GLOBECOMM SYSTEMS INC, S-1/A, 1997-05-07

GLOBECOMM SYSTEMS INC
S-1/A, 1997-05-07
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1997

REGISTRATION NO. 333-22425

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

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GLOBECOMM SYSTEMS INC.
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 3663 11-3225567
(State of (Primary Standard Industrial (I.R.S. Employer
Incorporation) Classification Code) Identification Number)
</TABLE>

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375 OSER AVENUE, HAUPPAUGE, NEW YORK 11788
(516) 231-9800
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)

------------------------------

DAVID E. HERSHBERG
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GLOBECOMM SYSTEMS INC.
375 OSER AVENUE
HAUPPAUGE, NEW YORK 11788
(516) 231-9800
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

------------------------------

COPIES TO:

<TABLE>
<S> <C>
RICHARD R. PLUMRIDGE, ESQ. DAVID J. BEVERIDGE, ESQ.
LUCI STALLER ALTMAN, ESQ. SHEARMAN & STERLING
BROBECK, PHLEGER & HARRISON LLP 599 LEXINGTON AVENUE
1633 BROADWAY NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10019 (212) 848-4000
(212) 581-1600
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(A),
MAY DETERMINE.

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<PAGE>

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 7, 1997

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SHARES

[LOGO]

COMMON STOCK
-----------------

All of the shares of Common Stock offered hereby (the "Shares") are being
offered by Globecomm Systems Inc. ("GSI" or the "Company").

Prior to this offering (the "Offering"), there has been no public market for
the Common Stock of the Company. It is currently anticipated that the initial
public offering price will be between $ and $ per share. See
"Underwriting" for a discussion of the factors considered in determining the
initial public offering price. Application has been made to have the Common
Stock approved for quotation on The Nasdaq National Market, subject to official
notice of issuance, under the symbol "GSIC."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 7 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO
THE CONTRARY IS A
CRIMINAL
OFFENSE.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share......................... $ $ $
Total............................. $ $ $
Total Assuming Full Exercise of
Over-Allotment Option(3)........ $ $ $
</TABLE>

(1) See "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to the
Underwriters to purchase up to additional shares, on the same terms,
solely to cover over-allotments. See "Underwriting."
-------------------

The Shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to their right to reject orders in whole or in part. It is expected that
delivery of the Shares of Common Stock will be made in New York City on or about
, 1997.
-------------------
PAINEWEBBER INCORPORATED UNTERBERG HARRIS
------------

THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>

[LOGO]

SYSTEM AND NETWORK INSTALLATIONS

ARTWORK: MAP OF THE WORLD INDICATING LOCATIONS WHERE THE COMPANY HAS COMPLETED
INSTALLATIONS AND WHERE THE COMPANY HAS INSTALLATIONS IN PROGRESS.

THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND AN OPINION THEREON
EXPRESSED BY AN INDEPENDENT PUBLIC ACCOUNTING FIRM AND WITH QUARTERLY REPORTS
FOR THE FIRST THREE QUARTERS OF EACH FISCAL YEAR CONTAINING UNAUDITED INTERIM
CONSOLIDATED FINANCIAL INFORMATION.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES THERETO
APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, THE
INFORMATION IN THIS PROSPECTUS: (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION, (II) REFLECTS A 2.85-FOR-ONE STOCK SPLIT OF THE COMMON
STOCK OF THE COMPANY, $.001 PAR VALUE ("COMMON STOCK") PRIOR TO THE CLOSING OF
THIS OFFERING (THE "STOCK SPLIT"), (III) REFLECTS THE FILING, PRIOR TO THE
CLOSING OF THIS OFFERING, OF THE AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF THE COMPANY AND (IV) REFLECTS THE AUTOMATIC CONVERSION OF ALL
OUTSTANDING SHARES OF ALL SERIES OF THE COMPANY'S CONVERTIBLE CLASS A PREFERRED
STOCK AND CONVERTIBLE CLASS B PREFERRED STOCK (COLLECTIVELY, THE "CONVERTIBLE
PREFERRED STOCK") INTO AN AGGREGATE OF 1,958,001 SHARES OF COMMON STOCK UPON THE
CLOSING OF THIS OFFERING (THE "PREFERRED STOCK CONVERSION"). SEE "DESCRIPTION OF
CAPITAL STOCK," "CERTAIN TRANSACTIONS" AND NOTES 6 AND 7 OF NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS. THIS PROSPECTUS CONTAINS, IN ADDITION TO
HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS" AS WELL
AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE COMPANY HAS RECENTLY
CHANGED ITS NAME FROM WORLDCOMM SYSTEMS INC. TO GLOBECOMM SYSTEMS INC.

------------------------

THE COMPANY

Globecomm Systems Inc. ("GSI" or the "Company") designs, assembles and
installs satellite ground segment systems and networks which support a wide
range of satellite communications applications, including fixed, mobile and
direct broadcast services as well as certain military applications. The
Company's customers include prime communications infrastructure contractors,
government-owned postal, telephone and telegraph providers ("PTTs"), other
telecommunications carriers, producers and distributors of news and
entertainment content and other corporations. The Company's ground segment
systems typically consist of an earth station, which is an integrated system
designed to transmit and receive signals to and from satellites, together with
ancillary subsystems. The Company's ground segment networks are typically
comprised of two or more ground segment systems communicating with a satellite
and interconnected with a terrestrial network. Since the Company commenced
operations in August 1994, it has completed, or is in the process of completing,
the installation of 57 ground segment systems and networks in 21 countries.

The Company's revenue grew from $72,000 at the end of its first fiscal year
to $13.5 million for the fiscal year ended June 30, 1996, and to $21.5 million
for the nine months ended March 31, 1997. During the nine months ended March 31,
1997, the Company booked $37.5 million in contract orders and at March 31, 1997
had a backlog of $27.6 million of contract orders. The Company believes that its
revenue growth and its ability to compete are based on its unique combination of
competitive advantages which include: (i) an experienced management group with
extensive technological and engineering expertise, (ii) the proven ability to
meet the complex satellite ground segment requirements of its customers in
diverse political, economic and regulatory environments in various locations
around the world and (iii) its ability to identify, develop and maintain
strategic relationships with developers and suppliers of leading-edge
technologies which enhance performance, reduce costs and broaden applications of
the Company's ground segment systems and networks.

The Company has recently established a subsidiary, NetSat Express, Inc.
("NetSat"), to develop service revenues by providing high-speed,
satellite-delivered data communications to developing markets worldwide. In
order to accomplish this objective, NetSat intends to leverage: (i) the
Company's expertise in satellite ground segment system and network
implementation, (ii) extensive management experience in providing
satellite-delivered communications services, (iii) the knowledge and
capabilities of local market strategic partners and (iv) DirecPC and Personal
Earth Station technology developed and owned by Hughes Network Systems, Inc., a
subsidiary of Hughes Electronics Corp. ("Hughes Network Systems" or "HNS"). Each
project for which NetSat uses HNS' DirecPC technology will require the grant of
a license from HNS to NetSat. NetSat currently is pursuing joint ventures with
local partners in Russia and Brazil to market low-cost, high-speed satellite
Internet access services, as well as intranet services, to corporate,

3
<PAGE>

educational and government customers who have limited or no access to
terrestrial network infrastructure capable of supporting the economical delivery
of such services. To date, NetSat has generated only limited revenues.

According to Federal Communications Commission (the "FCC") estimates,
providers of satellite-delivered communications services generated approximately
$13.8 billion in revenues in 1995, which amount is projected to grow at a
compound annual rate of 21% to approximately $37.0 billion in 2000. The Company
believes this expected growth in satellite communications services will require
significant investment in new ground segment system and network infrastructure.
Based on industry sources, the markets for ground segment systems and networks
in which the Company competes had aggregated revenues of approximately $1.6
billion in 1996 and are projected to grow at a compound annual rate of
approximately 11% to revenues of approximately $2.5 billion by the year 2000.
Although there are currently no reliable data available on the market for
satellite-delivered Internet and intranet applications in developing countries,
a market in which the Company participates through NetSat, the Company believes
such market has potential for rapid growth. The FCC has estimated that
satellite-delivered data communications services accounted for approximately
$1.3 billion of service revenues worldwide in 1995 and that this amount will
grow at a compound annual rate of approximately 26% to revenues of approximately
$4.2 billion in 2000.

The Company believes that the growth in demand for ground segment
infrastructure is principally a result of the following major factors: (i)
global deregulation and privatization of government-owned monopoly
telecommunications carriers and the emergence of competitive carriers, each of
which is driving capital investment, (ii) rapidly growing worldwide demand for
communications services generally, including data communications services over
the Internet and corporate intranets, (iii) relative cost-efficiency of
satellite communications for many applications and (iv) technological
advancements which reduce costs and increase capacity, thereby broadening
applications for both satellite and terrestrial networks.

The Company's business strategy is to expand its market share in its ground
segment systems and networks business, improve its profitability and create
opportunities to capture recurring service revenues. The Company intends to
execute this strategy by: (i) targeting communications infrastructure
development opportunities worldwide, (ii) focusing on high margin
engineering-intensive ground segment system and network projects, (iii)
developing strategic customer relationships, (iv) developing strategic supplier
relationships and (v) entering the satellite-delivered data communications
services business through NetSat.

The Company seeks to build close relationships with customers for whom it
can provide complementary engineering skills by working as part of their system
development teams. A key objective of this strategy is to obtain this business
on a negotiated basis, rather than through the competitive bidding process,
which is likely to carry a lower margin. To date, the Company has developed
strategic relationships with two of its customers: Hughes Network Systems and
Thomson-CSF ("Thomson"). The Company sought the establishment of these
relationships based on these customers' abilities to: (i) generate significant
potential revenues for the Company, (ii) provide access to a large number of
potential business opportunities as a result of their size and global operations
and (iii) provide access to complementary technologies and expertise that could
serve as competitive advantages for the Company. At March 31, 1997, Hughes
Network Systems and Thomson owned equity interests in the Company of 3.7% and
6.3%, respectively. In addition, Hughes Network Systems owns a 19% equity stake
in NetSat, with an option to increase this position to 29%.

In addition to its strategic customer relationships, the Company also seeks
to develop strategic relationships with suppliers which it believes are each in
a position to supply products, technologies or services which will improve the
Company's competitive position in one or more of the market segments it serves.
As of March 31, 1997, the Company has made equity investments aggregating
approximately $885,000 in three such companies. These suppliers enable the
Company to outsource a significant portion of its research and development
efforts and gain access to advanced technology while the Company continues its
independence to select the most suitable products and technologies to deliver to
its customers from any suppliers.

4
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the Company.......... shares

Common Stock to be outstanding after the
Offering(1)................................ shares

Use of Proceeds.............................. Working capital, start-up expenses and
investments associated with Netsat, capital
expenditures, investments in strategic
suppliers, potential acquisitions and general
corporate purposes. See "Use of Proceeds."

Proposed Nasdaq National Market symbol....... GCOM
</TABLE>

- ------------------------------

(1) Based on the number of shares outstanding as of March 31, 1997. Excludes
1,669,032 shares of Common Stock issuable upon the exercise of stock options
outstanding at March 31, 1997. Also excludes 64,125 shares of Common Stock
issuable upon exercise of warrants. See "Capitalization," "Management--1997
Stock Incentive Plan" and Notes 6 and 8 of Notes to Consolidated Financial
Statements.

------------------------------

The Company was incorporated in Delaware on August 17, 1994. The Company's
principal executive offices are located at 375 Oser Avenue, Hauppauge, New York
11788, and its telephone number is (516) 231-9800.

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS
AUGUST 17, 1994 ENDED
(INCEPTION) MARCH 31,
THROUGH JUNE 30, YEAR ENDED --------------------
1995 JUNE 30,1996 1996 1997
----------------- ------------- --------- ---------

<S> <C> <C> <C> <C>
(unaudited)
STATEMENT OF OPERATIONS DATA:
Revenues....................................................... $ 72 $ 13,476 $ 10,518 $ 21,532
Costs of revenues.............................................. 58 11,238 8,437 18,736
------- ------------- --------- ---------
Gross profit............................................. 14 2,238 2,081 2,796
------- ------------- --------- ---------
Operating expenses:
Selling and marketing........................................ 346 1,915 1,253 2,216
Research and development..................................... -- 712 488 352
General and administrative................................... 772 1,945 1,432 2,534
------- ------------- --------- ---------
Total operating expenses....................................... 1,118 4,572 3,173 5,102
------- ------------- --------- ---------
Loss from operations..................................... (1,104) (2,334) (1,092) (2,306)
Interest income, net........................................... 39 89 81 187
------- ------------- --------- ---------
Loss before minority interests in operations of consolidated
subsidiary .................................................. (1,065) (2,245) (1,011) (2,119)
Minority interests in operations of consolidated subsidiary.... -- -- -- 275
------- ------------- --------- ---------
Net loss................................................. $ (1,065) $ (2,245) $ (1,011) $ (1,844)
------- ------------- --------- ---------
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Pro forma net loss per share (unaudited)(1).................... $ $
------------- ---------
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Shares used in computing pro forma net loss per share
(unaudited)(1)...............................................
------------- ---------
------------- ---------

OTHER OPERATING DATA:
EBITDA(2)...................................................... $ (1,036) $ (2,142) $ (932) $ (2,041)
Capital expenditures........................................... 437 339 287 3,965
Backlog at end of period(3).................................... 7,716 11,588 7,266 27,563
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------------
<S> <C> <C>
PRO FORMA
ACTUAL AS ADJUSTED(4)
--------- -------------------
BALANCE SHEET DATA:
Cash and cash equivalents................................................................ $ 6,309 $
Working capital.......................................................................... 10,820
Total assets............................................................................. 23,716
Long-term debt........................................................................... 33
Stockholders' equity..................................................................... 16,550
</TABLE>

- ------------------------
(1) Computed on the basis described in Note 2 of Notes to Consolidated Financial
Statements.

(2) EBITDA represents earnings before minority interests in operations of
consolidated subsidiary, interest income, net, income taxes, depreciation
and amortization expense. EBITDA does not represent cash flows as defined by
generally accepted accounting principles and does not necessarily indicate
that cash flows are sufficient to fund all the Company's cash needs. EBITDA
is a financial measure commonly used in the Company's industry and should
not be considered in isolation or as a substitute for net income, cash flows
from operating activities or other measures of liquidity determined in
accordance with generally accepted accounting principles. EBITDA may not be
comparable to other similarily titled measures of other companies.

(3) The Company records an order in backlog when it receives a firm contract or
purchase order which identifies product quantities, sales price and delivery
dates. Backlog represents the amount of unrecorded revenue on undelivered
orders and a percentage of revenues from sales of products that have been
shipped but have not been accepted by the customer. The Company's backlog at
any given time is not necessarily indicative of future period revenues. See
"Business--Backlog."

(4) Adjusted to reflect the sale of shares of Common Stock offered hereby
at an assumed initial public offering price of $ per share, after
deducting underwriting discounts and commissions and estimated Offering
expenses payable by the Company.
------------------------------

Globecomm, GSI, NetSat Express and NetSat are trademarks of the Company.
This Prospectus also includes trademarks and trade names of Hughes Network
Systems and other companies.

6
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING RISK
FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS
BUSINESS BEFORE PURCHASING SHARES OF COMMON STOCK OFFERED HEREBY.

LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES AND ACCUMULATED DEFICIT

The Company, which was formed in August 1994, has a limited operating
history upon which an evaluation of the Company and its prospects can be based
and has incurred significant operating losses since its inception. The Company
has financed its operations to date primarily from the sale of equity securities
and, to a lesser degree, from stockholder loans. The Company generated its first
revenue from its ground segment systems and networks business in June 1995 and
has generated only minimal revenues from its satellite-delivered data
communications services business, which commenced operations in July 1996. The
Company incurred operating losses of $1.1 million, $2.3 million and $2.3 million
during the fiscal years ended June 30, 1995 and 1996 and during the nine-month
period ended March 31, 1997, respectively. The Company currently anticipates
that it will incur further operating losses as it attempts to expand its
business, and there can be no assurance that the Company will generate
significant additional revenues or will ever generate positive operating or net
income. As of March 31, 1997, the Company had an accumulated deficit of $5.2
million. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

INTENSE COMPETITION; LIMITED BARRIERS TO ENTRY

The markets for both ground segment systems and networks and
satellite-delivered data communications services are highly competitive. Many of
the Company's competitors have greater market presence, engineering and
marketing capabilities, and financial, technological and personnel resources
than those available to the Company. As a result, such competitors may be able
to develop and expand their products and services more quickly, adapt more
swiftly to new or emerging technologies and changes in customer requirements,
take advantage of acquisition and other opportunities more readily, and devote
greater resources to the marketing and sale of their products and services than
can the Company. In addition, there are limited barriers to entry in the
Company's markets and certain of the Company's strategic suppliers and customers
have technologies and capabilities in the Company's product areas and could
choose to compete with the Company or to replace the Company's products or
services with their own. The entry of new competitors, the decision by a
strategic ally to compete with the Company or the decision by a customer to
develop and employ in-house capability to satisfy its satellite communications
needs could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Competition."

There can be no assurance that the Company's competitors will not develop or
acquire competing products or that such products will not be offered at
significantly lower prices. In addition, current and potential competitors in
both markets in which the Company competes have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products and services to address the needs of the Company's
current and prospective customers. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition is likely to result in price
reductions, reduced gross profit margins and loss of market share, any of which
would have a material adverse effect on the Company's business, results of
operations and financial condition. There can be no assurance that the Company
will be able to compete successfully against current or future competitors or
that competitive pressures will not have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business-- Competition."

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The Company also is dependent on the continued success and development of
the satellite communications industry, which itself competes with other
technologies such as terrestrial microwave, copper wire

and fiber optic communications systems. Any failure of the satellite
communications industry to continue to develop, or any technological development
which significantly improves the capacity, cost or efficiency of such competing
systems relative to satellite systems, could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"--Rapid Industry Change; Technological Obsolescence."

RELIANCE ON STRATEGIC RELATIONSHIPS

The Company is dependent on certain customers and suppliers for the
development and expansion of its ground segment system and network business.
However, such relationships are not governed by any contract and accordingly
neither the Company nor such customers or suppliers are obligated to maintain
such strategic relationships. There can be no assurance that the Company will be
able to maintain such strategic relationships, that its strategic customers and
suppliers will continue to assist the Company by developing and expanding its
business and by providing research and development expertise, or that such
strategic customers and suppliers will not actually compete with the Company in
the future. See "--Intense Competition; Limited Barriers to Entry."

In addition, the Company relies on the Personal Earth Station and DirecPC
technologies provided by Hughes Network Systems in connection with the planned
operation of NetSat's satellite-delivered data communications services business.
Each project for which NetSat uses HNS' DirecPC technology will require the
grant of a license from HNS to NetSat. Hughes Network Systems is under no
obligation to grant such licenses and there can be no assurance that NetSat will
be able to negotiate such licensing arrangements with Hughes Network Systems on
acceptable terms, or at all. In addition, failure to maintain a business
relationship with Hughes Network Systems would have a material adverse effect on
the Company's business, financial condition and results of operations.

Because the Company intends to provide its satellite-delivered data
communications services almost entirely in developing markets where the Company
has little or no market experience, the Company will also be dependent on local
partners in such markets to provide marketing expertise and knowledge of the
local regulatory environment in order to facilitate the acquisition of necessary
licenses and access to existing customers. The Company has not yet formally
established an alliance with a local partner. The Company's failure to form and
maintain such alliances with local partners, or the preemption or disruption of
such alliances by the actions of the Company's competitors or otherwise, would
adversely affect the Company's ability to penetrate and compete successfully in
such emerging markets. There can be no assurance that the Company will be able
to compete successfully in the future in such markets or that competition will
not have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Strategic Relationships" and
"--Competition."

RISK OF CUSTOMER CONCENTRATION

The Company typically relies upon a small number of customers for a large
portion of its revenues. For example, approximately 43% and 15% of the Company's
revenues in fiscal 1996 and for the nine months ended March 31, 1997,
respectively, were derived from sales to Hughes Network Systems. At March 31,
1997, $16.5 million, or approximately 60% of the Company's backlog, was
accounted for by a contract between the Company and American Sky Broadcasting
LLC ("A Sky B"). On February 25, 1997, The News Corporation Limited, the parent
corporation of A Sky B, announced plans to merge A Sky B with Echostar
Communications Corporation to form a nationwide satellite television service.
There is no assurance that the merger will occur and the Company does not know
what effect, if any, the merger, if it occurs, will have on its relationship
with A Sky B. The Company expects that in the near term a significant portion of
its revenues will continue to be derived from one or a limited number of
customers (the identity of whom may vary from year to year) as the Company seeks
to expand its business and its customer base. The reduction, delay, or
cancellation of orders from one or more of such significant customers would have

8
<PAGE>
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Customers."

RISK OF MANAGEMENT OF RAPID GROWTH

The Company has been significantly and rapidly expanding its operations
since its inception. In order to pursue successfully the opportunities presented
by the ground segment and emerging satellite-delivered communications and
Internet/intranet-infrastructure markets, the Company will be required to
continue to expand its operations. Such expansion has placed, and is expected to
continue to place, a significant strain on the Company's personnel, management,
financial and other resources. In order to manage any future growth effectively,
the Company will, among other things, be required to attract, train, motivate
and manage a significantly larger number of employees successfully to conduct
product engineering and management, product implementation, sales activity and
customer support activities; manage higher working capital requirements; and
improve its operating and financial systems. Any failure to manage any future
growth in an efficient manner and 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. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview,"
"Business--Product Design, Assembly and Testing," "--Facilities" and
"--Employees."

RISK OF FIXED-PRICE CONTRACTS

Virtually all of the Company's contracts for installation of ground segment
systems and networks are on a fixed-price basis. Profitability of such contracts
is subject to inherent uncertainties as to the cost of performance. In addition
to possible errors or omissions in making initial estimates, cost overruns may
be incurred as a result of unforeseen obstacles, including both physical
conditions and unexpected problems encountered in engineering, design and
testing. Since the Company's business may at certain times be concentrated in a
limited number of large contracts, a significant cost overrun on any one
contract could have a material adverse effect on the Company's business,
financial condition and results of operations. See "--Customer Concentration."

INHERENT RISK OF INTERNATIONAL OPERATIONS

Most of the Company's revenues are derived from sales to customers outside
the United States. Revenues from foreign sales accounted for 21.8% and 50.0% of
total revenues in fiscal 1996 and the nine-month period ended March 31, 1997,
respectively, and the Company anticipates that foreign sales will continue to
account for a significant portion of total revenues in the foreseeable future.
The Company's foreign sales are generally denominated in U.S. dollars.
Consequently, a decrease in the value of foreign currencies relative to the U.S.
dollar may adversely affect demand for the Company's products and services by
increasing the price of the Company's products and services in the currency of
the countries in which they are sold. Additional risks inherent in the Company's
international business activities include various and changing regulatory
requirements, costs and risks of relying upon local subcontractors for the
installation of its ground segment systems and networks, increased sales and
marketing expenses, availability of export licenses, tariffs and other trade
barriers, political and economic instability, difficulties in staffing and
managing foreign operations, potentially adverse taxes, complex foreign laws and
treaties and the possibility of difficulty in accounts receivable collections.
In addition, the Company is subject to the Foreign Corrupt Practices Act (the
"FCPA") which may place the Company at a competitive disadvantage to foreign
companies, which are not subject to the FCPA. 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.

EMPHASIS ON DEVELOPING MARKETS; UNCERTAIN MARKET POTENTIAL

The Company believes a substantial portion of the growth in demand for its
ground segment systems and networks and its recently launched
satellite-delivered data communications services will come from customers in
developing countries. There can be no assurance that such increases in demand
will occur or

9
<PAGE>
that prospective customers will accept such products and services in sufficient
quantities or at all. The degree to which the Company is able to penetrate
potential markets in developing countries will be affected in major part by the
speed with which other competing elements of the communications infrastructure,
such as telephone lines, other satellite-delivered solutions and fiber optic
cable and television cable, are installed in the developing countries and with
respect to the Company's data communications services, on the effectiveness of
the Company's local partners in such markets. The failure to have its products
and services accepted in developing countries would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "--Intense Competition; Limited Barriers to Entry" and "--Reliance on
Strategic Relationships."

RAPID INDUSTRY CHANGE; TECHNOLOGICAL OBSOLESCENCE

The telecommunications industry, including the satellite communications
ground segment systems and networks and data communication services businesses,
is characterized by rapid and continuous technological change. Future
technological advances in the telecommunications industry may result in the
availability of new products or services that could compete with the satellite
ground segment products and services provided by the Company or render the
Company's products and services obsolete. There can be no assurance that the
Company will be successful in developing and introducing new products and
services that meet changing customer needs or in responding to technological
changes or evolving industry standards in a timely manner, if at all, or that
services or technologies developed by others will not render the Company's
products or services noncompetitive. Any failure by the Company to respond to
changing market conditions, technological developments, evolving industry
standards or changing customer requirements, or the development of competing
technology or products that render the Company's products and services
noncompetitive or obsolete would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--Research
and Development" and "-- Competition."

DEPENDENCE UPON SUPPLIERS; SOLE AND LIMITED SOURCES OF SUPPLY

The Company currently procures most of the critical components and services
for its products from single or limited sources in connection with specific
contracts and does not otherwise carry significant inventories or have long-term
or exclusive supply contracts with its source vendors. The Company has from time
to time experienced delays in receiving products from certain of its vendors due
to quality control or manufacturing problems, shortages of materials or
components or product design difficulties. There can be no assurance that
similar problems will not recur or that replacement products will be available
when needed at commercially reasonable rates, or at all. If the Company were to
change certain of its vendors, the Company would be required to perform
additional testing procedures upon the components supplied by such new vendors,
which could prevent or delay product shipments. Additionally, prices could
increase significantly in connection with changes of vendors. Any inability of
the Company to obtain timely deliveries of materials of acceptable quality or
timely services, or any significant increase in the prices of materials or
services, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "--Risk of Fixed-Price
Contracts," "--Quarterly Fluctuations" and "Business--Product Design, Assembly
and Testing."

QUARTERLY FLUCTUATIONS

The Company may in the future experience significant quarter to quarter
fluctuations in its results of operations, which may result in volatility in the
price of the Company's Common Stock. Quarterly results of operations may
fluctuate as a result of a variety of factors, including the timing of the
initiation and completion of contracts, the demand for the Company's products
and services, the introduction of new or enhanced products and services by the
Company or its competitors, market acceptance of new products and services, the
mix of revenues between custom-built satellite communications systems and
networks designed for its customers and standard installations provided to its
customers, the growth of demand for Internet infrastructure-based products and
services in developing countries, the timing of significant

10
<PAGE>
marketing programs, the extent and timing of the hiring of additional personnel,
competitive conditions in the industry and general economic conditions. Due to
the foregoing factors, it is likely that in one or more future quarters the
Company's operating results will be below the expectations of public market
analysts and investors. Such an event could have a material adverse effect on
the price of the Company's Common Stock. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-- Quarterly Results."

RISK OF FAILURE TO COMPLY WITH GOVERNMENT REGULATIONS

The Company is subject to various federal laws and regulations which may
have negative effects on the Company. The Company intends to erect a teleport in
Hauppauge, New York, which will be subject to FCC Rules and Regulations. The
Company will be required to obtain a license from the FCC for both domestic and
international operation of the teleport and must operate it in compliance with
FCC Rules and Regulations for the term of the license. There can be no assurance
that the Company will be able to obtain or maintain the necessary license. See
"Business--Government Regulation."

Under the FCC Rules and Regulations, non-U.S. citizens or their
representatives, foreign governments, or corporations otherwise subject to
control by non-U.S. citizens, may not own more than 20% of a licensee directly,
or, if the FCC finds it consistent with the public interest, may not own more
than 25% of the parent of a licensee. Non-U.S. citizens may not serve as
officers of a licensee or as members of a licensee's board of directors,
although the FCC may waive this requirement in whole or in part. Failure to
comply with these requirements may result in the FCC issuing an order to the
entity requiring divestiture of alien ownership to bring the entity into
compliance with the FCC Rules and Regulations. In addition, fines, a denial of
renewal or revocation of the license are possible. The Company has no knowledge
of any present foreign ownership which would result in a violation of the FCC
Rules and Regulations, but there can be no assurance that foreign holders will
not in the future hold more than 20% or 25% of the Common Stock of the Company.

Regulatory schemes in countries in which the Company may seek to provide its
satellite-delivered data communications services may impose impediments on the
Company's operations. Certain countries in which the Company intends to operate
have telecommunications laws and regulations that do not currently contemplate
technical advances in broadcast technology such as Internet/intranet
transmission by satellite. There can be no assurance that the present regulatory
environment in any such country will not be changed in a manner which may have a
material adverse impact on the Company's business. The Company or its local
partners typically must obtain authorization for each country in which the
Company provides its satellite-delivered data communications services. Although
the Company believes that it or its local partners will be able to obtain the
requisite licenses and approvals from the countries in which the Company intends
to provide service, the regulatory schemes in each country are different and
thus there may be instances of noncompliance of which the Company is not aware.
Although the Company believes these regulatory schemes will not prevent the
Company from pursuing its business plan, there can be no assurance such licenses
and approvals are or will remain sufficient in the view of foreign regulatory
authorities, or that necessary licenses and approvals will be granted on a
timely basis in all jurisdictions in which the Company wishes to offer its
services or that restrictions applicable thereto will not be unduly burdensome.
See "Business--Government Regulation."

The sale of the Company's ground segment systems and networks outside the
United States is subject to compliance with the regulations of the United States
Export Administration Regulations. The absence of comparable restrictions on
competitors in other countries may adversely affect the Company's competitive
position. In addition, in order to ship its products into European Union
countries, the Company must satisfy certain technical requirements. If the
Company were unable to comply with such requirements with respect to a
significant quantity of the Company's products, the Company's sales in Europe
could be restricted, which could have a material adverse effect on the Company's
business, financial condition and results of operations. See
"Business--Government Regulation."

11
<PAGE>
DEPENDENCE ON KEY PERSONNEL

The Company's future success depends to a significant extent on its
executive officers and certain technical, managerial and marketing personnel.
The loss of the services of any of these individuals or group of individuals
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company maintains term life insurance
in the amount of $1.0 million on David E. Hershberg, the Chairman and Chief
Executive Officer of the Company and term life insurance in the amount of
$500,000 for each of Messrs. Miller, DiCicco, Woodring, Yablonski and Melfi, all
of whom are officers of the Company. The Company believes that its future
success also will depend significantly upon its ability to attract, motivate and
retain additional highly skilled technical, managerial and marketing personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be successful in attracting, assimilating and retaining the
personnel it requires to grow and operate profitably. See "Management--Directors
and Executive Officers and Other Key Employees" and "Business--Employees."

PROPRIETARY TECHNOLOGY; RISK OF INFRINGEMENT

The Company relies heavily on the technological and creative skills of its
personnel, new product developments, computer programs and designs, frequent
product enhancements, reliable product support and proprietary technological
expertise in maintaining its competitive position, and lacks patent protection
for its products and services. There can be no assurance that others will not
independently develop or acquire substantially equivalent techniques or
otherwise gain access to the Company's proprietary and confidential
technological expertise or disclose such technologies or that the Company can
ultimately protect its rights to such proprietary technological expertise.

