-3 B.E.R. (*) ms
Detection of 1x10-4 B.E.R. (*) ms
Scrambling: Digital signals are scrambled to ensure the
radiated RF spectrum does not contain
discrets spectral components as a result of
repetitive patterns in the Input data
stream or carrying internally generated
AIS.
Input Jitter Tolerance: per CCITT G.823/G921. See appendix "A" for
mask. No errors when using a PRBS 215-1
signal.
Output Jitter Tolerance: When using a PRBS 215-1 signal:
(*) UI p-p, (*) Hz to (*) KHz
(*) UI p-p, (*) Kz to (*) KHz
Jitter Gain per CCITT G.823/G921. See appendix "B" for
mask. No errors when using a PRBS 215-1
signal.
Issue 1.1
*CONFIDENTIAL TREATMENT REQUESTED.
3
<PAGE>
Siemens Specification for 38 GHz Radios
Section 3: Transmitter.
Power Output: (*) dBm minimum (31.6 mW) at antenna port
Frequency Stability:
Over Temperature: (*) ppm
Years 1 to 4 (*) ppm
Years 5 to 10 (*) ppm
10 year period total (*) ppm
Transmitter Mute: (*) dB when loss of lock of Modulator or
Synthesizer
Attenuation Range: (*) - (*) dB
(*) - (*) db Electrical (IDU, NMS access)
(*) - (*) db Mechanical (in ODU)
Immediate Frequency: (*) MHz
Composite Data Rate:
1 x 2.048 Mb/s (*) Mb/s
2 x 2.048 Mb/s (*) Mb/s
4 x 2.048 Mb/s (*) Mb/s
Occupied Bandwidth:
1 x 2.048 Mb/s (*) MHz (using level FSK modulation)
2 x 2.048 Mb/s (*) MHz
4 x 2.048 Mb/s (*) MHz
Spectrum Efficiency:
1 x 2.048 Mb/s (*) bit/sec/Hz (using level FSK modulation)
2 x 2.048 Mb/s (*) bit/sec/Hz
4 x 2.048 Mb/s (*) bit/sec/Hz
TX Spurious Emissions:
30 MHZ to 21.2 GHz (*) dBW
21.2 GHz to 66 GHz (*) dBW
66 GHz to 80 GHz (*) dBW
TX Spectrum Mask: Refer to Appendix "C"
Issue 1.1 4
*CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
Siemens Specification for 38 GHz Radios
Section 4: Receiver:
Type: Dual Conversion
Intermediate Frequencies" *MHz & *MHz
Noise Figure: *dB
- -RX Noise Bandwidth:
1 x 2.048 Mb/s *MHz
2 x 2.048 Mb/s *MHz
4 x 2.048 Mb/s *MHz
Maximum RSL for 1x10-6 B.E.R. -15 dBm
Maximum RSL for 1x10-3 B.E.R. -13 dBm
Receiver Sensitivity, Dynamic Range, and System Gain specifications reflect 2
FSK modulation for 1 x 2 Mb/s systems, while 2 x 2 Mb/s and 4 x 2 Mb/s
specifications reflect 4 FSK modulation.
Sensitivity for 1x10-6 B.E.R. with F.E.C.
1 x 2.048 Mb/s *dBm
2 x 2.048 Mb/s *dBm
4 x 2.048 Mb/s *dBm
Dynamic Range for 1x10-6 B.E.R. with F.E.C.
1 x 2.048 Mb/s *dB
2 x 2.048 Mb/s *dB
4 x 2.048 Mb/s *dB
System Gain for 1x10-6 B.E.R. with F.E.C.
1 x 2.048 Mb/s *dB
2 x 2.048 Mb/s *dB
4 x 2.048 Mb/s *dB
Sensitivity for 1x10-3 B.E.R. with F.E.C.
1 x 2.048 Mb/s *dBm
2 x 2.048 Mb/s *dBm
4 x 2.048 Mb/s *dBm
Dynamic Range for 1x10-3 B.E.R. with F.E.C.
1 x 2.048 Mb/s *dB
2 x 2.048 Mb/s *dB
4 x 2.048 Mb/s *dB
System Gain for 1x10-3 B.E.R. with F.E.C.
1 x 2.048 Mb/s *dB
2 x 2.048 Mb/s *dB
4 x 2.048 Mb/s *dB
RX Spurious Emissions:
30 MHz to 21.2 GHz *dBW
21.2 GHz to 66 GHz *dBW
66 GHz to 80 GHz *dBW
Unfaded B.E.R. *
*CONFIDENTIAL TREATMENT REQUESTED.
Issue 1.1. 5
<PAGE>
Siemens Specification for 38 GHz Radios
Section 5: Miscellaneous:
Co-Channel Interference: *dB for one decade B.E.R. degradation
referenced to 1x10-6 B.E.R. threshold. This
applies to all bit rates.
Adjacent Channel Interference: For one decade B.E.R. degradation referenced
to 1x10-6 B.E.R. threshold, using a
modulated carrier similar to the wanted RX
signal.
1 x 2.048 Mb/s *dB with a 3.5 MHz separation
2 x 2.048 Mb/s *dB with a 3.5 MHz separation
4 x 2.048 Mb/s *dB with a 7 MHz separation
Forward Error Correction: Standard Feature, * Type,
corrects five bytes per frame.
Link ID's 1 - 100. Eliminates the possibility of an
unwanted transmitter locking up a wanted
receiver in densely populated areas of
radios.
Section 6: Service Channels:
Number of Service Channels: Three
One EOW (Engineering Orderwire) - Optional
One Data Channel
One NMS Channel - equipped as a second data
channel
Service Channel #1 EOW (Engineering Orderwire) - Optional
Type: Analog
Impedance: 600 ohms Balanced
Coding Scheme: A-Law PCM
Frequency Response: 300-3400 Hz
Bridge Input Level: -14dBm to +1 dBm adjustable through keypad
Bridge Output Level: -11dBm to +4 dBm adjustable through keypad
Signalling: E&M type-E head to ground. "Call" button on
front panel of IDU.
I/O Connector RJ-11, 4 pin modular
Bridge: 2 way- 4 wire balance bridge
Bridge connector: RJ-45, 8 pin modular
Service Channel #2 Digital Data Channel
Type: Digital
Mode: Asynchronous
Interface: RS-232C, RS-422/RS-423
Speed: 0-9600 bit/s
I/O Connector DB-9
Service Channel #3 NMS Channel or Digital Data Channel #2
Type: Digital
Mode: Asynchronous
Interface: R8-232C, RS-422/RS-423
Speed: 0-9600 bit/s
I/O Connector DB-9
*CONFIDENTIAL TREATMENT REQUESTED.
* 7MHz separation guaranteed
35MHz separation to be tested before confirmation
Issue 1.1. 6
<PAGE>
Siemens Specification for 38 GHz Radios
Section 7: Alarms:
Front Panel Indicators:
On-Line LED Green indicates power is applied to
unit.
IDU LED Green indicates normal. Flashes or
solid red in alarm.
ODU LED Green indicates normal. Flashes or
solid red in alarm.
CBL (Cable) LED Green indicates normal. Red when cable
short or open.
RMT (Remote) LED Green indicates normal. Flashes or
solid yellow when far end terminal is
not in normal operation.
External Alarms: Up to eight external alarms can be
used per IDU for site alarms such as
Open door, Temperature, A/C Fail, etc.
Alarm Relays: Five form "C" relays. These alarm
relays can be "mapped" using the
optional P.C. software.
Transmit Mute: The alarms that will cause the
transmitter to mute are:
Modulator
LO/Synthesizer
Time Delay for TX Mute:
Alarm recognition to Tx Mute: less than * milliseconds
Alarm Clearing to Tx Output Restoral: * seconds
Resulting Power Reduction: * dB
Section 8: Loopbacks: Three types of loopbacks are offered:
IDU Loopback: Loops the aggregate date before the
"N" connector of the IDU. Tests all
circuits in the IDU for operation. An
external BERT set is needed to test
for error performance. Traffic
effecting on all tributaries.
ODU Loopback: Used only with the Loopback Test Translator
(LBT) to allow testing of an entire
terminal. The LBT consists of a mixer and a
1280 MHz oscillator.
Link Loopback: Loops the far end tributary at the line
driver and returns the E1 signal to the
local end. Affects only the tributary
selected. An external BERT set is needed to
perform error rate tests.
Issue 1.1. 7
*CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
Siemens Specification for 38 GHz Radios
Section 9: Power Supply:
Input Voltage:
Standard: -48 VDC
Range: -38.4 VDC to -62.4 VDC
Optional: +24/-24 VDC. (-20%, +30%)
Power Consumption: * watts includes service channel options
installed
Section 10: Environmental:
Temperature Range-Operational
Outdoor Unit -30 degrees C to +60 degrees C
Indoor Unit -10 degrees C to +55 degrees C
Temperature Range-Storage: -40 degrees C to +70 degrees C for
both IDU and ODU
Relative Humidity:
Outdoor Unit: up to 100% for all weather operation
Indoor Unit 95% at +55 degrees C
Attitude: 4,500 meters (15,000 feet)
Section 11: Mechanical:
Dimensions:
Outdoor Unit 250 mm dia x 200 mm depth (10" dia
x 8" depth)
Indoor Unit 89 mm H, x 483 mm W, x 267 mm D
(3.5" H, x 19" W x 10.5" D)
* Specification Listed on Attachment
Weight: *
Outdoor Unit 4.5 kg (10 lbs)
Indoor Unit 3.5 kg (8 lbs)
Section 12: Shock: per ETS 300 019-1-3
IDU: 5g Operational, 10g Survival
ODU: 5g Operational, 10g Survival
Section 13: Vibration: per ETS 300 019-1-3
IDU: 0.25g random, 5Hz to 200 Hz
Operational
0.5g random, 5Hz to 200 Hz Survival
ODU O.9g ramdon, 5Hz to 500 Hz
Operational
2.4g random, 5Hz to 500 Hz Survival
Issue 1.1.
8
*CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Siemens Specification for 38 GHz Radios
Section 14: IDU to ODU Interconnection:
Number of Cables: One
Type: RG-8/U - Belden 9913 or equivalent
Impedance: 50 ohms unbalanced
Maximum Distance: 300 meters
IDU Connector Type: "N" type Female
ODU Connector Type: "N" type Female
Cable Length Criteria:
DC Resistance: 4 ohms
AC Resistance: 27 dB at *MHz for 300 meter run
Shielding 100%
Signals on Interconnect Cable: Frequency Level
TX IF *MHz +13 dBm +/- 2dB
RX IF *MHz -25 to -5 dBm
Telemetry, TX *MHz 0 dBm nominal
Telemetry, RX *MHz -20 to 0 dBm
Power DC -48 VDC @ 1 amp max
Section 15: Antenna Specification.
Frequency Band: 37.0 - 39.5 GHz
Diameter: 30 cm 60cm
Gain, min 37.5dBl 44dBl
Radiation Pattern: As per ETS 300 197 Figure 2. Type 2C
3 dB beamwidth: 0.8 degrees 1.6 degrees
Section 16: Protected Configuration (1+1) Specifications.
Number of tributaries: Up to four
Impedance: 120 ohm balanced
or 75 ohm unbalanced
PSS Indicators: "A" On Line, "B" On Line
PSS Manual Switch: "A" On Line, "B" On Line, Auto
Switching Type: Combined Tx and Rx.
RF Branching losses:
Dual antenna system None
Single antenna system:
Equal loss splitter: Main *dB, Standby *dB
Unequal loss splitter: Main *dB, Standby *dB
Total switching time: * SCC
Muting Level: * dB from operational
Mechanical Dimension * Weight
*CONFIDENTIAL TREATMENT REQUESTED
Issue 1.1. 9
<PAGE>
Siemens Specification for 38 GHz Radios
Section 17: EMC and Transient Specifications.
Conducted Emissions: *KHz-*MHz, average peak
CISPR-22
Radiated Emissions: *MHz-*GHz, 3m and 10m ranges
EN55022
DIN VDE 0876
Conducted Immunity: IEC 801-2 ESD
Radiated Immunity: IEC 801-3
Lightning Protection: IEC 801-5 Class 2 & 4 with optional arrestors.
Section 18: Reliability Specifications.
IDU MTBF: * hours (* years)
ODU MTBF: * hours (* years)
Calculated using MIL-HDBK-217 Rev F
*CONFIDENTIAL TREATMENT REQUESTED.
Issue 1.1. 10
<PAGE>
Siemens Specification for 38 GHz Radios
Input Jitter Tolerance Mask
Appendix "A"
[GRAPH APPEARS HERE]
---------------------------------------------
E1 Jitter Tolerance Mask
CCITT G.823 (Above Curve = In Spec)
Corner Points:
--------------------
1Hz 2.9 UI
20 1.5
2.4K 1.5
18K .2
100K .2
=============================================
Frequency (Hz)
Issue 1.0. 10 bis
<PAGE>
Siemens Specification for 38 GHz Radios
Appendix
[GRAPH APPEARS HERE]
-------------------------------------------------
E1 Jitter Transfer Mask
CCITT G.823I1.431 (Below Curve = In Spec)
Corner Points:
--------------------
1Hz *0.5 dB
40 *0.5
400 - 19.5
15K - 19.5
=================================================
Frequency (Hz)
Issue 1.0. 11
<PAGE>
Siemens Specification for 38 GHz Radios
Appendix "C"
Transmit Spectrum Mask
per BAPT 211 ZV 12/38 GHz
Issue 1.0 12
<PAGE>
Spectral shape for 7MHz channel spacing
[Spectral power-density/(dB) normalized to the maximum value]
[GRAPH APPEARS HERE]
------------------------------
0.0 MHz 0 dB
------------------------------
+/-3.3 MHz 0 dB
------------------------------
+/-6.1 MHz -25 dB
------------------------------
+/-6.8 MHz -25 dB
------------------------------
+/-12.8 MHz -45 dB
------------------------------
+/-20.0 MHz -45 dB
------------------------------
Edition: September 1993
13
<PAGE>
Spectral shape for 7MHz channel spacing (3,5MHz-channel-width, co-channel
operation)
Spectral power-density/(dB) normalized to the maximum value)
[GRAPH APPEARS HERE]
----------------------------------
0 MHz 0 dB
----------------------------------
+/-1.65 MHz 0 dB
----------------------------------
+/-3.05 MHz -25 dB
----------------------------------
+/-3.40 MHz -25 dB
----------------------------------
+/-6.40 MHz -45 dB
----------------------------------
+/-10.00 MHz -45 dB
----------------------------------
Edition: September 1993
14
<PAGE>
Siemens Specification for 38 GHz Radios
Appendix "D"
38 GHz Channel Plans
15
<PAGE>
38 GHz E1 Channel Plan, 3.5 MHz Spacing, Band 2 ODU
<TABLE>
<CAPTION>
3.5 MHz Channel, 1260 T/A 3.5 MHz Channel, 1260 T/A 3.5 MHz Channel, 1260 T/A
CH # TX Frequency AX Frequency CH # TX Frequency AX Frequency CH # TX Frequency AX Frequency
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 37620.75 38879.75 41 37759.75 39019.75 81 37899.75 39159.75
2 37623.25 38883.25 42 37763.25 39023.25 82 37903.25 39163.25
3 37626.75 38886.75 43 37766.75 39026.75 83 37906.75 39166.75
4 37630.25 38890.25 44 37770.25 39030.25 84 37910.25 39170.25
5 37633.75 38893.75 45 37773.75 39033.75 85 37913.75 39173.75
6 37637.25 38897.25 46 37777.25 39037.25 86 37917.25 39177.25
7 37640.75 38900.75 47 37780.75 39040.75 87 37920.75 39180.75
8 37644.25 38904.25 48 37784.25 39044.25 88 37924.25 39184.25
9 37647.75 38907.75 49 37787.75 39047.75 89 37927.75 39187.75
10 37651.25 38911.25 50 37791.25 39051.25 90 37931.25 39191.25
11 37654.75 38914.75 51 37794.75 39054.75 91 37934.75 39194.75
12 37658.25 38918.25 52 37798.25 39058.25 92 37938.25 39198.25
13 37661.75 38921.75 53 37801.75 39061.75 93 37941.75 39201.75
14 37665.25 38925.25 54 37805.25 39065.25 94 37945.25 39205.25
15 37668.75 38928.75 55 37808.75 39068.75 95 37948.75 39208.75
16 37672.25 38932.25 56 37812.25 39072.25 96 37952.25 39212.25
17 37675.75 38935.75 57 37815.75 39075.75 97 37955.75 39215.75
18 37679.25 38939.25 58 37819.25 39079.25 98 37959.25 39219.25
19 37682.75 38942.75 59 37822.75 39082.75 99 37962.75 39222.75
20 37686.25 38946.25 60 37826.25 39086.25 100 37966.25 39226.25
21 37689.75 38949.75 61 37829.75 39089.75 101 37969.75 39229.75
22 37693.25 38953.25 62 37833.25 39093.25 102 37973.25 39233.25
23 37696.75 38956.75 63 37836.75 39096.75 103 37976.75 39236.75
24 37700.25 38960.25 64 37840.25 39100.25 104 37980.25 39240.25
25 37703.75 38963.75 65 37843.75 39103.75 105 37983.75 39243.75
26 37707.25 38967.25 66 37847.25 39107.25 106 37987.25 39247.25
27 37710.75 38970.75 67 37850.75 39110.75 107 37990.75 39250.75
28 37714.25 38974.25 68 37854.25 39114.25 108 37994.25 39254.25
29 37717.75 38977.75 69 37857.75 39117.75 109 37997.75 39257.75
30 37721.25 38981.25 70 37861.25 39121.25 110 38001.25 39261.25
31 37724.75 38984.75 71 37864.75 39124.75 111 38004.75 39264.75
32 37728.25 38988.25 72 37868.25 39128.25 112 38008.25 39268.25
33 37731.75 38991.75 73 37871.75 39131.75 113 38011.75 39271.75
34 37735.25 38995.25 74 37875.25 39135.25 114 38015.25 39275.25
35 37738.75 38998.75 75 37878.75 39138.75 115 38018.75 39278.75
36 37742.25 39002.25 76 37882.25 39142.25 116 38022.25 39282.25
37 37745.75 39005.75 77 37885.75 39145.75 117 38025.75 39285.75
38 37749.25 39009.25 78 37889.25 39149.25 118 38029.25 39289.25
39 37752.75 39012.75 79 37892.75 39152.75 119 38032.75 39292.75
40 37756.25 39016.25 80 37896.25 39156.25 120 38036.25 39296.25
<CAPTION>
3.5 MHz Channel, 1260 T/A
CH # TX Frequency AX Frequency
<S> <C> <C>
121 38039.75 39299.75
122 38043.25 39303.25
123 38046.75 39306.75
124 38050.25 39310.25
125 38053.75 39313.75
126 38057.25 39317.25
127 38060.75 39320.75
128 38064.25 39324.25
129 38067.75 39327.75
130 38071.25 39331.25
131 38074.75 39334.75
132 38078.25 39338.25
133 38081.75 39341.75
134 38085.25 39345.25
135 38088.75 39348.75
136 38092.25 39352.25
137 38095.75 39355.75
138 38099.25 39359.25
139 38102.75 39362.75
140 38106.25 39366.25
141 38109.75 39369.75
142 38113.25 39373.25
143 38116.75 39376.75
144 38120.25 39380.25
145 38123.75 39383.75
146 38127.25 39387.25
147 38130.75 39390.75
148 38134.25 39394.25
149 38137.75 39397.75
150 38141.25 39401.25
151 38144.75 39404.75
152 38148.25 39408.25
153 38151.75 39411.75
154 38155.25 39415.25
155 38158.75 39418.75
156 38162.25 39422.25
157 38165.75 39425.75
158 38169.25 39429.25
159 38172.75 39432.75
160 38176.25 39436.25
</TABLE>
<PAGE>
38 GHz E1 Channel Plan, 3.5 MHz Spacing, Band 4 ODU
<TABLE>
<CAPTION>
- -------------------------------- -------------------------------- -------------------------------- ---------------------------------
3.5 MHz Channel, 1260 T/A 3.5 MHz Channel, 1260 T/A 3.5 MHz Channel, 1260 T/A 3.5 MHz Channel, 1260 T/A
CH# TX Frequency RX Frequency CH# TX Frequency RX Frequency CH# TX Frequency RX Frequency CH# TX Frequency RX Frequency
- -------------------------------- -------------------------------- -------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 38879.75 37619.75 41 39019.75 37759.75 81 39159.75 37899.75 121 39299.75 38039.75
2 38883.25 37623.25 42 39023.25 37763.25 82 39163.25 37903.25 122 39303.25 38043.25
3 38886.75 37626.75 43 39026.75 37766.75 83 39166.75 37906.75 123 39306.75 38046.75
4 38890.25 37630.25 44 39030.25 37770.25 84 39170.25 37910.25 124 39310.25 38050.25
5 38893.75 37633.75 45 39033.75 37773.75 85 39173.75 37913.75 125 39313.75 38053.75
6 38897.25 37637.25 46 39037.25 37777.25 86 39177.25 37917.25 126 39317.25 38057.25
7 38900.75 37640.75 47 39040.75 37780.75 87 39180.75 37920.75 127 39320.75 38060.75
8 38904.25 37644.25 48 39044.25 37784.25 88 39184.25 37924.25 128 39324.25 38064.25
9 38907.75 37647.75 49 39047.75 37787.75 89 39187.75 37927.75 129 39327.75 38067.75
10 38911.25 37651.25 50 39051.25 37791.25 90 39191.25 37931.25 130 39331.25 38071.25
11 38914.75 37654.75 51 39054.75 37794.75 91 39194.75 37934.75 131 39334.75 38074.75
12 38918.25 37658.25 52 39058.25 37798.25 92 39198.25 37938.25 132 39338.25 38078.25
13 38921.75 37661.75 53 39061.75 37801.75 93 39201.75 37941.75 133 39341.75 38081.75
14 38925.25 37665.25 54 39065.25 37805.25 94 39205.25 37945.25 134 39345.25 38085.25
15 38928.75 37668.75 55 39068.75 37808.75 95 39208.75 37948.75 135 39348.75 38088.75
16 38932.25 37672.25 56 39072.25 37812.25 96 39212.25 37952.25 136 39352.25 38092.25
17 38935.75 37675.75 57 39075.75 37815.75 97 39215.75 37955.75 137 39355.75 38095.75
18 38939.25 37679.25 58 39079.25 37819.25 98 39219.25 37959.25 138 39359.25 38099.25
19 38942.75 37682.75 59 39082.75 37822.75 99 39222.75 37962.75 139 39362.75 38102.75
20 38946.25 37686.25 60 39086.25 37826.25 100 39226.25 37966.25 140 39366.25 38106.25
21 38949.75 37689.75 61 39089.75 37829.75 101 39229.75 37969.75 141 39369.75 38109.75
22 38953.25 37693.25 62 39093.25 37833.25 102 39233.25 37973.25 142 39373.25 38113.25
23 38956.75 37696.75 63 39096.75 37836.75 103 39236.75 37976.75 143 39376.75 38116.75
24 38960.25 37700.25 64 39100.25 37640.25 104 39240.25 37980.25 144 39380.25 38120.25
25 38963.75 37703.75 65 39103.75 37843.75 105 39243.75 37983.75 145 39383.75 38123.75
26 38967.25 37707.25 66 39107.25 37847.25 106 39247.25 37987.25 146 39387.25 38127.25
27 38970.75 37710.75 67 39110.75 37850.75 107 39250.75 37990.75 147 39390.75 38130.75
28 38974.25 37714.25 68 39114.25 37854.25 108 39254.25 37994.25 148 39394.25 38134.25
29 38977.75 37717.75 69 39117.75 37857.75 109 39257.75 37997.75 149 39397.75 38137.75
30 38981.25 37721.25 70 39121.25 37861.25 110 39261.25 38001.25 150 39401.25 38141.25
31 38984.75 37724.75 71 39124.75 37864.75 111 39264.75 38004.75 151 39404.75 38144.75
32 38988.25 37728.25 72 39128.25 37868.25 112 39268.25 38008.25 152 39408.25 38148.25
33 38991.75 37731.75 73 39131.75 37871.75 113 39271.75 38011.75 153 39411.75 38151.75
34 38995.25 37735.25 74 39135.25 37875.25 114 39275.25 38015.25 154 39415.25 38155.25
35 38998.75 37738.75 75 39138.75 37878.75 115 39278.75 38018.75 155 39418.75 38158.75
36 39002.25 37742.25 76 39142.25 37882.25 116 39282.25 38022.25 156 39422.25 38162.25
37 39005.75 37745.75 77 39145.75 37885.75 117 39285.75 38025.75 157 39425.75 38165.75
38 39009.25 37749.25 78 39149.25 37889.25 118 39289.25 30029.25 158 39429.25 38169.25
39 39012.75 37752.75 79 39152.75 37892.75 119 39292.75 30032.75 159 39432.75 38172.75
40 39016.25 37756.25 80 39156.25 37896.25 120 39296.25 38036.25 160 39436.25 38176.25
</TABLE>
<PAGE>
38 GHz E1 Channel Plan MHz Spacing, Band 2 ODU
- ---------------------------------------------
7 MHz Channel. 1260 T/R
CH # TX Frequency RX Frequency
- ---------------------------------------------
1 37621.50 38881.50
- ---------------------------------------------
2 37628.50 38888.50
- ---------------------------------------------
3 37635.50 38895.50
- ---------------------------------------------
4 37642.50 38902.50
- ---------------------------------------------
5 37649.50 38909.50
- ---------------------------------------------
6 37656.50 38916.50
- ---------------------------------------------
7 37663.50 38923.50
- ---------------------------------------------
8 37670.50 38930.50
- ---------------------------------------------
9 37677.50 38937.50
- ---------------------------------------------
10 37684.50 38944.50
- ---------------------------------------------
11 37691.50 38951.50
- ---------------------------------------------
12 37698.50 38958.50
- ---------------------------------------------
13 37705.50 38965.50
- ---------------------------------------------
14 37712.50 38972.50
- ---------------------------------------------
15 37719.50 38979.50
- ---------------------------------------------
16 37726.50 38986.50
- ---------------------------------------------
17 37733.50 38993.50
- ---------------------------------------------
18 37740.50 39000.50
- ---------------------------------------------
19 37747.50 39007.50
- ---------------------------------------------
20 37754.50 39014.50
- ---------------------------------------------
21 37761.50 39021.50
- ---------------------------------------------
22 37768.50 39028.50
- ---------------------------------------------
23 37775.50 39035.50
- ---------------------------------------------
24 37782.50 39042.50
- ---------------------------------------------
25 37789.50 39049.50
- ---------------------------------------------
26 37796.50 39056.50
- ---------------------------------------------
27 37803.50 39063.50
- ---------------------------------------------
28 37810.50 39070.50
- ---------------------------------------------
29 37817.50 39077.50
- ---------------------------------------------
30 37824.50 39084.50
- ---------------------------------------------
31 37831.50 39091.50
- ---------------------------------------------
32 37838.50 39098.50
- ---------------------------------------------
33 37845.50 39105.50
- ---------------------------------------------
34 37852.50 39112.50
- ---------------------------------------------
35 37859.50 39119.50
- ---------------------------------------------
36 37866.50 39125.50
- ---------------------------------------------
37 37873.50 39133.50
- ---------------------------------------------
38 37880.50 39140.50
- ---------------------------------------------