The Company generally relies on confidentiality agreements with its
consultants, key employees and sales representatives to protect its proprietary
technological expertise, and generally controls access to and distribution of
its technology, software and other proprietary information. Despite these
precautions, there can be no assurance that such agreements will not be
breached, that the Company will have adequate remedies for any such breach or
that a third party will not copy or otherwise obtain and use the Company's
products or technology without authorization or develop similar products or
technology independently. Failure by the Company to maintain protection of its
proprietary technological expertise for any reason could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business--Intellectual Property."

The Company is subject to the risk of alleged infringement of intellectual
property rights of others. Most of the Company's officers and employees were
formerly officers or employees of other companies in the industry. The Company
believes that neither it nor its officers or employees have violated any
agreements with, or obligations to, prior employers. Although the Company is not
aware of any pending or threatened infringement claims with respect to the
Company's current or future products, there can be no assurance that third
parties, including previous employers, will not assert such claims or that any
such claims will not require the Company to enter into license arrangements or
result in protracted and costly litigation, regardless of the merits of such
claims. No assurance can be given that any necessary licenses will be available
or that, if available, such licenses can be obtained on commercially reasonable
terms. Furthermore, litigation may be necessary to enforce or protect the
Company's intellectual property rights, to determine the validity 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.

12
<PAGE>
Company may be able to design around the Company's patents. The laws of certain
foreign countries in which the Company's products are or may be developed,
manufactured or sold may not protect the Company's products or intellectual
property rights to the same extent as do the laws of the United States and thus
make the possibility of piracy of the Company's technology and products more
likely.

The Company has filed an application for registration of Globecomm Systems
Inc. as a service mark in the United States and has filed applications for
registration of NetSat Express as a trademark and service mark in the United
States, Singapore, the European Union and the Russian Federation and as a
trademark in Brazil, and intends to seek registration of other trademarks and
service marks in the future. There can be no assurance that registrations will
be granted from any of the Company's pending or future applications, or that any
registrations that are granted to the Company will prevent others from using
similar trademarks and service marks in connection with related goods and
services.

RISK OF CONCENTRATED OWNERSHIP

Upon completion of this Offering, the Company's officers and directors, and
their affiliates, will beneficially own approximately shares, constituting
approximately % of the Company's outstanding Common Stock. These
stockholders, if acting together, may be able to exert significant influence
over the election of directors and other corporate actions requiring stockholder
approval. See "Management" and "Principal Stockholders."

RISK OF SALES OF COMMON STOCK UPON EXPIRATION OF RULE 144 HOLDING PERIOD AND
LOCK-UP AGREEMENTS

Sales of substantial numbers of shares of Common Stock in the public market
after this Offering could adversely affect the market price of the Common Stock.
Upon completion of this Offering, the Company will have outstanding shares
of Common Stock. In addition to the shares of Common Stock offered hereby,
as of the effective date of the Registration Statement of which this Prospectus
forms a part (the "Effective Date"), there will be 5,834,038 shares of Common
Stock outstanding, all of which are "restricted securities" under the Securities
Act. Certain stockholders of the Company are subject to lock-up agreements
providing generally that they will not offer to sell, sell, contract to sell,
grant any option to sell or otherwise dispose of any shares of Common Stock or
any securities convertible or exchangeable into Common Stock for a period of 180
days after the date of this Prospectus (the "Lock-Up Period") without the prior
written consent of PaineWebber Incorporated which may be given at any time,
without notice, with respect to all or any portion of such shares. Certain other
stockholders of the Company are subject to lock-up agreements providing
generally that they will not offer to sell, sell, contract to sell, grant any
option to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exchangeable for Common Stock for a period of one
year after the date of this Prospectus the "One-Year Lock-Up Period" without the
prior written consent of PaineWebber Incorporated which may be given at any
time, without notice, with respect to all or any portion of such shares. Taking
into account the lock-up agreements and notwithstanding possible earlier
eligibility for resale under the provisions of Rules 144 and 701, the numbers of
shares that will be available for sale in the public market will be as follows.
Beginning 90 days after the Effective Date, approximately 529,669 shares of
restricted securities will become eligible for resale in the public market. Upon
the expiration of the Lock-Up Period, or earlier upon the consent of PaineWebber
Incorporated, approximately 4,662,123 shares of restricted securities (including
approximately 354,164 shares issuable upon exercise of vested options) will be
eligible for sale in the public market and, as of that date, approximately
2,482,005 of such shares will be subject to certain volume and other resale
restrictions pursuant to Rule 144 and approximately 1,688,972 of such shares
will be eligible for sale without restriction under Rule 144(k). Upon the
expiration of the One-Year Lock-Up Period, or earlier upon the consent of
PaineWebber Incorporated, approximately 1,283,555 additional shares of
restricted securities (including approximately 50,235 additional shares issuable
upon exercise of vested options) will be eligible for sale in the public market
and, as of that date, approximately 1,149,473 of such shares will be subject to
certain and other resale restrictions pursuant to Rule 144 of which none of such
shares will be eligible for sale without restriction under Rule 144(k).

13
<PAGE>
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this Offering there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market for the
Common Stock will develop or be sustained after the Offering. The initial public
offering price will be determined by negotiations between the Company and the
representatives of the Underwriters based upon several factors and may not be
indicative of future market prices. The market price of the Company's Common
Stock could be subject to wide fluctuations in response to quarterly variations
in operating results, announcements of technological innovations or new products
by the Company or its competitors, acceptance of satellite communication
services in developing countries, and other events or factors. In addition, the
stock market has experienced extreme price and volume fluctuations, which have
affected the market price of securities of many companies in the
telecommunications and high technology industries. These broad market
fluctuations may adversely affect the market price of the Company's Common
Stock. See "--Quarterly Fluctuations" and "Underwriting."

MANAGEMENT'S DISCRETION OVER APPLICATION OF PROCEEDS OF THE OFFERING

The Company has no specific plan for the net proceeds of this Offering other
than to fund capital expenditures and investments and for general working
capital purposes. As a consequence, the Company's management will have broad
discretion over the allocation of the proceeds for the foreseeable future.
Pending any such uses, the Company plans to invest the net proceeds in
investment-grade, interest-bearing securities. See "Use of Proceeds."

POTENTIAL ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BY-LAWS

The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") authorizes the Board of Directors to issue,
without stockholder approval, up to 1,000,000 shares of Preferred Stock with
voting, conversion and other rights and preferences that could adversely affect
the voting power or other rights of the holders of Common Stock. In addition,
the Company will be subject to the provisions of Section 203 of the Delaware
General Corporation Law, which will generally prohibit the Company from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. The foregoing and other provisions of the Certificate of
Incorporation and the Company's By-laws, as amended (the "By-laws") and the
application of Section 203 of the Delaware General Corporation Law could have
the effect of deterring certain takeovers or delaying or preventing certain
changes in control or management of the Company, including transactions in which
stockholders might otherwise receive a premium for their shares over then
current market prices. See "Description of Capital Stock--Preferred Stock" and
"--Delaware Anti-takeover Statute."

SUBSTANTIAL DILUTION

Purchasers of shares of Common Stock offered hereby will experience
immediate and substantial dilution in the net tangible book value of their
investment from the initial public offering price. Additional dilution will
occur upon exercise of outstanding options, warrants and preemptive rights. In
addition, Thomson is entitled to receive shares of Common Stock equal to 1% of
the Company's Common Stock outstanding upon the acceptance by the Company of
each of the next four $3.0 million of orders placed by Thomson with the Company
through May 1998. See "Dilution" and "Business--Strategic Relationships--
Thomson-CSF."

ABSENCE OF DIVIDENDS

The Company has never paid any cash dividends on the Common Stock and does
not anticipate paying any cash dividends in the foreseeable future, but instead
intends to retain earnings, if any, for use in the Company's operations and in
the expansion of its business. See "Dividend Policy."

14
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from this Offering are estimated to be
approximately $ ($ if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $ per share
and after deducting underwriting discounts and commissions and estimated
Offering expenses.

The Company anticipates that approximately $ million of the net
proceeds from this Offering will be used to fund capital expenditures,
investments in strategic suppliers, including the exercise of certain stock
purchase rights and potential acquisitons of complementary businesses, products
or technologies, although there are no current agreements or negotiations with
respect to any such transactions. Approximately $ million of the net
proceeds will be used to fund start-up expenses and investments in potential
international joint ventures associated with NetSat. The remainder of the net
proceeds will be used to fund working capital requirements, increased selling
and marketing efforts, increased internal research and development expenses and
for general corporate purposes.

Pending such uses, the net proceeds will be invested in short-term debt
instruments, certificates of deposit or direct or guaranteed obligations of the
United States.

DIVIDEND POLICY

The Company has not declared or paid any cash dividends on its capital stock
since inception and does not expect to pay dividends in the foreseeable future.
The Company presently intends to retain future earnings, if any, to finance the
expansion of its business. The payment of any cash dividends in the future will
depend on the Company's earnings, financial condition, results of operations,
capital needs, and other factors deemed pertinent by the Company's Board of
Directors, subject to laws and regulations then in effect.

15
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1997: (i) on a pro forma basis to give effect to the Stock Split, the
Preferred Stock Conversion and the authorization of additional shares of Common
Stock and Preferred Stock, $.001 par value and (ii) on a pro forma as adjusted
basis to give effect to the sale by the Company of shares of Common Stock
at an assumed initial public offering price of $ per share, after
deducting underwriting discounts and commissions and estimated Offering
expenses, and the application of the estimated net proceeds therefrom.

<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
Cash and cash equivalents, including restricted cash of $1.5 million.............. $ 7,800 $
----------- -----------
----------- -----------
Long-term debt, including current portion......................................... $ 83 $ 83

Stockholders' equity:
Preferred Stock, $.001 par value, 1,000,000 shares authorized; none issued and
outstanding on a pro forma or pro forma as adjusted basis..................... -- --
Common Stock, $.001 par value, 12,000,000 shares authorized; 5,834,038 shares
issued and outstanding on a pro forma basis; and shares issued and
outstanding on a pro forma as adjusted basis(1)............................... 6
Additional paid-in capital........................................................ 21,698
Accumulated deficit............................................................... (5,154) (5,154)
----------- -----------
Total stockholders' equity.................................................... 16,550
----------- -----------
Total capitalization........................................................ $ 16,633 $
----------- -----------
----------- -----------
</TABLE>

- ------------------------------

(1) Based on the number of shares outstanding as of March 31, 1997. Excludes
1,669,032 shares of Common Stock issuable upon the exercise of stock options
outstanding at March 31, 1997 with a weighted average exercise price of
$5.89 per share. At March 31, 1997, 610,968 shares of Common Stock were
available for issuance under the Company's stock option plans. Also excludes
64,125 shares of Common Stock issuable upon exercise of warrants, all with
an exercise price of $8.07 per share. See "Capitalization,"
"Management--1997 Stock Incentive Plan" and Notes 6 and 8 of Notes to
Consolidated Financial Statements.

16
<PAGE>
DILUTION

The pro forma net tangible book value of the Company as of March 31, 1997
was approximately $16.5 million or $2.84 per share of Common Stock. "Pro forma
net tangible book value per share" is equal to the Company's total tangible
assets less total liabilities, divided by the number of shares of Common Stock
outstanding and gives effect to the Stock Split and the Preferred Stock
Conversion. After giving effect to the sale by the Company of shares of
Common Stock in this Offering (at an assumed initial public offering price of
$ per share) and after deducting the estimated underwriting discounts
and Offering expenses, the pro forma net tangible book value of the Company as
of March 31, 1997 would have been $ or $ per share of Common
Stock. This represents an immediate increase in pro forma net tangible book
value per share of $ to existing holders and immediate dilution in pro
forma net tangible book value of $ per share to new investors. The
following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $
---------
Pro forma net tangible book value before the
Offering............................................. $ 2.84
Increase attributable to new investors.................
---------
Pro forma net tangible book value after the Offering.....
---------
Dilution per share to new investors...................... $
---------
---------
</TABLE>

The following table summarizes, on a pro forma basis as of March 31, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by existing stockholders
and by investors purchasing shares offered by the Company hereby (at an assumed
initial public offering price of $ per share).

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- -------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................... 5,834,038 % $ 25,497,513 % $ 4.37
New investors....................................... $
---------- ----- ------------- -----
Total........................................... 100.0% 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>

The foregoing is based on the number of shares outstanding as of March 31,
1997 and assumes no exercise of any outstanding options or warrants. At March
31, 1997, there were outstanding options to purchase an aggregate of 1,669,032
shares at a weighted average exercise price of $5.89 per share. Additionally, on
March 31, 1997 there were outstanding warrants which may be exercised for up to
64,125 shares of Common Stock at a price of $8.07 per share. Additional dilution
will occur upon exercise of the outstanding warrants or options. See
"Management--1997 Stock Incentive Plan" and Notes 6 and 8 of Notes to
Consolidated Financial Statements.

17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus. The consolidated statement
of operations data for the period from the Company's inception on August 17,
1994 through June 30, 1995 and for the fiscal year ended June 30, 1996, and the
balance sheet data at June 30, 1995 and 1996 have been derived from consolidated
financial statements audited by Price Waterhouse LLP, independent accountants.
The audited Consolidated Financial Statements and the Notes thereto are included
elsewhere in this Prospectus. The selected consolidated financial data for the
nine months ended March 31, 1996 and March 31, 1997 are derived from unaudited
consolidated financial statements of the Company, which are included elsewhere
in this Prospectus. The unaudited consolidated financial data includes all
adjustments (consisting only of normal recurring adjustments) which the Company
considers necessary for a fair presentation. The results of operations for the
nine months ended March 31, 1997 are not necessarily indicative of the results
for any future period or for the full fiscal year ending June 30, 1997.

<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 17, 1994
(INCEPTION) NINE MONTHS ENDED
THROUGH JUNE YEAR ENDED MARCH 31,
30, JUNE 30, ----------------------
1995 1996 1996 1997
--------------- ----------- ----------- ---------
(unaudited)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................... $ 72 $ 13,476 $ 10,518 $ 21,532
Costs of revenues.......................................... 58 11,238 8,437 18,736
------- ----------- ----------- ---------
Gross profit......................................... 14 2,238 2,081 2,796
------- ----------- ----------- ---------
Operating expenses:
Selling and marketing.................................... 346 1,915 1,253 2,216
Research and development................................. -- 712 488 352
General and administrative............................... 772 1,945 1,432 2,534
------- ----------- ----------- ---------
Total operating expenses................................... 1,118 4,572 3,173 5,102
------- ----------- ----------- ---------
Loss from operations................................. (1,104) (2,334) (1,092) (2,306)
Interest income, net....................................... 39 89 81 187
------- ----------- ----------- ---------
Loss before minority interests in operations of
consolidated subsidiary.................................. (1,065) (2,245) (1,011) (2,119)
Minority interests in operations of consolidated
subsidiary............................................... -- -- -- 275
------- ----------- ----------- ---------
Net loss............................................. $ (1,065) $ (2,245) $ (1,011) $ (1,844)
------- ----------- ----------- ---------
------- ----------- ----------- ---------
Pro forma net loss per share (unaudited)(1)................ $ $
----------- ---------
----------- ---------
Shares used in computing pro forma net loss per share
(unaudited)(1)...........................................
----------- ---------
----------- ---------
OTHER OPERATING DATA:
EBITDA(2).................................................. $ (1,036) $ (2,142) $ (932) $ (2,041)
Capital expenditures....................................... 437 339 287 3,965
Backlog at end of period(3)................................ 7,716 11,588 7,266 27,563
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
-------------------- -----------
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................................................... $ 3,507 $ 3,435 $ 6,309
Working capital.................................................................... 2,663 4,727 10,820
Total assets....................................................................... 6,375 9,503 23,716
Long-term debt..................................................................... 109 74 33
Stockholders' equity............................................................... 3,207 5,730 16,550
</TABLE>

- ------------------------------

(1) Computed on the basis described in Note 2 of Notes to Consolidated Financial
Statements.

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION,
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE DISCUSSED IN "RISK FACTORS" AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

The Company designs, assembles and installs satellite ground segment systems
and networks. In addition, it is currently in the early stages of expanding its
business to provide high-speed, satellite-delivered data communications
services, including Internet access, to areas of the world which lack the
terrestrial communication network infrastructure required to provide such
services on a cost-effective basis.

The Company was founded in August 1994 and was a development-stage
enterprise for the period from its inception through June 30, 1995. During this
period it was involved in various start-up activities, including raising
capital, acquiring equipment, leasing office space, recruiting and training
personnel and developing its initial marketing efforts. The Company began
generating revenue during June 1995, and has grown rapidly since that date.

Since the Company's inception, substantially all of the Company's revenue
has been generated by its satellite ground segment-related operations. Contracts
for these ground segment systems and networks have been in virtually all cases
fixed-price contracts. The period from contract award through installation of
ground segment systems and networks supplied by the Company generally requires
from three to 12 months. The Company uses the percentage of completion method of
accounting for contract revenues, upon the achievement of certain milestones.
Accordingly, most of the revenue from sales of products is typically recognized
when the product is shipped, with the balance recognized at the time of
acceptance by the customer. Revenues from providing services are recognized at
the time the service is performed. Costs of revenues are generally recorded
based on the relationship of the amount of projected final costs to the
percentage of revenue recorded for the specific contract. See Note 2 of Notes to
Consolidated Financial Statements.

The Company's role in supplying a particular system or network may range
from designing systems and acquiring and installing the components required to
meet a customer's specific design specifications to the complete design and
engineering of the ground segment of a satellite communications network. The
profitability of any particular contract is affected significantly by: (i) the
extent to which the Company is called upon to perform relatively high
value-added design activities, (ii) whether the contract is awarded on a
negotiated basis or by competitive bid, (iii) the extent to which the system or
network can be implemented by replicating previously engineered products and
(iv) competitive factors. Generally, the lowest margins are experienced for
ground segment systems and networks built to customer-engineered specifications,
installed under a contract awarded through a competitive bidding process and
requiring a minimum of engineering by the Company. The highest margins generally
are experienced for engineering-intensive, value-added ground segment systems
and networks designed by the Company.

The Company typically relies upon a small number of customers for a large
portion of its revenues. For example, approximately 43% and 15% of the Company's
revenues in fiscal 1996 and for the nine months ended March 31, 1997,
respectively, were derived from sales to Hughes Network Systems. At March 31,
1997, $16.5 million, or approximately 60% of the Company's backlog, was
accounted for by a contract between the Company and A Sky B. On February 25,
1997, The News Corporation Limited, the parent corporation of A Sky B, announced
plans to merge A Sky B with Echostar Communications Corporation to form a
nationwide satellite television service. There is no assurance that the merger
will occur and the Company does not know what effect, if any, the merger, if it
occurs, will have on its relationship with A Sky B. The Company expects that in
the near term a significant portion of its revenues

20
<PAGE>
will continue to be derived from one or a limited number of customers (the
identity of whom may vary from year to year) as the Company seeks to expand its
business and its customer base. The reduction, delay, or cancellation of orders
from one or more of such significant customers would have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Risk Factors--Customer Concentration" and "Business--Customers."

Costs of revenues consist primarily of the costs of purchased material,
direct labor and related overhead expenses, project-related travel, living costs
and subcontractor salaries. Selling and marketing expenses consist primarily of
salaries and travel and living costs for sales and marketing personnel. Research
and development expenses consist primarily of salaries and related overhead
expenses paid to engineers. The Company also benefits from research and
development conducted by its strategic suppliers. See "Business--Research and
Development." General and administrative expenses consist of expenses associated
with the Company's management, accounting, contract and administrative
functions. The Company anticipates that selling and marketing, research and
development and general and administrative expenses will continue to increase
during the next several years due to expected increases in personnel and
expenses related to supporting the Company's expanding customer base.

The Company and Thomson entered into an agreement in November 1995 under
which Thomson purchased 199,500 shares of Common Stock of the Company at $4.68
per share. Pursuant to this agreement, the Company is obligated to issue up to
an additional 5% of its Common Stock under the following conditions: 1% of the
then outstanding Common Stock upon acceptance of sales orders from Thomson
totalling $1.5 million, and 1% of the then outstanding Common Stock upon the
acceptance of each of four subsequent increments of $3.0 million of sales orders
from Thomson. This obligation to provide shares based on orders placed by
Thomson remains in effect until May 1998. Upon the issuance of shares under this
agreement, the Company currently recognizes sales and marketing expense based on
a price of $4.68 per share, the fair market value of the shares at the date of
issuance, which was also the date of the agreement. Such amounts are recorded
initially in the balance sheet as prepaid expenses until the related orders are
recorded as revenue, at which time such amounts are recorded in the statement of
operations. Due to potential changes in the accounting treatment of such share
issuances, there can be no assurance that the Company, if it accepts such sales
orders, will not have to recognize sales and marketing expense based on the fair
market value at the date of purchase rather than at the date of the agreement.
In November 1995, the Company issued 37,147 shares of Common Stock to Thomson
under this arrangement after receipt of sales orders totaling $1.5 million,
resulting in the recognition of $173,743 of selling and marketing expense during
the nine months ended March 31, 1997. See "Dilution," "Business--Strategic
Relationships--Thomson-CSF" and Note 6 of Notes to Consolidated Financial
Statements.

The Company consolidates the operating results of NetSat subject to the
minority interests relating to Hughes Network Systems' 19% investment in NetSat.
For the nine months ended March 31, 1997, the minority interests in the
operations of consolidated subsidiary recorded was $275,000, the total amount of
HNS' and PolyVentures' capital contributions to NetSat. In the future (unless a
party other than the Company makes an additional capital contribution to
NetSat), the Company will consolidate 100% of NetSat's operating losses. If
NetSat's operations achieve profitability in the future, the Company would
continue to consolidate 100% of NetSat's operating results until such time as
the amount of profits otherwise attributable to Hughes Network Systems would
have fully offset their proportionate share of NetSat's losses previously
recorded by the Company. In addition, Hughes Network Systems has the right,
until August 2001, to increase its equity interest in NetSat to 29% at nominal
cost.

The Company currently accounts for its interests in its strategic supplier
partners and other investees using the cost method of accounting. To the extent
that the Company exercises any of its options to increase its equity interest in
such investee to greater than 20% and has the ability to exercise significant
influence over the operating and financial policies of the investee, the
Company's equity in the net income or loss of such investee would be accounted
for using the equity method of accounting. In the event that the Company
increases its interest in any of its investees such that it would be required to
convert to accounting for such interest using the equity method, generally
accepted accounting principles require that

21
<PAGE>
the Company's historical financial statements be adjusted retroactively in a
manner consistent with the accounting for a step-by-step acquisition with
respect to the results of any such investee for the periods prior to using the
equity method. See "Business--Strategic Relationships."

Due to the Company's development stage status prior to June 30, 1995, and
its rapid growth since that date, the comparison of its financial position and
results of operations from one period to another, as set forth below, is of
limited utility in predicting future results, and should be viewed with
considerable caution.

RESULTS OF OPERATIONS

The following table sets forth certain operating data as a percentage of
total revenues for the periods indicated:

<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 17, 1994 NINE MONTHS ENDED
(INCEPTION)
THROUGH JUNE YEAR ENDED MARCH 31,
30, JUNE 30, --------------------
1995 1996 1996 1997
--------------- ------------- --------- ---------
<S> <C> <C> <C> <C>
PERCENTAGE OF TOTAL REVENUES:
Revenues........................................................... 100.0% 100.0% 100.0% 100.0%
Costs of revenues.................................................. 81.0 83.4 80.2 87.0
------- ----- --------- ---------
Gross profit................................................. 19.0 16.6 19.8 13.0
------- ----- --------- ---------
Operating expenses:
Selling and marketing............................................ 482.4 14.2 11.9 10.3
Research and development......................................... -- 5.3 4.6 1.6
General and administrative....................................... 1,075.8 14.4 13.7 11.8
------- ----- --------- ---------
Total operating expenses........................................... 1,558.2 33.9 30.2 23.7
------- ----- --------- ---------
Loss from operations........................................... (1,539.2) (17.3) (10.4) (10.7)
Interest income, net............................................... 54.7 .7 .8 .9
------- ----- --------- ---------
Loss before minority interests in operations of consolidated
subsidiary....................................................... (1,484.5) (16.6) (9.6) (9.8)
Minority interests in operations of consolidated subsidiary........ -- -- -- 1.2
------- ----- --------- ---------
Net loss..................................................... (1,484.5)% (16.6 )% (9.6)% (8.6)%
------- ----- --------- ---------
------- ----- --------- ---------
</TABLE>

NINE MONTHS ENDED MARCH 31, 1997 AND 1996

REVENUES. Revenues, which were derived from sales of ground segment systems
and networks, increased by $11.0 million, or 104.7%, to $21.5 million for the
nine months ended March 31, 1997 from $10.5 million for the nine months ended
March 31, 1996. The increase was primarily the result of an increase in the
number of shipments and/or completion of contracts from 14 for the nine months
ended March 31, 1996 to 37 for the nine months ended March 31, 1997.

COSTS OF REVENUES. Costs of revenues increased by $10.3 million, or 122.1%,
to $18.7 million for the nine months ended March 31, 1997 from $8.4 million for
the nine months ended March 31, 1996. The increase was primarily due to the
increase in the shipment and/or completion of ground segment systems and
networks contracts. Costs of revenues as a percentage of revenues was 87.0% for
the nine months ended March 31, 1997 compared to 80.2% for the nine months ended
March 31, 1996.

GROSS PROFIT. Gross profit increased by $715,000 to $2.8 million for the
nine months ended March 31, 1997 from $2.1 million for the nine months ended
March 31, 1996. The increase was primarily due to the increase in the shipment
of ground segment systems and networks. Gross profit as a percentage of revenues
was 13.0% for the nine months ended March 31, 1997 compared to 19.8% for the
nine months ended March 31, 1996. Such decrease was due primarily to an increase
in orders awarded through a competitive bidding process, which typically result
in lower gross profit margins than negotiated contracts and a contract awarded
in the previous period with an unusually high profit margin.

22
<PAGE>

SELLING AND MARKETING. Selling and marketing expenses increased by
$963,000, or 76.9%, to $2.2 million for the nine months ended March 31, 1997
from $1.3 million for the nine months ended March 31, 1996. The increase was
primarily due to the opening of marketing offices in Hong Kong and in Atlanta,
Georgia, the hiring of selling and marketing personnel for NetSat, commission
expense recorded in connection with the issuance of 37,147 shares of Common
Stock to Thomson as described above, and the increase in the number of bids and
proposals prepared by the Company. Selling and marketing expenses as a
percentage of revenues was 10.3% for the nine months ended March 31, 1997
compared to 11.9% for the nine months ended March 31, 1996.

RESEARCH AND DEVELOPMENT. Research and development expenses decreased by
$137,000, or 28.0%, to $351,000 for the nine months ended March 31, 1997 from
$488,000 for the nine months ended March 31, 1996 due to a decline in
development costs associated with customizable systems. Research and development
expenses as a percentage of revenues decreased to 1.6% for the nine months ended
March 31, 1997 from 4.6% for the nine months ended March 31, 1996.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
by $1.1 million, or 77.0%, to $2.5 million for the nine months ended March 31,
1997 from $1.4 million for the nine months ended March 31, 1996, but decreased
as a percentage of revenues to 11.8% for the nine months ended March 31, 1997
from 13.7% for the nine months ended March 31, 1996. The increase in general and
administrative expenses resulted from personnel increases to service the
increasing customer base for the Company's ground segment business as well as
the hiring of NetSat administrative personnel.

FISCAL YEARS ENDED JUNE 30, 1996 AND 1995

REVENUES. Revenues increased to $13.5 million for the fiscal year ended
June 30, 1996 from $72,000 for the year ended June 30, 1995 as a result of the
commencement of commercial operations.

COSTS OF REVENUES. Costs of revenues increased to $11.2 million for the
fiscal year ended June 30, 1996 from $58,000 for the fiscal year ended June 30,
1995 as a result of the commencement of commercial operations.

GROSS PROFIT. Gross profit increased to $2.2 million for the fiscal year
ended June 30, 1996 from $14,000 for the fiscal year ended June 30, 1995. The
increase was primarily due to the commencement of commercial operations and the
shipment of ground segment systems and networks.

SELLING AND MARKETING. Selling and marketing expenses increased to $1.9
million for the fiscal year ended June 30, 1996 from $346,000 for the fiscal
year ended June 30, 1995 as a result of the first full year of commercial
operations.

RESEARCH AND DEVELOPMENT. Research and development expenses were $712,000
for the fiscal year ended June 30, 1996. There were no research and development
expenses for the fiscal year ended June 30, 1995. Research and development
expenses in fiscal 1996 were related primarily to development of the Company's
customizable systems.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $1.9 million for the fiscal year ended June 30, 1996 from $772,000 for the
fiscal year ended June 30, 1995. This increase was primarily attributable to
increases in costs of hiring additional personnel to support the Company's
expanding customer base.