39 37887.50 39147.50
- ---------------------------------------------
40 37894.50 39154.50
- ---------------------------------------------
41 37901.50 39161.50
- ---------------------------------------------
42 37908.50 39168.50
- ---------------------------------------------
43 37915.50 39175.50
- ---------------------------------------------
44 37922.50 39182.50
- ---------------------------------------------
45 37929.50 39189.50
- ---------------------------------------------
46 37936.50 39196.50
- ---------------------------------------------
47 37943.50 39203.50
- ---------------------------------------------
48 37950.50 39210.50
- ---------------------------------------------
49 37957.50 39217.50
- ---------------------------------------------
50 37964.50 39224.50
- ---------------------------------------------
51 37971.50 39231.50
- ---------------------------------------------
52 37978.50 39238.50
- ---------------------------------------------
53 37985.50 39245.50
- ---------------------------------------------
54 37992.50 39252.50
- ---------------------------------------------
55 37999.50 39259.50
- ---------------------------------------------
56 38006.50 39266.50
- ---------------------------------------------
57 38013.50 39273.50
- ---------------------------------------------
58 38020.50 39280.50
- ---------------------------------------------
59 38027.50 39287.50
- ---------------------------------------------
60 38034.50 39294.50
- ---------------------------------------------
61 38041.50 39301.50
- ---------------------------------------------
62 38048.50 39308.50
- ---------------------------------------------
63 38055.50 39315.50
- ---------------------------------------------
64 38062.50 39322.50
- ---------------------------------------------
65 38069.50 39329.50
- ---------------------------------------------
66 38076.50 39335.50
- ---------------------------------------------
67 38083.50 39348.50
- ---------------------------------------------
68 38090.50 39350.50
- ---------------------------------------------
69 38097.50 39357.50
- ---------------------------------------------
70 38104.50 39364.50
- ---------------------------------------------
71 38111.50 39371.50
- ---------------------------------------------
72 38118.50 39378.50
- ---------------------------------------------
73 38125.50 39385.50
- ---------------------------------------------
74 38132.50 39392.50
- ---------------------------------------------
75 38139.50 39399.50
- ---------------------------------------------
76 38146.50 39406.50
- ---------------------------------------------
77 38153.50 39413.50
- ---------------------------------------------
78 38160.50 39420.50
- ---------------------------------------------
79 38167.50 39427.50
- ---------------------------------------------
80 38174.50 39434.50
- ---------------------------------------------
<PAGE>
38 GHz E1 Channel Plan MHz Spacing, Band 4 ODU
<TABLE>
<CAPTION>
- --------------------------------------
7 MHz Channel, 1260 T/R
CH # TX Frequency RX Frequency
- --------------------------------------
<S> <C> <C>
1 38881.50 37621.50
- --------------------------------------
2 38888.50 37628.50
- --------------------------------------
3 38895.50 37635.50
- --------------------------------------
4 38902.50 37642.50
- --------------------------------------
5 38909.50 37649.50
- --------------------------------------
6 38916.50 37656.50
- --------------------------------------
7 38923.50 37663.50
- --------------------------------------
8 38930.50 37670.50
- --------------------------------------
9 38937.50 37677.50
- --------------------------------------
10 38944.50 37684.50
- --------------------------------------
11 38951.50 37691.50
- --------------------------------------
12 38958.50 37698.50
- --------------------------------------
13 38965.50 37705.50
- --------------------------------------
14 38972.50 37712.50
- --------------------------------------
15 38979.50 37719.50
- --------------------------------------
16 38986.50 37726.50
- --------------------------------------
17 38993.50 37733.50
- --------------------------------------
18 39000.50 37740.50
- --------------------------------------
19 39007.50 37747.50
- --------------------------------------
20 39014.50 37754.50
- --------------------------------------
21 39021.50 37761.50
- --------------------------------------
22 39028.50 37768.50
- --------------------------------------
23 39035.50 37775.50
- --------------------------------------
24 39042.50 37782.50
- --------------------------------------
25 39049.50 37789.50
- --------------------------------------
26 39056.50 37796.50
- --------------------------------------
27 39063.50 37803.50
- --------------------------------------
28 39070.50 37810.50
- --------------------------------------
29 39077.50 37817.50
- --------------------------------------
30 39084.50 37824.50
- --------------------------------------
31 39091.50 37831.50
- --------------------------------------
32 39098.50 37838.50
- --------------------------------------
33 39105.50 37845.50
- --------------------------------------
34 39112.50 37852.50
- --------------------------------------
35 39119.50 37859.50
- --------------------------------------
36 39126.50 37866.50
- --------------------------------------
37 39133.50 37873.50
- --------------------------------------
38 39140.50 37880.50
- --------------------------------------
39 39147.50 37887.50
- --------------------------------------
40 39154.50 37894.50
- --------------------------------------
41 39161.50 37901.50
- --------------------------------------
42 39168.50 37980.50
- --------------------------------------
43 39175.50 37915.50
- --------------------------------------
44 39182.50 37922.50
- --------------------------------------
45 39189.50 37929.50
- --------------------------------------
46 39196.50 37936.50
- --------------------------------------
47 39203.50 37943.50
- --------------------------------------
48 39210.50 37950.50
- --------------------------------------
49 39217.50 37957.50
- --------------------------------------
50 39224.50 37964.50
- --------------------------------------
51 39231.50 37971.50
- --------------------------------------
52 39238.50 37978.50
- --------------------------------------
53 39245.50 37985.50
- --------------------------------------
54 39252.50 37992.50
- --------------------------------------
55 39259.50 37999.50
- --------------------------------------
56 39266.50 38006.50
- --------------------------------------
57 39273.50 38013.50
- --------------------------------------
58 39280.50 38020.50
- --------------------------------------
59 39287.50 38027.50
- --------------------------------------
60 39204.50 38034.50
- --------------------------------------
61 39301.50 38041.50
- --------------------------------------
62 39308.50 38048.50
- --------------------------------------
63 39315.50 38055.50
- --------------------------------------
64 39322.50 38062.50
- --------------------------------------
65 39329.50 38069.50
- --------------------------------------
66 39336.50 38076.50
- --------------------------------------
67 39343.50 38083.50
- --------------------------------------
68 39350.50 38090.50
- --------------------------------------
69 39357.50 38097.50
- --------------------------------------
70 39364.50 38104.50
- --------------------------------------
71 39371.50 38111.50
- --------------------------------------
72 39378.50 38118.50
- --------------------------------------
73 39385.50 38125.50
- --------------------------------------
74 39392.50 38132.50
- --------------------------------------
75 39399.50 38139.50
- --------------------------------------
76 39400.50 38140.50
- --------------------------------------
77 39413.50 38153.50
- --------------------------------------
78 39420.50 38160.50
- --------------------------------------
79 39427.50 38167.50
- --------------------------------------
80 39434.50 38174.50
- --------------------------------------
</TABLE>
19
<PAGE>
[LETTERHEAD OF P-COM APPEARS HERE]
Link Manager Features:
The control product is a PC based (Windows) program. Either local site or remote
site terminal can be controlled and monitored by the software. The software will
provide the following functionality:
1. Channel Control
2. Link ID
3. Transmit Power Set
4. Transmitter Mute
5. Bit Rate Selection (1x2, 2x2, 4x2)
6. AGC Level Display
7. B.E.R. Performance Display
8. Loopback Set and Test:
a) IDU Loopback
b) ODU Loopback (requires external equipment)
c) Link Loop (per line)
d) Local Loop (per line)
e) Link Test (per line)
9. Enable/Invert Line Alarming
10. Configure B.E.R. Triggered AIS
11. Display ODU Band
12. Set T/R Address
12. Alarms display, and alarm history display of:
a) B.E.R. alarm
b) Cable Solid alarm
c) Cable Open alarm
d) Cable Short alarm
e) Configuration alarm
f) External Input
g) IDU Solid alarm
h) Line alarm (AIS, LOS, USD) USD = Unexpected Signal Detected
i) Loopback condition
j) ODU Solid alarm
k) Peer Channel alarm
l) Receive Mute
m) Remote alarm
n) Telemetry alarm
o) Transmit Mute alarm
p) Clock Recovery alarm
14. Clear Alarm History
<PAGE>
ATTACHMENT 2
QUALITY ASSURANCE
<PAGE>
ATTACHMENT 2
__________________
QUALITY ASSURANCE
1. SCOPE
To evaluate the supplier Q.A. System and the quality requirements for the
"Product Family".
2. SUPPLIER EVALUATION
The supplier evaluation is carried out through the questionnaire 018-004/21 PQ,
to be filled up by the supplier and delivered to Siemens.
Siemens reserves the right to perform quality audits based on the questionnaire
and/or the supplier Quality Assurance Plan.
3. Q.A. PRODUCT REQUIREMENTS
Each product will be defined by a detailed technical specification (see
attachment 1 to this Agreement).
Besides the specific mechanical and electrical parameters therein contained, the
following general requirements shall be met:
REQUIREMENTS
3.1 Environmental conditions
3.1.1 Storage
Weatherprotected, not temperature controlled storage location. According
to ETS 300 019-1-1 class 1.2 and ETS 300019-2-1 test specification T 1.2
3.1.2 Transportation
Public transportation According to ETS 300 019-1-2 class 2.3 and ETS
300019-2-2 test specification T 2.3
SUPPLIER'S COMMENTS
3.1.1 storage IAW Technical specifications currently in your possession.
3.1.2 To date, P-COM equipment[ has not been evaluated for compliance to
referenced specifications.]**
<PAGE>
REQUIREMENTS
3.1.3 In use
3.1.3.1 Indoor locations
Partly temperature controlled locations (customers premises). According
to ETS 300-1-3 and to ETS 019-2-3 test specification T 3.2.
3.1.3.2 Outdoor locations
Non weatherprotected locations.
According to ETS 300 019-14 class 4.1E and to ETS 300 019-2-4 test
specification T 4.1E.
3.2 Documents control
The supplier shall provide a list of units and sub-assemblies with
their part-number and their issue.
Any design change shall result in a change of the issue; a description
of the new issue shall be provided and the compatibility with the
previously delivered units shall be guaranteed.
3.3 Components control
High quality components shall be used; their qualification shall be
carried out through a dedicated procedure. Siemens reserves the right to
require the list of component used, their qualification procedure and
test results.
3.4 Workmanship requirements
The supplier shall have documented workmanship standards, suitable for
the used technology. Repairs also shall be considered.
SUPPLIER'S COMMENTS
3.1.3.1 Indoor use IAW Technical specification currently in your possession
3.1.3.2 Outdoor use IAW Technical specification currently in your possession.
3.2 The control, approval, issue, all changes to P-COM documents is
accomplished in accordance with P-COM QAP 4.5 document control.
3.3 The selection and qualification of all products is accomplished in
accordance with P-COM QAP 4.4 Design control
3.4 Workmanship standard for all P-COM products is IPC-A-610.
Repairs are accomplished in accordance with IPC-R-700 as directed by P-
COM Material Review Board (MRB)
<PAGE>
REQUIREMENTS
3.5 Final test documentation and declaration of conformity
For each delivered product a declaration of conformity according to EN
45014 shall be provided.
Moreover each product shall be accompanied by a final test report
containing the main test results agreed upon between Siemens and supplier.
The whole equipment, as well as the single replaceable parts, shall be
identified by a serial number.
For every delivered equipment a document shall indicate the serial numbers
of the equipment and of the relevant replaceable parts.
3.6 Product traceability
The supplier shall provide a traceability method to follow the
manufacturing history of each unit and the possible problems arisen during
the production cycle.
3.7 Reliability
For each product the supplier shall provide the MTBF value, for the
complete equipment and for each replaceable part, and its calculation
method.
3.8 Safety
Each product shall be designed according to the safety procedure EN 60950
3.9 Packing
Each product shall be packed in a single, suitable box.
SUPPLIER'S COMMENTS
3.5 P-COM provides with all equipment shipped, a certificate of Conformance.
which identifies each Top assembly part, by serial number. In addition P-COM can
make provisions to include a copy the final Systems Test Data for each
individual Indoor Unit (IOU) and Outdoor Unit (ODU) in the respective shipping
container
3.6 All products manufacture by P-COM are processed through the manufacturing
cycle on a Production, Assembly Traveler which identifies specific operations,
applicable drawings/documentation, and quality inspection points.
3.7 MTBF shall be provided using parts count reliabilty, prediction performed
to the requirements of MIL-HDBK-217F Notice 1
3.8 Product compliant to EN60950
3.9 All products are shipped individual containers, accompanied by any
applicable installation hardware in accordance with P-COM QAP 4.15
<PAGE>
REQUIREMENTS
3.10 Flammability
All molded materials shall meet the flammability requirements according to
IEC 695 T 2.2 or, alternatively, according to UL 94 V-0 (Preferred) or UL
94 V-1. Moreover the oxygen index shall be greater than or equal to 28%
according to ASTM method D2863-77.
3.11 Manufacturing Quality Plan
The supplier shall provide the Manufacturing Quality Plan complete with
the quality control steps, the control criteria, the data acquisition
documents, the responsible department and the test markings.
SUPPLIER'S COMMENTS
3.10 To date, P-COM equipment*
3.11 In the case that customer Quality requirements exceed or differ from the
P-COM Quality Assurance Manual and its supporting Quality Assurance Procedures,
a Customer Specific Quality Plan can and will be generated.
<PAGE>
- --------------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma
Esec. FACCIO Contr. G.V. Ed. Var. Firma [_]
- --------------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI
SOTTOINSIEMI ELETTRONICI
Original electronic manufacturer
(OEM) evaluation
P-COM INC.
Fornitore : ..........................................................
Vendor
NOME E FIRMA DEL
RESPONSABILE DELL 'ASSICURAZIONE QUALITA
QUALITY ASSURANCE MANAGER NAME AND SIGNATURE:
Kenneth Bean P-COM, Director of Quality Kenneth Bean
..............................................................................
Data : .................
DATE FEB 8 1995
- --------------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
---------------
SIEMENS SOTTOINSIEMI ELECTRONICI
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION FOGLIO 1/12
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma
Esec. FACCIO Contr. G.V. Ed. Var. Firma [_]
- --------------------------------------------------------------------------------
1. SCOPO
SCOPE
I1 questionario riporta i criteri generali per la valutazione de fornitori
di lavorazioni.
The questionnaire defines the general criteria to evaluate vendors
functional electronic subsystems.
2. STRUTTURA
STRUCTURE
I1 documento e strutturato sottoforma di check-list, ed e diviso in tre
parti;
The documents is structured, as a check-list form, in three parts:
* Informazioni generali
General informations
* Organizzazione del Sistema Qualita Aziendale
Quality Assurance system
* Qualita nella produzione.
Manufacturing quality.
3. APPLICABILITA'
APPLICABILITY
I1 documento si applica per la valutazione dei nuovi fornitori il cui Sistema
di Qualita e sconosciuto. Inoltre puo essere usato durante gli audits di
qualita.
The document shall be applied to evaluate new suppliers whose Quality System is
unknown. Moreover it can be used as a basis for quality audits.
- --------------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
SIEMENS SOTTOINSIEMI ELETTRONICI
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION Foglio 2/12
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma
Esec. FACCIO Contr. G.V. Ed. Var. Firma [_]
- --------------------------------------------------------------------------------
4. INFORMAZIONI GENERALI
GENERAL INFORMATION
P-COM INC.
4.1 Ragione Sociale ...................................
Company name
3175 S. Winchester Blvd.
- Indirizzo Campbell, CA 95008
...................................
Address
- Telefono (408) 866-3666
...................................
Phone
- Fax (408) 866-3655
...................................
4.2 Appartenenza ad un gruppo
Group member Yes
American Electronics Association
................................................................................
................................................................................
4.3 Capitale sociale N/A
...................................
Capital stock
4.4 Fatturato dell'ultimo anno 9.2M
...................................
Last year sales
4.5 Investimenti (ultimo anno) ...................................
Investments (last year)
- Ricerca e Sviluppo $6.9M
...................................
R and D
- Produzione N/A
...................................
Production
- Qualita N/A
...................................
Quality
4.6 Politica costi di riduzione
Cost reduction policy Yes
................................................................................
................................................................................
- --------------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
------------------
SIEMENS SOTTOINSIEMI ELECTRONICI
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION Foglio 3/12
- --------------------------------------------------------------------------------
<PAGE>
________________________________________________________________________________
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma
Esec. FACCIO Contr. G.V. Ed. Var. Firma [ ]
4.7 Principali prodotti
Main product
Microwave Radio Equipment
................................................................................
................................................................................
................................................................................
4.8 Settori del mercato verso i quali e indirizzato, in %, il prodotto (TLC,
consumer...)
% of product distribution over market segment (TLC, consumer ...)
................................................................................
Telecommunications 100%
................................................................................
................................................................................
4.9 Ripartizione del prodotto per aree geografiche di mercato
Product distribution over geographic areas
Europe 60% North America 16%
................................................................................
Central & South America 24%
................................................................................
4.10 Principali Clienti (none e % di fatturato)
Main customers (name and % of sales)
................................................................................
N/A
................................................................................
................................................................................
4.11 Altri clienti apparteneti al gruppo Siemens
other customers from Siemens corporate Yes (NO)
................................................................................
................................................................................
________________________________________________________________________________
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
SIEMENS SOTTOINSIEMI ELETTRONICI -------------
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION Foglio 4/12
________________________________________________________________________________
<PAGE>
- ------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma [ ]
Esec. FACCIO Contr. G.V. Ed. Var. Firma [ ]
- ------------------------------------------------------------------------
4.12 N degrees dipendenti della Societa December 31, 1994
Company employees ...........................
- Ricerca e Sviluppo 29
R and O ...........................
- Ingegneria N/A
Engineering ...........................
- Controllo qualita (staff) 8
Quality Assurance ...........................
- Produzione 23
Production ...........................
- Approvigionamento N/A
Purchasing ...........................
- Ispezione in arrivo N/A
Incoming inspection ...........................
- Test fabbricazione N/A
Manufacturing test ...........................
- Test finale N/A
Final test ...........................
- Amministrazione e servizi 7
Administration and services ...........................
Sales & Marketing 11
--
78
- -------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
---------------
SIEMENS SOTTOINSIEMI ELETTRONICI
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION Foglio 5/12
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma
Esec. FACCIO Contr. G.V. Ed. Var. Firma [ ]
- --------------------------------------------------------------------------------
5. ORGANIZZAZIONE DEL SISTEMA QUALITA'
QUALITY ASSURANCE SYSTEM ORGANIZATION
5.1 E' disponibile l'organigramma generale della Societa?
Is Company organization diagram available? Yes
- Se si, allegare
If yes, enclose [X]
5.2 Esiste un Manuele del Sistema Qualita aziendale? Yes
Do you have a Company Quality System Manual?
- Se si, allegare
If yes, enclose [X]
- Data dell'ultimo aggiornamento Revision E dated 3-94 Yes
Last issue date
- Chi e responsabile degli aggiornamenti?
Who is responsible for the updating?
Director of Quality
5.3 Il Sistema Qualita aziendale e organizzato in accordo alle norme ISO 90017
Is the Quality system organized accuring to Iso 9001 standard? Yes
Se si:
If yes:
- Il sistema e gia certificato?
Is the system already certified? Yes No
- La certificazione e in corso?
Is the certification in progress? No
- La certificazione e programmata
Is the certification planned? No
- Quando? N/A
When
- --------------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
----------------
SIEMENS SOTTOINSIEM ELETTRONICI Foglio 6/12
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION
- --------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma
Esec. FACCIO Contr. G.V. Ed. Var. Firma [ ]
- -----------------------------------------------------------------------------
5.4 Esiste l'organigramma dell'organizzazione del Sistema Qualita?
Is the Quality organization diagram available? [Yes] No
- Se si, allegare [x]
If yes, enclose
5.5 La Societa ha sviluppato proprie procedure scritte che definiscono
le attivita delle seguenti funzioni?:
Do you have written procedures defining the following activities?
- Ricerca e sviluppo
R and D [Yes] No
- Ingegneria
Engineering [Yes] No
- Assicurazione Qualita
Quality Assurance [Yes] No
- Approvvigionamenti
Purchasing [Yes] No
- Accettazione materiali
Incoming Inspection [Yes] No
- Magazzini
Stores [Yes] No
- Produzione
Production [Yes] No
- Controllo di linea
Manufacturing Test [Yes] No
- Collaudo finale
Final Test [Yes] No
5.6 Quale ente e responsible dell'aggiornamento delle procedure?
Which department is responsible for the procedures updating?
........The Applicable departments are responsible..............................
for updating their respective procedures.
- --------------------------------------------------------------------------------
SIEMENS VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
-------------
SOTTOINSIEMI ELETTRONICI Foglio 7/12
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma [_]
Esec. FACCIO Contr. G.V. Ed. Var. Firma [_]
- --------------------------------------------------------------------------------
5.7 Compiti della Qualita
Quality jobs
Quality Management: establish policies and procedures necessary to insure
Quality, integrity and Reliability of all P-COM products.
Quality Engineering: Implementation and enforcement of quality requirements,
including but not limited to generation and maintenance of procedures, vendor
surveillance and control, analysis of quality data for continous improvement
coordination of all failure analysis of corrective action.
Inspection: product inspection and tabulation, segregation and quarantine of
Non-conforming.
- Esegue valutazioni sulla qualita di processo?
Does the Q.A. evaluate the quality process? Yes
- Esistono procedure scritte di controllo di processo?
Do you have a written procedure to control the process? Yes
- Esegue valutazioni sulla qualita di prodotto?
Does the Q.A. evaluate the quality product? Yes
- Esistono procedure scritte di controllo di prodotto?
Do you have a written procedure to control the product? Yes
- La qualita partecipa alla gestione delle non conformita?
Is the Q.A. involved in non conformities management? Yes
- Esiste una procedura scritta relativa all segregazione e
segregazione e revisione delle parti non conformi?
Do you have a written procedure relevant to non conformities
segregation? Yes
- La qualita esercita un azione di coordinamento nello sviluppo delle
azioni correttive?
Does Q.A. coordinate the corrective actions? Yes
- I risultati raggiunti sono oggetto di un rapporto scritto?
Do you have a written report relevant to the corrective actions
results? Yes
- Esiste una procedura scritta relativa alle azioni correttive?
Do you have a written procedure relevant to the corrective
actions? Yes
5.8 Esiste una procedura scritta per qualificare i fornitori?
Do you have a written procedures to qualify vendors? Yes
- --------------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
---------------
SIEMENS SOTTOINSIEMI ELETTRONICI
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION Foglio 8/12
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma
Esec. FACCIO Contr. G.V. Ed. Var. Firma [ ]
- --------------------------------------------------------------------------------
5.9 Esiste una lista fornitori?
Do you have a qualified vendor list? Yes
5.10 Chi e l'ente responsabile della qualificazione dei fornitori?
Which department is responsible to qualify vendors?
Purchasing and Quality Management
________________________________________________________________________________
5.11 La Qualita e responsabile della qualificazione del prodotto?
Is the Q.A. responsible of the product qualification Yes
Se No, chi e responsabile? Design Engineering
If No, Who is responsible?
5.12 E' disponibile il, piano di qualificazione del prodotto con i relativi
tests elettrici e ambientali?
Is the product qualification plan, with the relevant
electrical/environmental tests, available? Yes
Se Si, allegare
If Yes, enclose [ ] *NOTE: Product qualification is performed and
data is recorded. Records of tests are
available for on-site review
5,13 Viene effettuata la stima del tasso di guasto del prodotto?
Do you perform the product failure rate evaluation? Yes
Se si, siete in grado di fornire il valore di MTBF?