23
<PAGE>
QUARTERLY RESULTS

The following tables set forth certain unaudited financial information for
each of the seven fiscal quarters in the period ended March 31, 1997. The
Company believes that this information has been presented on the same basis as
the audited Consolidated Financial Statements appearing elsewhere in the
Prospectus and in the opinion of management all necessary adjustments
(consisting only of normal recurring adjustments) have been included in the
amounts stated below to present fairly the unaudited quarterly results when read
in conjunction with the audited Consolidated Financial Statements of the Company
and related Notes thereto included elsewhere in this Prospectus. The operating
results for any quarter are not necessarily indicative of the operating results
for any future period.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1996 1996 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------

<CAPTION>
(IN THOUSANDS, EXCEPT PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues..................................... $3,009 $4,306 $3,203 $ 2,958 $4,155 $9,151 $8,226
Costs of revenues............................ 2,156 3,819 2,463 2,799 3,591 7,906 7,239
--------- --------- --------- --------- --------- --------- ---------
Gross profit............................... 853 487 740 159 564 1,245 987
--------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Selling and marketing...................... 337 458 458 661 554 847 815
Research and development................... 175 76 237 224 92 137 122
General and administrative................. 383 481 568 515 661 755 1,118
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses..................... 895 1,015 1,263 1,400 1,307 1,739 2,055
--------- --------- --------- --------- --------- --------- ---------
Loss from operations..................... (42) (528) (523) (1,241) (743) (494) (1,068)
Interest income, net......................... 40 14 28 7 14 56 117
--------- --------- --------- --------- --------- --------- ---------
Loss before minority interests in operations
of consolidated subsidiary.................. (2) (514) (495) (1,234) (729) (438) (951)
Minority interests in operations of
consolidated subsidiary..................... -- -- -- -- 175 100 --
--------- --------- --------- --------- --------- --------- ---------
Net loss................................. $ (2) $ (514) $ (495) $(1,234) $ (554) $ (338) $ (951)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
PERCENTAGE OF TOTAL REVENUES:
Revenues..................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of revenues............................ 71.7 88.7 76.9 94.6 86.4 86.4 88.0
--------- --------- --------- --------- --------- --------- ---------
Gross profit............................. 28.3 11.3 23.1 5.4 13.6 13.6 12.0
--------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Selling and marketing...................... 11.2 10.6 14.3 22.3 13.3 9.3 10.0
Research and development................... 5.8 1.8 7.4 7.6 2.2 1.5 1.5
General and administrative................. 12.7 11.2 17.8 17.4 15.9 8.2 13.6
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses..................... 29.7 23.6 39.5 47.3 31.4 19.0 25.1
--------- --------- --------- --------- --------- --------- ---------
Loss from operations..................... (1.4) (12.3) (16.4) (41.9) (17.8) (5.4) (13.1)
Interest income, net......................... 1.3 .4 .9 .2 .3 .6 1.4
--------- --------- --------- --------- --------- --------- ---------
Loss before minority interests in operations
of consolidated subsidiary.................. (.1) (11.9) (15.5) (41.7) (17.5) (4.8) (11.7)
Minority interests in operations of
consolidated subsidiary..................... -- -- -- -- 4.2 1.1 --
--------- --------- --------- --------- --------- --------- ---------
Net loss................................. (.1)% (11.9)% (15.5)% (41.7)% (13.3)% (3.7)% (11.7)%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>

<PAGE>
The Company may in the future experience significant quarter to quarter
fluctuations in its results of operations, which may result in volatility in the
price of the Company's Common Stock. Quarterly results of operations may
fluctuate as a result of a variety of factors, including the timing of the
initiation and completion of contracts, the demand for the Company's products
and services, the introduction of new or enhanced products and services by the
Company or its competitors, market acceptance of new products and services, the
mix of revenues between custom-built satellite communications systems and
networks designed for its customers and standard installations provided to its
customers, the growth of demand for Internet infrastructure-based products and
services in developing countries, the timing of significant marketing programs,
the extent and timing of the hiring of additional personnel, competitive
conditions in the industry and general economic conditions. Due to the foregoing
factors, it is likely that in one or more future quarters the Company's
operating results will be below the expectations of public market analysts and
investors. Such an event could have a material adverse effect on the price of
the Company's Common Stock.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations to date primarily from the sale of
equity securities and, to a lesser degree, from stockholder loans. Through March
31, 1997, the Company raised approximately $20.6 million of net proceeds through
private offerings of its Common Stock and Convertible Preferred Stock. The
Company received net proceeds of $4.2 million from sales of Common Stock in
private offerings during the period from August 17, 1994 (inception) to June 30,
1995, $4.4 million from sales of Common Stock and Convertible Preferred Stock in
private offerings during the fiscal year ended June 30, 1996 and $12.6 million
from the sale of Convertible Preferred Stock in private offerings and the
exercise of warrants during the nine months ended March 31, 1997. In addition,
the Company's chief executive officer lent the Company $315,000 in October 1994,
which was repaid in full in January 1997, and $80,700 during fiscal 1995, of
which $60,000 was repaid during fiscal 1995 and $20,700 was repaid during fiscal
1996. See "Certain Transactions."

At March 31, 1997, the Company had working capital of $10.8 million,
including cash and cash equivalents of $6.3 million, restricted cash of $1.5
million, accounts receivable of $8.2 million and inventories of $1.2 million,
offset by $6.2 million in accounts payable and $883,000 million in accrued
expenses.

With the proceeds from this Offering, the Company intends to use
approximately $ million to fund capital expenditures, investments in
strategic suppliers and potential acquisitions of complementary businesses,
products or technologies, approximately $ million to fund start-up expenses
and investments in potential international joint ventures associated with
NetSat, and approximately $ million to fund working capital requirements,
increased selling and marketing efforts, increased research and development
expenses and for general corporate purposes.

The Company has experienced negative cash flow from operations since its
inception. Net cash used in operating activities for the periods from inception
to June 30, 1995 and the fiscal year ended June 30, 1996 was $454,000 and $2.5
million, respectively. The principal factor contributing to the negative
operating cash flow during the period from inception to June 30, 1995 was the
net loss from operations for this period of $1.1 million. This loss was offset
in part by an excess of approximately $387,000 of accounts payable over the
value of inventory at the end of the period. This excess reflects the fact that
the Company normally acquires inventory only against specific customer
contracts. As a result, a portion of such inventory is delivered and revenue
accrued more quickly than payment for such inventory is required by normal
commercial terms. For the fiscal year ended June 30, 1996, the principal
contributor to the negative cash flow, in addition to the net loss of $2.2
million, was an increase in accounts receivable of approximately $1.9 million as
deliveries were made against the underlying contracts. This negative cash flow
was offset in part by reductions in inventory of approximately $664,000,
increases in operating liabilities (reflecting a continued expansion of
operations) and the use of stock to pay certain compensation expenses.

Management anticipates that NetSat will experience negative cash flow for at
least the next several years as a result of capital investment required for
construction of its hub facility in Hauppauge, New York, development of its
planned initial operations in Russia, Brazil and Eastern Europe and initial
losses from

25
<PAGE>
operations. In order to limit the capital requirements for startup of operations
in Eastern Europe, current plans call for NetSat to use the services of a hub
facility located in Germany and owned by Hughes Olivetti Telecom Limited, an
affiliate of Hughes Network Systems.

Several factors had a major effect on the Company's liquidity during the
nine months ended March 31, 1997. First, revenues increased substantially as a
result of a significant increase in contract deliveries, particularly during
December. Revenues for the nine-month period exceeded those of the entire fiscal
year ended June 30, 1996. The higher revenues increased the Company's working
capital needs, as accounts receivable increased by approximately $6.2 million
during the nine-month period. Offsetting the increased accounts receivable were
an increase in accounts payable of approximately $3.4 million and accrued
expenses of approximately $315,000 reflecting costs incurred in performing the
contracts. Because the Company records progress payments as an offset to
inventory, the approximately $127,000 decrease in net inventory during the
nine-month period is lower than might be expected based on the increased level
of activity and receipt of substantial progress payments against contracts not
yet completed of approximately $2.6 million. Inventory levels may be expected to
increase as work proceeds on these contracts.

The second factor affecting liquidity during the nine-month period was the
Company's investment activities. The Company increased its investment in its
strategic suppliers by approximately $885,000 during the period and purchased
approximately $700,000 in additional computer and test equipment. In addition,
the Company purchased a new office and assembly facility for approximately $2.6
million in cash and has spent an additional $700,000 on improvements. The
Company expects the office and assembly-facility will require an additional
expenditure of $1.8 million for improvements before it is ready for occupancy.
The Company intends to seek financing for the facility and improvements through
third parties.

The third major factor affecting liquidity was the completion of a private
offering of Convertible Preferred Stock and the exercise of warrants during the
nine-month period. Net proceeds of these offerings were approximately $12.6
million leaving the Company with cash and cash equivalents at the end of the
period of approximately $6.3 million.

The Company has incurred losses since its inception and therefore has not
been subject to federal income taxes. Through December 31, 1996, the Company,
for income tax purposes, has generated net operating loss carryforwards of
approximately $3.1 million which may be available to reduce future taxable
income and future tax liabilities. These carryforwards begin to expire in the
years 2010 through 2012. The Tax Reform Act of 1986 provides for an annual
limitation on the use of net operating loss carryforwards (following certain
ownership changes) that could significantly limit the Company's ability to
utilize these carryforwards. Upon the completion of this Offering, the exercise
of the over-allotment option or the subsequent exercise of option or warrants or
in connection with other future sales of equity, the Company's ability to
utilize the aforementioned carryforwards to reduce future taxable income and tax
liabilities may be limited. Additionally, because the United States tax laws
limit the time during which these carryforwards may be applied against future
taxes, the Company may not be able to take full advantage of these attributes
for federal income tax purposes.

The Company is currently in negotiations with a bank with respect to a $5.0
million credit facility which, if consummated by the Company and the Lender,
will consist of two credit lines consisting of (1) a $2.5 million secured
domestic line of credit and (2) a $2.5 million secured export-import guaranteed
line of credit. Each line of credit will bear interest at the prime rate plus
1/2% per annum and will be collateralized by a first security interest on all
assets.

The Company's future capital requirements will depend upon many factors,
including the extent to which it is able to locate additional strategic
suppliers in whose technology it wishes to invest, the success of the Company's
marketing efforts in both the satellite ground segment and Internet services
fields, the nature and timing of customer orders and the extent to which it must
conduct research and development efforts internally. Based on current plans, the
Company believes that its existing capital resources together with the net
proceeds of this Offering will be sufficient to meet its capital requirements
for at least the next 18 months.

26
<PAGE>
BUSINESS

OVERVIEW

The Company designs, assembles and installs satellite ground segment systems
and networks which support a wide range of satellite communications
applications, including fixed, mobile and direct broadcast services as well as
certain military applications. The Company's customers include prime
communications infrastructure contractors, government-owned PTTs, other
telecommunications carriers, producers and distributors of news and
entertainment content and other corporations. The Company's ground segment
systems typically consist of an earth station, which is an integrated system
designed to transmit and receive signals to and from satellites, together with
ancillary subsystems. The Company's ground segment networks are typically
comprised of two or more ground segment systems communicating with a satellite
and interconnected with a terrestrial network. Since the Company commenced
operations in August 1994, it has completed, or is in the process of completing,
the installation of 57 ground segment systems and networks in 21 countries.

The Company's revenue grew from $72,000 at the end of its first fiscal year
to $13.5 million for the fiscal year ended June 30, 1996 and to $21.5 million
for the nine months ended March 31, 1997. During the nine months ended March 31,
1997, the Company booked $37.5 million in contract orders and at March 31, 1997
had a backlog of $27.6 million of contract orders. The Company believes that its
revenue growth and its ability to compete are based on its unique combination of
competitive advantages which include: (i) an experienced management group with
extensive technological and engineering expertise, (ii) the proven ability to
meet the complex satellite ground segment requirements of its customers in
diverse political, economic and regulatory environments in various locations
around the world and (iii) its ability to identify, develop and maintain
strategic relationships with developers and suppliers of leading-edge
technologies which enhance performance, reduce costs and broaden the
applications of the Company's ground segment systems and networks.

The Company has recently established a subsidiary, NetSat, to develop
service revenues by providing high-speed, satellite-delivered data
communications to developing markets worldwide. In order to accomplish this
objective, NetSat intends to leverage: (i) the Company's expertise in satellite
ground segment system and network implementation, (ii) extensive management
experience in providing satellite-delivered communications services, (iii) the
knowledge and capabilities of local market strategic partners and (iv) DirecPC
and Personal Earth Station technology developed and owned by Hughes Network
Systems. Each project for which NetSat uses HNS' DirecPC technology will require
the grant of a license from HNS to NetSat. NetSat currently is pursuing joint
ventures with local partners in Russia and Brazil to market low-cost, high-speed
satellite Internet access services, as well as intranet services, to corporate,
educational and government customers who have limited or no access to
terrestrial network infrastructure capable of supporting the economical delivery
of such services. To date, NetSat has generated only limited revenues.

INDUSTRY BACKGROUND

SATELLITE COMMUNICATIONS

MARKET STRUCTURE

Satellite communications systems are comprised of satellites (the "space
segment") and ground-based transmission and reception systems (the "ground
segment"). The space segment consists of one or more satellites in earth orbit
which typically provide continuous communications coverage over a wide
geographic area. Satellites typically contain multiple transponders, each
capable of independently receiving and transmitting one or more signals to or
from multiple users simultaneously. The ground segment consists principally of
one or more earth stations, which provide a communications link to the end user
either directly or through a terrestrial network. An earth station is an
integrated system consisting of

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antennas, radio signal transmitting and receiving equipment,
modulation/demodulation equipment, monitor and control systems and voice, data
and video network interface equipment.

Satellite communications industry participants include: (i) designers,
manufacturers and integrators of ground segment products, systems and networks,
(ii) communications service providers, which may or may not own the actual
satellites used for transmission and (iii) designers, manufacturers and
operators of satellites. The Company has participated principally in the ground
segment systems and networks portion of the market and has recently expanded
into the satellite-delivered data communications services market through its
NetSat subsidiary.

MARKET SIZE

According to FCC estimates, providers of commercial satellite-delivered
communications services generated approximately $13.8 billion in revenues in
1995 and this amount is expected to grow at a compound annual rate of
approximately 21% through the year 2000 to approximately $37.0 billion. The
Company believes that the historic and expected growth in its addressable ground
segment markets has been and will continue to be driven by, among other things,
the growth of satellite-delivered communications services.

SATELLITE GROUND SEGMENT. Based on industry sources, the markets for ground
segment systems and networks in which the Company competes had aggregated
revenues of approximately $1.6 billion in 1996 and are projected to grow at a
compound annual rate of approximately 11% to revenues of approximately $2.5
billion by the year 2000. These data do not include estimates for revenues of
military-tactical systems, custom networks, ground segment management systems
and dedicated Internet access products, each of which is a market to which the
Company targets its ground segment systems and networks.

SATELLITE-DELIVERED DATA COMMUNICATIONS SERVICES. Through NetSat, the
Company participates in the satellite-delivered data communications segment of
the overall satellite-delivered communications services market. Although there
are currently no reliable data available on the market for satellite-delivered
Internet and intranet applications in developing countries, the Company believes
such market has potential for rapid growth. The Company bases this belief on the
increasing use of Internet and intranet applications in developing markets,
together with the relatively undeveloped terrestrial infrastructure in such
markets. The FCC has estimated that the worldwide satellite-delivered data
communications market (including Internet and intranet applications) accounted
for revenues of approximately $1.3 billion in 1995 and projects that such
worldwide market will grow at a compound annual growth rate of 26% to revenues
of approximately $4.2 billion in the year 2000.

SATELLITE SERVICE APPLICATIONS

Satellites provide a number of advantages over terrestrial facilities for
many high-speed communications service applications. First, satellites enable
high-speed communications service where there is no suitable terrestrial
alternative available or where the terrestrial alternative is inadequate.
Second, unlike the cost of terrestrial networks, the cost to provide services
via satellite does not increase with the distance between sending and receiving
stations. Finally, in contrast to the installation of fiber optic cable which is
expensive, time consuming and requires obtaining rights-of-way, satellite
networks can be rapidly installed, upgraded and reconfigured. The three
principal categories of satellite communications service applications are: (i)
fixed satellite services, (ii) mobile satellite services and (iii) direct
broadcast services.

FIXED SATELLITE SERVICES. Fixed satellite services provide point-to-point
and point-to-multipoint satellite communication of voice, data and video between
fixed land-based earth stations. The introduction of high-power satellites has
created additional growth within the fixed satellite services segment by
enabling the use of smaller, less costly earth stations, such as very small
aperture terminals ("VSATs"), for

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applications such as corporate data networks, Internet access and rural
telephony. The Company believes that the fixed satellite services segment will
continue to experience rapid growth due to the expansion of VSAT applications
and the planned implementation of new high-capacity, high-power Ka-band (20-30
GHz) systems within the next several years. The future Ka-band services are
expected to expand the number of applications provided directly to the home and
are expected to reduce significantly the cost of such services. These systems
offer the additional bandwidth needed for emerging multimedia services that
combine voice and video transmissions, as well as Internet access, expanded
telephony services, and computer networking.

MOBILE SATELLITE SERVICES. Mobile satellite services, which operate between
fixed gateway earth stations and mobile user earth stations (terminals), provide
mobile voice and data transmission capability on land, sea and air. New mobile
satellite services are being developed using low, medium and geostationary
orbiting satellite systems that are designed to bring more extensive coverage
and circuit reliability for mobile telephone and data services to underserved
populations throughout the world.

DIRECT BROADCAST SERVICES. Direct broadcast satellite services provide a
direct transmission link from high-power satellites to customers over a wide
geographic area. Technology which has been successfully deployed by Thomson,
Hughes Network Systems and others for direct-to-home television services is now
being applied to direct broadcast data services, including Internet and intranet
access.

DATA COMMUNICATIONS AND THE INTERNET

The data communications services market is comprised currently of common
carrier data network services, corporate business networks and emerging
applications such as Internet and intranet services. The Company believes that
Internet and intranet services will comprise a significant portion of data
communications services used in developing countries, and that the growth of
data communications services in these regions will rely on satellite
communications to a significant extent.

THE INTERNET

The Internet is a global network of millions of interconnected computers and
computer networks that allow businesses, other organizations and individuals to
communicate electronically, distribute and receive information and conduct
commerce. Advances in technology, low-cost Internet access and an increasing
corporate reliance on distributed information environments has fueled the rapid
growth of the Internet. Much of the recent growth in Internet use by businesses
and individuals has been driven by the emergence of the World Wide Web (the
"Web"), a network of servers and information available on the Internet. The Web
enables users to find and retrieve vast and diverse quantities of information on
the Internet in a consistent, easy-to-use manner that makes the underlying
complexities transparent to the user.

The utility of the Internet as a global communications network enabling
millions of users worldwide to access information in real-time is dependent upon
the existence of a communications infrastructure which can accommodate the rapid
and reliable transmission of such information. Today, much of the world lacks
not only the sophisticated optical fiber and digital switching infrastructure
required for the high-speed transmission of data over the Internet, but also the
basic telephone networks to accommodate low-speed data communication over
traditional analog facilities. Due to the high costs associated with the
installation of wireline infrastructures capable of the reliable transmission of
data at higher speeds and with better quality, the Company believes that the
development of a communications infrastructure in much of the world, and the use
of the Internet both by individuals and as a viable commercial tool, will in
large part depend upon the rapid installation of wireless and satellite
communications systems.

CORPORATE INTRANETS

The low-cost client/server tools which have been developed for the Internet
offer compelling support for the creation of corporate "intranets," which are
private data networks that provide employees with easy

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access to corporate databases. The benefits of applying Internet technology to
private corporate data networks include the lower cost of implementation,
standardized user interfaces, lower training and support costs, platform
independence, and the ease of interfacing to "legacy" mainframe databases. The
benefits associated with corporate migration to these Internet tools have
created a rapidly growing market in the United States and other developed
markets where relatively inexpensive data communications have been available. An
industry source estimates that revenues from the corporate intranet market will
exceed the revenues attained from the Internet market by a ratio of 2:1 by the
year 1999.

The Company believes that the use of satellite communications technology
which may be used to bring both the Internet and corporate intranets to nations
that are developing their telecommunications infrastructure will help those
nations rapidly improve their education, access to medical information, commerce
and overall communications.

GROWTH DRIVERS

The Company believes that the growth projected by third parties in the
satellite communications industry will be driven principally by the following
major factors: (i) global deregulation and privatization of government-owned
monopoly telecommunications carriers, (ii) rapidly growing worldwide demand for
communications services in general, including data communications services over
the Internet and corporate intranets, (iii) the relative cost-effectiveness of
satellite communications for many applications and (iv) technological
advancements which broaden applications for and increase the capacity in both
satellite and terrestrial networks.

DEREGULATION AND PRIVATIZATION. Rapid deregulation and privatization, and
the implementation of governmental policies aimed at developing modern
telecommunications infrastructure, are occurring globally, as countries seek the
economic benefits of enhanced and expanded telecommunications services. Through
deregulation and privatization, governments are stimulating the development of
competitive telecommunications services in the private sector. These actions
have placed communications carriers under increasing pressure to achieve greater
efficiencies and to offer their services to broader customer bases at more
competitive prices, leading to an increase in capital investment. In addition,
the Company believes that the recent World Trade Organization proposal which
will provide U.S. and foreign companies with market access to a variety of
telecommunications services and allow foreign ownership of telecommunication
companies will lead to additional increased capital investment in the worldwide
telecommunications market.

GROWING WORLDWIDE DEMAND FOR COMMUNICATIONS SERVICES. Factors contributing
to the growing demand for communications services include worldwide economic
development, governmental policies aimed at improving the telecommunications
infrastructure in developing countries and the increasing globalization of
commerce. In addition to the growth in developing markets, the terrestrial
infrastructure in developed countries is evolving to support the growing demand
for higher bandwidth services in response to the needs of businesses to
communicate with customers and employees located around the world and to the
growing acceptance of the Internet and multimedia applications as both
productivity-enhancing tools and consumer products. The Company expects demand
for these kinds of higher bandwidth services to grow in developing countries as
well. The International Telecommunications Union forecasts that the number of
telephone lines in developing countries will grow at a compound annual growth
rate of 17% per year through the year 2000, compared to 5% per year in the same
period for developed nations. The Company believes that global network
infrastructure development will require significant reliance upon satellite
communications because satellite-delivered communications services can be
implemented quickly and deliver flexible high-speed transmission capacity at
relatively low cost over large geographic areas.

RELATIVE COST-EFFECTIVENESS OF SATELLITE COMMUNICATIONS. The relative
cost-effectiveness of satellite communications compared to terrestrial solutions
for many applications is a major factor driving the

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growth of satellite communications in areas with rapidly growing
telecommunications infrastructures such as the Asia-Pacific region and the
former Soviet Union. The vast geographic areas to be covered, where population
concentrations are separated by large distances, require a technology whose cost
and speed of implementation is relatively insensitive to distance. Unlike the
cost of terrestrial networks, the cost to provide services via satellite does
not increase with the distance between sending and receiving stations. A single
satellite can be configured to deliver both broad beams that cover entire
regions and narrow spot beams that cover only areas of high population or
traffic density.

TECHNOLOGICAL ADVANCES. Technological advances which increase the capacity
of a single satellite and/ or increase the number of potential applications of
its available bandwidth reduce the overall cost of a system or the service it
delivers. This increases the number of potential end users for the services and
expands the available market. Recent technological developments which make
satellite solutions increasingly competitive in cost and performance with
terrestrial-based networks, or as a viable alternative solution where
terrestrial services are not feasible, include:

- BANDWIDTH ON DEMAND -- allows the satellite transponder bandwidth to be
allocated dynamically as user needs require. Excess bandwidth capacity is
returned to a "pool" of bandwidth that can then be accessed by other
users.

- DIGITAL TECHNOLOGY -- allows compression of data to communicate more
information at lower costs using less bandwidth. Digital compression
technology, when applied to international voice, data and video
transmission by satellite, increases several fold the capacity of
satellite transponders.

- HIGH-POWER SATELLITES -- provide a signal powerful enough to deliver
reception over a large geographic area and reduce the size, and
consequently cost, of the ground-based receiving and transmitting
antennas. High-power satellites, coupled with advanced digital processing
receivers, allow transmission of high-quality television programming and
high-speed data to the home with antennas of less than 21 inches in
diameter.

- SPOT-BEAM TECHNOLOGY -- narrowly focuses a satellite-delivered signal on
the receiving antenna and reduces the total power requirements in the
satellite, enabling an increase in a satellite's circuit capacity without
a corresponding increase in weight, associated equipment and launch costs.
Spot-beam technology, combined with an antenna for wide area coverage, may
be used to provide local and national television programming
simultaneously from a single geostationary satellite.

- ONBOARD PROCESSING -- provides the ability to switch circuits on the
satellite rather than on the ground. By building a "switch in the sky,"
the cost of implementing telecommunications infrastructure may be reduced,
facilitating the implementation of applications such as mobile telephony
via satellite and future direct-to-home data, video and voice services.

GSI COMPETITIVE ADVANTAGES

The Company believes that it is well positioned to capitalize on the
increasing demand for satellite ground segment systems and networks and
satellite-delivered data communications services and that its future success in
these markets will be based upon its ability to leverage its unique combination
of competitive advantages that have led to its historical achievements and its
favorable industry reputation. These competitive advantages include: (i) an
experienced management group with extensive technological and engineering
expertise, (ii) the proven ability to meet the complex satellite ground segment
requirements of its customers in diverse political, economic and regulatory
environments in various locations around the world and (iii) the ability to
identify, develop and maintain strategic relationships with developers and
suppliers of leading-edge technologies which enhance the performance, reduce
costs and broaden the applications of the Company's ground segment systems and
networks.

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GSI BUSINESS STRATEGY

The Company's business strategy is to expand its market share in its ground
segment systems and networks business, improve its profitability, and create
opportunities to capture recurring service revenues. The Company intends to
execute this strategy by: (i) targeting communication infrastructure development
opportunities worldwide, (ii) focusing on high margin engineering-intensive
system and network projects, (iii) developing strategic customer relationships,
(iv) developing strategic supplier relationships and (v) entering the data
communications services business through NetSat.

TARGET INFRASTRUCTURE DEVELOPMENT OPPORTUNITIES

The Company primarily targets developing markets which it believes will
account for a significant portion of the growing demand for ground segment
systems and networks because these markets typically lack terrestrial
infrastructure adequate to support increasing demand for domestic and
international communications services. In addition, in developed countries the
Company targets ground segment infrastructure development projects for emerging
satellite communications applications such as direct broadcast and future
Ka-band frequencies. The Company has developed an international sales and
marketing organization focused on identifying opportunities for the Company and
on developing key sourcing relationships. In order to increase its access to
project opportunities and limit its exposure to the political and commercial
complexities of doing business in foreign countries, the Company intends to
continue to pursue international opportunities primarily in partnership with
strong local companies or as a subcontractor to larger communications services
and infrastructure providers. Most of the Company's revenues are derived from
sales to customers outside the United States. Revenues from foreign sales
accounted for 21.8% and 50.0% of total revenues in fiscal year 1996 and the
nine-month period ended March 31, 1997, respectively.

FOCUS ON ENGINEERING-INTENSIVE SYSTEM AND NETWORK PROJECTS

The Company seeks to focus its technological expertise on high value-added
system and network projects which require engineering-intensive design and
implementation. This emphasis positions the Company to earn higher gross margins
through the delivery of innovative, cost-effective solutions to customer
performance requirements that are typically priced on a negotiated basis, as
opposed to typically lower-margin competitive bid projects. In addition, the
Company often benefits from the research and design phase of its more complex
projects through the development of proprietary products, systems and
technologies that can be applied cost-effectively to future projects and which
provide the Company with a competitive advantage.

DEVELOP STRATEGIC CUSTOMER RELATIONSHIPS

The Company seeks to build close relationships with customers for whom it
can provide complementary engineering skills by working as part of their system
development teams. A key objective of this strategy is to obtain this business
on a negotiated basis, rather than through the competitive bidding process,
which is likely to carry a lower margin. To date, the Company has developed
strategic relationships with two of its customers: Hughes Network Systems and
Thomson. The Company sought the establishment of these relationships based on
these customers' abilities to: (i) generate significant potential revenues for
the Company, (ii) provide access to a large number of potential business
opportunities as a result of their size and global operations and (iii) provide
access to complementary technologies and expertise that could serve as
competitive advantages for the Company. At March 31, 1997, Hughes Network
Systems and Thomson owned equity interests in the Company of 3.7% and 6.3%,
respectively. In addition, Hughes Network Systems owns a 19% equity stake in
NetSat, with an option to increase this position to 29%.

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DEVELOP STRATEGIC SUPPLIER RELATIONSHIPS

The Company seeks to establish strategic relationships with suppliers that
it believes are in a unique position to supply products or services which will
improve the Company's competitive position in one or more of the markets which
it serves. In certain cases, the Company seeks to strengthen such relationships
by investing in such suppliers, and has, through March 31, 1997, made equity
investments of an aggregate of approximately $885,000 for minority equity stakes
of approximately 19%, 5% and 17% in Shiron Satellite Communications (1996) Ltd.
("Shiron"), C-Grams Unlimited, Inc. ("C-Grams") and Armer Communications
Engineering Services, Inc. ("Armer"), respectively. The strategic supplier
relationships with Shiron and C-Grams enable the Company to outsource a
significant portion of its research and development costs and gain access to
advanced technology while preserving the independence to select the best
products and technologies to deliver to its customers on any particular project.
The relationship with Armer allows the Company preferred access to quality field
engineering and installation resources. The Company intends to continue to
pursue additional strategic supplier relationships on a selective basis.

CREATE RECURRING SERVICE REVENUE OPPORTUNITIES

The Company seeks to capture recurring revenues by providing data
communications services. The initial application of this strategy is the
Company's NetSat subsidiary, formed in alliance with Hughes Network Systems, to
provide satellite-delivered data communications services such as Internet
access, intranet applications and business data applications in developing
countries, using HNS' low-cost, high-speed Personal Earth Station and DirecPC
Terminal technology. The Company's strategy for implementing this objective
through NetSat includes the following major elements:

MARKET THROUGH JOINT VENTURES AND STRATEGIC RELATIONSHIPS. NetSat intends
to form joint ventures with strategic partners located in local markets around
the world which are expected typically to handle marketing, distribution and
support of the NetSat Direct and DirecPC products and would typically provide
transmission, content delivery, billing and customer service functions. The
Company anticipates selecting local market partners based upon their in-region
marketing experience, knowledge of the local regulatory environment, operating
licenses, existing customers, established business organizations and other
important elements that the Company believes will help support the success of
the venture. The Company is currently providing services in certain Eastern
European countries pursuant to a value-added reseller agreement with Hughes
Olivetti Telecom Limited ("HOT"), a joint venture between Ing. C. Olivetti & C.,
S.p.A. and an affiliate of Hughes Network Systems, and is pursuing joint
ventures with local partners in Russia and Brazil.

SEEK MULTIPLE REVENUE SOURCES. Through NetSat and its potential joint
venture affiliates, the Company intends to generate revenue from multiple
sources, including the sales of terminal equipment to potential subscribers, the
transmission of data via satellite, the provision of Internet connections and
incidental services such as domain name service, and the development and
delivery of custom content for specific customer groups.

TARGET MULTINATIONAL CUSTOMER BASE. NetSat intends to establish a diverse,
multinational customer base by designing innovative Internet, intranet and
business data service solutions for corporations, governments and educational
institutions in countries with rapidly growing telecommunications infrastructure
requirements. NetSat plans to apply the same satellite-delivered technology
which it uses for Internet access to meet the communication needs of corporate
users in such countries in support of their intranet requirements.

GSI GROUND SEGMENT SYSTEMS AND NETWORKS

The Company designs, assembles and installs ground segment system and
network solutions for the complex and changing communications requirements of
its customers. The Company's ground segment

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systems typically consist of an earth station and ancillary subsystems such as
microwave links for back-haul of traffic to a central office or generators for
emergency power restoral. An earth station is an integrated system consisting of
antennas, transmitting and receiving equipment, modulation/demodulation
equipment, monitor and control systems and voice, data and video network
interface equipment. The Company's ground segment networks are typically
comprised of two or more ground segment systems interconnected with a satellite
and/or terrestrial communications network. The Company's customizable systems
may be sold separately as stand-alone ground segment systems or may be used as
modular building blocks to be integrated into a complete ground segment system
or network. The Company believes that this modular approach allows it to
engineer its ground segment systems and networks to serve client-specific
traffic and service requirements rapidly, cost-effectively and efficiently.

CUSTOMIZABLE SYSTEMS

CURRENTLY AVAILABLE CUSTOMIZABLE SYSTEMS

FAMILY OF STANDARD INTELSAT EARTH STATIONS. This family of earth stations,
which is used primarily for international voice, data and video circuit trunking
and as gateways for domestic networks using the International Telecommunications
Satellite Organization ("Intelsat") system, is targeted principally at PTTs and
other common carriers. The family consists of earth stations of varying sizes
and capacities, all of which conform to Intelsat specifications. The Intelsat
Standard A earth stations, which have the highest capacity, feature antennas
ranging from 13 to 21 meters in diameter, high-power amplifiers from 700 to
3,000 watts, radio frequency converters and related electronics, modems and a
UNIX or Microsoft Windows NT based monitoring and control system. Available
options include power monitor systems, de-icing equipment, uninterruptible power
system/backup generators and equipment shelters. The Company has designed and
installed Intelsat Standard A earth stations in China, Korea, Kuwait, Malaysia,
the United Kingdom and the United States. The Company typically sells these
Intelsat Standard A earth stations at prices ranging from approximately $1.0
million (13-meter antenna) to approximately $2.0 million (21-meter antenna). The
Company is able to provide smaller, lower capacity earth stations that conform
to Intelsat specifications by customizing its modular building block or
commercial terminal families of earth stations described below.