If yes, are you able to give the MTBF value and to specify the
evaluation methods? Yes
- --------------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
---------------
SIEMENS SOTTOINSIEME ELETTRONICI
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION Foglio 9/12
<PAGE>
- --------------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma [ ]
Esec. FACCIO Contr. G.V. Ed. Var. Firma [ ]
- --------------------------------------------------------------------------------
6. QUALITA' NEILA PRODUZIONE
PRODUCTION QUALITY [Yes] No
6.1 E' disponibile il flow-chart produttivo?
Is the MFR flow-chart available? [Yes] No
- Se Si, allegare
If Yes, enclose [X]
6.2 Ci sono procedure scritte per l'incoming inspection?
There are a written procedure for incoming inspection? [Yes] No
6.3 I dati di incoming inspection sono registrati e disponibili?
Are the incoming inspection data recorded and available? [Yes] No
6.4 Esiste una procedura scritta per la protezione contro le
cariche elettrostatiche?
There is a written procedure for ESD precautions? [Yes] No
- Se No, vengono applicate precauzioni contro le
cariche elettrostatiche?
If No, ESDS precautions are applied? [Yes] No
6.5 Vengono effettuati i controlli di linea?
Does the company perform the line controls?
- Esistono procedure scritte per guidare l'attivita
del personale?
There are written procedure to drive the personnel
activity? [Yes] No
6.6 La rintracciabilita dei prodotti e assicurata?
The products traceablity is guaranteed? [Yes] No
- Come? All products manufactured by P-COM are processed through the
How? manufacturing cycle on a production assenbly traveler, which
identifies specific operations, applicable drawings,
documentation and quality inspection points. These records
are retained in accordance with P-COM QAP 4.16, Quality
records.
- La relativa documentazione di fabbricazione e in edizione
controllata?
There is a controlled issue of the relevant MFR
documentation? [Yes] No
- --------------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
---------------
SIEMENS SOTTOINSIEMI ELECTTRONICI
ORIGINAL ELECRONIC MANUFACTURER EVALUATION Foglio 10/12
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma [ ]
Esec. FACCIO Contr. G.V. Ed. Var. Firma [ ]
- --------------------------------------------------------------------------------
6.7 Esiste una zona dedicata per il collaudo finale?
Do you have a dedicated area for the final test? [Yes] No
6.8 Esiste una procedura scritta per il collaudo finale?
Do you have a written procedure for the final test? [Yes] No
6.9 La strumentazione e' in regime di taratura?
The instrumentation is under calibration control? [Yes] No
- Esiste un reparto di taratura?
Do you have a calibration department? Yes [No]
- Esiste una procedura scritta per la taratura?
Do you have a written procedure for the calibration? [Yes] No
- E' prevista la rimozione della strumentazione non conforme?
Is the non-conforming instrumentation removed? [Yes] No
- Esistono documenti per la raccolta dei risultati della
taratura?
Do you have a data collection relevant to calibration results? [Yes] No
- Presso quali Istituti Metrologici si procede alla taratura
dei campioni primari?
Which Metrologic Institutes are incharged to calibrate the standards?
All standards and records demonstrate traceability to the National Institute of
Standards and Technology
6.10 Esiste una procedura di riparazione?
Does the company have a written procedure for repairing? Yes No
- Se si allegare [_] *Repairs are accomplished in accordance
If Yes, enclose with IPC-R-700 as directed by P-COM
Material Review Board (MRB)
- --------------------------------------------------------------------------------
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
---------------
SIEMENS SOTTOINSIEMI ELETTRONICI Foglio 11/12
ORIGINAL ELECTRONIC MANUFACTURER EVALUATION
- --------------------------------------------------------------------------------
<PAGE>
________________________________________________________________________________
Rep. 0610 Data 03.02.93 Ed. 01 Em. V3-02/0209 Firma ?
Esec. FACCIO Contr. G.V. Ed. Var. Firma [ ]
________________________________________________________________________________
7. OSSERVAZIONI DEL FORNITORE
VENDOR'S REMARKS
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
................................................................................
________________________________________________________________________________
VALUTAZIONE DEI FORNITORI DI 018-004/21-PQ
SIEMENS SOTTOINSIEMI ELETTRONICI -------------
ORIGINAL ELECRONIC MANUFACTURER EVALUATION Foglio 12/12
________________________________________________________________________________
(C) SIEMENS TELECOMUNICAZIONI S.P.A.
<PAGE>
P COM
QUALITY ASSURNACE
MANNUAL
[PHOTO APPEARS HERE] [PHOTO APPEARS HERE]
RESEARCH & DEVELOPMENT CUSTOMER SERVICE
QUALITY SYSTEM
[PHOTO APPEARS HERE] [PHOTO APPEARS HERE]
MANFACTURING & TEST SALES & MARKETING
DOC. CONTROL
FEB 08 1995
<PAGE>
- --------------------------------------------------------------------------------
QUALITY ASSURANCE MANUAL
COPY CONTROL NO.______
[_] UNCONTROLLED COPY
This Quality Assurance Manual addresses the requirements of ISO9001 -
1987(BS5750: Part 1, EN29001 - 1987) and is the property of P-Com, Inc., and
must be returned upon request.
This manual describes in outline form the organization and the quality related
systems within the Company, and is intended to assist the recipient in
understanding how the Company's Quality System works.
The Quality System outlined is enforced by separate Quality Assurance Procedures
that are considered confidential and may not be distributed outside the Company.
This manual in whole or part may not be copied without the written permission of
the President of the Company.
P-Com, Inc.
3175 S. Winchester Boulevard
Campbell, CA 95008
U.S.A.
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
ISO 9001 CROSS REFERENCE TABLE........................................ 3
ISO 9001 CROSS REFERENCE.............................................. 3
1.0 QUALITY POLICY STATEMENT.......................................... 4
2.0 APPLICABLE DOCUMENTS.............................................. 5
3.0 GLOSSARY.......................................................... 5
4.0 CORPORATE PROFILE................................................. 6
5.0 ORGANIZATION...................................................... 7
6.0 MANAGEMENT RESPONSIBILITY......................................... 8
7.0 QUALITY SYSTEM.................................................... 10
8.0 PROCEDURE SUMMARY................................................. 11
LOCATION MAP.......................................................... 17
RECORD OF REVISIONS................................................... 18
<PAGE>
- --------------------------------------------------------------------------------
ISO 9001 CROSS REFERENCE
------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
ISO 9001 QAM
PARA REQUIREMENTS PARA PAGE QAP #
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4.1.1 Quality Policy 1.0 4
- -------------------------------------------------------------------------------------------------------------------------
4.1.2.1 Responsibility and Authority 5.0 7
- -------------------------------------------------------------------------------------------------------------------------
4.1.2.3 Management Representative 6.0 8
- -------------------------------------------------------------------------------------------------------------------------
4.1.3 Management Review 8.1 11 03.70.002
- -------------------------------------------------------------------------------------------------------------------------
4.2 Quality System 7.0 10
- -------------------------------------------------------------------------------------------------------------------------
4.3 Contract Review 8.2 11 03.70.003
- -------------------------------------------------------------------------------------------------------------------------
4.4.1 Design Control 8.3 11 03.70.004
- -------------------------------------------------------------------------------------------------------------------------
4.4.5 Design Verification 8.3.5 12 03.70.004
- -------------------------------------------------------------------------------------------------------------------------
4.4.6 Design Changes 8.3.6 12 03.70.004
- -------------------------------------------------------------------------------------------------------------------------
4.5 Document Control 8.4 12 03.70.005
- -------------------------------------------------------------------------------------------------------------------------
4.6 Purchasing 8.5 13 03.70.006
- -------------------------------------------------------------------------------------------------------------------------
4.7 Purchaser Supplied Product 8.6 13 03.70.007
- -------------------------------------------------------------------------------------------------------------------------
4.8 Product Identification and Traceability 8.7 13 03.70.008
- -------------------------------------------------------------------------------------------------------------------------
4.9 Process Control 8.8 14 03.70.009
- -------------------------------------------------------------------------------------------------------------------------
4.10 Inspection and Testing 8.9 14 03.70.010
- -------------------------------------------------------------------------------------------------------------------------
4.11 Inspection, Measuring and Test Equipment 8.10 14 03.70.011
- -------------------------------------------------------------------------------------------------------------------------
4.12 Inspection and Test Status 8.11 15 03.70.012
- -------------------------------------------------------------------------------------------------------------------------
4.13 Control of Non-Conforming Material 8.12 15 03.70.013
- -------------------------------------------------------------------------------------------------------------------------
4.13.1 Non-conformance Review and Disposition 8.12.1 15 03.70.013
- -------------------------------------------------------------------------------------------------------------------------
14.14 Corrective Action 8.13 15 03.70.014
- -------------------------------------------------------------------------------------------------------------------------
14.15.1 Handling, Storage, Packaging and Delivery 8.14 15 03.70.015
- -------------------------------------------------------------------------------------------------------------------------
4.16 Quality Records 8.15 16 03.70.016
- -------------------------------------------------------------------------------------------------------------------------
4.17 Internal Quality Audits 8.16 16 03.70.017
- -------------------------------------------------------------------------------------------------------------------------
4.18 Training 8.17 16 03.70.018
- -------------------------------------------------------------------------------------------------------------------------
4.19 Servicing 8.18 16
- -------------------------------------------------------------------------------------------------------------------------
4.20 Statistical Techniques 8.19 16 03.70.019
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
1.0 QUALITY POLICY STATEMENT
- ----------------------------
It is the policy of P-Com, Inc., to provide the Customer with products that
conform to all aspects of generally accepted industrial standards and
specified contract requirements.
Quality is of vital importance to the Company and we totally commit to a
Quality Assurance Management System that conforms to the requirements of
ISO9001:1987.
All employees are responsible for quality, and are responsible for achieving
the specified levels of quality at all stages of work that have an effect on
the final quality of the product supplied.
We undertake, by practical example and training, to ensure that each
employee has a proper understanding of the quality function and it's direct
relevance and significant contribution to our success.
1.1 MANAGEMENT CERTIFICATION
I hereby certify that this Quality Assurance Manual accurately describes the
Quality Assurance Management System in use within P-Com, Inc., and
encompasses the requirements of ISO 9001:1987.
President and CEO /s/ George P. Roberts Date:3/21/94
---------------------- -------
George P. Roberts
<PAGE>
- --------------------------------------------------------------------------------
1.2 COMPANY CONTACTS
All questions concerning P-Com's commitment to the contents of this Quality
Assurance Manual may be directed to either George Roberts, President and
CEO, or Kenneth Bean, Quality Assurance Manager, by the following methods:
Tel: 408-866-3666
Fax: 408-566-3655
Mail: P-Com, Inc.
3175 S. Winchester Boulevard
Campbell, CA 95008
U.S.A.
2.0 APPLICABLE DOCUMENTS
- ------------------------
ISO 9001:1987 Quality Systems
BS 5750 Part 1:1987 Quality Systems
EN 29001:1987 Quality Systems
ANSI/ASQC Q91 Quality Systems
QAP 03.70.002 Management Review - QAP 4.1
QAP 03.70.003 Contract Review - QAP 4.3
QAP 03.70.004 Design Control - QAP 4.4
QAP 03.70.005 Document Control - QAP 4.5
QAP 03.70.008 Purchasing - QAP 4.6
QAP 03.70.007 Purchaser Supplied Product - QAP 4.7
QAP 03.70.008 Product l.D. and Traceability - QAP 4.8
QAP 03.70.009 Process Control - QAP 4.9
QAP 03.70.010 Inspection and Testing - QAP 4.10
QAP 03.70.011 Inspection, Measuring and Test Equipment - QAP 4.11
QAP 03.70.012 Inspection and Test Status - QAP 4.12
QAP 03.70.013 Control of Non-conforming Product - QAP 4.13
QAP 03.70.014 Corrective Action - QAP 4.14
QAP 03.70.015 Handling, Storage, Packaging and Delivery - QAP 4.15
QAP 03.70.016 Quality Records - QAP 4.16
QAP 03.70.017 Internal Quality Audits - QAP 4.17
QAP 03.70.018 Training - QAP 4.18
QAP 03.70.019 Statistical Techniques - QAP 4.20
3.0 GLOSSARY
- ------------
QUALITY: The totality of features and characteristics of the product that
bear on its ability to satisfy stated or implied needs.
QUALITY ASSURANCE MANAGEMENT SYSTEM: All the planned and systematic actions
necessary to provide adequate confidence in the product to satisfy given
requirements for quality.
<PAGE>
- --------------------------------------------------------------------------------
4.0 CORPORATE PROFILE
- ----------------------
P-Com Inc. was founded in August 1991, for the express purpose of
developing, manufacturing and marketing millimeter wave radio products for
the telecommunications industry. These products meet a critical need for
high quality, cost effective, digital transmission in short distance
applications. In general, the P-Com management team is dedicated to removing
the gap that exists between the products that are currently available and
the needs of the market.
P-Com millimeter wave radio products meet the crucial requirement of
minimizing the customer's "cost of ownership". The design philosophy that
governs all P-Com product development decisions is one that results in a
product that is low in cost, high in reliability and simple to install and
maintain. Given the competitive nature of the telecommunications service
industry, these attributes play a key role in the successful and profitable
operation of a customers telecommunications network.
4.1 COMPANY MISSION
To design, develop and manufacture high quality radio transmission products
for the worldwide wireless telecommunications market.