MODULAR BUILDING BLOCK (MBB) EARTH STATION. These earth stations are
incorporated in point-to-point data links and hubs for VSAT and Demand Assigned
Multiple Access ("DAMA") networks, and are typically used as gateways for
corporate, common carrier and government networks. These earth stations can also
be configured to conform to the applicable standards of Intelsat and other
satellite systems. Earth stations constructed using MBBs require minimal site
preparation and can be installed rapidly and cost-effectively due to their
modular construction. Antenna sizes range from 4.5 to 9 meters, with high-power
amplifiers ranging from 50 to 700 watts. Generally, all electronics are housed
in a single building mounted rack. Available options include de-icing equipment,
tracking equipment, uninterruptible power system/ backup generators and
equipment shelters. To date, the Company has designed and installed MBB earth
stations in Brazil, India, Indonesia, Pakistan, Russia, Thailand and the United
States. The Company typically sells these earth stations at prices ranging from
approximately $250,000 to $600,000.

COMMERCIAL TERMINAL FAMILY (CTF). This family of earth stations, which
encompasses a range of general purpose, low-cost antenna-mounted earth stations,
is used primarily for data, voice or video transmissions from commercial or
government premises, and are principally targeted at corporate, common carrier
and government networks. These earth stations can also be configured to conform
to the applicable standards of Intelsat and other satellite systems. Antenna
sizes range from 1.2 to 9.3 meters, with high-power amplifiers ranging from 16
to 400 watts. Generally, all radio frequency electronics are housed in
weatherproof enclosures mounted on the antenna. To date, the Company has
designed and installed CTF earth stations in India, Korea, Russia and the United
States. The Company typically sells these earth stations at prices ranging from
approximately $100,000 to $300,000.

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MILITARIZED TRIBAND FLY-AWAY EARTH STATION FAMILY. This family of triband
tactical earth stations is used for military communications applications and is
targeted principally at major defense contractors. These earth stations
typically use a 2.4 meter antenna, are highly transportable, and are designed to
be mounted on a pallet on military vehicles or air-dropped into a combat
environment. The pallet-mounted earth station features an automatic antenna
pointing and multichannel capability. These militarized earth stations are able
to perform under extreme conditions in the military tactical environment and
offer multiband capability: C-band (4-6 GHz), X-band (7-8 GHz) or K-band (12-17
GHz). The Company has sold one of each configuration of this earth station to
Thomson to be used as demonstration models incorporated into military
communications systems currently marketed by Thomson. Prices for these systems
range from approximately $250,000 to $1.0 million, depending on the
configuration.

DIGITAL FLY-AWAY EARTH STATIONS. This group of earth stations is primarily
used for emergency communications and news gathering and is comprised of highly
transportable, modular earth stations designed to be quickly deployed and
installed anywhere in the world. Antenna sizes range from 1.2 to 2.4 meters,
with high-power amplifiers up to 350 watts. All components are mounted in
separate cases which are small enough to be easily transported by commercial
carrier. Additional system availability can be achieved through the addition of
redundant modules for critical components. Since these units may be operated in
a variety of harsh environments, the Company conducts environmental stress
screening tests on these components for enhanced reliability. To date, the
Company has sold one digital fly-away earth station to a customer in Portugal.
The Company markets these earth stations at prices ranging from approximately
$150,000 to $600,000.

EARTH STATION MANAGEMENT SYSTEMS. The Company's earth station systems
typically employ monitor and control software for system maintenance developed
either by the Company or by its strategic supplier, C-Grams. This software
permits the station operator to monitor and control the status of each
electronic equipment component at the station from a remote location and to
receive immediate failure reports and analysis. The Company also offers database
applications to integrate maintenance and operational functions, thereby
reducing operating costs. The price of this software varies substantially and is
typically included in the price of the system or network provided by the
Company.

CUSTOMIZABLE SYSTEMS UNDER DEVELOPMENT

COMPACT DIGITAL EARTH STATION FAMILY. This family of earth stations is
designed to be used principally to provide limited capacity (up to T1/E1 data
rates) to areas with limited or no telecommunications infrastructure. These
digital earth stations will integrate radio frequency and baseband components
into one antenna-mounted package. These earth stations feature a multiband
capability and a proprietary L-band (1 to 1.5 GHz) interface being developed
with Shiron which can support a series of modems for a range of applications,
including rural telephony and digital video. These earth stations may be
operated on either preassigned channels or channels assigned on demand, allowing
efficient transponder utilization. Antenna sizes range from 1.2 to 3.7 meters.
These earth stations are expected to be marketed for less than $20,000.

MOBILE SATELLITE SYSTEM RADIO FREQUENCY TERMINALS. These terminals are a
component of the mobile satellite system gateways expected to be used to
interface between terrestrial telephone networks and satellites that communicate
with mobile land-, air- and sea-based terminals. The Company has designed one
version of this terminal in concert with Hughes Network Systems and another
version in concert with Thomson. Both versions incorporate innovative
proprietary designs which provide L-band interfaces between an earth station's
radio frequency equipment and baseband equipment. Antenna sizes range from 4.5
to 16 meters. These terminals are expected to be marketed primarily to prime
contractors at prices ranging from approximately $500,000 to $2.0 million.

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GROUND SEGMENT SYSTEM INSTALLATIONS

The following are examples of ground segment systems sold or currently being
installed by the Company:

BRITISH TELECOMMUNICATIONS PLC ("BT") INTELSAT STANDARD A SYSTEM
UPGRADE. The Company has designed and installed an Intelsat Standard A ground
segment system upgrade for BT in the United Kingdom for international voice and
digital video transmission. The implementation of this system required the
supply of a new tracking system for an existing BT antenna, an electronics
shelter built to stringent standards, high-power amplifiers, radio frequency
high-power multiplex equipment, up and down converters, and advanced monitor and
control software.

VSAT HUB SYSTEMS. The Company has designed and installed a 9-meter C-band
hub earth station for Hughes Network Systems as part of a VSAT network in
Brazil. The Company utilized its modular building block (MBB) family of
customizable products to meet an accelerated delivery schedule. The Company has
also entered into a contract to provide a 9-meter C-band hub earth station for
AT&T Corporation as part of a VSAT network in Russia, where the Company is
utilizing its commercial terminal family (CTF) of customizable products to
provide a low-cost solution and meet an accelerated delivery schedule.

TELEPORT TP EUROPEAN TELECOMMUNICATIONS SATELLITE ORGANIZATION ("EUTELSAT")
TDMA EARTH STATION SYSTEM. The Company has provided Hughes Network Systems with
an earth station for use in the Eutelsat telephony/data network. This earth
station required sophisticated engineering and implementation due to the high
data rates used by Eutelsat's network. The Company incorporated the C-Grams
earth station management systems into its design to simplify operation of the
earth station by the end user, Teleport TP in Moscow.

A SKY B DIRECT-TO-HOME TRANSMIT SYSTEMS. The Company has entered into a
contract to supply uplink facilities for A Sky B consisting of four 13-meter
antennas with transmit/receive capabilities in the broadcast satellite services
band. The transmit facilities will include eight operational and two backup
uplinks for each of the four antennas. This configuration will provide extremely
high availability of service as well as ease of operation. The Company is
developing customizable designs for future application in other direct broadcast
system uplinks.

GROUND SEGMENT NETWORK INSTALLATIONS

The following are examples of ground segment networks sold or currently
being installed by the Company:

THAILAND MINISTRY OF HEALTH TELEMEDICINE NETWORK. The Company has been
awarded a subcontract by Loxley Public Company Limited ("Loxley"), a
telecommunications infrastructure provider in Thailand, to design, assemble and
install, together with Loxley, a telemedicine network comprised of 20 earth
stations in Thailand for the Ministry of Health. This network will provide video
conferencing and bandwidth on demand for transferring images and data from
diverse types of electronic medical diagnostic tools such as X-ray, CAT scan,
and electrocardiogram machines to and from medical personnel situated in remote
locations.

HYUNDAI NETWORKS. The Company was recently awarded a contract to provide a
corporate network for restoral of terrestrial circuits and for video
broadcasting for Hyundai Electronics Industries Co. Ltd. ("Hyundai") in Korea.
This proposed network is to be comprised of a hub earth station and 12 remote
earth stations with high-speed data capability and an additional 60 locations
with digital video receive-only capability. In addition, the Company and Hyundai
recently designed, assembled and installed, on an accelerated schedule, a
demonstration private corporate network comprised of five earth stations in
Korea. This network provides interconnection between up to five Hyundai
locations for a broad range of

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<PAGE>
purposes, including voice, data and video conferencing. The Company is working
with Hyundai to market similar networks to other customers in Korea.

NETSAT DATA COMMUNICATIONS SERVICES

The Company's NetSat services are designed to provide broadband access to
data communications media such as the Internet, corporate intranet applications
and business data applications by integrating end-user terminals, satellite
communications equipment and international networks. NetSat provides data
communications services through either a one-way satellite downlink using HNS'
DirecPC Terminal linked to existing terrestrial communications infrastructure,
or through a two-way satellite uplink/downlink using a NetSat Direct Terminal,
which consists of an HNS DirecPC Terminal integrated with an HNS Personal Earth
Station. Each project for which NetSat uses HNS's DirecPC technology will
require the grant of a license from HNS to NetSat. HNS is under no obligation to
grant such licenses and no assurance can be given that NetSat will be able to
obtain licenses from HNS on acceptable terms, or at all. See "Risk
Factors--Reliance on Strategic Relationships." NetSat currently has entered into
a value-added reseller agreement with HOT for sales of DirecPC and Personal
Earth Station 5000 products in certain Eastern European countries. The
value-added reseller arrangement is not contingent upon the grant of any license
from HNS to NetSat.

In the future, NetSat intends to offer a range of options and accessories to
permit value-added resellers to deliver reliable, cost-effective turnkey
solutions to their customers. These options are expected to include multimedia
PCs, alternative antenna configurations, local area network ("LAN") servers and
custom system configurations. NetSat's Network Operations Center ("NOC"), when
functional, will provide 24-hour technical support, as well as a customer and
billing database and certain other functions such as a domain name service, a
mail server and a Web server. NetSat also expects to offer its customers the
ability to access customized interactive multimedia program content developed
for specific user groups.

NETSAT INFRASTRUCTURE

The DirecPC Terminal is a two-way Internet access terminal with a satellite
downlink of 400 Kbps from the Internet, approximately seven times as fast as a
terrestrial ISDN line, and a standard dial-up modem to access and send requests
to the Internet. This Internet connection can be routed through either a local
Internet service provider or one of the proposed regional NetSat satellite
gateways. In locations where terrestrial connections do not exist or are not
economically or practically feasible, the DirecPC Terminal downlink can be
integrated with an HNS Personal Earth Station uplink to form the NetSat Direct
Terminal, a small satellite earth station system that can provide the user with
two-way direct satellite access to the Internet and other data communications
services. With a NetSat Direct Terminal, the customer request channel is
uplinked at 19.2 Kbps and is designed to be connected from the NetSat regional
satellite gateway to NetSat's planned NOC in Hauppauge, New York, and then into
the Internet. Responses from the Internet to either a DirecPC unit or a NetSat
Direct Terminal will pass through NetSat's NOC to the regional gateway, and will
be placed onto the satellite link and transmitted to the terminal units at 400
Kbps.

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The following diagram illustrates how information will flow through the
NetSat system once the NOC is operational.

Artwork: Two graphics each depicting the flow of information through the NetSat
system. One such graphic represents the NetSat DirectPC Terminal (One-Way). The
second such graphic represents the NetSat Direct Terminal (Two-Way).

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<PAGE>
STRATEGIC RELATIONSHIPS

A key element of the Company's strategy is to establish strategic customer
and supplier relationships. The Company selects its strategic customers and
suppliers based on many factors, including technical capability, geographic
location and market presence. The Company has found that making an equity
investment in a supplier, or allowing a customer to acquire an equity interest
in it, strengthens the relationship and results in greater awareness of the
Company's capabilities by potential customers as well as referrals of potential
projects to the Company by its strategic customers.

The following table sets forth certain information regarding the Company's
strategic relationships:

<TABLE>
<CAPTION>
PRO FORMA
OWNERSHIP OWNERSHIP %
COMPANY % OF GSI(1) HELD BY GSI(2) STATUS RELEVANT BUSINESS
- --------------------------------- --------------- ------------------- -------------- ---------------------------------
<S> <C> <C> <C> <C>
Hughes Network Systems % -- Customer Satellite networks
Thomson %(3) -- Customer Military communications systems
Shiron -- 19% Supplier Low-cost satellite modems
C-Grams -- 5% Supplier Earth station management systems
Armer -- 17% Supplier Site engineering services
Applied Theory -- -- Customer/ Commercial Internet service
Supplier
</TABLE>

- ------------------------------

(1) Pro forma for the sale of shares in this Offering.

(2) Does not include the Company's options and warrants to purchase additional
capital stock of such companies.

(3) Does not include Thomson's right to receive 1% of the Company's then
outstanding share capital (measured at the time of issuance) for each of its
next four consummated orders with the Company of at least $3.0 million
through May 1998.

HUGHES NETWORK SYSTEMS

Hughes Network Systems is a division of Hughes Electronics Corp., a leading
supplier of satellites and satellite-delivered communications infrastructure
solutions and a subsidiary of General Motors Corporation. Hughes Network Systems
provides the Company with opportunities to act as a subcontractor, supplying
earth stations to complement HNS' system and network offerings. After giving pro
forma effect to the issuance of the shares in this Offering, Hughes Network
Systems will own approximately % of the Company's Common Stock, which
interest was acquired in August 1994 in exchange for a commitment by Hughes
Network Systems to purchase certain systems from the Company. Hughes purchased
such systems and has no current contractual commitment to purchase any
additional systems from the Company.

In August 1996, Hughes Network Systems invested $250,800 in convertible
preferred stock of NetSat, convertible into 19% of NetSat's Common Stock and
received a five-year option to purchase up to an additional 10% of NetSat's
Common Stock under specified circumstances. NetSat uses the HNS DirecPC Terminal
and Personal Earth Station products in its data communications systems. Each
project for which NetSat uses HNS' DirecPC technology will require the grant of
a license from HNS to NetSat. Hughes Network Systems is under no obligation to
grant such licenses, and no assurance can be given that NetSat will be able to
obtain licenses from Hughes Network Systems on acceptable terms, or at all. See
"Risk Factors--Reliance on Strategic Relationships."

NetSat entered into an agreement in January 1997 with HOT pursuant to which
NetSat will act as a nonexclusive value-added reseller of HOT satellite
telecommunications services and sales of HOT's DirecPC and Personal Earth
Station 5000 products in certain European countries.

39
<PAGE>
THOMSON-CSF

Thomson is a leading supplier of professional electronics for civil and
military markets. In connection with its purchase in 1995 of 199,500 shares of
Common Stock for $933,100, Thomson agreed to provide the Company with business
and marketing assistance in the satellite communications field and the Company
agreed to provide Thomson with satellite communications systems to complement
its radar and communication switching technology. Through March 31, 1997, the
Company had issued 37,147 shares of Common Stock to Thomson in exchange for
receipt of the first $1.5 million of purchase orders placed by Thomson. In
addition, under the agreement with Thomson, upon acceptance by the Company of
each of the next four $3.0 million of orders placed by Thomson through May 1998,
Thomson will receive shares of Common Stock equal to 1% of the Company's Common
Stock outstanding at such time. Thomson also has expressed its intention to
purchase shares in this Offering. Thomson is currently marketing two
versions of the Company's militarized triband fly-away earth station products.
See "Certain Transactions" for further information regarding certain rights
granted by the Company to Thomson including preemptive rights, rights of first
refusal and the right to appoint a member to the Company's Board of Directors,
all of which rights survive for so long as Thomson's stock ownership does not
fall below 5% of the outstanding share capital of the Company as a result of
Thomson selling or otherwise disposing of a portion of its Shares.

SHIRON ADVANCED COMMUNICATIONS LTD.

In January 1996, the Company and Shiron Advanced Communications Ltd. formed
Shiron to develop a low-cost satellite modem to be incorporated into earth
station products targeted at bringing communications infrastructure to rural or
remote regions of developing countries. The Company plans to use the modem in
its digital earth station product line and in connection with the data
communications services, including Internet access, it will offer through
NetSat. The modem is being developed under a grant from the Israel-United States
Binational Industrial Research and Development Foundation (the "BIRD
Foundation") and the BIRD Foundation will receive a royalty from the proceeds of
sales of the modem. The Company holds 19% of Shiron's capital stock and has
options to purchase additional shares if the Company purchases certain
quantities of products from Shiron.

C-GRAMS UNLIMITED INC.

In August 1996, pursuant to agreements with C-Grams, a supplier of advanced
network and earth station management software, the Company purchased a 5% equity
interest in C-Grams for $400,278, has an option for an additional 15%, and
agreed to use C-Gram's earth station monitor and control systems when
appropriate. The Company believes its investment in C-Grams will provide it with
research and development in new software products aimed at the Company's needs
and access to customers who need to develop optimized solutions for their
network management requirements. See "--GSI Ground Segment Systems and Networks"
and "--Research and Development."

ARMER COMMUNICATIONS ENGINEERING SERVICES, INC.

In November 1996, the Company purchased for $150,000 a 15% interest in
Armer, a field engineering company focused on the satellite communications
business. In March 1997, the Company purchased for $50,000 an additional 2%
interest in Armer. The Company retains an option to purchase up to an additional
8% interest in Armer. Armer complements the Company's satellite communications
engineering capability by providing qualified field installation/test personnel
for the implementation and test phase of turnkey projects.

40
<PAGE>
APPLIED THEORY COMMUNICATIONS, INC.

In December 1996, NetSat and Applied Theory Communications, Inc. ("Applied
Theory"), a successor to a portion of a business conducted by NYSERNet, Inc., a
New York-based Internet and intranet service provider, entered into a Memorandum
of Understanding pursuant to which the companies agreed to work together to form
a joint venture in which Applied Theory would provide its Internet engineering
and operations capabilities to support the development and operation of the
planned NetSat NOC. The parties have agreed to jointly market their capabilities
to their existing and potential customers and to submit joint bids for
contracts, where appropriate. Further, the parties have agreed to form a joint
development team which will develop processes to help ensure the compatibility
of the partners and the success of the proposed venture. The parties have
reserved the right to independently pursue projects within the scope of their
individual expertise.

SALES AND MARKETING

The Company markets its products and services to prime communications
infrastructure contractors, PTTs, other telecommunications carriers, producers
and distributors of news and entertainment content and other corporations
through sales representatives in foreign countries as well as its sales and
marketing offices in Hauppauge, New York, Atlanta, Georgia, and Hong Kong. The
Company presently employs 23 persons with marketing responsibility, of which 11
are engaged in marketing on a full-time basis.

The Company applies a "project team" approach to identifying, obtaining and
maintaining customer accounts by grouping sales representatives, marketing
executives, business execution teams and account managers together to develop
close and continuing relationships with its customers. The Company's sales
representatives in foreign countries provide local presence and identify
prospective customers for the Company's marketing executives. The marketing
executives and associated business execution teams work together to develop
relationships with these customers, and ultimately obtain orders for the
Company's products or services. The business execution teams manage the accounts
on a day-to-day basis and long-term customers are assigned to an account manager
who usually also functions as a project engineer for that account. The Company
believes that this account management focus provides continuity and loyalty
between the Company and its customers and fosters long-term relationships that
lead to follow-up work and referrals to new customers.

In addition to obtaining business through its project team approach, the
Company obtains sales leads for new customers through referrals from existing
customers, industry suppliers, and other sources such as participation in trade
shows. The Company also directs its marketing efforts to its strategic allies,
primarily through the Company's senior management. In some cases a strategic
ally may be the prime contractor for a system or network installation and will
subcontract the ground segment of the project to the Company. In other cases,
the strategic ally may recommend the Company as prime contractor for the design
and supply of a system.

The Company's marketing strategy for NetSat's Internet access and data
communications services is at an early stage of development. The Company
anticipates that such strategy will be carried out primarily through local joint
ventures and value added resellers in each of the countries in which it markets
its services, depending on the capabilities of such partners and resellers, the
nature and location of prospective customers in such countries and the
particular communications infrastructure requirements and regulatory structure
of each potential market. The Company expects that members of senior management
will play a role in developing and maintaining relationships with local value
added resellers, joint venture partners and local partners.

41
<PAGE>
CUSTOMERS

The Company's customers include prime communications infrastructure
contractors, PTTs and other telecommunications carriers, producers and
distributors of news and entertainment content and corporations. A partial list
of customers for whom the Company has designed ground segment system or network
solutions, the types of solutions, and the geographic location of the projects
are set forth below.

<TABLE>
<CAPTION>
CUSTOMER SOLUTION LOCATION
- --------------------------------------------- --------------------------------------------- -------------------
<S> <C> <C>
Hughes Network Systems, Inc. VSAT Hubs/MBB Various
Intelsat Standard A Kuwait
TDMA Earth Station Moscow
AT&T Corporation CTF Russia
EDS Corp. MBB Thailand
AO Rustel MBB Russia
CTF Russia
British Telecommunications plc Digital Video Broadcast Uplink Germany
Digital Video Broadcast Uplink United Kingdom
Orion Electronics Corp. of America Intelsat Standard A United States
Ministry of Posts and Telecommunications Intelsat Standard A China
(China)
Bezeq The Israel Telecommunication Corp. Ltd. Digital Video Broadcast Uplink and Israel
Receive-Only Earth Station
Satellite Technology Management, Inc. Intelsat Standard A Malaysia
C.P.R.M. (Marconi) of Portugal Digital Fly-Away Earth Station Portugal
United Nations Digital Transportable Earth Station Croatia
Thomson-CSF Tactical Military Terminals France
Thailand Ministry of Health CTF and Overall Network Thailand
Hyundai Corp. CTF and Overall Network Korea
Transworld Communications, Inc. MBB Russia
American Sky Broadcasting LLC Direct Broadcast Uplinks/Video Reception United States
Systems/TT&C
Tele-TV Video Reception System United States
Bell Atlantic Corp. Video Reception System United States
Soros Foundation Affiliates in Eastern Europe Internet access through NetSat Serbia, Bulgaria,
Slovenia
</TABLE>

- ------------------------

The Company typically relies upon a small number of customers for a large
portion of its revenues. For example, approximately 43% and 15% of the Company's
revenues in fiscal 1996 and for the nine months ended March 31, 1997,
respectively, were derived from sales to Hughes Network Systems. At March 31,
1997, $16.5 million, or approximately 60% of the Company's backlog, was
accounted for by a contract between the Company and A Sky B. The Company expects
that in the near term a significant portion of its revenues will continue to be
derived from one or a limited number of customers (the identity of whom may vary
from year to year) as the Company seeks to expand its business and its customer
base. The reduction, delay, or cancellation of orders from one or more of such
significant customers would have a material adverse effect on the Company's
business, financial condition and results of operations.

BACKLOG

At March 31, 1997, the Company's backlog of undelivered orders was $27.6
million (approximately 63% of which is expected to be delivered during fiscal
1997) compared with $7.3 million at March 31, 1996. The Company records an order
in backlog when it receives a firm contract or purchase order which identifies
product quantities, sales price and delivery dates. Backlog represents the
amount of unrecorded

42
<PAGE>
revenue on undelivered orders and a percentage of revenues from sales of
products that have been shipped but have not been accepted by the customer. The
Company's backlog at any given time is not necessarily indicative of future
period revenues. While from time to time a substantial portion of the Company's
backlog has been comprised of large orders, the cancellation of any of which
could have a material adverse effect on the Company's operating results, the
Company to date has not experienced significant changes in its backlog from
cancellations or revisions of orders. See "Risk Factors--Customer
Concentration."

PRODUCT DESIGN, ASSEMBLY AND TESTING

The Company assigns a project team to each contract into which it enters.
The project team is led by a project engineer who is responsible for execution
of the project process, which includes engineering and design, assembly and
testing, installation and customer acceptance. Project teams generally consist
of between two and 10 employees and include engineers, integration specialists,
buyer-planners and an operations team. The Company's proprietary products and
system designs are utilized in the engineering and design phases of a project.
Once a system is designed, the integration specialist works with the buyer-
planner and the operations team to assure a smooth transfer from the engineering
phase to the integration phase. The integration phase consists mainly of
integration of purchased equipment, components and subsystems into a complete
functioning system. Assembly, integration and test operations are conducted on
both an automated and manual basis, depending primarily on production volume.
The Company provides facilities for complete in-plant testing of all its systems
before delivery in order to assure all performance specifications will be met
during installation at the customer's site.

The Company employs formal Total Quality Management programs and other
training programs, and has entered the International Organization of Standards
quality certification process for ISO 9001, a standard sometimes imposed by
foreign buyers, that enumerates certain requirements an organization must follow
in order to assure consistent quality in the supply of products and services.
The certification process qualifies the Company for access to virtually all
international projects, and the Company believes that this represents a
competitive advantage. The Company has designed its processes and procedures
based on ISO 9001 requirements and believes, although there can be no
assurances, that certification will be completed in a timely manner.

The Company currently procures most of the critical components and services
for its products from single or limited sources in connection with specific
contracts and does not otherwise carry significant inventories or have long-term
or exclusive supply contracts with its source vendors. The Company has from time
to time experienced delays in receiving products from certain of its vendors due
to quality control or manufacturing problems, shortages of materials or
components or product design difficulties. There can be no assurance that
similar problems will not recur or that replacement products will be available
when needed at commercially reasonable rates, or at all. If the Company were to
change certain of its vendors, the Company would be required to perform
additional testing procedures upon the components supplied by such new vendors,
which could prevent or delay product shipments. Additionally, prices could
increase significantly in connection with changes of vendors. Any inability of
the Company to obtain timely deliveries of materials of acceptable quality or
timely services, or any significant increase in the prices of materials or
services, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors--Risks of
Fixed-Price Contracts," "--Quarterly Fluctuations" and "--Dependence upon
Suppliers; Sole and Limited Sources of Supply."

RESEARCH AND DEVELOPMENT

The Company outsources much of its research and development by making
strategic investments in certain suppliers who perform research and development
for the Company. This provides the Company with a cost-effective way to develop
new technology, while minimizing its direct expenditures. The Company believes
that outsourcing research and development, where the costs are funded partially
by the investments made in its strategic suppliers, allows the Company to retain
its flexibility in developing

43
<PAGE>
solutions for its customers, while at the same time leaving open the opportunity
to develop proprietary products through its strategic supplier relationships.

The Company's internal research and development efforts generally focus on
the development of products not available from other suppliers to the industry.
Current efforts are focused on developing a compact digital earth station and
other customizable systems. Through March 31, 1997, the Company has incurred
$1.1 million in internal research and development expenses.

COMPETITION

The Company believes that its ability to compete successfully in the
satellite ground segment market is based primarily on its ability to provide a
solution which fits the customer's requirements, as well as on price,
performance, reputation of its management, on-time delivery, reliability and
customer support. The Company believes its success in the satellite-delivered
data communications services market will depend primarily on its ability to
provide prompt delivery and installation, competitive pricing, consistent and
reliable connections, and customer support.

The Company's primary competitors in the satellite ground segment market
generally fall into the following groups: (i) vertically integrated satellite
systems providers such as Nippon Electric Corporation ("NEC"), California
Microwave, Inc. ("CMI"), Scientific-Atlanta, Inc. and ComSat RSI and (ii) system
integrators such as Engineering & Technical Services and IDB Systems, a division
of LDDS Worldcom Inc. In the satellite-delivered data communications (including
Internet) services market, while the Company expects to cooperate with many
local providers, the Company may compete with other satellite communication
companies as they develop technology in this area as well as conventional
Internet services providers, such as Uunet Technology, Inc., NETCOM On-Line
Communication Services, Inc. and PSINet Inc. In addition, the Company may
compete with local governmental PTTs and other local access providers which
often have monopoly rights for certain services including telephony.

The Company anticipates that its competitors may develop or acquire products
that provide functionality that is similar to that provided by the Company's
products and that such products may be offered at a significantly lower price or
bundled with other products. In addition, current and potential competitors in
both markets have established or may establish cooperative relationships among
themselves or with third parties to increase the ability of their products and
services to address the needs of the Company's current and prospective
customers. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. Increased
competition is likely to result in price reductions, reduced gross margins and
loss of market share, any of which would have a material adverse effect on the
Company's business, results of operations and financial condition. There can be
no assurance that the Company will be able to compete successfully against
current or future competitors or that

44
<PAGE>
competitive pressures will not have a material adverse effect on the Company's
business, results of operations and financial condition.

INTELLECTUAL PROPERTY

The Company currently has two patent applications pending in the United
States and intends to seek further patents on its technology, if appropriate.
There can be no assurance that patents will issue from any of the Company's
pending or any future applications or that any claims allowed from such
applications will be of sufficient scope or strength, or be issued in all
countries where the Company's products can be sold, to provide meaningful
protection or any commercial advantage to the Company. Also, competitors of the
Company may be able to design around the Company's patents. The laws of certain
foreign countries in which the Company's products are or may be developed,
manufactured or sold may not protect the Company's products or intellectual
property rights to the same extent as do the laws of the United States and thus
make the possibility of piracy of the Company's technology and products more
likely.

The Company has filed an application for registration of Globecomm Systems
Inc. as a service mark in the United States and has filed applications for
registration of NetSat Express as a trademark and service mark in the United
States and in Singapore, the European Union and the Russian Federation and as a
trademark in Brazil, and intends to seek registration of other trademarks and
service marks in the future. There can be no assurance that registrations will
be granted from any of the Company's pending or

45
<PAGE>
future applications, or that any registrations that are granted to the Company
will prevent others from using similar trademarks and service marks in
connection with related goods and services.

GOVERNMENT REGULATION

The Company is subject to various federal laws and regulations which may
have negative effects on the Company. The operation of the teleport (a group of
transmit earth stations) that the Company intends to construct in Hauppauge, New
York, will be subject to regulation by the FCC for domestic and international
carriage and by government agencies in other countries. The Company's
transmission of voice and data for its data communications business through the
teleport must be licensed by the FCC for domestic and international service.
Additionally, a Certificate of Public Convenience and Necessity ("CPCN") must be
obtained and a tariff filed for the provision of international service.

To receive the license for domestic service, the Company must submit an
application which contains technical information about the proposed teleport and
a demonstration of the public interest aspects of the teleport, including a
shareholder list and a statement that the Company's ownership complies with the
FCC's foreign ownership restrictions for licensees. Under the FCC Rules and
Regulations, non-U.S. citizens or their representatives, foreign governments, or
corporations otherwise subject to control by non-U.S. citizens, may not own more
than 20% of a licensee directly, or, if the FCC finds it consistent with the
public interest, may not own more than 25% of the parent of a licensee. Non-U.S.
citizens may not serve as officers of a licensee or as members of a licensee's
board of directors, although the FCC may waive this requirement in whole or in
part. Failure to comply with these requirements may result in the FCC issuing an
order to the entity requiring divestiture of alien ownership to bring the entity
into compliance with the FCC Rules and Regulations. In addition, fines, a denial
of renewal or revocation of the license are possible. The Company has no
knowledge of any present foreign ownership which would result in a violation of
the FCC Rules and Regulations, but there can be no assurance that foreign
holders will not in the future hold more than 20% or 25% of the Common Stock of
the Company.

The application, if accepted for filing, is placed on public notice for 30
days. After the notice period, the FCC determines whether the application should
be granted. If the license is granted, the teleport must be constructed and made
operational within twelve months from the date of the license grant. The Company
will have to file annual reports with the FCC indicating modifications, project
status and changes in foreign ownership. The Company is in the process of
preparing the application and there can be no assurance that the FCC will grant
a license for the teleport.

With respect to international service, the Company must submit an
application to the FCC for a CPCN which is placed on public notice and, if no
comments are received, automatically granted on the 36th day following
publication. The Company will also be required to file and maintain tariffs
containing the specific rates, terms and conditions applicable to its services.
The tariffs can become effective one day after public notice of grant of the
CPCN. No assurance can be given that the Company will receive a CPCN or
successfully file and maintain its tariff.

46
<PAGE>
these regulatory schemes will not prevent the Company from pursuing its business
plan, there can be no assurance such licenses and approvals are or will remain
sufficient in the view of foreign regulatory authorities, or that necessary
licenses and approvals will be granted on a timely basis in all jurisdictions in
which the Company wishes to offer its services or that restrictions applicable
thereto will not be unduly burdensome.

The Company's Internet operations (other than the operation of a teleport)
are not currently subject to direct government regulation in most countries, and
there are currently few laws or regulations directly applicable to access to or
commerce on the Internet. However, due to the increasing popularity and use of
the Internet, it is likely that a number of laws and regulations may be adopted
at the local, national or international levels with respect to the Internet,
covering issues such as user privacy and expression, pricing of products and
services, taxation, advertising, intellectual property rights, information
security or the convergence of traditional communication services with Internet
communications. For example, the Telecommunications Act of 1996 (the
constitutionality of certain portions of which is currently under challenge) was
recently enacted in the United States, and imposes criminal penalties via the
Communications Decency Act (or "CDA") on anyone who distributes obscene,
lascivious or indecent communications over the Internet. It is anticipated that
a substantial portion of the Company's Internet operations will be carried out
in countries which may impose greater regulation of the content of information
coming into the country than that which is generally applicable in the United
States. To the extent that the Company provides content as a part of its
Internet services, it will be subject to any such laws regulating content.
Moreover, the adoption of any such laws or regulations may decrease the growth
of the Internet, which could in turn decrease the demand for the Company's
Internet services or increase the Company's cost of doing business or in some
other manner have a material adverse effect on the Company's business, operating
results and financial condition. In addition, the applicability to the Internet
of existing laws governing issues such as property ownership, copyrights and
other intellectual property issues, taxation, libel and personal privacy is
uncertain. The vast majority of such laws were adopted prior to the advent of
the Internet and related technologies and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. Changes to
such laws intended to address these issues, including some recently proposed
changes, could create uncertainty in the marketplace which could reduce demand
for the Company's services, could increase the Company's cost of doing business
as a result of costs of litigation or increased product development costs, or
could in some other manner have a material adverse effect on the Company's
business, financial condition and results of operations.

EMPLOYEES

As of March 31, 1997, the Company had 79 full-time employees, including 39
in engineering and program management, 14 in the manufacturing and manufacturing
support group, 11 in sales and marketing, and 15 in management and
administration. The Company's employees are not covered by any
collective-bargaining agreements. The Company believes that its relations with
its employees are good.

FACILITIES

The Company's principal offices and production facilities are currently
located in approximately 20,000 square feet of space in an industrial facility
located at 375 Oser Avenue, Hauppauge, New York.

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<PAGE>

The Company leases the space under an agreement which terminates on November 30,
1998 with a base rent of $105,000 per year. In December 1996, the Company
purchased 121,830 square feet of space in a facility in Hauppauge on 7.2 acres
where the Company intends to move its principal offices and production
facilities by June 1997. The Company has a one-year lease on office space in
Hong Kong at a monthly rental fee (including maintenance fees) of approximately
$3,000. The Company also leases office space in the Atlanta, Georgia, area under
a three-year lease at an initial base monthly rent of $1,750, which rental
amount increases in years two and three of the lease and is currently $1,820 per
month. NetSat's principal offices are located in approximately 3,000 square feet
of space located at 400 Oser Avenue, Hauppauge, New York, which NetSat leases on
a month-to-month basis, at a monthly rent of $2,500.

LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings.

48
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES

The directors, executive officers and other key employees of the Company are
as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>

David E. Hershberg................................... 59 Chief Executive Officer and Chairman of the Board of
Directors

Kenneth A. Miller.................................... 52 President and Director

Thomas A. DiCicco.................................... 46 Vice President--Government Systems, Corporate
Secretary and Director

Donald G. Woodring................................... 49 Vice President--Network and Systems Analysis and
Director

Stephen C. Yablonski................................. 50 Vice President--Commercial Systems and Director

Ray Stuart........................................... 59 Vice President--International Marketing

Paul J. Johnson...................................... 41 Vice President--Contracts

Andrew C. Melfi...................................... 43 Chief Financial Officer

Gerald A. Gutman..................................... 54 President--NetSat Express

Gary C. Gomes........................................ 51 Executive Vice President--NetSat Express

Herman Fialkov(1).................................... 75 Director

Shelley A. Harrison.................................. 54 Director

Benjamin Duhov....................................... 69 Director

C.J. Waylan(1)....................................... 55 Director
</TABLE>

- ------------------------

(1) Member of the Audit Committee and the Compensation Committee.

DAVID E. HERSHBERG founded the Company in 1994 and has served as Chief
Executive Officer and Chairman of the Board of Directors since its inception.
From 1976 to 1994, Mr. Hershberg was the President of Satellite Transmission
Systems, Inc. ("STS"), a provider of satellite ground segment systems and
networks, which he founded and which became a subsidiary of CMI. From 1990 to
1994, Mr. Hershberg also served as Group President of the Satellite
Communications Group of CMI, where he also had responsibility for EFData, Inc.,
a manufacturer of satellite communications modems and for Viasat Technology
Corp. ("Viasat"), a manufacturer of communications systems which specialized in
portable and mobile satellite communications equipment. Mr. Hershberg headed the
Space Communications division of ITT Corporation from 1968 to 1972, and the
Systems Division of Comtech Systems, Inc. ("Comtech") from 1972 to 1976. Mr.
Hershberg is a Director of Primus Telecommunications Group, Incorporated
("Primus"), a telecommunications company providing long distance services. He
holds a B.S.E.E. from Rensselaer Polytechnic Institute, an M.S.E.E. from
Columbia University and an M.S. in Management Science from Stevens Institute of
Technology.

KENNETH A. MILLER has served as President and a Director since joining the
Company in November 1994. From 1978 to 1994, he held various positions with STS,
and succeeded Mr. Hershberg as President of that company in 1994. During his
tenure at STS, Mr. Miller developed and implemented satellite communications
systems and networks for customers in the United States and overseas. Prior to
his employment at

49
<PAGE>
STS, Mr. Miller was Manager of Satellite Systems at Comtech and a Satellite
Communications Staff Officer with the United States Army. Mr. Miller holds an
M.B.A. from Hofstra University and a B.S.E.E. from the University of Michigan.

THOMAS A. DICICCO has served as Vice President--Government Systems,
Corporate Secretary and a Director since joining the Company in October 1994.
From 1988 to 1994, he was employed by STS, most recently as Senior Director. He
was Vice President of Engineering at Comtech from 1979 to 1988 and was employed
by the AIL Division of Cutler Hammer from 1970 to 1979. Mr. DiCicco holds a
B.S.E.E. from Hofstra University and an A.S. in Engineering Science from SUNY at
Farmingdale.

DONALD G. WOODRING has served as Vice President--Network and Systems
Analysis and a Director since joining the Company in October 1994. From 1982 to
1994, he was Assistant Vice President for System Analysis at STS. From 1980 to
1982, he was employed by the SHAPE Technical Center and from 1972 to 1980 was
employed by the U.S. Department of Defense. Mr. Woodring holds a B.S. from Penn
State University and an M.S.E.E. from Catholic University.

STEPHEN C. YABLONSKI has served as Vice President--Commercial Systems and a
Director since joining the Company in April 1995. From 1988 to 1995, he was
employed by STS, most recently as Vice President and General Manager of the
Commercial Systems and Networks Division. Prior to that he was Vice President of
Engineering at Argo Communications, a telecommunications services provider. Mr.
Yablonski holds a B.S.E.E. from Brown University and an M.S.E.E. from the
University of Pennsylvania.

RAY STUART has served as Vice President--International Marketing since
joining the Company in July 1995. From 1989 to 1995, he was employed by Comsat
RSI, a satellite communications equipment supplier, most recently as Vice
President of Business Development. Mr. Stuart holds a B.S.E.E. from Mississippi
State University.

PAUL J. JOHNSON has served as Vice President--Contracts since joining the
Company in October 1996. From 1991 to 1996, he was Director of Contracts for
STS. He holds a B.B.A. from St. Bonaventure University.

ANDREW C. MELFI has served as Chief Financial Officer since joining the
Company in January 1996. From 1982 to 1995 he was the Controller of STS. From
1980 to 1982, he was the Assistant Controller of Dorne and Margolin, Inc., a
designer and manufacturer of antennas. Mr. Melfi holds an M.B.A. and a B.B.A. in
accounting from Dowling College.

GERALD A. GUTMAN has served as President of NetSat since July 1996. From
February 1996 to June 1996, he served as a consultant to the Company. In 1987,
he founded Viasat, where he served as Chief Executive Officer from 1987 to 1995.
From 1977 to 1987, Mr. Gutman served as President and Chief Executive Officer of
Nav-Com Incorporated, a satellite communications company providing
communications services to the maritime industry. Mr. Gutman has served as
Chairman of the COMSAT Manufacturer's Advisory Committee to Inmarsat, Vice
Chairman of the Mobile Satellite User's Association and as President of the
National Marine Electronics Association. He holds a B.B.A. in Marketing from
Hofstra University.

GARY C. GOMES has served as Executive Vice President of NetSat since January
1997 and he served as Vice President of the Company from September 1995 to
December 1996. From October 1994 to September 1995, Mr. Gomes served as a
consultant to the Company. Prior to that, he was Senior Vice President of
Marketing at STS, where he was employed from March 1983 to September 1995. From
1971 to 1981, he was employed by Fairchild Industries, Inc., a provider of
services to the aerospace industry. Mr. Gomes holds a B.A. in Mathematics and
Economics from California Western University, an M.S.I.A. from Carnegie Mellon's
Graduate School of Industrial Administration and a J.D. from the Law School of
the University of Pennsylvania.

HERMAN FIALKOV has served as a Director of the Company since January 1995.
In 1968, Mr. Fialkov started the venture capital firm of Geiger & Fialkov and
has been involved in venture investments since

50
<PAGE>
that time. He has been a General Partner of PolyVentures Associates, L.P., a
high technology venture capital fund ("PolyVentures Associates") since 1987.
From 1972 to 1983, he was President and later Chairman of Standard Microsystems
Corporation, a manufacturer and provider of large-scale integrated circuits and
local area network products, and is currently a Director of that company. He
also is a Director of Primus and a Trustee of Polytechnic University. Mr.
Fialkov holds a B.Ad.E. from New York University.

SHELLEY A. HARRISON has been a Director of the Company since July 1995.
Since 1987, Dr. Harrison has been a Managing General Partner of PolyVentures
Associates. He currently serves as Chairman and Chief Executive Officer of
Spacehab, Inc., which develops, owns and operates habitable modules that provide
space-based laboratory research facilities and logistics aboard the United
States space shuttle fleet. In 1973, Dr. Harrison co-founded Symbol Technologies
Inc., a leading provider of bar code laser scanners and portable terminals,
where he served as Chairman and Chief Executive Officer until 1982. As President
of Harrison Enterprise, from 1982 to 1986, he managed venture financing and
technology start-ups. Dr. Harrison also is a Director of NetManage, Inc., a
software company specializing in personal information management and Internet
applications, and several privately held high technology portfolio companies in
the information, software, and telecommunications industries. He is Chairman of
the Board of Trustees of the New York State Center for Advanced Technology in
Telecommunications and a Trustee of Polytechnic University. He holds a B.S.E.E.
from New York University and an M.S. and a Ph.D. in Electrophysics from
Polytechnic University.

BENJAMIN DUHOV has been a Director of the Company since January 1996. He is
a Consultant and the President of Stamford Consulting Group which provides
consulting services to the aerospace industry. He worked for Thomson-CSF S.A.
from June 1975 to October 1993, and for CBS Laboratories, which was devoted to
technical developments in the television and defense industries, from 1972 to
1975. Mr. Duhov holds a B.S.E.E. from Washington University.

C. J. WAYLAN has been a Director of the Company since January 1997. He
currently serves as Executive Vice President of NextWave Telecom Inc.
("NextWave"), a provider of wireless personal telecommunications services. Prior
to joining NextWave in 1996, Dr. Waylan worked for GTE Corporation from February
1981 to April 1996, where he served as Executive Vice President for GTE Mobilnet
and President of GTE Spacenet Corporation. Dr. Waylan also is a Director of
Stanford Telecommunications, Inc., a communications technology company. Dr.
Waylan holds a B.S. from the University of Kansas and an M.S.E.E. and a Ph.D.
from the Naval Post Graduate School.

Messrs. Hershberg, DiCicco and Woodring were elected to the Board of
Directors pursuant to a voting agreement among certain stockholders of the
Company. This agreement will terminate upon the consummation of this Offering.

Mr. Duhov was elected to the Board of Directors pursuant to an agreement
between Thomson and the Company which grants Thomson the right to designate one
nominee for election to the Company's Board of Directors. This right terminates
if Thomson's stock ownership falls below 5% of the outstanding share capital of
the Company as a result of Thomson selling or otherwise disposing of a portion
of its shares.

Dr. Harrison was elected to the Board of Directors pursuant to an agreement
between PolyVentures II, Limited Partnership ("PolyVentures") and the Company.
This agreement will terminate upon the consummation of this Offering.

All directors hold office until the next annual meeting of stockholders or
until their successors have been duly elected and qualified. All officers of the
Company are elected to serve in such capacities at the pleasure of the Board of
Directors. There are no family relationships among any of the directors and
executive officers of the Company.

The Audit Committee of the Board of Directors reviews, acts on and reports
to the Board of Directors with respect to various auditing and accounting
matters, including the selection of the Company's auditors,

51
<PAGE>
the scope of the annual audits, fees to be paid to the auditors, the performance
of the Company's independent auditors and the accounting practices of the
Company.

The Compensation Committee of the Board of Directors determines the salaries
and incentive compensation of the officers of the Company and provides
recommendations for the salaries and incentive compensation of the other
employees and the consultants of the Company. The Compensation Committee also
administers various incentive compensation, stock and benefit plans.

DIRECTORS' COMPENSATION

Each of Messrs. Fialkov and Waylan receives a director's fee of $500 per
month. Other directors do not receive any cash compensation for their service as
members of the Board of Directors, although they are reimbursed for certain
expenses incurred in connection with attendance at Board and Committee meetings.
Currently, PolyVentures, with whom Dr. Harrison is affiliated, and Mr. Fialkov
have each been granted options to purchase 42,750 shares of Common Stock at an
exercise price of $3.51 per share. Mr. Waylan has been granted an option to
purchase 42,750 shares of Common Stock at an exercise price of $8.07 per share.
In addition, in February 1997, the Company adopted the 1997 Stock Incentive Plan
pursuant to which options will be granted to new non-employee directors of the
Company. See "1997 Stock Incentive Plan."

52
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation paid
by the Company for services rendered during the fiscal year ended June 30, 1996
to: (i) the Company's Chief Executive Officer and (ii) all of the other
executive officers whose base salary during fiscal 1996 was in excess of
$100,000 (together, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE(1)(2)

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -------------
COMPENSATION SECURITIES
------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY OPTIONS COMPENSATION(3)
- ------------------------------------------------------------------ ------------- ------------- -----------------
<S> <C> <C> <C>
David E. Hershberg,
Chairman and Chief Executive Officer............................ $ 165,006 -- $ 2,350
Kenneth A. Miller,
President....................................................... 159,994 68,400 6,500
Stephen A. Yablonski,
Vice President--Commercial Systems.............................. 119,995 22,800 --
Ray Stuart,
Vice President--International Marketing......................... 128,797(4) 55,219 --
</TABLE>

- ------------------------

(1) Other compensation in the form of perquisites and other personal benefits
has been omitted as the aggregate amount of such perquisites and other
personal benefits constituted the lesser of $50,000 or 10% of the total
annual salary and bonus of the Named Executive Officer for such year. The
Company did not award a bonus to any of its executive officers during fiscal
1996.

(2) Does not include summary compensation information for Gerald A. Gutman,
President--NetSat, who was retained on July 1, 1996 at an annual salary of
$100,000 per year.

(3) Includes annual registrant contributions to the Company's 401(k) plan.

(4) Includes $34,893 paid to Mr. Stuart as a consulting fee.

STOCK OPTION GRANTS

The following table sets forth certain information regarding the option
grants made pursuant to the Company's Incentive Stock Option Plan during fiscal
1996 to each of the Named Executive Officers. The Company has never granted any
stock appreciation rights.

OPTION GRANTS IN LAST FISCAL YEAR(1)

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
NUMBER OF APPRECIATION FOR
SECURITIES PERCENTAGE OF OPTION TERM(3)
UNDERLYING OPTIONS TOTAL OPTIONS EXERCISE EXPIRATION ----------------------
NAME GRANTED GRANTED(2) PRICE DATE 5% 10%
- -------------------------- ------------------- ----------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David E. Hershberg........ -- -- -- -- -- --
Kenneth A. Miller......... 68,400 9.4% $ 4.68 03/14/06 $ 201,096 $ 510,264
Stephen C. Yablonski...... 22,800 3.1 4.68 03/14/06 67,032 170,088
Ray Stuart................ 40,969(4) 5.6 4.68 07/07/05 120,448 305,628
14,250 2.0 4.68 03/14/06 41,895 106,305
</TABLE>

- ------------------------

(1) All option grants to employees of the Company vest in four equal annual
installments commencing one year after the date of the option grant.

(2) Based on an aggregate of 730,384 options granted to employees in fiscal
1996, including options granted to the Named Executive Officers.

53
<PAGE>
(3) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the ten-year option term. The assumed 5%
and 10% rates of stock appreciation are mandated by rules of the Securities
and Exchange Commission and do not represent the Company's estimate of the
future market price of the Common Stock.

(4) These options replace 35,625 options originally granted to Mr. Stuart on
July 7, 1995, which had an exercise price of $3.51 per share.

No options were exercised by the Named Executive Officers in 1996. The
following table sets forth, for each of the Named Executive Officers, certain
information concerning the value of unexercised options at the end of fiscal
1996.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED NET VALUES OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS(1)
-------------------------- ------------------------------
<S> <C> <C> <C> <C>
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------------- ----------- ------------- ------------- ---------------
David E. Hershberg..................................... -- -- -- --
Kenneth A. Miller...................................... -- 68,400 -- $0
Stephen C. Yablonski (2)............................... 29,498 111,292 $0 0
Ray Stuart............................................. 10,243 44,976 0 0
</TABLE>

- ------------------------

(1) Based on the estimated fair value of the Company's Common Stock at the end
of fiscal year 1996 valued at $4.68 per share (as determined by the
Company's Board of Directors), less the exercise price payable for such
shares. If the initial public offering price of $ is used in this
calculation instead of the fair market value of the shares at the end of
fiscal year 1996, the value for Mr. Miller becomes $ , the values for
Mr. Yablonski become $ and $ , and the values for Mr. Stuart
become $ and $ .

(2) Includes 117,990 options which replace 102,600 options originally granted to
Mr. Yablonski on May 5, 1995, which had an exercise price of $3.51 per
share.

1997 STOCK INCENTIVE PLAN

The Company's 1997 Stock Incentive Plan (the "1997 Plan") is intended to
serve as the successor equity incentive program to the Company's Incentive Stock
Option Plan and Director Stock Option Plan (the "Predecessor Plans"). The 1997
Plan was adopted by the Board of Directors on February 26, 1997, subject to
stockholder approval. 2,280,000 shares of Common Stock have been initially
authorized for issuance under the 1997 Plan. This share reserve is comprised of
(i) the shares which remained available for issuance under the Predecessor
Plans, including the shares subject to outstanding options thereunder, plus (ii)
an additional increase of 285,000 shares. This initial share reserve will
increase on the first trading day of each calendar year beginning with the 1998
calendar year by one percent (1%) of the aggregate shares of Common Stock
outstanding on the last business day of the preceding calendar year. However, in
no event may any one participant in the 1997 Plan receive option grants or
direct stock issuances for more than 1,425,000 shares in the aggregate per
calendar year.

Outstanding options under the Predecessor Plans will be incorporated into
the 1997 Plan upon the date of this Offering, and no further option grants will
be made under the Predecessor Plans. The incorporated options will continue to
be governed by their existing terms, unless the Plan Administrator elects to
extend one or more features of the 1997 Plan to those options. However, except
as otherwise noted below, the outstanding options under the Predecessor Plans
contain substantially the same terms and conditions summarized below for the
Discretionary Option Grant Program in effect under the 1997 Plan.

The 1997 Plan is divided into five separate components: (i) the
Discretionary Option Grant Program, (ii) the Salary Investment Option Grant
Program, (iii) the Stock Issuance Program, (iv) the Automatic Option Grant
Program and (v) the Director Fee Option Grant Program.

54
<PAGE>
The Discretionary Option Grant, Salary Investment Option Grant and Stock
Issuance Programs will be administered by the Compensation Committee. The
Compensation Committee as Plan Administrator will have complete discretion to
determine which eligible individuals are to receive option grants or stock
issuances, the time or times when such option grants or stock issuances are to
be made, the number of shares subject to each such grant or issuance, the status
of any granted option as either an incentive stock option or a non-statutory
stock option under the Federal tax laws, the vesting schedule to be in effect
for the option grant or stock issuance and the maximum term for which any
granted option is to remain outstanding.

Under the Discretionary Option Grant Program, eligible individuals may, at
the discretion of the Plan Administrator, be granted options to purchase shares
of Common Stock at an exercise price not less than 85% of their fair market
value on the grant date.

Stock appreciation rights are authorized for issuance under the
Discretionary Option Grant Program which provide the holders with the election
to surrender their outstanding options for an appreciation distribution from the
Company equal to the excess of (i) the fair market value of the vested shares of
Common Stock subject to the surrendered option over (ii) the aggregate exercise
price payable for such shares. Such appreciation distribution may be made in
cash or in shares of Common Stock.

The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program (including
options incorporated from the Predecessor Plans) in return for the grant of new
options for the same or different number of option shares with an exercise price
per share based upon the fair market value of the Common Stock on the new grant
date.

Under the Stock Issuance Program, eligible individuals may, in the Plan
Administrator's discretion, be issued shares of Common Stock directly, through
the purchase of such shares at a price not less than 85% of their fair market
value at the time of issuance or as a bonus tied to the performance of services.

In the event that there is a change in control of the Company (including the
acquisition of more than 35% of the outstanding voting stock), each outstanding
option under the Discretionary Option Grant Program will automatically
accelerate in full, and all unvested shares under the Stock Issuance Program
will immediately vest. Options currently outstanding under the Incentive Stock
Option Plan will accelerate upon an acquisition of the Company by merger or
asset sale, but such options are not subject to acceleration upon a hostile
change in control of the Company. Options currently outstanding under the
Director Stock Option Plan accelerate upon the optionee's retirement, disability
or death, or if the Company executes an agreement pursuant to which the Company
is acquired by merger or asset sale or an acquisition (or increase in ownership)
by any person to more than 20% of the outstanding voting stock.

Under the Salary Investment Option Grant Program, selected executive
officers and other highly compensated employees may elect to have a portion of
their base salary invested each year in special option grants. The Plan
Administrator will have the discretion to determine the calendar years for which
the program is to be in effect and to select the individuals eligible to
participate in the program. For each year the Plan Administrator elects to
activate the Salary Investment Option Grant Program, each individual selected
for participation may elect, prior to the start of the calendar year, to reduce
his base salary for that calendar year by a specified dollar amount not less
than $5,000 nor more than $50,000. In return, the officer will automatically be
granted, on or before the last trading day in January of the calendar year for
which the salary reduction is to be in effect, a non-statutory option to
purchase that number of shares of Common Stock determined by dividing the salary
reduction amount by two-thirds of the fair market value per share of Common
Stock on the grant date. The option will be exercisable at a price per share
equal to one-third of the fair market value of the option shares on the grant
date. As a result, the built-in gain on the option at the time of grant will be
equal to the salary reduction amount. The option will vest in a series of 12
equal monthly installments over the calendar year for which the salary reduction
is in effect and will be subject to full and immediate vesting upon certain
changes in the ownership or control of the Company.

55
<PAGE>
Under the Automatic Option Grant Program, each individual who first becomes
a nonemployee Board member on or after the date the Underwriting Agreement for
this Offering is executed will receive an option grant on such date for 15,000
shares of Common Stock, provided such individual has not otherwise been in the
prior employ of the Company and provided he is not serving as a member of the
Board pursuant to contractual rights granted to certain groups of stockholders
in connection with their purchase of stock in the Company.

Each automatic grant will have a term of 10 years, subject to earlier
termination following the optionee's cessation of Board service. Each option
will be exercisable for those option shares which have vested. During the period
of service as a member of the Board, each 15,000-share grant will vest to the
extent of one-third of the number of shares granted thereby (5,000 shares), on
the first anniversary of the date of grant, and cumulatively to the extent of an
additional one-third, on each of the next two succeeding anniversaries, so that
on the third anniversary of the date of grant (provided service as a Board
member has continued throughout the period), the options granted to any Eligible
Director will be fully vested. However, each outstanding option will immediately
vest upon: (i) certain changes in the ownership or control of the Company or
(ii) the death or disability of the optionee while serving as a Board member.

Under the Director Fee Option Grant Program, nonemployee Board members may
elect to have all or any portion of any annual retainer fee otherwise payable in
cash applied to a special option grant. Each member who elects, prior to the
start of a calendar year, to apply all or any portion of his retainer fee for
that calendar year to the acquisition of an option will automatically be
granted, on the first trading day in the calendar year for which the salary
reduction is to be in effect, a non-statutory option to purchase that number of
shares of Common Stock determined by dividing the amount of the retainer fee
subject to the election by two-thirds of the fair market value per share of
Common Stock on the grant date. The option will be exercisable at a price per
share equal to one-third of the fair market value of the option shares on the
grant date. As a result, the built-in gain on the option at the time of grant
will be equal to the amount of the retainer fee subject to the election. The
option becomes exercisable for 50% of the option shares upon completion of six
(6) months of Board service in the calendar year for which the election is in
effect and the balance of the shares will become exercisable in a series of six
(6) equal monthly installments upon completion of each additional month of Board
service during that calendar year. The option will be subject to full and
immediate vesting upon certain changes in the ownership or control of the
Company.

The Board may amend or modify the 1997 Plan at any time. The 1997 Plan will
terminate on February 25, 2007, unless sooner terminated by the Board.

EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS

The Company has entered into three-year employment agreements with each of
Messrs. Hershberg and Miller as of January 27, 1997 (the "Executive
Agreements"). Messrs. Hershberg and Miller are required to devote their
full-time efforts to the Company as Chairman of the Board and Chief Executive
Officer, and as President, respectively. The Company is required to compensate
Messrs. Hershberg and Miller at annual rates of $165,000 and $160,000,
respectively (which amounts are reviewed annually by the Board of Directors and
are subject to increase at their discretion). Messrs. Hershberg and Miller are
entitled to all employee benefits generally made available to executive
officers. If the Company terminates the Executive Agreements other than for
disability or cause, the Company will have the following obligations: (i) if the
termination is after the end of the initial three-year term, the Company must
pay the terminated executive one-twelfth of his then applicable base salary as
severance pay and (ii) if the termination is before the end of the initial
three-year term, the Company must pay to the terminated executive, as they
become due, all amounts otherwise payable if he had remained employed by the
Company until the end of the third year of the Executive Agreements. If their
employment is terminated other than for cause following a change of control of
the Company, each of Messrs. Hershberg and Miller will be entitled to receive:
(i) a cash payment equal to three times his respective annual base salary plus
fringe benefits and bonus, (ii) a cash payment equal to three times the
Company's 401(k) contribution for

56
<PAGE>
such executive and (iii) medical benefits for one year for the executive and his
dependents. In addition, all stock options will become immediately exercisable
upon a change of control. The definition of "change in control" in the Executive
Agreements is the same as in the 1997 Plan.

The Compensation Committee as Plan Administrator of the 1997 Plan will have
the authority to provide for the accelerated vesting of the shares of Common
Stock subject to outstanding options held by any executive officer or the shares
of Common Stock subject to direct issuances held by any such individual, in
connection with certain changes in control of the Company or the subsequent
termination of the executive officer's employment following the change in
control.

401(K) PLAN

The Company participates in a tax-qualified employee savings and retirement
plan (the "401(k) Plan") which covers all of the Company's employees with one
(1) month of service before the end of the preceding quarter who are at least 21
years of age. Pursuant to the 401(k) Plan, employees may elect to reduce their
current compensation by up to 20% and have the amount of such reduction
contributed to the 401(k) Plan. The Company matches 100% of the first 4% of such
contributions. In addition, the 401(k) Plan provides for discretionary
profit-sharing contributions in an amount determined each year by the Board of
Directors. The Company has not made any such discretionary profit-sharing
contributions under the Plan to date. The 401(k) Plan further provides for
additional voluntary contributions (which are made on an after-tax basis) by
Plan participants. The 401(k) Plan is intended to qualify under Section 401 of
the Internal Revenue Code of 1996, as amended, so that salary reduction
contributions by employees, matching or profit-sharing contributions by the
Company, and income earned on plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that contributions by the Company
will be deductible by the Company when made. The Trustees under the 401(k) Plan,
at the direction of each participant, invest the assets of the 401(k) Plan in
one or more of several investment options.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

As of the date of this Prospectus, the Company's Compensation Committee
consists of Mr. Fialkov and Dr. Waylan. Prior to this time, effective September
19, 1996, the Board elected a Compensation Committee consisting of Messrs.
Hershberg and Fialkov and Dr. Harrison. From February 21, 1995 to September 18,
1996, the Compensation Committee consisted of Mr. Fialkov and Mr. Andrew B.
Krieger (who is no longer a Director of the Company). Prior to that time,
decisions concerning the compensation of executive officers were made by the
entire Board of Directors. Certain members of the Company's Board of Directors
are parties to transactions with the Company. See "Certain Transactions."