[MAP APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
QUALITY ASSURANCE MANUAL
5.0 ORGANIZATION
- -----------------
The Company organization and lines of authority are detailed in Figure 1.
[CHART APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
6.0 MANAGEMENT RESPONSIBILITY
- -------------------------------
The Company's organization is designed to provide effective direction,
communication and management to meet the requirements defined in the
Qualify Policy Statement.
6.1 PRESIDENT and CHIEF EXECUTIVE OFFICER (CEO)
The President and CEO holds responsibility within the Company to
formulate, in association with the key Executives, overall Company policy.
He is responsible for the development and implementation of strategies for
the control of all aspects of the business through designated Company
personnel. The President shall be deputized Quality Assurance Manager in
his absence.
6.2 EXECUTIVE VICE PRESIDENT and CHIEF TECHNICAL OFFICER (CTO)
Reporting to the President of the Company, the Executive Vice-President
has overall responsibility for the introduction of advanced technologies
into the product, business development and strategic business alliance
activities.
6.3 QUALITY ASSURANCE MANAGER
The Quality Assurance Manager is the management representative reporting
to the President and is responsible for ensuring full implementation and
maintenance of the ISO 9001 quality system and the internal auditing
required to verify its effectiveness. In addition to these
responsibilities, he has issuing and revision control of the Company's
Qualify Assurance Manual and related Quality Assurance Procedures (QAP's).
6.3.1 SENIOR QUALITY ENGINEER
The Senior Quality Engineer reporting to the Quality Assurance Manager
develops and initiates standards and methods for inspection, testing, and
evaluation of materials and products. The Senior Quality Engineer also
directs Inspectors engaged in product inspection and tabulating data
concerning materials, product, or process quality and reliability. In
addition, duties include maintaining the procedures for disposition of
non-conforming materials and product in conjunction with the appropriate
corrective action follow-up.
6.4 VICE PRESIDENT (V.P.), OPERATIONS
Reporting to the President of the Company, the Operations V.P. is
responsible for organizing and introducing the product manufacturing
strategy and manufacturing control systems combined with providing
services and facilities for the Company's operation.
6.4.1 PROGRAM MANAGER
Reporting to the Operations V.P. the Program Manager is responsible for
providing technical support for other Company functions and creating a
Master Design Schedule to satisfy the Market Requirements Specification
and the business objectives as defined by senior management. The Program
Manager also identifies critical issues and expediting improvements
through staff meetings and design reviews with consideration to estimated
parts and labor costs.
<PAGE>
- --------------------------------------------------------------------------------
6.4.2 PRODUCTION MANAGER
Reporting to the Operations V.P. the Production Manager prepares
operational schedules and coordinates manufacturing activities to ensure
production and quality of products. Other responsibilities include
planning production operations, establishing priorities and sequences for
manufacturing products.
6.4.3 MATERIALS MANAGER
Reporting to the Operations V.P. the Materials Manager is responsible for
directing and coordinating the purchasing and distribution of components
for the design and manufacture of products, capital equipment, and
liaison with arranging contracts with suppliers and subcontractors.
6.5 SENIOR VICE PRESIDENT (VP), MARKETING & SALES
Reporting to the President of the Company, the Marketing V.P. is
responsible for developing the customer base and obtaining sales orders
through marketing and sales strategy action plans. Other responsibilities
include communicating the Company's corporate image in the market place
while defining the market requirements for use by design engineering. He
also provides technical publications, operation manuals, training
materials and seminars for existing or potential customers.
6.5.1 MARKETING MANAGER
Reporting to the Marketing & Sales V.P., the Product Marketing Manager is
responsible for: a) product definition to Engineering based upon customer
inputs, competitive research, industry standards and cost targets, b)
corporate and product promotional literature, trade shows, public
relations, customer demonstrations/presentations and sales support
(assistance in proposal generation).
6.5.2 DIRECTOR OF SALES
Reporting to the Marketing & Sales V.P., the Director of Sales is
responsible for expanding the customer base, developing the Marketing
Plan, obtaining sales orders, and meeting the revenue objectives of the
corporation. Other responsibilities include ensuring customer
satisfaction, relaying customer requests for product improvement and
customer support functions of the corporation. The Director of Sales acts
as a liaison between the customer and the corporation.
6.6 VICE PRESIDENT (V.P.), FINANCE/CONTROLLER
Reporting to the President of the Company, the Finance V.P. is
responsible for preparation of the Company's assets. Other
responsibilities include management of Human Resources and Administrative
functions.
6.7 VICE PRESIDENT (V.P.), ENGINEERING
Reporting to the President, the Engineering V.P. is responsible for
planning, budgeting, and managing the technical resources for the
Company. Responsibilities also include technical direction for the
Company, and organizing the engineering team to insure the technical
integrity of products developed and that the requirements as defined by
Marketing are satisfied.
6.7.1 DIRECTOR, MICROWAVE ENGINEERING
Reporting to the Engineering V.P., the Microwave Engineering Director is
responsible for managing a team of design engineers, technicians and
consultants that provide all the microwave circuit designs and associated
system interfaces including all the required documentation and control
procedures.
<PAGE>
- --------------------------------------------------------------------------------
6.7.2 DIRECTOR, SIGNAL PROCESSING (SP) ENGINEERING
Reporting to the Engineering V.P., the SP Engineering Director is
responsible for managing a team of design engineers, technicians and
consultants that provide all the SP electronics circuit designs and
associated system interfaces including all the required documentation and
control procedures.
7.0 QUALITY SYSTEM
- ----------------------
The Quality System within the Company is based on a four tier
documentation system composed of the following.
. Level 1, Quality Assurance Manual
. Level 2, Quality Assurance Procedures (QAP's)
. Level 3, Company Standards and Procedures
. Level 4, Industrial Standards and Database
7.1 LEVEL 1
The Quality Assurance Manual describes in outline form the Management's
organization and the quality related systems in operation within the
Company to meet the requirements of ISO 9001:1987. It assists the
customer in making an assessment of our ability to meet the specified
quality assurance requirements.
7.2 LEVEL 2
The systems outlined in the Quality Assurance Manual are enforced by
separate Quality Assurance Procedures (QAP's) which describe the
operational procedures of the related systems and define the responsible
personnel and the objective evidence generated for substantiation.
The QAP's are confidential to the Company and not for general
distribution. However, at the discretion of the Company President, they
may be made available for review by the customer.
7.3 LEVEL 3
The QAP's are supported by a number of related non-product design
documents such as Company Standards and Procedures that contain details
describing the administrative system, such as how to conduct a Design
Review meeting.
Separate from Company Standards and Procedures are the product design
documents describing tasks or work instructions that are in direct
support of the product. such as a Test Procedure.
Both non-product design and product design documents are confidential to
the Company and are not for general distribution. However, at the
discretion of the Company President, they may be made available for
review by the customer.
7.4 LEVEL 4
Level four documents are industrial engineering standards, design rules
or Customer documents that form reference materials as a database
supporting internal Company Standards and Procedures.
<PAGE>
QUALITY ASSURANCE MANUAL No: 03.70.001
Rev: E
Date: 3-94
Page: 11 of 18
- --------------------------------------------------------------------------------
8.0 PROCEDURE SUMMARY
- -------------------------
The following sections give a brief overview of each QAP that describes
in detail the operational procedures of the related systems in support
of ISO 9001 :1987. Next to each QAP title the corresponding document
number is given in parenthesis as applicable.
8.1 MANAGEMENT REVIEW - QAP 4.1(03.70.002)
It is company policy that the Quality System is reviewed by the
President every six months. The review meeting is chaired by the
President, and attended by the Vice Presidents, the Quality Assurance
Manager, and any other personnel deemed necessary.
The agenda includes a review, of actions taken from previous meetings,
results of Internal Quality Audits, Non-conformance Reports, customer
complaints and overall effectiveness of the Quality System.
The minutes of the meeting and relevant documentation are retained by
the Quality Assurance Manager.
8.2 CONTRACT REVIEW - QAP 4.3(03.70.003)
It is the policy of P-Corn to document all inquiries, quotations,
contracts, bid proposals, purchase orders and associated data.
This documentation is reviewed to establish that requirements can be
achieved and that all contracts and specifications are adequately
defined. Deviations are resolved with the customer before processing and
amendments to requirements are documented.
8.3 DESIGN CONTROL - QAP 4.4(03.70.004)
8.3.1 GENERAL
P-Corn has established Standards and Procedures for control and
verification of the product design to ensure that all specified contract
requirements are satisfied.
8.3.2 DESIGN AND DEVELOPMENT PLANNING
The Marketing Requirement Specification is used by the Program Manager
to create a Master Design Schedule for the design project. Additional
planning schedules are produced containing planning information for
engineers and personnel from other functions. These are regularly
reviewed, documented and the information circulated to all appropriate
groups within the company.
Quality Plans are written describing how the quality requirements of the
contract are achieved.
The Engineering V.P. has overall responsibility for the product design
function and assigns design and verification activities to the
Engineering Directors. The design resources consist of teams of
specialist engineers and technicians with the necessary capital
equipment.
8.3.3 DESIGN INPUT
The Marketing Requirement Specification and specific customer contracts
are the source documents for the design input requirements.
Technical engineering specifications are developed for the product and
for defined subdivisions of the product. Detail requirements are refined
during the design process.
<PAGE>
QUALITY ASSURANCE MANUAL No: 03.70.001
Rev: E
Date: 3-94
Page: 12 of 18
- --------------------------------------------------------------------------------
8.3.3 CON'T
The Product Design Specification defines the functionality of the
product system and identifies the regulatory, customer specific,
marketing, product safety, and engineering requirements.
8.3.4 DESIGN OUTPUT
During the design process acceptance criteria are established for all
appropriate product systems and sub-systems.
Design calculations, system analysis, drawings, process instructions,
test procedures, specifications, user manuals, etc., are generated as
design outputs.
8.3.5 DESIGN VERIFICATION
Design reviews are regularly held to control all aspects of the design
process and are part of the Master Design Schedule.
Verification that the design meets the specified contract requirements
is conducted at various levels of product system. Testing against
defined acceptance criteria and qualification programs are carried out.
8.3.6 DESIGN CHANGES
P-Com has Standards and Procedures for the documentation and recording
of design changes. The Engineering Change Order (ECO) system provides
the method to evaluate, approve, and incorporate design changes into
product design documentation.
8.3.7 PRODUCT RELEASE
P-Com has Standards and Procedures defining the requirements for a
uniform method of releasing a product and its technical documentation to
manufacturing. The system also provides the method of controlling
documentation during the engineering development cycle and construction
of breadboard and/or prototype product.
8.4 DOCUMENT CONTROL - QAP 4.5(03.70.005)
84.1 DOCUMENT APPROVAL AND ISSUE
P-Com operates Standards and Procedures for the registration, issue and
circulation of all product design documents and non product documents
including the Quality Manual, Quality Assurance Procedures, Company
Standards, Procedures and Database.
The Document Control department ensures that only the applicable issues
of documents are used and obsolete documents are removed.
8.4.2 DOCUMENT CHANGE AND MODIFICATION
Company Standards and Procedures provide for the initiation, evaluation,
approval and implementation of all documentation changes. The Document
Control department maintains a log of all proposed and approved ECO's
for product design documents. Approval Sheets for changes of non product
design documents are also maintained within Document Control.
<PAGE>
QUALITY ASSURANCE MANUAL No: 03.70.001
Rev: E
Date: 3-94
Page: 13 of 18
- --------------------------------------------------------------------------------
8.5 PURCHASING - QAP 4.6 (03.70.006)
8.5.1 GENERAL
All purchasing related activities are conducted under controlled
conditions which provide for objective assessment of all suppliers and
ensure that purchasing information is correct before release to the
supplier.
8.5.2 ASSESSMENT OF SUPPLIERS/SUBCONTRACTORS
It is Company policy that, wherever possible, purchased material and
subcontracted services are obtained from a company approved source.
The Company maintains lists of approved sources and carries out
supplier/sub-contractor evaluations to ensure conformance with
requirements. Products purchased from non-approved sources are
identified to the customer.
8.5.3 PURCHASING DATA
All purchasing documents clearly describe the material and sub-
contractor services ordered. Purchase Orders are reviewed and approved
before release.
8.5.4 VERIFICATION OF PURCHASED PRODUCT/SERVICE
When contractually specified by the customer, Quality Assurance
requirements may be verified at P-Com by the customer. It is Company
policy to provide for and assist those customers who require such
verification.
8.6 PURCHASER SUPPLIED PRODUCT - QAP 4.7(03.70.007)
Purchaser Supplied Product in this type of industry is typically
equipment and/or documentation supplied to P-Com for design and
production related work. The Marketing Manager is responsible for the
care and control of documentation and the Quality Assurance Manager is
responsible for equipment.