KEY-PERSON LIFE INSURANCE

The Company maintains key-person life insurance policies on the life of Mr.
Hershberg in the amount of $1.0 million and on the lives of Messrs. Miller,
DiCicco, Woodring, Yablonski and Melfi in the amount of $500,000 for each.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company's Certificate of Incorporation provides that, except to the
extent prohibited by the Delaware General Corporation Law (the "Delaware Law"),
its directors shall not be personally liable to the Company or its stockholders
for monetary damages for any breach of fiduciary duty as directors of the
Company. Under Delaware law, the directors have a fiduciary duty to the Company
which is not eliminated by this provision of the Certificate of Incorporation
and, in appropriate circumstances, equitable remedies such as injunctive or
other forms of nonmonetary relief will remain available. In addition, each
director will continue to be subject to liability under Delaware law for breach
of the director's duty of loyalty to the Company, for acts or omissions which
are found by a court of competent

57
<PAGE>
jurisdiction to be not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are prohibited by Delaware law. This provision also does not
affect the directors' responsibilities under any other laws, such as the Federal
securities laws or state or Federal environmental laws. The Company has obtained
liability insurance for its officers and directors.

Section 145 of the Delaware Law empowers a corporation to indemnify its
directors and officers and to purchase insurance with respect to liability
arising out of their capacity or status as directors and officers, provided that
this provision shall not eliminate or limit the liability of a director: (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) arising under
Section 174 of the Delaware Law or (iv) for any transaction from which the
director derived an improper personal benefit. The Delaware Law provides further
that the indemnification permitted thereunder shall not be deemed exclusive of
any other rights to which the directors and officers may be entitled under the
corporation's bylaws, any agreement, vote of stockholders or otherwise. The
Company's Certificate of Incorporation eliminates the personal liability of
directors to the fullest extent permitted by Section 102(b)(7) of the Delaware
Law and provides that to the fullest extent permitted by law, the Corporation
shall fully indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
(whether civil, criminal, administrative or investigative) by reason of the fact
that such person is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Certificate of Incorporation. The Company is not
aware of any threatened litigation or proceeding that may result in a claim for
such indemnification.

58
<PAGE>
CERTAIN TRANSACTIONS

In October 1994, the Company's Chief Executive Officer lent the Company
$315,000, evidenced by a note bearing interest at 6% per annum. The principal
plus accrued interest in the aggregate amount of $354,423 was repaid in January
1997. During fiscal year 1995, the Chief Executive Officer lent the Company
$80,700 in noninterest-bearing working capital advances of which $60,000 was
repaid during fiscal 1995 and the remaining $20,700 balance was repaid during
fiscal 1996.

In December 1995, the Company lent Donald Woodring, an executive officer of
the Company, $150,000 to cover relocation expenses, repayable June 30, 1997 with
an annual interest rate of 5% per annum. Mr. Woodring has paid all interest on
the loan as it has become due. As of March 31, 1997, the aggregate amount
outstanding on the note was $150,000.

In June 1995, the Company issued an aggregate of 1,218,982 shares of Common
Stock to various investors at a purchase price of $4.68 per share, including
106,901 shares to PolyVentures, a venture capital firm affiliated with Shelley
A. Harrison, a Director of the Company. In connection with the June 1995
offering, the Company sold to PolyVentures for a purchase price of $3,751 a
five-year warrant to purchase an additional 106,901 shares of the Company's
Common Stock at an exercise price of $5.26 per share. In January 1997,
PolyVentures exercised its warrant and the Company issued to PolyVentures
106,901 shares of its Common Stock.

In May 1996, the Company issued an aggregate of 156,250 shares of Class A
Convertible Preferred Stock (the "Class A Stock") at an aggregate purchase price
of $2.5 million to three investors, including 31,250 shares to PolyVentures,
convertible automatically upon the closing of this Offering into an aggregate of
445,313 shares of Common Stock.

In December 1996, the Company issued an aggregate of 432,142 shares of Class
B Convertible Preferred Stock (the "Class B Stock") at an aggregate purchase
price of $12.1 million to 77 investors, convertible automatically upon the
closing of this Offering into an aggregate of 1,231,605 shares of Common Stock.

In connection with the June 1995 and December 1996 private placements, the
Company engaged Northeast Securities, Inc. ("NSI") to serve as the placement
agent. Mr. Andrew B. Krieger, a former director of the Company, served as a
broker-dealer in the private placements through an affiliation with NSI. In
connection with these offerings, the Company paid Krieger Associates, of which
Mr. Krieger is the President and Chief Executive Officer, cash commissions
totaling an aggregate of $1,330,428. In addition, in connection with these
transactions, the Company has agreed to pay Krieger Associates further cash
commissions totaling an aggregate of $432,000, to be paid in monthly
installments over a 36-month period, of which the Company has paid $12,000 to
date. The Company also has retained Krieger Associates to perform certain
financial and other consulting services and to date has paid a total of
approximately $116,000 for the performance of such services since February 1995.
In addition, in connection with these private placements, the Company issued an
aggregate of 156,488 shares of Common Stock and 52,438 shares of Class B Stock,
convertible automatically upon the closing of this Offering into an aggregate of
149,448 shares of Common Stock, to Mr. Krieger, Krieger Associates, NSI and
certain individuals and entities designated by NSI or Mr. Krieger.

The shares of Common Stock issued in the June 1995 private placement and the
shares of Common Stock issued upon conversion of the Class A and Class B
Convertible Preferred Stock are entitled to certain registration rights. See
"Registration Rights of Certain Holders" and "Shares Eligible for Future Sale."

In November 1995, Thomson purchased 199,500 shares of the Company's Common
Stock at a price of $4.68 per share. Under the agreement with Thomson, Thomson
was granted certain preemptive and other rights regarding future issuances of
securities of the Company including (i) a preemptive right to purchase up to 15%
of the total number of securities offered in any public offering undertaken by
the Company and

59
<PAGE>

(ii) the right to participate in any private offering to the extent required to
maintain its percentage ownership in the Company as well as the right to
nominate a director to the Board of Directors. These rights survive for so long
as Thomson's stock ownership does not fall below 5% of the outstanding share
capital of the Company as a result of Thomson selling or otherwise disposing of
a portion of its shares. In connection with its preemptive right, Thomson has
expressed its intention to purchase shares being offered in this
Offering which will enable it to maintain its percentage ownership of the
Company. Additionally, until May 1998, Thomson is to receive additional shares
of Common Stock based on orders placed with the Company. Pursuant to this
agreement, in November 1995, for its first $1.5 million of orders, the Company
issued Thomson 37,147 shares of the Company's Common Stock which was equal to 1%
of the Company's Common Stock then outstanding. For each of its next four orders
of at least $3.0 million, Thomson is to receive an additional 1% of the
Company's then outstanding share capital (measured at the time of issuance). In
August 1996, the Company issued Thomson 16,054 shares of the Company's Class A
Stock, at a purchase price of $16.00 per share, convertible automatically upon
the closing of this Offering into an aggregate of 45,754 shares of Common Stock,
pursuant to the rights of first refusal granted by the Company to Thomson.

On July 1, 1996, the Company hired Donald Gutman, the brother of an
executive officer of the Company, as the Company's Director of Engineering at an
annual salary of $80,000 plus a standard benefit package.

In October 1996, PolyVentures purchased 18,939 shares of NetSat's Class A
Preferred Stock which in April 1997 the Company converted to 30,082 shares of
the Company's Common Stock.

From August 17, 1994 through March 31, 1997, the Company granted executive
officers and directors of the Company and employees, some of whom are immediate
family members of the Company's executive officers, a total of 909,079 stock
options for the purchase of the Company's Common Stock with exercise prices
ranging from $4.68 to $8.07 per share. See "Management--1997 Stock Incentive
Plan."

60
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth, as of April 15, 1997, certain information
with respect to the beneficial ownership of shares of Common Stock of: (i) all
stockholders known by the Company to be the beneficial owners of more than 5% of
its outstanding Common Stock, (ii) each director of the Company and each Named
Executive Officer and (iii) all directors and executive officers of the Company
as a group. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and includes voting and investment power
with respect to shares.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED OWNED
PRIOR TO OFFERING(2) AFTER OFFERING(2)
NAME AND ADDRESS OF -------------------------- ------------------------
BENEFICIAL OWNER(1) NUMBER PERCENT NUMBER PERCENT
----------------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
David E. Hershberg........................................... 1,282,500(3) 22.1%
%
Kenneth A. Miller............................................ 273,600(4) 4.7
Stephen C. Yablonski......................................... 64,696(5) 1.1
Ray Stuart................................................... 24,048(6) *
Thomas A. DiCicco............................................ 142,500(7) 2.4
Donald G. Woodring........................................... 141,078(8) 2.4
Herman Fialkov............................................... 361,446(9) 6.2
Shelley A. Harrison.......................................... 361,446 (10 6.2
Benjamin Duhov............................................... 5,700 *
C.J. Waylan.................................................. -- --
Thomson Corp. of America..................................... 366,248 (11 6.3
99 Canal Center Plaza
Suite 450
Alexandria, VA 22314
Vertex Investment (II) Ltd................................... 356,250 (12 6.1
c/o Vertex Management (II) Pte Ltd.
77 Science Park Drive
#02-15 Cintech III
Singapore Science Park
Singapore U511
PolyVentures II, Limited Partnership......................... 332,946 5.7
c/o Polytechnic University
901 Route 110
Farmingdale, NY 11735

All current directors and executive officers as a group (14
persons)................................................... 2,352,571 (13 39.1%
%
</TABLE>

- ------------------------

* Represents less than 1%.

(1) Except as otherwise indicated, (i) the stockholders named in the table have
sole voting and investment power with respect to all shares beneficially
owned by them and (ii) the address of all stockholders listed in the table
is: c/o GSI, 375 Oser Avenue, Hauppauge, New York 11788.

(2) The number of shares of Common Stock deemed outstanding prior to this
Offering includes (i) 3,876,037 shares of Common Stock and (ii) 1,958,001
shares of Common Stock issuable upon the conversion of all outstanding
shares of Convertible Preferred Stock. Amounts shown for each stockholder
include (i) all shares of Common Stock issuable upon conversion of Preferred
Stock at the closing of this Offering and (ii) shares of Common Stock
underlying options, warrants and rights of first refusal exercisable within
60 days of April 15, 1997.

61
<PAGE>
(3) Includes 342,000 shares of Common Stock held in trust by Mr. Hershberg for
certain members of his family of which Mr. Hershberg disclaims beneficial
ownership and 171,000 shares of Common Stock held by Deerhill Associates, a
family partnership of which Mr. Hershberg is General Managing Partner. Mr.
Hershberg disclaims beneficial ownership of the shares held by Deerhill
Associates except to the extent of his proportionate pecuniary interest
therein.

(4) Includes 54,150 shares of Common Stock held by certain members of Mr.
Miller's family of which Mr. Miller disclaims beneficial ownership and
17,100 shares of Common Stock issuable upon exercise of stock options.

(5) Consists of 1,425 shares of Common Stock held by Mr. Yablonski's wife and
64,696 shares of Common Stock issuable upon exercise of stock options.

(6) Consists of 24,048 shares of Common Stock issuable upon exercise of stock
options.

(7) Includes 14,250 shares of Common Stock issuable upon exercise of stock
options.

(8) Includes 19,950 shares of Common Stock held by certain members of Mr.
Woodring's family of which Mr. Woodring disclaims beneficial ownership and
14,250 shares of Common Stock issuable upon exercise of stock options.

(9) Consists of 332,946 shares of Common Stock held by PolyVentures of which Mr.
Fialkov is a General Partner, and 28,500 shares of Common Stock issuable
upon exercise of stock options. Mr. Fialkov disclaims beneficial ownership
of the shares held by PolyVentures except to the extent of his proportionate
pecuniary interest therein.

(10) Consists of 332,946 shares of Common Stock held by PolyVentures of which
Dr. Harrison is the Managing General Partner, and 28,500 shares of Common
Stock issuable upon exercise of stock options. Dr. Harrison disclaims
beneficial ownership of the shares held by PolyVentures except to the extent
of his proportionate pecuniary interest therein.

(11) Does not include shares of Common Stock which Thomson has a right to
acquire in this Offering pursuant to its preemptive rights. Does not include
Thomson's right to receive 1% of the Company's outstanding share capital
(measured at the time of issuance) for each of its next four consummated
orders with the Company of at least $3.0 million.

(12) Consists of 285,000 shares of Common Stock held by Vertex Investment (II)
Ltd. ("Vertex") and 71,250 shares of Common Stock held by HWH Investment
Pte. Ltd. ("HWH"). Vertex manages HWH, which is an investment fund owned by
an entity affiliated with the Government of Singapore. Vertex disclaims
beneficial ownership of the shares held by HWH.

(13) See Notes (3) through (10) above.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

Upon the consummation of this Offering, the authorized capital stock of the
Company will consist of shares of Common Stock, $0.001 par value, and
1,000,000 shares of Preferred Stock, $0.001 par value.

COMMON STOCK

Each holder of Common Stock is entitled to one vote for each share held.
Following this Offering, the holders of Common Stock, voting as a single class,
will be entitled to elect all of the directors of the Company. In all matters
other than the election of directors, when a quorum is present at any
stockholders' meeting, the affirmative vote of the majority of shares present in
person or represented by proxy shall decide any question before such meeting.
Directors are elected by a plurality of the votes of the shares present in
person or represented by proxy at a stockholders' meeting. The holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
would be entitled to share in the Company's assets remaining after the payment
of liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of Preferred Stock. A stockholder, holding in
the aggregate 282,401 shares of Common Stock, has the right to participate in
any private offering of the Company to the extent required to maintain its
percentage ownership in the Company. No other holders of Common Stock have any
preemptive or other subscription rights. The shares of Common Stock are not
convertible into any other security. The outstanding shares of Common Stock are,
and the shares being offered hereby will be, upon issuance and sale, fully paid
and nonassessable.

At March 31, 1997, there were 5,834,038 shares of Common Stock outstanding
(after giving effect to the Preferred Stock Conversion and the Stock Split) and
held of record by 295 stockholders, and options to purchase an aggregate of
1,669,032 shares of Common Stock were also outstanding. See "Management-- 1997
Stock Incentive Plan."

PREFERRED STOCK

Upon the consummation of this Offering, the Company will be authorized to
issue 1,000,000 shares of Preferred Stock with such voting rights, designations,
preferences and rights and such qualifications, limitations or restrictions
thereof, as may be determined by the Board of Directors providing for such
series. Although the Company has no current plans to issue any shares of
Preferred Stock, the issuance of Preferred Stock or of rights to purchase
Preferred Stock could be used to discourage an unsolicited acquisition proposal.
In addition, the possible issuance of Preferred Stock could discourage a proxy
contest, make more difficult the acquisition of a substantial block of the
Company's Common Stock or limit the price that investors might be willing to pay
in the future for shares of the Company's Common Stock.

The Company believes that the Preferred Stock will provide the Company with
increased flexibility in structuring possible future financing and acquisitions,
and in meeting other corporate needs that might arise. Having such authorized
shares available for issuance will allow the Company to issue shares of
Preferred Stock without the expense and delay of a special stockholders'
meeting. The authorized shares of Preferred Stock, as well as shares of Common
Stock, will be available for issuance without further action by stockholders,
unless such action is required by applicable law or the rules of any stock
exchange on which the Company's securities may be listed.

63
<PAGE>
COMMON STOCK WARRANTS

As of March 31, 1997, warrants to purchase an aggregate of 64,125 shares of
the Company's Common Stock, all of which will expire on November 21, 2006 and
have an exercise price of $8.07 per share, were outstanding.

REGISTRATION RIGHTS OF CERTAIN HOLDERS

After this Offering, the holders of shares of Common Stock (the
"Registrable Securities") will be entitled to certain demand rights with respect
to the registration of the Registrable Securities under the Securities Act.
Under the terms of the agreement between the Company and the holders of the
Registrable Securities, subject to certain restrictions, at any time twelve (12)
months after this Offering is complete, holders holding more than 25% of the
Registrable Securities are entitled to demand that the Company register not less
than 25% of the Registrable Securities under the Securities Act in an
underwritten public offering, the expected aggregate price to the public of
which exceeds $3,000,000 (net of underwriting discounts and commissions).
Additionally, the Company shall not, subject to certain provisions, be obligated
to effect a registration pursuant to such a demand right during the period
starting with the date sixty (60) days prior to the Company's estimated date of
filing of, and ending on a date four (4) months following the effective date of,
a registration statement pertaining to an underwritten public offering of
securities for the account of the Company. The Company is not required to effect
more than one such registration pursuant to such demand registration rights.

Additionally, after this Offering, the holders of shares of Common
Stock (the "Additional Registrable Securities"), pursuant to the terms of the
July 1995 private placement, will be permitted by the Company to undertake one
demand registration right. Thereafter, the holders of the Additional Registrable
Securities will have piggyback registration rights. Such demand and piggyback
rights are subject to certain restrictions.

Under an additional agreement with respect to the holders of 491,066 shares
of Common Stock (the "Class A Registrable Securities"), the holders of the Class
A Registrable Securities will be entitled to certain demand rights with respect
to the registration of the Class A Registrable Securities under the Securities
Act. Under the terms of the agreement between the Company and the holders of the
Class A Registrable Securities, subject to certain restrictions, at any time
after this Offering is complete, holders holding more than 25% of the Class A
Registrable Securities are entitled to demand that the Company register not less
than 25% of the Class A Registrable Securities under the Securities Act in an
underwritten public offering, the expected aggregate price to the public of
which exceeds $3,000,000 (net of underwriting discounts and commissions). The
Company is not required to effect more than one such registration pursuant to
such demand registration rights.

In addition, under an additional agreement with respect to the holders of
1,383,088 shares of Common Stock (the "Class B Registrable Securities"), after
this Offering, if the Company proposes to register any of its securities under
the Securities Act, either for its own account or for the account of other
security holders exercising registration rights, subject to certain
restrictions, the holders of the Registrable Securities, the Class A Registrable
Securities and the Class B Registrable Securities are entitled to notice of such
registration and are entitled to request inclusion of their Registrable
Securities, Class A Registrable Securities and Class B Registrable Securities
therein. The Company is required to include any Registrable Securities and Class
A Registrable Securities in an unlimited number of such registrations, and any
Class B Registrable Securities in not more than two such registrations. In
addition, at any time fifty-four (54) weeks after the Offering is complete, the
holders of the Class B Registrable Securities, subject to certain restrictions,
are entitled to demand that the Company register the Class B Registrable
Securities under the Securities Act in an underwritten public offering. The
Company is generally required to bear the expenses of any registrations pursuant
to the exercise of the registration rights described herein.

64
<PAGE>
Registration of the Registrable Securities, the Additional Registrable
Securities, the Class A Registrable Securities or Class B Registrable Securities
pursuant to such rights would result in such shares becoming freely tradable
without restriction under the Securities Act immediately upon the effectiveness
of such registration.

DELAWARE ANTI-TAKEOVER STATUTE

The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the Board of
Directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (a) by persons who are directors and also
officers and (b) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer or (iii) on or subsequent to
such date, the business combination is approved by the Board of Directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Company will act as transfer agent and
registrar for the Company's Common Stock.

65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of this Offering, the Company will have shares of
Common Stock outstanding, assuming no exercise of the over-allotment option or
of warrants and options to acquire an aggregate of shares outstanding at
March 31, 1997. Of these shares, the shares registered in this Offering
will be freely tradable without restriction under the Securities Act, unless
they are purchased by "affiliates" of the Company, as that term is used under
the Securities Act. The remaining 5,834,038 shares will be "restricted
securities," as defined in Rule 144 under the Securities Act (the "Restricted
Shares").

Beginning 90 days after the Effective Date, 529,669 Restricted Shares not
subject to lock-up agreements (including approximately 206,833 shares issuable
upon exercise of vested options) and not being sold in this Offering will be
eligible for sale in the public market without restriction in reliance on Rule
144(k) under the Securities Act. All officers and directors of the Company and
certain other stockholders, holding an aggregate of 4,307,959 shares of Common
Stock, have agreed with PaineWebber Incorporated not to offer to sell, sell,
contract to sell, grant any option to sell or otherwise dispose of any shares of
Common Stock convertible into or exchangeable for Common Stock owned by them for
a period ending 180 days after the date of this Prospectus (the "Lock-Up
Period") without the prior written consent of PaineWebber Incorporated. Certain
other stockholders, holding an aggregate of 1,233,320 shares of Common Stock,
have agreed with PaineWebber Incorporated not to offer to sell, sell, contract
to sell, grant any option to sell or otherwise dispose of any shares of Common
Stock convertible into or exchangeable for Common Stock owned by them for a
period ending one year after the date of this Prospectus (the "One-Year Lock-Up
Period") without the prior written consent of PaineWebber Incorporated. Upon the
expiration of the Lock-Up Period, or earlier upon the consent of PaineWebber
Incorporated, approximately 4,662,123 shares of restricted securities (including
approximately 354,164 shares issuable upon exercise of vested options) will be
eligible for sale in the public market and, as of that date, approximately
2,482,005 of such shares will be subject to certain volume and other resale
restrictions pursuant to Rule 144 and approximately 1,688,972 of such shares
will be eligible for sale without restriction under Rule 144(k). Upon the
expiration of the One-Year Lock-Up Period, or earlier upon the consent of
PaineWebber Incorporated, approximately 1,283,555 additional shares of
restricted securities (including approximately 50,235 additional shares issuable
upon exercise of vested options) will be eligible for sale in the public market
and, as of that date, approximately 1,149,473 of such shares will be subject to
certain and other resale restrictions pursuant to Rule 144 of which none of such
shares will be eligible for sale without restriction under Rule 144(k).

In general, under Rule 144, as it will be in effect as of April 29, 1997,
any person (or persons whose shares are aggregated) who has beneficially owned
his or her restricted securities (as that term is defined in Rule 144) for at
least one year is entitled to sell, within any three-month period, a number of
such securities that does not exceed the greater of 1% of the then outstanding
shares of the Company's Common Stock (approximately shares immediately
after this Offering) or the average weekly trading volume during the four
calendar weeks preceding the date on which notice of such sale was filed under
Rule 144, provided certain requirements concerning availability of public
information, manner of sale and notice of sale are satisfied. A person who is
not an affiliate, has not been an affiliate within three months prior to the
sale and has beneficially owned the restricted securities for at least two years
is entitled to sell such shares under Rule 144(k) without regard to any of the
limitations described above. In meeting the one- and two-year holding periods
described above, a holder of Restricted Shares may include under certain
circumstances the holding period of a prior owner. Currently, the holding
periods are two years and three years, respectively.

Any employee or director of or consultant to the Company who has been
granted options to purchase shares or who has purchased shares pursuant to a
written compensatory plan or written contract prior to the effective date of
this Offering pursuant to Rule 701 will be entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to sell their Rule 701
shares without having to comply with the public information, holding-period,
volume-limitation or notice provisions of Rule 144 and permits affiliates to

66
<PAGE>
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
Prospectus.

The Company intends to file, on or about the date of the Prospectus, a
registration statement on Form S-8 under the Securities Act to register shares
of Common Stock reserved for issuance under the Predecessor Plans and the 1997
Plan, including, in some cases, shares for which an exemption under Rule 144 or
Rule 701 would also be available, thus permitting the resale of shares issued
under those plans, options or warrants by nonaffiliates in the public market
without restriction under the Securities Act. Such registration statement will
become effective immediately upon filing. An aggregate of 1,669,032 shares of
Common Stock are issuable pursuant to outstanding options and options under the
1997 Plan. An additional 610,968 shares of Common Stock are available for future
grants under the Company's 1997 Plan.

Following this Offering, the holders of Restricted Shares will have
the right to cause the Company to register the sale of such shares under the
Securities Act. If such registration rights are exercised, the shares can be
sold without any holding period or sales volume limitation. See "Description of
Capital Stock--Registration Rights of Certain Holders."

Prior to this Offering, there has been no market for the Common Stock of the
Company. Future sales of substantial amounts of Common Stock in the public
market could adversely effect the market price of the Common Stock.

67
<PAGE>
UNDERWRITING

The Underwriters named below, acting through PaineWebber Incorporated and
Unterberg Harris (the "Representatives"), have severally agreed, subject to the
terms and conditions set forth in the Underwriting Agreement by and among the
Company and the Representatives (the "Underwriting Agreement"), to purchase from
the Company, and the Company has agreed to sell to the Underwriters, the number
of shares of Common Stock set forth opposite the name of such Underwriters
below:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------------------------------------------------------------------------------- -----------
<S> <C>
PaineWebber Incorporated...........................................................
Unterberg Harris...................................................................
-----------

Total..............................................................................
-----------
-----------
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the Shares listed above are subject to certain conditions. The
Underwriting Agreement also provides that the Underwriters are committed to
purchase, and the Company is obligated to sell, all of the Shares offered by
this Prospectus, if any of the Shares being sold pursuant to the Underwriting
Agreement are purchased (without consideration of any shares that may be
purchased through the exercise of the Underwriters' over-allotment option).

The Representatives have advised the Company that the Underwriters propose
to offer the Shares to the public initially at the public offering price set
forth on the cover page of this Prospectus and to certain dealers at such price
less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession to other dealers not in excess
of $ per share. After the initial public offering of the Shares, the
public offering price, the concessions to selected dealers and the reallowance
to other dealers may be changed by the Representatives.

The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
additional shares of Common Stock at the initial public offering price set
forth on the cover page of this Prospectus, less underwriting discounts and
commissions. The Underwriters may exercise such option only to cover
over-allotments, if any, incurred in the sale of Shares. To the extent the
Underwriters exercise such option, each of the Underwriters will become
obligated, subject to certain conditions, to purchase such percentage of such
additional shares of Common Stock as is approximately equal to the percentage of
Shares that it is obligated to purchase as shown in the table set forth above.

Pursuant to Thomson's preemptive right to purchase up to 15% of the total
number of shares of Common Stock offered in this Offering, Thomson has expressed
an intention to purchase shares being offered in this Offering which will
enable it to maintain its percentage ownership of the Company. There can be no
assurance that Thomson will make such purchase.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.

Certain officers of Unterberg Harris own in the aggregate 10,177 shares of
Common Stock of the Company.

The Representatives have informed the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.

The Company and each of its executive officers, directors and certain other
stockholders holding an aggregate of shares of Common Stock, for a period
ending 180 days from the date of this Prospectus, and certain other stockholders
holding in the aggregate shares of Common Stock, for a period ending one
year from the date of this Prospectus, have agreed not to offer to sell, sell,
contract to

68
<PAGE>
sell, or grant any option to purchase or otherwise dispose of, directly or
indirectly, any shares of capital stock of the Company or any securities
convertible into or exercisable or exchangeable for any capital stock or
warrants or other rights to purchase shares of capital stock of the Company
owned by any of them prior to the expiration of 180 days or one year from the
date of this Prospectus, as the case may be, except: (i) for the Shares offered
hereby, (ii) with the prior written consent of PaineWebber Incorporated and
(iii) in the case of the Company, for the issuance of shares of Common Stock
upon the exercise of options, or the grant of options to purchase shares of
Common Stock or restricted stock awards under the Stock Plans.

Prior to this Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined pursuant to
negotiations between the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price, in addition to
prevailing market conditions, will be certain financial information of the
Company, the history of, and the prospects for, the Company and the industry in
which it competes, an assessment of the Company's management, its past and
present operations, the prospects for, and timing of, future revenues of the
Company, the present state of the Company's development, and the above factors
in relation to market values and various valuation measures of other companies
engaged in activities similar to the Company. The initial public offering price
set forth on the cover page of this Prospectus should not, however, be
considered an indication of the actual value of the Common Stock. Such price is
subject to change as a result of market conditions and other factors. There can
be no assurance that an active trading market will develop for the Common Stock
or that the Common Stock will trade in the public market subsequent to the
Offering at or above the initial public offering price.

In connection with this Offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of the Offering to cover
all or a portion of such short position. The Underwriters may also cover all or
a portion of such short position, up to shares of Common Stock, by
exercising the Underwriters' over-allotment option referred to above. In
addition, PaineWebber Incorporated, on behalf of the Underwriters, may impose
"penalty bids" under contractural arrangements with the Underwriters whereby it
may reclaim from an Underwriter (or dealer participating in the Offering) for
the account of the other Underwriters, the selling concession with respect to
Common Stock that is distributed in the Offering but subsequently purchased for
the account of the Underwriters in the open market. Any transactions described
in this paragraph may result in the maintenance of the price of the Common Stock
at a level above that which might otherwise prevail in the open market. None of
the transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, New York, New York, and for the
Underwriters by Shearman & Sterling, New York, New York.

EXPERTS

The Consolidated Financial Statements of the Company at December 31, 1996,
and for the six months then ended, appearing in this Prospectus and Registration
Statement, have been audited by Ernst & Young LLP, independent auditors, and at
June 30, 1996 and 1995, and for the year ended June 30, 1996 and the period from
August 17, 1994 (inception) through June 30, 1995, by Price Waterhouse LLP,
independent accountants, as set forth in their respective reports thereon
appearing elsewhere herein, and are included in reliance upon such reports given
upon the authority of such firms as experts in accounting and auditing.

69
<PAGE>
ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (which term shall include any amendments
thereto) on Form S-1 under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement, including the exhibits
thereto, and the Consolidated Financial Statements and related Notes filed as a
part thereof. Statements made in this Prospectus concerning the contents of any
document referred to herein are not necessarily complete. With respect to each
such document filed with the Commission as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved.

As a result of this Offering, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended. As long as the Company is subject to such
periodic reporting and informational requirements, it will file with the
Commission all reports, proxy statements and other information required thereby.
The Registration Statement, as well as such reports and other information filed
by the Company with the Commission, may be inspected at the public reference
facilities maintained by the Commission at its principal office located at 450
Fifth Street, N.W., Washington, D.C. 20549, and at its regional offices located
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7 World
Trade Center, 13th Floor, New York New York 10048. Copies of such material may
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a World Wide Web site (http://www.sec.gov) that contains material
regarding issuers that file electronically with the Commission. The Registration
Statement, of which the Prospectus forms a part, has been so filed and may be
obtained at such site.

CHANGE IN INDEPENDENT ACCOUNTANTS

On November 27, 1996, the Company dismissed Price Waterhouse LLP as its
independent accountants. The reports of Price Waterhouse LLP on the Company's
financial statements for the past two fiscal years contained no adverse opinion
or disclaimer of opinion, and were not qualified or modified as to uncertainty,
audit scope or accounting principles. In connection with its audits for the year
ended June 30, 1996 and for the period from August 17, 1994 (inception) through
June 30, 1995, and through November 27, 1996, there have been no disagreements
with Price Waterhouse LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Price Waterhouse LLP would
have caused them to make reference thereto in their report on the financial
statements for such years. The decision to change firms was approved by the
Company's Board of Directors. The Company has requested that Price Waterhouse
LLP furnish it with a letter addressed to the Commission stating whether or not
it agrees with the above statements. A copy of such letter, dated February 27,
1997, is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.

The Company engaged Ernst & Young LLP as its new independent auditors as of
November 27, 1996.

During the two most recent fiscal years and through November 27, 1996, the
Company did not consult with Ernst & Young LLP on items which (i) were or should
have been subject to Statement on Auditing Standards No. 50 or (ii) concerned
the subject matter of a disagreement or reportable event with Price Waterhouse
LLP.