8.7 PRODUCT IDENTIFICATION AND TRACEABILITY - QAP 4.8(03.70.008)
Components, printed circuit assemblies (PCA's), modules, and top
assemblies used to produce the product shall be assigned unique part
numbers. All of these shall be physically marked with their
corresponding part numbers and revision where practical using a
permanent method. In the case of purchased off the shelf components and
size limitations, the storage or handling container shall be marked with
the corresponding part number and revision.
PCA's, modules, and top assemblies used to produce the product are
assigned and indelibly marked with serial numbers. Records of the serial
numbers used for the final product assembly are maintained.
Components are excluded from individual serial number assignments except
when deemed necessary by the Design department for critical applications
requiring source lot traceability. These components are identified on
purchase documentation such as Source Control Drawings and Specification
Control Documents, drawings/schematics, and Bills of Material.
<PAGE>
QUALITY ASSURANCE MANUAL No: 03.70.001
Rev: E
Date: 3-94
Page: 14 of 18
- --------------------------------------------------------------------------------
8.8 PROCESS CONTROL - QAP 4.9(03.70.009)
GENERAL
The company ensures that the procedures that control the planning and
operation of the manufacturing process are implemented. This is
accomplished through documented work instructions and appropriate
equipment for process, assembly and test.
Product quality standards are maintained in accordance with industrial
reference standards, codes of practice, Quality Plans and contract
specified requirements.
8.8.1 SPECIAL PROCESSES
There are no special processes.
8.9 INSPECTION AND TESTING - QAP 4.10(03.70.010)
8.9.1 RECEIVING INSPECTION AND TESTING
All incoming materials are checked for compliance with the purchase
order detail. Any damaged or incorrect materials are identified,
segregated and processed using formal control procedures. Incoming
material released for urgent purposes is identified and recorded in
accordance with formal positive recall procedures.
8.9.2 IN-PROCESS INSPECTION AND TESTING
At defined stages of the process and assembly operation, the product is
identified, inspected and tested to establish conformance to documented
specified requirements.
Product is not progressed until satisfactorily inspected and tested
except when released under positive recall procedures.
Non-conforming product is identified and segregated in accordance with
formal procedures.
8.9.3 FINAL INSPECTION AND TESTING
Inspection and testing of the finished product is completed in
accordance with the Quality Plan or documented procedures to verify
conformance to the contract specified requirements.
All necessary data and release documentation is made available before
dispatch.
8.9.4 INSPECTION AND TEST RECORDS
All inspection records are retained for manufactured products indicating
acceptance to defined criteria.
8.10 INSPECTION, MEASURING AND TEST EQUIPMENT - QAP 4.11 (03.70.011)
The Company operates a system for ensuring that inspection, measuring
and test equipment used to determine the conformance of product to
contract specified requirements are periodically calibrated, serviced
and adjusted to maintain the accuracy to required limits.
Calibration system and records are maintained in compliance to
applicable national standards.
<PAGE>
QUALITY ASSURANCE MANUAL No: 03.70.001
Rev: E
Date: 3-94
Page: 15 of 18
- --------------------------------------------------------------------------------
8.11 INSPECTION AND TEST STATUS - QAP 4.12(03.70.012)
The inspection and test status of product during the process and
assembly stages of the operation is identified by unique routing card.
A unique routing card is provided for each defined module, subassembly
or product recording its progress through the manufacturing process and
its conformance to inspection and tests performed.
The Quality Assurance Manager is responsible for the release of
conforming product.
8.12 CONTROL OF NON-CONFORMING PRODUCT - QAP 4.13(03.70.013)
Incoming material, work in progress, and finished product that does not
conform to specified requirements is prevented from inadvertent use by
identification, segregation and disposition in accordance with
documented procedures.
8.12.1 NON-CONFORMANCE REVIEW AND DISPOSITION
In the documented procedures, the Quality Engineer is responsible for
the review of Non-conformance Reports with other members of the Company
Material Review Board to determine the appropriate disposition of non-
conforming material and product.
A Deviation Authorization may be requested from the customer for non-
conforming product that is proposed for use or repair.
8.13 CORRECTIVE ACTION - QAP 4.14(03.70.014)
The Company maintains documented procedures for the investigation and
analysis of the cause for non-conforming material and product resulting
in corrective actions to prevent recurrence.
8.14 HANDLING, STORAGE, PACKAGING AND DELIVERY - QAP 4.15(03.70.015)
8.14.1 GENERAL
Procedures for handling, storage, packaging and delivery of material,
work in process and finished product are maintained by the Company.
Special Company Standards and Procedures establish the minimum
requirements for electrostatic discharge control where sensitive
electronic parts, assemblies or products are manufactured, assembled,
tested, serviced, handled, packaged or stored.
8.14.2 HANDLING
The Company handles all materials in such a manner as to prevent damage,
deterioration or loss.
8.14.3 STORAGE
Secure storage areas are provided and Company Standards and Procedures
control the receipt and issuing of materials.
Lists of materials requiring special storage conditions, or having a
limited shelf life are maintained and controls applied to conform with
requirements. The materials requiring special storage conditions are
maintained in the appropriate environment and materials having limited
shelf life are discarded in an approved manner when shelf life has
expired. Material Safety Data Sheet regulations are applied for storage
and handling of material. Lists of such materials are maintained.
<PAGE>
QUALITY ASSURANCE MANUAL No: 03.70.001
Rev: E
Date: 3-94
Page: 16 of 18
- --------------------------------------------------------------------------------
8.14.4 PACKAGING
Company Standards and Procedures control the marking and packaging of
the product to ensure conformance to specified contract requirements.
8.14.5 DELIVERY
After final inspection and test, documented procedures provide for the
protection of the product in stores and during delivery to the customer.
Delivery documentation is provided and instructions are carried out in
accordance with specified contract requirements.
8.15 QUALITY RECORDS - QAP 4.16 (03.70.016)
The quality records identified in the Quality Assurance Procedures are
filed and maintained by the applicable department and are under the
jurisdiction of the Quality Assurance Manager for demonstration of the
Quality System effectiveness.
The records are retained for a minimum of five years or for a period
specified by customer contract.
8.16 INTERNAL QUALITY AUDITS - QAP 4.17(03.70.017)
All quality activities are subject to a planned and documented audit to
verify compliance with the defined Quality System.
Audits are conducted at predetermined intervals and are carried out by
trained personnel under the control of the Quality Assurance Manager.
The results of these audits are recorded and used to improve the
effectiveness of the Quality System.
8.17 TRAINING - QAP 4.18 (03.70.018)
The Company maintains procedures for identifying the training needs of
all employees in performing assigned tasks and in increasing their
quality awareness.
Training records are held for each employee registering their education,
experience and training requirements.
8.18 SERVICING
The design philosophy of products manufactured by the Company precludes
the need for regular maintenance. Servicing procedures are therefore not
required.
8.19 STATISTICAL TECHNIQUES - QAP 4.20(03.70.019)
The Company promotes the use of statistical tools and techniques in a
systematic way to continually reduce variation in processes, products,
and incoming materials. The Quality Assurance Manager is the Statistical
Coordinator for the Company.
<PAGE>
QUALITY ASSURANCE MANUAL No: 03.70.001
Rev: E
Date: 3-94
Page: 17 of 18
- --------------------------------------------------------------------------------
LOCATION MAP
- ------------
[MAP APPEARS HERE]
<PAGE>
QUALITY ASSURANCE MANUAL No: 03.70.001
Rev: E
Date: 3-94
Page: 18 of 18
- --------------------------------------------------------------------------------
RECORD OF REVISIONS
- -------------------
<TABLE>
<CAPTION>
REVISION DESCRIPTION DATE APPROVED
BY
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 Initial draft. 10-12-92 KB
- -----------------------------------------------------------------------------------------------------------
2 Adds expanded Procedure Summary pages 8 through 14. 11-06-92 KB
- -----------------------------------------------------------------------------------------------------------
3 Introduced modified front sheet, organization chart, 12-17-92 KB
management responsibilities and procedure summary
- -----------------------------------------------------------------------------------------------------------
A Formal Release 01-08-93 K Bean
- -----------------------------------------------------------------------------------------------------------
B Update 5.0, 6.0 10-20-93 K Bean
- -----------------------------------------------------------------------------------------------------------
C Add ISO cross reference table and rewrite para. 8.19 11-18-93 K Bean
- -----------------------------------------------------------------------------------------------------------
D Add QAP 4.20 to Applicable Documents 11-29-93 K Bean
- -----------------------------------------------------------------------------------------------------------
E Correct address page 1 & para. 1.2. Update Location Map 03-21-94 K Bean
page 17.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
STANDARD/PROCEDURE APPROVAL
Standard/Procedure Number 03.70.001 Revision E Date 03-14-94
Standard/Procedure Title Quality Assurance Manual
As a minimum, the originator and the Director of the department issuing the
Standard/Procedure are the required approvals. For Company Standards, the
President must also approve.
Approvals:
/S/ Kenneth Bean 3-14-94 /S/ George Roberts 3/21/94
- --------------------------------- --------------------------------
QA Manager Date President Date
<PAGE>
ATTACHMENT 3
PRICES
<PAGE>
ATTACHMENT 3
___________
PRICES AND DISCOUNTS SCHEDULE FCA EUROPEAN COUNTRIES OR FCA CAMPBELL
(** ** *******)
1. PRICES: Prices are listed in the "Tel-Link Series List Prices" annexed to
this Attachment (3 sheets)
2. DISCOUNTS: As per table herebelow
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
LEVEL TOTAL ANNUAL 23GHZ 38GHZ 50GHZ
QUANTITY
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ----------------------------------------
1 *** less than or equal to *** *** *** * * *
- ----------------------------------------
2 *** less than or equal to **** *** ***** * * *
- ----------------------------------------
3 **** less than or equal to **** *** ***** * * *
- ----------------------------------------
4 more than **** ***** *** * * *
- ----------------------------------------
- ---------------------------------------------------------------------------
</TABLE>
. Price to be considered valid for the whole ****
. Items 1, 2 and 8E1/16E1 capacity systems are inclusive of
items *** ***** ******* *****
*** *****
*** ****** **********
. Spare parts ordered together with main purchase order will entitle the same
above discounts
. Items 5 and 6: ** *********
*CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
TEL-LINK SERIES LIST PRICES - E1 STANDARD RADIOS
<TABLE>
<CAPTION>
Tel-Link 38 Tel-Link 23
Item Description List Price List Price
<S> <C> <C> <C>
1 Non-Protected Terminal,
48VDC input pwr,
Antenna w/Pole Mount,
Instal. Material & Manual:
2-FSK, 30cm Ant. 4-FSK,80cm Ant.
1.1 3x64 Kb/s Capacity $12,230 $13,715 See note 6.
1.2 1E1 Capacity $11,850 $13,365
1.3 2E1 Capacity $12,450 $14,010
1.4 4E1 Capacity $13,010 $14,640
1.5 Universal- Capacity Only (1E1, 2E1, 4E1) $13,490 $15,180
1.6 Universal- Capacity & Mod. (2- or 4-FSK) $13,990 $15,680
2 Protected Terminal, Two Ant. Solution,
-48VDC Input pwr,
Antenna w/Pole Mount,
Instal. Material & Manual:
2-FSK, 90cm Ant. 4-FSK, 80cm Ant.