70
<PAGE>
GLOBECOMM SYSTEMS INC.
CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

<TABLE>
<S> <C>
Report of Independent Auditors--Ernst & Young LLP..................................... F-2

Report of Independent Accountants--Price Waterhouse LLP............................... F-3

Consolidated Balance Sheets as of June 30, 1995 and 1996, December 31, 1996 and March
31, 1997 (unaudited)................................................................ F-4

Consolidated Statements of Operations for the period from August 17, 1994 (inception)
through June 30, 1995, the year ended June 30, 1996, the six months ended December
31, 1995 (unaudited) and 1996, and the nine months ended March 31, 1996 (unaudited)
and 1997 (unaudited)................................................................ F-5

Consolidated Statements of Changes in Stockholders' Equity for the period from August
17, 1994 (inception) through June 30, 1995, the year ended June 30, 1996, the six
months ended December 31, 1996, and the three months ended March 31, 1997
(unaudited)......................................................................... F-6

Consolidated Statements of Cash Flows for the period from August 17, 1994 (inception)
through June 30, 1995, the year ended June 30, 1996, the six months ended December
31, 1995 (unaudited) and 1996, and the nine months ended March 31, 1996 (unaudited)
and 1997 (unaudited)................................................................ F-7

Notes to Consolidated Financial Statements............................................ F-8
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Globecomm Systems Inc.

We have audited the accompanying consolidated balance sheet of Globecomm
Systems Inc. at December 31, 1996 and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the six months
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Globecomm
Systems Inc. at December 31, 1996, and the consolidated results of its
operations and its cash flows for the six months then ended in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Melville, New York
January 24, 1997, except for
Note 1 as to which the date
is , 1997

- --------------------------------------------------------------------------------

The foregoing report is in the form that will be signed upon (a) completion of
the split of outstanding shares of common stock and amendment to the certificate
of incorporation and (b) determination of the estimated initial public offering
price for purposes of computing shares used in per share computations, as
described in Notes 1 and 2, respectively, to the consolidated financial
statements.

/s/ ERNST & YOUNG LLP

ERNST & YOUNG LLP

Melville, New York
May 6, 1997

F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Stockholders of Globecomm Systems Inc.

The stock split described in Note 1 to the financial statements has not been
consummated at May 5, 1997. When it has been consummated, we will be in a
position to furnish the following report:

"In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the
financial position of Globecomm Systems Inc. and its subsidiary at June 30,
1995 and 1996, and the results of their operations and their cash flows for
the period from August 17, 1994 (inception) through June 30, 1995 and the
year ended June 30, 1996, 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."

/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
August 23, 1996, except as to Note 1,
which is as of , 1997

F-3
<PAGE>
GLOBECOMM SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1996 DECEMBER 31, 1996 MARCH 31, 1997
------------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 3,507,108 $ 3,434,910 $ 9,618,382 $ 6,308,536
Restricted cash.............................................. 96,000 1,231,850 1,615,486 1,491,850
Accounts receivable.......................................... 68,515 1,998,846 7,838,033 8,157,109
Inventories, net............................................. 2,041,303 1,377,083 88,642 1,249,702
Note receivable from stockholder............................. -- 150,000 150,000 150,000
Prepaid expenses and other current assets.................... 9,875 233,612 222,654 596,326
------------- ------------- ----------------- -----------------
Total current assets........................................... 5,722,801 8,426,301 19,533,197 17,953,523

Fixed assets, net.............................................. 560,881 719,657 3,605,832 4,440,210
Investments.................................................... -- 238,418 1,078,678 1,136,018
Other assets................................................... 91,658 118,419 193,194 186,126
------------- ------------- ----------------- -----------------

Total assets................................................... $ 6,375,340 $ 9,502,795 $ 24,410,901 $ 23,715,877
------------- ------------- ----------------- -----------------
------------- ------------- ----------------- -----------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................. $ 2,428,596 $ 2,766,790 $ 6,275,817 $ 6,200,253
Accrued payroll and related fringe benefits.................. 102,720 217,000 319,750 242,497
Accrued commissions.......................................... -- -- 432,000 396,000
Other accrued expenses....................................... 143,015 350,213 875,772 244,198
Note payable to stockholder.................................. 315,000 315,000 315,000 --
Loan payable to stockholder.................................. 20,700 -- -- --
Capital lease obligations.................................... 49,678 50,083 53,036 50,370
------------- ------------- ----------------- -----------------
Total current liabilities...................................... 3,059,709 3,699,086 8,271,375 7,133,318
Capital lease obligations...................................... 108,852 73,945 46,664 32,590
------------- ------------- ----------------- -----------------
Total liabilities.............................................. 3,168,561 3,773,031 8,318,039 7,165,908
------------- ------------- ----------------- -----------------
Commitments
Stockholders' equity:
Preferred stock, $.001 par value; 1,000,000 shares
authorized:
Class A Convertible--shares authorized, issued and
outstanding: none at June 30, 1995, 156,250 at June 30,
1996 and 172,304 at December 31, 1996 and March 31, 1997
(liquidation preference $2,756,864)...................... -- 156 172 172
Class B Convertible--shares authorized, issued and
outstanding: none at June 30, 1995 and 1996, 485,294 at
December 31, 1996 and 514,714 at March 31, 1997
(liquidation preference $14,411,992)..................... -- -- 485 514
Common stock, $.001 par value; 12,000,000 shares authorized,
shares issued and outstanding: 3,506,275 at June 30, 1995,
3,769,136 at June 30, 1996 and December 31, 1996 and
3,876,037 at March 31, 1997 (5,834,038 after giving effect
to the conversion of preferred stock into common stock).... 3,506 3,769 3,769 3,876
Additional paid-in capital................................... 5,168,100 9,036,298 20,291,057 21,699,443
Accumulated deficit.......................................... (1,065,183) (3,310,459) (4,202,621) (5,154,036)
------------- ------------- ----------------- -----------------
4,106,423 5,729,764 16,092,862 16,549,969
Less stock subscriptions receivable.......................... (899,644) -- -- --
------------- ------------- ----------------- -----------------
Total stockholders' equity..................................... 3,206,779 5,729,764 16,092,862 16,549,969
------------- ------------- ----------------- -----------------
Total liabilities and stockholders' equity..................... $ 6,375,340 $ 9,502,795 $ 24,410,901 $ 23,715,877
------------- ------------- ----------------- -----------------
------------- ------------- ----------------- -----------------
</TABLE>

See accompanying notes.

F-4
<PAGE>
GLOBECOMM SYSTEMS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 17,
1994
(INCEPTION) SIX MONTHS ENDED NINE MONTHS ENDED
THROUGH YEAR ENDED DECEMBER 31 MARCH 31
JUNE 30, JUNE 30, --------------------------- ----------------------------
1995 1996 1995 1996 1996 1997
------------- ------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Revenues........................... $ 71,756 $ 13,476,276 $ 7,315,340 $ 13,306,482 $ 10,518,203 $ 21,532,212
Costs of revenues.................. 58,089 11,237,977 5,976,034 11,497,100 8,437,518 18,736,399
------------- ------------- ------------ ------------- ------------- -------------
Gross profit....................... 13,667 2,238,299 1,339,306 1,809,382 2,080,685 2,795,813
------------- ------------- ------------ ------------- ------------- -------------
Operating expenses:
Selling and marketing............ 346,141 1,915,037 796,421 1,401,071 1,252,831 2,215,882
Research and development......... -- 711,906 250,528 229,593 488,010 351,455
General and administrative....... 771,974 1,945,623 862,491 1,416,294 1,431,881 2,534,214
------------- ------------- ------------ ------------- ------------- -------------
Total operating expenses........... 1,118,115 4,572,566 1,909,440 3,046,958 3,172,722 5,101,551
------------- ------------- ------------ ------------- ------------- -------------
Loss from operations............... (1,104,448) (2,334,267) (570,134) (1,237,576) (1,092,037) (2,305,738)

Interest income, net of interest
expense of $14,797, $32,293,
$14,880 (unaudited), $15,898,
$21,483 (unaudited) and $20,248
(unaudited) in June 1995, June
1996, December 1995, December
1996, March 1996 and March 1997,
respectively..................... 39,265 88,991 53,965 70,414 81,179 187,161
------------- ------------- ------------ ------------- ------------- -------------
Loss before minority interests in
operations of consolidated
subsidiary....................... (1,065,183) (2,245,276) (516,169) (1,167,162) (1,010,858) (2,118,577)
Minority interests in operations of
consolidated subsidiary.......... -- -- -- 275,000 -- 275,000
------------- ------------- ------------ ------------- ------------- -------------
Net loss........................... $ (1,065,183) $ (2,245,276) $ (516,169) $ (892,162) $ (1,010,858) $ (1,843,577)
------------- ------------- ------------ ------------- ------------- -------------
------------- ------------- ------------ ------------- ------------- -------------
Pro forma net loss per share
(unaudited)...................... $ $ $
------------- ------------- -------------
------------- ------------- -------------
Shares used in computing pro forma
net loss per share (unaudited)...
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
GLOBECOMM SYSTEMS INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
PREFERRED STOCK
----------------------------------------------
CLASS A CLASS B COMMON STOCK ADDITIONAL STOCK
---------------------- ---------------------- ---------------------- PAID-IN SUBSCRIPTIONS
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE
--------- ----------- --------- ----------- --------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Exchange of loan payable and
payment of cash for common
stock to chief executive
officer..................... 1,305,158 $ 1,305 $ 47,818
Issuance of common stock to
customer.................... 213,750 214 8,036
Issuance of common stock to
consultants................. 59,710 60 2,245
Sale of common stock to
employees................... 541,500 541 20,359
Sale of common stock to
investors................... 10,687 11 38,982 $ (34,493)
Issuance of common stock under
private placement offering
to investors, net of
issuance costs of
$1,401,606; paid in cash of
$669,682 and 156,488 shares
of stock.................... 1,375,470 1,375 5,034,342 (865,151)
Options granted to employees
and directors............... -- -- 16,318 --
Net loss...................... -- -- -- --
--------- ----------- ---------- ------------
Balance at June 30, 1995...... 3,506,275 3,506 5,168,100 (899,644)

Proceeds from stock
subscriptions receivable.... -- -- -- 899,644
Sale of common stock to
investor, net of issuance
costs of $17,495............ 199,500 199 915,406 --
Issuance of common stock as
sales commissions........... 37,147 37 173,706 --
Sale of common stock to
investors................... 10,687 11 49,977 --
Issuance of common stock to
consultants................. 15,527 16 52,250 --
Sale of convertible preferred
stock to investors, net of
issuance costs of $15,000... 156,250 $ 156 -- -- 2,484,844 --
Options granted to employees
and directors............... -- -- -- -- 192,015 --
Net loss...................... -- -- -- -- -- --
--------- ----------- --------- ----------- ---------- ------------
Balance at June 30, 1996...... 156,250 156 3,769,136 3,769 9,036,298 --

Sale of convertible preferred
stock to investors, net of
issuance costs of
$2,623,264; paid in cash of
$1,135,000 and 53,152 shares
of stock.................... -- -- 485,294 $ 485 -- -- 10,964,515 --
Sale of convertible preferred
stock to investor........... 16,054 16 -- -- -- -- 256,847 --
Options granted to employees
and directors............... -- -- -- -- -- -- 33,397 --
Net loss...................... -- -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ---------- ------------
Balance at December 31,
1996........................ 172,304 172 485,294 485 3,769,136 3,769 20,291,057 --
Unaudited:
Options granted to employees
and directors............. -- -- -- -- -- 22,127 --
Exercise of warrants........ -- -- -- 106,901 107 562,528 --
Sale of convertible
preferred stock to
investor.................. -- 29,420 29 -- -- 823,731 --
Net loss.................... -- -- -- -- -- -- -- --
--------- ----------- --------- ----------- --------- ----------- ---------- ------------
Balance at March 31, 1997
(unaudited)................. 172,304 $ 172 514,714 $ 514 3,876,037 $ 3,876 $21,699,443 $ --
--------- ----------- --------- ----------- --------- ----------- ---------- ------------
--------- ----------- --------- ----------- --------- ----------- ---------- ------------

TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
------------ ------------
<S> <C> <C>
Exchange of loan payable and
payment of cash for common
stock to chief executive
officer..................... $ 49,123
Issuance of common stock to
customer.................... 8,250
Issuance of common stock to
consultants................. 2,305
Sale of common stock to
employees................... 20,900
Sale of common stock to
investors................... 4,500
Issuance of common stock under
private placement offering
to investors, net of
issuance costs of
$1,401,606; paid in cash of
$669,682 and 156,488 shares
of stock.................... 4,170,566
Options granted to employees
and directors............... 16,318
Net loss...................... $(1,065,183) (1,065,183)
------------ ------------
Balance at June 30, 1995...... (1,065,183) 3,206,779
Proceeds from stock
subscriptions receivable.... -- 899,644
Sale of common stock to
investor, net of issuance
costs of $17,495............ -- 915,605
Issuance of common stock as
sales commissions........... -- 173,743
Sale of common stock to
investors................... -- 49,988
Issuance of common stock to
consultants................. -- 52,266
Sale of convertible preferred
stock to investors, net of
issuance costs of $15,000... -- 2,485,000
Options granted to employees
and directors............... -- 192,015
Net loss...................... (2,245,276) (2,245,276)
------------ ------------
Balance at June 30, 1996...... (3,310,459) 5,729,764
Sale of convertible preferred
stock to investors, net of
issuance costs of
$2,623,264; paid in cash of
$1,135,000 and 53,152 shares
of stock.................... -- 10,965,000
Sale of convertible preferred
stock to investor........... -- 256,863
Options granted to employees
and directors............... -- 33,397
Net loss...................... (892,162) (892,162)
------------ ------------
Balance at December 31,
1996........................ (4,202,621) 16,092,862
Unaudited:
Options granted to employees
and directors............. -- 22,127
Exercise of warrants........ -- 562,635
Sale of convertible
preferred stock to
investor.................. -- 823,760
Net loss.................... (951,415) (951,415)
------------ ------------
Balance at March 31, 1997
(unaudited)................. $5,154,036 $16,549,969
------------ ------------
------------ ------------
</TABLE>

See accompanying notes.

F-6
<PAGE>
GLOBECOMM SYSTEMS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 17,
1994 SIX MONTHS ENDED NINE MONTHS ENDED
(INCEPTION) YEAR ENDED DECEMBER 31 MARCH 31
THROUGH JUNE JUNE 30, ----------------------- ------------------------
30, 1995 1996 1995 1996 1996 1997
------------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
(Unaudited) (Unaudited)
OPERATING ACTIVITIES
Net loss........................ $(1,065,183) $(2,245,276) $(516,169) $ (892,162) ($1,010,858) $(1,843,577)
Adjustments to reconcile net
loss to cash used in operating
activities:
Stock issued to investor as
commission................ -- 173,743 -- -- -- --
Stock issued to customer.... 8,250 -- -- -- -- --
Stock issued to consultants
for services.............. 2,305 46,270 22,079 -- 34,704 --
Depreciation and
amortization.............. 61,163 180,634 65,000 124,587 155,002 243,957
Amortization of organization
costs..................... 7,020 12,034 3,510 14,134 5,265 21,202
Stock compensation
expense................... 16,318 192,015 96,008 33,397 135,147 55,524
Minority interests in
operations of consolidated
subsidiary................ -- -- -- (275,000) -- (275,000)
Changes in operating assets
and liabilities:
Accounts receivable....... (68,515) (1,930,331) (1,723,595) (5,839,187) (2,894,713) (6,158,263)
Inventories............... (2,041,303) 664,220 1,858,446 1,288,441 987,278 127,381
Prepaid expenses and other
current assets.......... (9,875) (223,737) (31,668) 10,958 (44,581) (362,714)
Other assets.............. (38,505) (38,795) (39,332) (7,751) (22,753) (7,751)
Accounts payable.......... 2,428,596 338,194 (1,417,185) 3,509,027 (30,033) 3,433,463
Accrued payroll and
related fringe
benefits................ 102,720 114,280 (13,702) 102,750 (27,463) 25,497
Accrued commissions and
other accrued
expenses................ 143,015 207,198 (7,687) 957,559 70,131 289,985
------------- ---------- ----------- ---------- ----------- -----------
Net cash used in operating
activities.................... (453,994) (2,509,551) (1,704,295) (973,247) (2,642,874) (4,450,296)
------------- ---------- ----------- ---------- ----------- -----------
INVESTING ACTIVITIES
Purchases of investments........ -- (238,418) (3,400) (840,260) (159,304) (897,600)
Purchases of fixed assets....... (437,210) (339,410) (100,111) (3,010,762) (287,397) (3,964,510)
Payment of organization costs... (60,173) -- -- (81,158) -- (81,158)
Restricted cash................. (96,000) (1,135,850) (328,000) (383,636) (828,000) (260,000)
------------- ---------- ----------- ---------- ----------- -----------
Net cash used in investing
activities.................... (593,383) (1,713,678) (431,511) (4,315,816) (1,274,701) (5,203,268)
------------- ---------- ----------- ---------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from sales of common
stock, net.................... 4,195,966 1,871,233 1,865,240 -- 1,865,240 --
Proceeds from sales of preferred
stock, net.................... -- 2,485,000 -- 11,221,863 -- 12,045,623
Proceeds from exercise of
warrants...................... -- -- -- -- -- 562,635
Proceeds from stockholder
loans......................... 444,823 -- -- -- --
Investment from minority
stockholders.................. -- -- -- 275,000 -- 275,000
Loan to stockholder............. -- (150,000) (150,000) -- (150,000) --
Repayment of loans payable to
stockholder................... (60,000) (20,700) (13,301) -- (13,301) (315,000)
Payments under capital leases... (26,304) (34,502) (22,033) (24,328) (26,763) (41,068)
------------- ---------- ----------- ---------- ----------- -----------
Net cash provided by financing
activities.................... 4,554,485 4,151,031 1,679,906 11,472,535 1,675,176 12,527,190
------------- ---------- ----------- ---------- ----------- -----------
Net (decrease) increase in cash
and cash equivalents.......... 3,507,108 (72,198) (455,900) 6,183,472 (2,242,399) 2,873,626
Cash and cash equivalents at
beginning of period........... -- 3,507,108 3,507,108 3,434,910 3,507,108 3,434,910
------------- ---------- ----------- ---------- ----------- -----------
Cash and cash equivalents at end
of period..................... $ 3,507,108 $3,434,910 $3,051,208 $9,618,382 $1,264,709 $6,308,536
------------- ---------- ----------- ---------- ----------- -----------
------------- ---------- ----------- ---------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash paid for interest.......... $ 1,882 $ 13,341 $ 6,874 $ 6,424 $ 9,245 $ 49,514
------------- ---------- ----------- ---------- ----------- -----------
------------- ---------- ----------- ---------- ----------- -----------
</TABLE>

See accompanying notes.

F-7
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

1. ORGANIZATION AND BUSINESS

Globecomm Systems Inc., formerly known as Worldcomm Systems Inc. (the
"Company"), was incorporated in the State of Delaware on August 17, 1994. The
Company designs, assembles and installs satellite ground segment systems and
networks which support a wide range of satellite communications applications
including fixed, mobile and direct broadcast services as well as certain
military applications. The Company was a development stage enterprise for the
period from August 17, 1994 (inception) through June 30, 1995.

On February 26, 1997, the Board of Directors authorized and, on ,
1997 the stockholders approved a 2.85-for-one stock split of the outstanding
shares of common stock, and amended and restated the Company's certificate of
incorporation increasing the number of authorized shares of common stock to
12,000,000, and changing the par value of its common and preferred stock to
$.001, to be effective prior to the closing of the planned initial public
offering ("IPO"). Effect has been given to this stock split as if it occurred on
August 17, 1994 (inception). All common share, option and warrant data has been
restated to reflect the stock split. In addition, on February 26, 1997, the
Board of Directors authorized, subject to stockholder approval, the 1997 Stock
Incentive Plan ("1997 Plan"), which will serve as a successor plan to the stock
option plans discussed in Note 8. The 1997 Plan provides for an increase of
285,000 shares to the previously existing stock option plans, among other
matters.

The Company has incurred operating losses since its inception and had an
accumulated deficit at December 31, 1996 and March 31, 1997 of $4,202,621 and
$5,154,036, respectively. Such losses have resulted principally from general and
administrative and selling and marketing expenses associated with the Company's
operations. The Company expects that its cash and working capital requirements
will continue to increase in connection with the Company's plans to continue to
expand operations. In order to fund these efforts, the Company completed a
private placement of preferred stock in December 1996, whereby it received net
proceeds of $10,965,000. Management believes that sufficient funding has been
obtained to enable the Company to meet its working capital needs through March
31, 1998.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the financial statements of
the Company and its majority-owned subsidiary, NetSat Express, Inc. ("NetSat").
All significant intercompany balances and transactions have been eliminated in
consolidation.

INTERIM FINANCIAL STATEMENTS

The consolidated balance sheet at March 31, 1997 and statement of changes in
stockholders' equity for the three months ended March 31, 1997 and the
consolidated statements of operations and cash flows for the six months ended
December 31, 1995 and the nine months ended March 31, 1996 and 1997 have been
prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position at March 31, 1997 and the results of
operations and cash flows for the six months ended December 31, 1995 and the
nine months ended March 31, 1996 and 1997 have been made. Certain information
and footnote

F-8
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the financial statements and accompanying notes. Actual
results could differ from those estimates.

REVENUE RECOGNITION

The Company uses the percentage-of-completion method of accounting for
contract revenues, upon the achievement of certain milestones. Accordingly,
revenue from long-term, fixed-price contracts, are generally recorded based on
the relationship of total costs incurred to date to total projected final costs.
Contract costs generally include purchased material, direct labor, overhead and
other indirect costs. Anticipated contracted losses are recognized as they
become known.

Revenues from sales of products and services are generally recognized when
the product is shipped or the service is performed.

INVENTORIES

Inventories, which consists primarily of costs incurred in connection with
specific customer contracts, are stated at the lower of cost or market value.

CASH EQUIVALENTS

The Company classifies as cash equivalents all highly liquid instruments
with a maturity of three months or less at the time of purchase.

FIXED ASSETS

Fixed assets are stated at cost less accumulated depreciation. Depreciation
of fixed assets is provided on a straight-line basis over their estimated useful
lives of three to five years. Certain leased office equipment has been
capitalized. These amounts are included in fixed assets within the accompanying
consolidated balance sheet and are being amortized over the estimated useful
lives of the equipment.

RESEARCH AND DEVELOPMENT

Research and development expenditures are expensed as incurred.

INCOME TAXES

The financial statements have been prepared in conformity with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
statement requires recognition of deferred income taxes under the liability
method.

F-9
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRO FORMA LOSS PER SHARE (UNAUDITED)

Pro forma loss per share is based on the weighted average number of shares
of Common Stock outstanding assuming the conversion of the Class A and Class B
Convertible Preferred Stock into Common Stock, which will occur upon the
consummation of the Company's planned IPO. However, in accordance with Staff
Accounting Bulletin 83 of the Securities and Exchange Commission, the stock
options that were issued during the 12 months preceding the planned IPO at
prices below the estimated IPO price (assumed to be $ per share) have
been included in the Company's pro forma loss per share computation using the
treasury stock method and the estimated IPO price, and treated as if they had
been issued at the Company's inception even though they were antidilutive.
Historical losses per share have not been presented because such amounts are not
deemed meaningful due to the significant change in the Company's capital
structure which will occur in connection with the planned IPO.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The book values of cash and cash equivalents, accounts receivable, note
receivable from stockholder, accounts payable, and accrued liabilities
approximate their fair values principally because of the short-term maturities
of these instruments. The fair value of the Company's note payable to
stockholder is estimated based on the current rates offered to the Company for
debt of similar terms and maturities. Under this method, the Company's fair
value of note payable to stockholder was not significantly different than the
stated value at June 30, 1995 and 1996, December 31, 1996 and March 31, 1997.

LONG-LIVED ASSETS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("Statement
121"), which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company has adopted Statement
121 during the six months ended December 31, 1996, and there was no effect on
the financial statements related to the adoption.

3. INVENTORY

Inventory consists of the following:

<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1996 DECEMBER 31, 1996 MARCH 31, 1997
------------- ------------- ----------------- --------------
<S> <C> <C> <C> <C>
Raw materials............... $ 7,516 $ 32,850 $ 60,930 $ 53,063
Work-in-progress............ 3,631,720 3,106,125 4,715,435 5,557,895
------------- ------------- ----------------- --------------
3,639,236 3,138,975 4,776,365 5,610,958
Less progress payments...... 1,597,933 1,761,892 4,687,723 4,361,256
------------- ------------- ----------------- --------------
$ 2,041,303 $ 1,377,083 $ 88,642 $ 1,249,702
------------- ------------- ----------------- --------------
------------- ------------- ----------------- --------------
</TABLE>

F-10
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

4. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
JUNE 30, JUNE 30, DECEMBER 31, MARCH 31,
1995 1996 1996 1997
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Construction in progress....................... $ -- $ -- $2,613,619 $ 3,301,549
Computer equipment............................. 188,810 408,586 671,333 819,294
Leasehold improvements......................... 95,843 119,822 149,055 149,055
Machinery and equipment........................ 83,738 135,485 258,960 355,145
Furniture and fixtures......................... 68,819 112,727 120,115 141,787
Equipment under capital leases................. 184,834 184,834 159,134 159,134
---------- ---------- ------------ ------------
622,044 961,454 3,972,216 4,925,964
Less accumulated depreciation and
amortization................................. 61,163 241,797 366,384 485,754
---------- ---------- ------------ ------------
$ 560,881 $ 719,657 $3,605,832 $ 4,440,210
---------- ---------- ------------ ------------
---------- ---------- ------------ ------------
</TABLE>

5. INVESTMENTS

Investments consists of the following:

<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1996 MARCH 31, 1997
------------- ----------------- --------------
<S> <C> <C> <C>
Shiron Satellite Communications (1996), Ltd. ("Shiron") (a).... $ 150,000 $ 285,000 $ 285,000
Euro Broadcasting Corporation ("Euro") (b)..................... -- 240,000 240,000
C-Grams Unlimited Inc. ("C-Grams")(c).......................... -- 400,278 400,278
Armer Communications Engineering Services, Inc. ("Armer")
(d).......................................................... -- 150,000 200,000
Other.......................................................... 88,418 3,400 10,740
------------- ----------------- --------------
$ 238,418 $ 1,078,678 $ 1,136,018
------------- ----------------- --------------
------------- ----------------- --------------
</TABLE>

- ------------------------

(a) On February 12, 1996, the Company purchased 10% of the common stock of
Shiron, an Israeli company, for $150,000 and, during October 1996, exercised
an option to purchase an additional 9% for $135,000. The Company has an
option to purchase up to an additional 11% of Shiron in accordance with the
terms of the purchase agreement.

(b) During August 1996, the Company purchased 19% of the common stock of Euro, a
Delaware corporation, for $240,000 with a one year option to purchase an
additional 10% at a price ranging from $125,000 to $200,000 depending upon
the exercise date.

(c) On August 30, 1996, the Company purchased 5% of the common stock of C-Grams,
a New Hampshire corporation, for $400,278 and has an option to purchase an
additional 15% at a price in accordance with the terms of the agreement.

F-11
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

5. INVESTMENTS (CONTINUED)

(d) On November 18, 1996, the Company purchased 15% of the common stock of
Armer, an Arizona corporation, for $150,000 and in March 1997 purchased an
additional 2% for $50,000. The Company has an option to purchase up to an
additional 8% at a price of $25,000 for each additional 1% through December
31, 1997.

The above investments have been accounted for at cost, since the Company
does not have the ability to exercise significant influence over operating and
financial policies of the investee.

The Company did not hold any investments at June 30, 1995.

6. COMMON STOCK

SALES OF COMMON STOCK

In June 1995, the Company completed a private placement offering in which
the Company issued 1,218,982 shares of common stock to various investors.
Proceeds from the issuance of these shares totaled $5,031,966, including
$861,400 of stock subscriptions received in July 1995, and net of related
expenses of $1,401,606. In satisfaction of these related expenses, the Company
paid $669,682 in cash and issued 156,488 shares of its common stock valued at
$731,924. Additionally, in connection with this offering, the Company sold to
one of its investors for $3,751, a five-year warrant to purchase 106,901 shares
of the Company's common stock at a price of $5.26 per share. The warrant
contains certain antidilution provisions as specified in the warrant agreement.
On January 24, 1997, the investor exercised the outstanding warrant.

During the year ended June 30, 1996, the Company sold 210,187 shares of its
common stock to various investors. Proceeds from the sale of these shares
totaled $965,593, net of related expenses of $17,495.

STOCK ISSUED TO CONSULTANTS

During the year ended June 30, 1996, the Company issued 9,975 shares of its
common stock to a consultant in payment for his efforts in assisting in various
Company matters. These shares were purchased by the consultant at a price of
$.04 per share. Consulting expense recorded as a result of this transaction
amounted to $46,270, which represents the difference between the fair market
value of the shares at the date of issuance and the purchase price.

During November 1996, the Company issued a ten-year warrant to five
consultants for future services to purchase an aggregate of 64,125 shares of
common stock at a price per share of $8.07, equal to the fair market value of
the shares at the date of issuance.

ISSUANCE OF COMMON STOCK AS COMMISSION

On November 9, 1995, and in connection with the Company's sale of 199,500
shares of its common stock to an investor also during the year ended June 30,
1996, the Company entered into a commitment to issue up to 5% of its share
capital as follows: (i) 1% of the then outstanding share capital of the Company
upon receipt of sales orders from this stockholder totalling $1,500,000 and (ii)
an additional 1% of the then

F-12
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

6. COMMON STOCK (CONTINUED)
outstanding share capital of the Company upon the receipt of each of four
subsequent increments of $3,000,000 in sales orders from this stockholder. This
agreement is in effect for two and a half years.

In November 1995, the Company issued 37,147 shares of its common stock to
this investor, or 1% of the then outstanding share capital. This issuance
resulted in $173,743 of commission expense based on the fair market value of the
shares at the date of issuance, which was also the date of the agreement. As of
June 30, 1996, this entire amount is included in prepaid expenses within the
accompanying consolidated balance sheet as the related orders were not recorded
as revenue during the year ended June 30, 1996. Such amount was included in
selling and marketing expense in the accompanying consolidated statement of
operations for the six months ended December 31, 1996, the period in which the
related revenue was recognized.

In addition, the investor was granted certain preemptive and other rights
regarding future issuances of securities of the Company including (i) a
preemptive right to purchase up to 15% of the total number of securities offered
in any public offering undertaken by the Company and (ii) the right to
participate in any private offering to the extent required to maintain its
percentage ownership in the Company as well as the right to nominate a director
to the Board of Directors. These rights survive for so long as the investor's
stock ownership does not fall below 5% of the outstanding share capital of the
Company as a result of the investor selling or otherwise disposing of a portion
of its shares.

7. CONVERTIBLE PREFERRED STOCK

In December 1996, the Company issued 485,294 shares (including 53,152 shares
issued as commission) of its Class B convertible preferred stock ("Class B
Convertible") at $28.00 per share to investors. Proceeds from the sales of these
shares totaled $10,965,000, net of related cash expenses of $1,135,000. In March
1997, and in connection with certain antidilution provisions related to a sale
of common stock to an investor during the year ended June 30, 1996, the Company
issued 29,420 shares of Class B Convertible at $28.00 per share.

On May 30, 1996, the Company issued 156,250 shares of its Class A
convertible preferred stock ("Class A Convertible") at $16.00 per share to
investors. Proceeds from the sale of these shares totaled $2,485,000, net of
related expenses of $15,000. In addition, during August 1996, the Company issued
16,054 shares of Class A Convertible at $16.00 per share to an investor.