2.1 1E1 Capacity $25,910 $28,880
2.2 2E1 Capacity $27,050 $30,170
2.3 4E1 Capacity $28,170 $31,430
2.4 Universal- Capacity Only (1E1, 2E1, 4E1) $29,130 $32,510
2.5 Universal- Capacity & Mod. (2. or 4-FSK) $30,130 $35,510
3 Spares
2-FSK 4-FSK
3.1 IDU-3x04 Kb/s $3,950 See note 6.
3.2 IDU-1E1 $ 3,500 $ 3,850
3.3 IDU-2E1 $ 4,070 $ 4,480
3.4 IDU-4E1 $ 4,630 $ 5,095
3.5 IDU- Universal- Capacity Only (1E1, 2E1, 4E1) $ 5,110 $ 5,620
3.6 IDU- Universal- Capacaity & Mod. (2. or 4-FSK) $5,620
3.7 PSS-1E1, 2E1 or 4E1 (Protected Terminals Only) $2,150
3.8 ODU $ 9,760 $10,980
(2 required per link)
3.9 ODU Switch (Single Antenna Protection Option Only) $1,980
3.10 30cm Antenna w/Pole Mount Hrdwr $ 450 $ 845
3.11 60cm Antenna w/Pole Mount Hrdwr $ 795 $ 1,190
4 Terminal Options (Add to terminal price)
4.1 +24/-24 VDC Input Pwr $ 745
4.2 Eng. Orderwire (EOW) w/handset & cord - Bridging $ 825
4.3 Eng. Orderwire (EOW) w/handset & cord - Point-to-Point Only $ 275
4.4 Data Channel 1 $ 590
4.5 Data Channel 2/MS8 Port $ 590
4.6 Link Manager Port $ 485
4.7 120 Ohm Bal. I/0 $ 450
4.8 Forward Error Correction (FEC) $1,250
4.9 4-FSK Modulation $ 500 N/A
4.10 High Power Amplifier N/A $ 1,490
4.11 30cm Antenna (purchased with terminal) N/A ($345)
4.12 60cm Antenna (purchased with terminal) $ 345 N/A
4.13 Single Antenna Protection (Prot. Terminals Only) $2,950
</TABLE>
Siemans-TS-E1 Rev. 1.0. 12/16/94 Page 1 of 3
<PAGE>
Tel-Link Series List Prices-E1 Standard Radios
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Tel-Link 38 Tel-Link 23
- ------------------------------------------------------------------------------------------------------------------------------
Item Description List Price List Price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
5 Software Products
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
5.1 Link Manager $4,900
- ------------------------------------------------------------------------------------------------------------------------------
5.2 Network Manager TBD
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
6 Miscellaneous
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
6.1 Crimp Tool $ 100
- ------------------------------------------------------------------------------------------------------------------------------
6.2 Test Cord- ODU AGC $ 50
- ------------------------------------------------------------------------------------------------------------------------------
6.3 Operations Manual $ 75
- ------------------------------------------------------------------------------------------------------------------------------
6.4 EOW Handset W/Cord $ 40
- ------------------------------------------------------------------------------------------------------------------------------
6.5 Digital Voltmeter $ 220
- ------------------------------------------------------------------------------------------------------------------------------
6.6 IDU-ODU Coax Cable (250 FT) $ 550
- ------------------------------------------------------------------------------------------------------------------------------
6.7 ODU Rem. Mount. KG (WG) not Incl. $ 390
- ------------------------------------------------------------------------------------------------------------------------------
6.8 OUD Holsting Handle $ 295
- ------------------------------------------------------------------------------------------------------------------------------
6.9 Flexible Waveguide 30" (38G or 23G) $ 750
- ------------------------------------------------------------------------------------------------------------------------------
6.10 Protection Upgrade kit - Dual Antenna Solution $2,150
- ------------------------------------------------------------------------------------------------------------------------------
6.11 Protection Upgrade kit - Single Antenna Solution $5,100
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Pricing Notes
- -----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
1. All prices are in US$ and are F.O.B factory.
- ------------------------------------------------------------------------------------------------------------------------------
2. Payment terms are not 30 days unless otherwise specified.
- ------------------------------------------------------------------------------------------------------------------------------
3. All prices are subject to Terms and Conditions of the Agreement.
- ------------------------------------------------------------------------------------------------------------------------------
4. Volume Discounts are provided as in Table A.1.
- ------------------------------------------------------------------------------------------------------------------------------
5. O.D.U. IDU interconnect cable not included; recommend local purchase of Belden 913 RG? (FIG-8) cable or equivalent.
- ------------------------------------------------------------------------------------------------------------------------------
6. 3x64 KB/s products are always 2-FSK, 7 MHz channel bandwidth.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 3
<PAGE>
LIST PRICES FOR TEL-LINK SERIES RADIOS
23 GHZ AND 38 GHZ
8E1 AND 16E1 CAPACITY SYSTEMS
- --------------------------------------------------------------------------------
The list prices, exclusive of any discounts, for the 23GHz and 38GHz radios, in
8E1 and 16E1 capacities are as shown below. List prices for all options are
provided as listed in the existing pricelist given to Siemens (Siemens-TS-E1,
Rev 1.0 dated 12/16/94):
23 GHZ RADIOS
23 GHz Radio, Non-Protected, Standard Power, 8E1 Capacity $16,105
4FSK Modulation, 60cm Antenna w/Pole Mount, -48VDC input
w/Installation Kit and Operations Manual
23 GHz Radio, Non-Protected, Standard Power, 16E1 Capacity $18,520
4FSK Modulation, 60cm Antenna w/Pole Mount, -48VDC input
w/Installation Kit and Operations Manual
23GHz Radio, Non-Protected, Standard Power, 8E1/16E1 Universal $19,000
Capacity, 4FSK Modulation, 60cm Antenna w/Pole Mount, -48VDC
w/Installation Kit and Operations Manual
23 GHz Radio, Protected, Standard Power, 8E1 Capacity $34,960
4FSK Modulation, 60cm Antenna w/Pole Mount, -48VDC input
w/Installation Kit and Operations Manual
23 GHz Radio, Protected, Standard Power, 16E1 Capacity $39,790
4FSK Modulation, 60cm Antenna w/Pole Mount, -48VDC input
w/Installation Kit and Operations Manual
23GHz Radio, Protected, Standard Power, 8E1/16E1 Universal $40,750
Capacity, 4FSK Modulation, 60cm Antenna w/Pole Mount, 48VDC
w/Installation Kit and Operations Manual
38 GHZ RADIOS
38 GHz Radio, Non-Protected, Standard Power, 8E1 Capacity $14,310
4FSK Modulation, 30cm Antenna w/Pole Mount, -48VDC input
w/Installation Kit and Operations Manual
38 GHz Radio, Non-Protected, Standard Power, 16E1 Capacity $16,455
4FSK Modulation, 30cm Antenna w/Pole Mount, -48VDC input
w/Installation Kit and Operations Manual
38 GHz Radio, Non-Protected, Standard Power, 8E1/16E1 Universal $16,935
Capacity, 4FSK Modulation, 30cm Antenna w/Pole Mount, -48VDC
w/Installation Kit and Operations Manual
38 GHz Radio, Protected, Standard Power, 8E1 Capacity $31,370
4FSK Modulation, 30cm Antenna w/Pole Mount, -48VDC input
w/Installation Kit and Operations Manual
38 GHz Radio, Protected, Standard Power, 16E1 Capacity $35,660
4FSK Modulation, 30cm Antenna w/Pole Mount, -48VDC input
w/Installation Kit and Operations Manual
38 GHz Radio, Protected, Standard Power, 8E1/16E1 Universal $36,620
Capacity, 4FSK Modulation, 30cm Antenna w/Pole Mount, -48VDC
w/Installation Kit and Operations Manual
Page 3 of 3
<PAGE>
FORECAST
<PAGE>
<TABLE>
<CAPTION>
P_Com Tel-Link Forecast Rev. 01 2/13/1996
- ------------------------------------------------------------------------------------------------------------------------------------
Item Description [*] [*] [*] [*] [*] [*] [*] TOTAL T/R
23 38 23 38 23 38 23 38 23 38 23 38 23 38 23 38
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
1.10 3X64 kb/s 1+0 (23 G)
- ------------------------------------------------------------------------------------------------------------------------------------
1.11 3X64 kb/s 1+0 (38 G)
- ------------------------------------------------------------------------------------------------------------------------------------
1.20 2Mb/s 1+0 (23 G) [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
1.21 2Mb/s 1+0 (38 G) [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
1.30 2x2Mb/s 1+0 (23 G)
- ------------------------------------------------------------------------------------------------------------------------------------
1.31 2x2Mb/s 1+0 (38 G) [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
1.40 4x2Mb/s 1+0 (23 G) [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
1.41 4x2Mb/s 1+0 (38 G) [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
1.50 Universal 1+0 (23G) [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
1.51 Universal 1+0 (38G) [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
1.60 Univ.Cap. & Mod. 1+0 (23G)
- ------------------------------------------------------------------------------------------------------------------------------------
1.61 Univ.Cap. & Mod. 1+1 (38G)
- ------------------------------------------------------------------------------------------------------------------------------------
2.10 2Mb/s 1+1 (23G)
- ------------------------------------------------------------------------------------------------------------------------------------
2.11 2Mb/s 1+1 (38G)
- ------------------------------------------------------------------------------------------------------------------------------------
2.20 2x2Mb/s 1+1 (23G)
- ------------------------------------------------------------------------------------------------------------------------------------
2.21 2x2Mb/s 1+1 (38G)
- ------------------------------------------------------------------------------------------------------------------------------------
2.30 4x2Mb/s 1+1 (23G) [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
2.31 4x2Mb/s 1+1 (38G) [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
2.40 Universal 1+1 (2/4) 23G [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
2.41 Universal 1+1 (2/4) 38G [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
2.50 Univ. Cap. & Mod. 1+1 (23G)
- ------------------------------------------------------------------------------------------------------------------------------------
2.51 Univ. Cap. & Mod. 1+1 (38G)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
All the configurations of items 1,2,7,8 include: 48v PSU, Antenna
(30cm-38G/cm-23G) w/pole mount, link manager port, FEC, 4 FSK modulation, inst.
material and manual
*CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
P_Com Tel-Link Forecast Rev. 01 2/13/1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ITEM DESCRIPTION [*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
7.10 3x2Mb/s 1 + 0 (23G)
- ------------------------------------------------------------------------------------------------------------------------------------
7.11 3x2Mb/s 1 + 0 (38G)
- ------------------------------------------------------------------------------------------------------------------------------------
7.20 16x2Mb/s 1 + 0 (23G)
- ------------------------------------------------------------------------------------------------------------------------------------
7.21 16x2Mb/s 1 + 0 (38G)
- ------------------------------------------------------------------------------------------------------------------------------------
7.30 Universal 1 + 0 (8/16) 23G
- ------------------------------------------------------------------------------------------------------------------------------------
7.31 Universal 1 + 0 (8/16) 38G
- ------------------------------------------------------------------------------------------------------------------------------------
8.10 8x2Mb/s 1 + 1 (23G)
- ------------------------------------------------------------------------------------------------------------------------------------
8.11 8x2Mb/s 1 + 1 (38G)
- ------------------------------------------------------------------------------------------------------------------------------------
8.20 16x2Mb/s 1 + 1 (23G) [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
8.21 16x2Mb/s 1 + 1 (38G) [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
8.30 Universal 1 + 1 (8/16) 23G
- ------------------------------------------------------------------------------------------------------------------------------------
8.31 Universal 1 + 1 (8/16) 38G
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL T/R [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
4.10 24V PSU
- ------------------------------------------------------------------------------------------------------------------------------------
4.20 EOW - Bridging [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
4.30 EOW PT - PT [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
4.40 data channel
- ------------------------------------------------------------------------------------------------------------------------------------
4.70 120 OHM I/O
- ------------------------------------------------------------------------------------------------------------------------------------
4.01 H.P. Amplifier 23G [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
All the configurations of items 1,2,7, 8 include: 48v PSU, Antenna
(30cm-38G/60cm-23G) w/pole mount, link manager port, FEC 4 FSK modulation,
inst. material and manual
*CONFIDENTIAL TREATMENT REQUESTED.
<PAGE>
EXHIBIT 11.1
P-COM, INC.
COMPUTATION OF NET INCOME PER SHARE
(This information is disclosed in note 1 of the "Notes to Financial
Statements".)
_________
Exhibit 6. This Exhibit should be read with "Summary of Significant Accounting
Policies - Pro Forma Net Income (Loss) Per Share" in Note 1 of the
Notes to Financial Statements.
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
OF THE REGISTRANT
<TABLE>
<CAPTION>
Jurisdiction of Incorporation
Subsidiary or Organization
- ------------------- ----------------------------------
<S> <C>
1. P-Com United Kingdom, Inc. Delaware
2. P-Com (BARBADOS) FSC Limited Barbados
3. P-Com Finance Corporation Delaware
4. Geritel S.p.A. Italy
5. P-Com Network Services, Inc. Delaware
6. P-Com GmbH Germany
7. Technosystem S.p.A. Italy
8. Control Resources Corporation Delaware
9. Telematics, Inc. Virginia
10. P-Com Services (UK) Limited England
11. RT Masts Limited England
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-89908 and No. 333-30561) and Form S-3 (No. 333-
44559 and No. 333-30473) of P-Com, Inc. of our report dated January 22, 1998
(except for Note 10 which is as of March 28, 1998) appearing on page 39 of
this Annual Report on Form 10-K.
Price Waterhouse LLP
San Jose, California
March 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-1-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 0 17,963
<SECURITIES> 27,929 24,263
<RECEIVABLES> 60,216 48,804
<ALLOWANCES> 1,989 (580)
<INVENTORY> 58,003 32,947
<CURRENT-ASSETS> 229,565 132,251
<PP&E> 46,215 26,933
<DEPRECIATION> (13,902) (6,348)
<TOTAL-ASSETS> 305,521 155,452
<CURRENT-LIABILITIES> 54,930 41,440
<BONDS> 0 0
0 0
0 0
<COMMON> 4 4
<OTHER-SE> 131,735 112,913
<TOTAL-LIABILITY-AND-EQUITY> 305,521 155,452
<SALES> 220,702 120,953
<TOTAL-REVENUES> 220,702 120,953
<CGS> 129,235 74,058
<TOTAL-COSTS> 191,006 112,029
<OTHER-EXPENSES> 61,771 37,971
<LOSS-PROVISION> (399) (579)
<INTEREST-EXPENSE> (1,277) (71)
<INCOME-PRETAX> 29,943 9,830
<INCOME-TAX> 11,052 956
<INCOME-CONTINUING> 18,891 8,874
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 18,891 8,874
<EPS-PRIMARY> 0.45 0.23
<EPS-DILUTED> 0.43 0.22
</TABLE>