The principal terms of the Class A Convertible and Class B Convertible
(collectively, the "Preferred Stock") are as follows:

- - LIQUIDATION PREFERENCE

In the event of a liquidation of the Company and before any distribution of
assets is made to holders of common stock, the holders of the Preferred
Stock are entitled to receive: Class A Convertible, $16.00 per share, or
$2,756,864, and Class B Convertible, $28.00 per share or $14,411,992.

F-13
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

7. CONVERTIBLE PREFERRED STOCK (CONTINUED)
- - CONVERSION

The holders of the Preferred Stock have the right, at any time, to convert
such shares into common stock on a 2.85-for-1 basis, subject to certain
anti-dilution provisions as described in the agreement. The Preferred Stock
shall automatically convert into 1,958,001 shares of common stock upon
notice of and prior to the consummation of a public offering of the
Company's common stock, where gross proceeds from the offering are at least
$7,500,000, subject to certain adjustment provisions as described in the
Company's Certificate of Incorporation, as amended.

The Company has reserved 1,958,001 shares of common stock for issuance upon
conversion of the Preferred Stock at March 31, 1997.

- - DIVIDENDS

The holders of the Preferred Stock shall be entitled to receive dividends
when and as declared by the Company's Board of Directors. If the Company
declares dividends on the common stock, the holders of the Preferred Stock
shall be entitled to receive the same dividend based on the number of shares
of common stock into which the Preferred Stock would convert at that time.
No dividends have been declared on the Preferred Stock or the common stock
as of March 31, 1997.

- - VOTING RIGHTS

The holders of the Preferred Stock shall be entitled to vote at any election
of directors or any other matter upon which holders of common stock have the
right to vote.

8. STOCK OPTION PLANS

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and related Interpretations in
accounting for its stock options because, as discussed below, the alternative
fair value accounting provided for under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based-Compensation" ("Statement 123"),
requires the use of option valuation models that were not developed for use in
valuing employee and director stock options.

EMPLOYEE PLAN

In February 1995, the Company adopted a stock option plan (the "Employee
Stock Option Plan"), which provides that the Company may grant employees options
to acquire up to an aggregate of 285,000 shares of the Company's common stock.
During the six months ended December 31, 1996, the Company increased the number
of shares it may grant to 1,710,000 and during February 1997 increased such
shares to 1,995,000. The options generally vest in equal installments over a
four-year period and expire on the tenth anniversary of the date of grant.

F-14
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

8. STOCK OPTION PLANS (CONTINUED)
The following table summarizes activity in employee stock options:

<TABLE>
<CAPTION>
PERIOD FROM AUGUST 17, NINE
MONTHS
1994 (INCEPTION) THROUGH ENDED
YEAR ENDED SIX MONTHS ENDED MARCH 31,
JUNE 30, 1995 JUNE 30, 1996 DECEMBER 31, 1996 1997
-------------------------- ------------------------ ------------------------ ---------
WEIGHTED- WEIGHTED- WEIGHTED-
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE SHARES
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE UNDER
OPTION PRICE OPTION PRICE OPTION PRICE OPTION
----------- ------------- --------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, beginning of period......... 209,475 $ 3.51 820,159 $ 4.45 820,159
Grants............................... 209,475 $ 3.51 730,384 $ 4.57 608,618 $ 7.71 684,998
Canceled............................. -- -- (119,700) $ 3.51 -- -- (7,125)
----------- --------- --------- ---------
Balance, end of period............... 209,475 $ 3.51 820,159 $ 4.45 1,428,777 $ 5.84 1,498,032
----------- --------- --------- ---------
----------- --------- --------- ---------
Weighted-average fair value of
options granted during the
period............................. $ 2.26 $ 3.28

WEIGHTED-
AVERAGE
EXERCISE
PRICE
-------------
<S> <C>
Balance, beginning of period......... $ 4.45
Grants............................... $ 7.95
Canceled............................. $ 7.39

Balance, end of period............... $ 6.04

Weighted-average fair value of
options granted during the
period............................. $ 3.56
</TABLE>

As a result of stock options granted during the years ended June 30, 1995
and 1996, the Company recorded compensation expense of $14,237, $99,053,
$49,527, $13,625, $74,289 and $25,866 during the years ended June 30, 1995 and
1996, the six months ended December 31, 1995 and 1996, and the nine months ended
March 31, 1996 and 1997, respectively, based on the difference between the fair
market value of the shares and the option exercise prices at the dates of grant.
As of December 31, 1996 and March 31, 1997, remaining compensation expense to be
recorded through the year ended June 30, 1999 was approximately $63,000 and
$51,000, respectively.

DIRECTOR PLAN

In June 1995, the Company adopted a stock option plan (the "Director Stock
Option Plan"), which provides that the Company may grant outside directors
options to acquire up to an aggregate of 285,000 shares of the Company's common
stock. The options vest annually in equal installments over a three year period
commencing on the date of grant. The options expire the earlier of five years
from the date of grant or three years from concluding service as director of the
Company.

Pursuant to the Director Stock Option Plan, in June 1995, the Company
granted certain outside directors options to purchase 128,250 shares of the
Company's common stock at $3.51 per share. As a result of these grants, the
Company recorded compensation expense during the years ended June 30, 1995 and
1996, the six months ended December 31, 1995 and 1996, and the nine months ended
March 31, 1996 and 1997 of $2,081, $92,962, $46,481, $19,772, $69,722 and
$29,658, respectively, based on the fair market value of the shares at the date
of grant. As of December 31, 1996 and March 31, 1997, remaining compensation
expense to be recorded through the year ended June 30, 1998 was approximately
$35,000, and $25,000, respectively. During January 1997, an additional outside
director was granted 42,750 options at $8.07 per share, the estimated fair value
of such shares on the date of grant. As of December 31, 1996 and March 31, 1997,
42,750 options were exercisable and none were exercised.

F-15
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

8. STOCK OPTION PLANS (CONTINUED)
STATEMENT 123

Pro forma information regarding net loss and net loss per share is required
by Statement 123, which also requires that the information be determined as if
the Company has accounted for its stock options granted subsequent to July 1,
1995 under the fair value method of that Statement. The fair value for these
options was estimated using a Black-Scholes option pricing model with the
following weighted-average assumptions for the year ended June 30, 1996, the six
months ended December 31, 1996 and the nine months ended March 31, 1997:
risk-free interest rate of 6.5%, volatility factor of the expected market price
of the Company's common stock of .40, a weighted-average expected life of the
option of six years and no dividend yields.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31 NINE MONTHS ENDED MARCH 31
YEAR ENDED -------------------------- ----------------------------
JUNE 30, 1996 1995 1996 1996 1997
------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Pro forma net
loss.............. $ (2,426,617) $ (563,766) $ (1,148,128) $ (1,108,233) $ (2,333,075)
Pro forma net loss
per share......... $ $ $ $ $
</TABLE>

Because Statement 123 is applicable to options granted subsequent to July 1,
1995, its pro forma effect will not be fully reflected until the year ending
June 30, 1998.

F-16
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

8. STOCK OPTION PLANS (CONTINUED)

The following tables summarize information about employee stock options
outstanding at December 31, 1996 and March 31, 1997:

<TABLE>
<CAPTION>
DECEMBER 31, 1996 MARCH 31, 1997
- ----------------------------------------------------- -----------------------------------------------------
<C> <C> <C> <S> <C> <C> <C> <C>
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
REMAINING REMAINING
EXERCISE OPTIONS OPTIONS CONTRACTUAL EXERCISE OPTIONS OPTIONS CONTRACTUAL
PRICES OUTSTANDING EXERCISABLE LIFE PRICES OUTSTANDING EXERCISABLE LIFE
- -------------- ----------- ----------- ----------- -------------- ----------- ----------- -----------
$3.51 151,050 40,000 8.4 years $3.51 151,050 53,000 8.2 years
$4.67 734,659 80,000 9.0 $4.67 733,234 161,000 8.8
$8.07 543,068 -- 9.9 $8.07 537,368 -- 9.7
$9.82 76,380 -- 10.0
----------- ----------- ----------- ----------- ----------- -----------
1,428,777 120,000 9.3 1,498,032 214,000 9.1
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>

The Company has reserved 2,451,026 and 2,344,125 shares of common stock for
issuance upon exercise of all outstanding options and warrants at December 31,
1996 and March 31, 1997, respectively.

9. RELATED PARTY TRANSACTIONS

NOTE RECEIVABLE FROM STOCKHOLDER

On December 8, 1995, the Company loaned $150,000 to an employee, who is also
a stockholder of the Company. The note was due on June 30, 1996 and was extended
until June 30, 1997. Interest is receivable at an annual rate of 5%.

NOTE AND LOAN PAYABLE TO STOCKHOLDER

On October 28, 1994, the Company received $315,000 in exchange for a note
payable to the Company's chief executive officer, who is also a stockholder of
the Company. Interest is payable at an annual rate of 6%. Principal and any
unpaid interest are payable in full upon demand at any time on or after October
28, 1995. Interest expense related to this note was $12,915, $18,952, $9,450,
$9,450, and $14,175 during the years ended June 30, 1995 and 1996, the six
months ended December 31, 1995 and 1996 and the nine months ended March 31,
1996, respectively.

As of June 30, 1995 and 1996 and December 31, 1996, $12,915, $29,266 and
$38,740, respectively, of accrued interest was included in accrued expenses in
the accompanying consolidated balance sheet. The note payable and accrued
interest was paid in full on January 14, 1997.

During the period ended June 30, 1995, the Company also received noninterest
bearing working capital loan advances of $80,700 from the Company's chief
executive officer, of which $60,000 was repaid during the year ended June 30,
1995 and $20,700 was repaid during the year ended June 30, 1996.

F-17
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

10. PENSION PLAN

During the period ended June 30, 1995, the Company established a 401(k) plan
which covers substantially all employees of the Company. Participants may elect
to contribute from 1% to 20% of their pre-tax compensation. Participant
contributions up to 4% of pre-tax compensation were fully matched by the Company
during the years ended June 30, 1995 and 1996 and the six months ended December
31, 1995 and 1996. The plan also provides for discretionary contributions by the
Company. The Company contributed $8,967, $41,883, $11,896, $42,994, $15,473 and
$80,056, to the plan during the years ended June 30, 1995 and 1996, the six
months ended December 31, 1995 and 1996 and the nine months ended March 31, 1996
and 1997, respectively. There were no discretionary contributions made by the
Company during the years ended June 30, 1995 and 1996, the six months ended
December 31, 1995 and 1996 and the nine months ended March 31, 1996 and 1997.

11. INCOME TAXES

As a result of losses incurred from inception, and if the Company filed an
income tax return at December 31, 1996, it would have available net operating
loss carryforwards of approximately $3,100,000 for income tax purposes which
expire through 2012.

As the Company has had cumulative losses and there is no assurance of future
taxable income, a valuation allowance has been established to offset deferred
tax assets. The components of the Company's net deferred tax assets are as
follows:

<TABLE>
<CAPTION>
JUNE 30, 1995 JUNE 30, 1996 DECEMBER 31, 1996
------------- ------------- -----------------
<S> <C> <C> <C>
Deferred tax liability:
Depreciation and amortization.................................. $ 13,000 $ 16,000 $ 19,000
------------- ------------- -----------------
Total deferred tax liability................................. 13,000 16,000 19,000
Deferred tax assets:
Net operating loss carryforwards............................... 378,000 891,000 1,240,000
Projects in progress........................................... -- 312,000 312,000
Accruals....................................................... -- 43,000 43,000
------------- ------------- -----------------
Total deferred tax........................................... 378,000 1,246,000 1,595,000
Valuation allowance for deferred tax assets.................... (365,000) (1,230,000) (1,576,000)
------------- ------------- -----------------
Net deferred tax assets........................................ 13,000 16,000 19,000
------------- ------------- -----------------
Net deferred taxes............................................. $ -- $ -- $ --
------------- ------------- -----------------
------------- ------------- -----------------
</TABLE>

Net deferred taxes at March 31, 1997 are not significantly different from the
December 31, 1996 amounts above.

12. SIGNIFICANT CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

The Company designs, assembles and installs satellite ground segment systems
and networks for customers in diversified geographic locations. The Company
performs ongoing credit evaluations of its

F-18
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

12. SIGNIFICANT CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK (CONTINUED)
customers' financial condition and in most cases requires a letter of credit or
cash in advance for foreign customers. Historically, the Company has not
incurred significant losses from trade receivables.

Sales to two major customers accounted for approximately 61% (43% and 18%)
of the Company's net revenues for the year ended June 30, 1996, and 86% (53% and
33%) and 33% (17% and 16%) of net revenues for the six months ended December 31,
1995 and 1996, respectively, and 65% (42% and 23%) and 28% (15% and 13%) of net
revenues for the nine months ended March 31, 1996 and 1997, respectively.

Revenues from foreign sales accounted for 22% (13% Europe, 5% Africa and 4%
Asia), 5% (Asia), 59% (43% Asia, 13% Europe and 3% Africa), 14% (2% Asia, 12%
Europe) and 50% (42% Asia, 1% Africa and 7% Europe) of total revenues for the
year ended June 30, 1996, the six months ended December 31, 1995 and 1996, and
the nine months ended March 31, 1996 and 1997, respectively.

Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and trade receivables.
The Company places its cash and cash equivalents with high quality financial
institutions and, by policy, limits the amount of credit exposure to any one
institution. Cash equivalents are comprised of short-term debt instruments,
certificates of deposit or direct or guaranteed obligations of the United
States, which are held to maturity and approximate cost. At times, cash may be
in excess of FDIC insurance limits.

13. COMMITMENTS

LINE OF CREDIT

As of December 31, 1996, the Company maintained a secured line of credit of
$1,500,000, which expired on January 31, 1997. Borrowings under this line bear
interest at the then prime rate and were secured by certain assets of the
Company in addition to a personal guarantee by the Company's chief executive
officer, who is also a stockholder of the Company. Through December 31, 1996,
there were no borrowings made under this line.

During January 1997, the Company received a one year, $5,000,000 proposed
credit facility from a bank. The proposed facility is to support the working
capital requirements of the Company and for the issuance of letters of credit.
The proposed facility will provide for interest at the prime rate plus 1/2% per
annum and will be collateralized by a first security interest on all assets.
Prior to closing of the proposed facility, the bank will complete its due
diligence inquiry of the Company, including an accounts receivable review, as
defined. Through March 31, 1997, there were no borrowings made under this
facility.

LETTERS OF CREDIT

The Company utilizes standby letters of credit to secure certain bid
proposals and performance guarantees in the normal course of business. The
Company provides cash collateral for all of these letters of credit. As of June
30, 1995 and 1996, December 31, 1996 and March 31, 1997, cash collateral related
to bid proposals amounted to $96,000, $1,043,000, $1,270,625, $1,303,000,
respectively, and cash collateral

F-19
<PAGE>
GLOBECOMM SYSTEMS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1995,
NINE MONTHS ENDED MARCH 31, 1996 AND 1997 AND AT MARCH 31, 1997 IS UNAUDITED

13. COMMITMENTS (CONTINUED)

related to performance guarantees amounted to zero, $188,850, $344,861,
$188,850, respectively. These amounts are included in restricted cash in the
accompanying consolidated balance sheets.

LEASE COMMITMENTS

Future minimum payments under noncancelable leases for office space and
equipment with terms of one year or more, consist of the following at December
31, 1996:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ----------
<S> <C> <C>
January 1, 1997 to June 30, 1997....................................... $ 31,116 $ 127,000
Year ending June 30, 1998.............................................. 62,232 150,000
Year ending June 30, 1999.............................................. 18,366 53,000
--------- ----------
Total minimum lease payments........................................... 111,714 $ 330,000
----------
----------
Less amounts representing interest..................................... 12,014
---------
Present value of net minimum lease payments............................ $ 99,700
---------
---------
</TABLE>

Lease commitments at March 31, 1997 are not significantly different from the
above.

EMPLOYMENT AGREEMENTS

During January 1997, the Company entered into three-year employment
agreements with two of its officers for an aggregate amount of $325,000 per
year. The Company will have certain obligations to the two officers if they are
terminated for disability, cause or following a change in control.

F-20
<PAGE>
- -------------------------------------------------------------
- -------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.

-------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.................................... 3
Risk Factors.......................................... 7
Use of Proceeds....................................... 15
Dividend Policy....................................... 15
Capitalization........................................ 16
Dilution.............................................. 17
Selected and Consolidated Financial
Data................................................ 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 20
Business.............................................. 27
Management............................................ 49
Certain Transactions.................................. 59
Principal Stockholders................................ 61
Description of Capital Stock.......................... 63
Shares Eligible for Future Sale....................... 66
Underwriting.......................................... 68
Legal Matters......................................... 69
Experts............................................... 69
Additional Information................................ 70
Change in Independent Accountants..................... 70
Index to Financial Statements......................... F-1
</TABLE>

-------------------

Until , 1997 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a Prospectus. This is in addition to the obligation of dealers to
deliver a Prospectus when acting as Underwriters and with respect to their
unsold allotments or subscriptions.

[LOGO]

COMMON STOCK

-----------------

PROSPECTUS

-------------------

PAINEWEBBER INCORPORATED
UNTERBERG HARRIS

------------

, 1997

- -------------------------------------------------------------
- -------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee, the NASD filing fees and the Nasdaq National Market
listing fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
------------
<S> <C>
SEC registration fee............................................................ $ 13,417.00
NASD filing fee................................................................. 4,927.50
Nasdaq National Market listing fee.............................................. *
Printing and engraving.......................................................... *
Legal fees and expenses......................................................... *
Accounting fees and expenses.................................................... *
Blue sky fees and expenses...................................................... *
Transfer agent fees............................................................. *
Miscellaneous................................................................... *
------------
Total..................................................................... $ *
------------
------------
</TABLE>

- ------------------------

* To be completed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's Board of Directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act"). Article 7 of the Registrant's Amended and Restated
Certificate of Incorporation provides for indemnification of its directors and
officers and permissible indemnification of employees and other agents to the
maximum extent permitted by the Delaware General Corporation Law. Reference is
also made to Section of the Underwriting Agreement contained in Exhibit
1.1 hereto, which sets forth certain indemnification provisions. The Registrant
has obtained liability insurance for its officers and directors.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant has sold and issued the following securities during the past
three years:

In June 1995, the Company entered into a Securities Purchase Agreement for
the sale of an aggregate of 1,218,982 shares of Common Stock to various
investors at a purchase price of $4.68 per share. In connection with such
offering, the Company issued, as commission fees, 156,488 shares of Common
Stock.

In November 1995, the Company entered into an agreement with an investor
pursuant to which it issued 199,500 shares of Common Stock at a price of $4.68
per share. Pursuant to the terms of this agreement, in connection with certain
rights granted to this investor for its first $1.5 million of orders with the
Company, in November 1995 the Company issued this investor 37,147 shares of
Common Stock.

In May 1996, the Company issued an aggregate of 156,250 shares of Class A
Convertible Preferred Stock at a purchase price of $2.5 million to three
investors, convertible automatically upon the consummation of this Offering into
an aggregate of 445,313 shares of Common Stock.

II-1
<PAGE>
In August 1996, the Company issued an aggregate of 16,054 shares of Class A
Convertible Preferred Stock at a purchase price of $256,863 convertible
automatically upon the consummation of this Offering into an aggregate of 45,754
shares of Common Stock.

In October 1996, the Company's wholly-owned subsidiary, NetSat Express,
Inc., issued 18,939 shares of its Class A Preferred Stock to PolyVentures, which
the Company in April 1997 converted to 30,082 shares of its Common Stock.

In December 1996, the Company issued an aggregate of 432,142 shares of Class
B Convertible Preferred Stock at a purchase price of $28.00 per share to 77
investors, convertible automatically upon the consummation of this Offering into
an aggregate of 1,231,605 shares of Common Stock. In connection with such
offering, the Company issued, as commission fees, 53,152 shares of Class B
Convertible Preferred Stock, convertible automatically upon the closing of this
Offering into an aggregate of 151,483 shares of Common Stock.

In March 1997, the Company issued 29,420 shares of Class B Convertible Stock
at a purchase price of $28.00 per share to one investor, convertible
automatically upon consummation of this Offering into an aggregate of 83,847
shares of Common Stock.

The Registrant from time to time has granted stock options to employees,
directors and consultants. The following table sets forth certain information
regarding such grants:

<TABLE>
<CAPTION>
RANGE OF
NO. OF EXERCISE
SHARES PRICES
------------ ----------------
<S> <C> <C>
August 17, 1994 to June 30, 1995............................. 337,725 $3.51
July 1, 1995 to June 30, 1996................................ 730,384 $3.51-$4.68
July 1, 1996 to March 31, 1997............................... 727,748 $3.51-$9.82
</TABLE>

The above securities were offered and sold by the Registrant in reliance
upon an exemption from registration under either (i) Section 4(2) of the
Securities Act as transactions not involving any public offering or (ii) Rule
701 under the Securities Act. No underwriters were involved in connection with
the sales of securities referred to in this Item 15.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>

1.1* Form of Underwriting Agreement.

3.1# Certificate of Incorporation.

3.2## Form of Amended and Restated Certificate of Incorporation to be in effect upon the consummation of the
public offering.

3.3# Bylaws of the Registrant.

3.4# Form of Amended and Restated By-Laws of the Registrant to be in effect upon the consummation of the
public offering.

4.1* Specimen Common Stock Certificate.

4.2 See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the Certificate of Incorporation and Bylaws of the
Registrant defining rights of holders of Common Stock of the Registrant.

5.1* Opinion of Brobeck, Phleger & Harrison LLP.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.1# Form of Registration Rights Agreement dated as of February 1997.

10.2# Form of Registration Rights Agreement dated May 30, 1996.

10.3# Form of Registration Rights Agreement dated December 31, 1996, as amended.

10.4# Letter Agreement for purchase and sale of 199,500 shares of Common Stock dated
November 9, 1995 between the Registrant and Thomson-CSF.

10.5# Investment Agreement dated February 12, 1996 by and between Shiron Satellite Communications (1996) Ltd.
and the Registrant.

10.6+# Stock Purchase Agreement dated as of August 30, 1996 by and between C-Grams Unlimited Inc. and the
Registrant.

10.7# Memorandum of Understanding dated December 18, 1996 by and between NetSat Express, Inc. and Applied
Theory Communications, Inc.

10.8# Stock Purchase Agreement dated as of August 23, 1996 by and between NetSat Express Inc. and Hughes
Network Systems, Inc.

10.9# Employment Agreement dated as of January 27, 1997 between the Registrant and David E. Hershberg.

10.10# Employment Agreement dated as of January 27, 1997 between the Registrant and Kenneth A. Miller.

10.11# Lease Agreement dated November 15, 1995 by and between RReef USA Fund-I, a California group trust, and
the Registrant.

10.12# Lease Agreement dated July 15, 1996 by and between NetSat Express, Inc. and RReef USA Fund-I.

10.13# Purchase and Sale Agreement, 45 Oser Avenue, Hauppauge, New York, dated December 12, 1996 by and between
Eaton Corporation and the Registrant.

10.14## 1997 Stock Incentive Plan.

11.1* Statement re: Computation of Per Share Earnings

16.1# Letter from Price Waterhouse LLP.

23.1## Consent of Ernst & Young LLP.

23.2## Consent of Price Waterhouse LLP.

23.3* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).

24# Powers of Attorney.

27## Financial Data Schedule.
</TABLE>

- ------------------------

* To be supplied by amendment.

# Previously filed.

## Filed herewith.

+ Confidential treatment has been requested for certain portions of this
Exhibit.

(b) Financial Statement Schedules

Financial Statement Schedules have been omitted because the information
required to be set forth therein is not applicable or is shown in Financial
Statements or notes thereto.

II-3
<PAGE>
ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the Underwriter,
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.

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

The undersigned Registrant hereby undertakes:

(1) That for purposes of determining any liability under the Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424 (b) (1) or (4), or 497
(h) under the Act shall be deemed to be part of this Registration Statement as
of the time it was declared effective.

(2) That for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of Prospectus shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

II-4
<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HAUPPAUGE, STATE OF NEW
YORK, ON THIS 7TH DAY OF MAY, 1997.

GLOBECOMM SYSTEMS INC.

By: /s/ KENNETH A. MILLER
-----------------------------------------
Kenneth A. Miller
PRESIDENT AND DIRECTOR

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON MAY 7, 1997:

SIGNATURE TITLE
- --------------------------------------- ---------------------------

By: * Chairman and Chief
------------------------------ Executive Officer and
David E. Hershberg Director (Principal
Executive Officer)

By: /s/ KENNETH A. MILLER President and Director
------------------------------
Kenneth A. Miller

By: * Chief Financial Officer
------------------------------ (Principal Financial and
Andrew C. Melfi Accounting Officer)

By: * Vice President and Director
------------------------------
Thomas A. DiCicco

By: * Vice President and Director
------------------------------
Stephen C. Yablonski

By: * Vice President and Director
------------------------------
Donald G. Woodring

By: * Director
------------------------------
Herman Fialkov

By: * Director
------------------------------
Shelley A. Harrison

By: Director
------------------------------
Benjamin Duhov

By: * Director
------------------------------
Cecil J. Waylan

*By: /s/ KENNETH A. MILLER
------------------------------
Kenneth A. Miller
ATTORNEY-IN-FACT

II-5
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<S> <C> <C>

1.1* Form of Underwriting Agreement.

3.1# Certificate of Incorporation.

3.2## Form of Amended and Restated Certificate of Incorporation to be in effect upon the consummation
of the public offering.

3.3# Bylaws of the Registrant.

3.4# Form of Amended and Restated By-Laws of the Registrant to be in effect upon the consummation of
the public offering.

4.1* Specimen Common Stock Certificate.

4.2 See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the Certificate of Incorporation and Bylaws
of the Registrant defining rights of holders of Common Stock of the Registrant.

5.1* Opinion of Brobeck, Phleger & Harrison LLP.

10.1# Form of Registration Rights Agreement dated as of February 1997.

10.2# Form of Registration Rights Agreement dated May 30, 1996.

10.3# Form of Registration Rights Agreement dated December 31, 1996, as amended.

10.4# Letter Agreement for purchase and sale of 199,500 shares of Common Stock dated
November 9, 1995 between the Registrant and Thomson-CSF.

10.5# Investment Agreement dated February 12, 1996 by and between Shiron Satellite Communications
(1996) Ltd. and the Registrant.

10.6+# Stock Purchase Agreement dated as of August 30, 1996 by and between C-Grams Unlimited Inc. and
the Registrant.

10.7# Memorandum of Understanding dated December 18, 1996 by and between NetSat Express, Inc. and
Applied Theory Communications, Inc.

10.8# Stock Purchase Agreement dated as of August 23, 1996 by and between NetSat Express Inc. and
Hughes Network Systems, Inc.

10.9# Employment Agreement dated as of January 27, 1997 between the Registrant and David E. Hershberg.

10.10# Employment Agreement dated as of January 27, 1997 between the Registrant and Kenneth A. Miller.

10.11# Lease Agreement dated November 15, 1995 by and between RReef USA Fund-I, a California group
trust, and the Registrant.

10.12# Lease Agreement dated July 15, 1996 by and between NetSat Express, Inc. and RReef USA Fund-I.

10.13# Purchase and Sale Agreement, 45 Oser Avenue, Hauppauge, New York, dated December 12, 1996 by and
between Eaton Corporation and the Registrant.

10.14## 1997 Stock Incentive Plan.

11.1* Statement re: Computation of Per Share Earnings

16.1# Letter from Price Waterhouse LLP.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- ------------------------------------------------------------------------------------------------
<S> <C> <C>
23.1## Consent of Ernst & Young LLP.

23.2## Consent of Price Waterhouse LLP.

23.3* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).

24# Powers of Attorney.

27## Financial Data Schedule.
</TABLE>

- ------------------------

* To be supplied by amendment.

# Previously filed.

## Filed herewith.

+ Confidential treatment has been requested for certain portions of this
Exhibit.

<PAGE>
Exhibit 3.2

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF

GLOBECOMM SYSTEMS INC.

Globecomm Systems Inc., a Delaware corporation (the "Corporation"), hereby
certifies and sets forth:

The name of the Corporation is Globecomm Systems Inc. The Corporation was
originally incorporated under the name Worldcomm Systems Inc. The original
Certificate of Incorporation was filed with the Secretary of State on August 17,
1994.

1. The registered office of the corporation in the State of Delaware is to be
located at 3422 Old Capitol Trail, Suite 700, in the city of Wilmington, county
of New Castle, 19808-6192. The registered agent in charge thereof is Delaware
Business Inc., Inc., located at that address.

2. The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.

3. The total number of shares of capital stock which the Corporation shall
have authority to issue is 12,000,000 shares, of which 11,000,000 shares shall
be Common Stock, $.001 par value and 1,000,000 shares shall be Preferred Stock,
$.001 par value.
(a) Common stock.
(i) Voting Rights. The holders of shares of Common Stock
shall be entitled to one vote for each share so held with respect to all matters
voted on by the stockholders of the Corporation.
(ii) Liquidation Rights. Subject to the prior and superior
rights of the Preferred Stock, upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, or the merger or
consolidation of the Corporation into another corporation, the remaining assets
of the Corporation available for distribution to stockholders shall be
distributed among the holders of Common Stock pro rata based upon the number of
shares of Common Stock held by each.
(iii) Dividends. Subject to the rights of the Preferred Stock,
dividends may be paid on the Common Stock out of any assets legally available
therefor, as and when declared by the Board of Directors.
(iv) Relative Rights of Preferred Stock and Common Stock. All
relative, participating, optional or other special rights of the Common Stock
are expressly made subject and subordinate to those that may be fixed with
respect to any shares of the Preferred Stock.
(b) Preferred Stock. The Board of Directors is empowered to authorize
the issuance of one or more classes of the Corporation's Preferred Stock, or one
or more series of any such class, and to fix the preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof for each such class or series, specifying for each such
class or series:
(i) the designation thereof in such manner as shall
distinguish shares thereof from all other series of Preferred Stock then or
theretofore authorized;

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(ii) the number of shares which shall initially constitute
such class or series;
(iii) whether or not the shares of such class or series shall
have voting rights in addition to the voting rights affirmatively required by
law;
(iv) the rate or rates and the time or times at which
dividends and other distributions on the shares of such class or series shall be
paid, and whether or not any such dividends shall be cumulative;
(v) the amount payable on the shares of such class or series
in the event of the voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Corporation;
(vi) whether or not shares of such class or series are to be
redeemable, and the terms and conditions upon which the Corporation or a holder
may exercise its or his right to redeem, or require redemption of, shares of
such class or series;
(vii) whether or not a sinking fund shall be created for the
redemption of the shares of such class or series, and the terms and conditions
of any such fund; and
(viii) any other preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof which shall be applicable to such class or series.

4. Upon the effectiveness of this Amended and Restated Certificate of
Incorporation, each outstanding share of Common Stock, par value $.01 per share,
shall be changed into 2.85 shares of Common Stock, par value $.001. Each holder
of record of a certificate for one or more shares of Common Stock of the
Corporation as of the close of business on the date this Amended and Restated
Certificate of Incorporation becomes effective shall be entitled to receive as
soon as practicable, and without surrender of such certificate, a certificate or
certificates representing 1.85 additional shares of Common Stock, par value
$.001, for each one share of Common Stock represented by the certificate of such
holder.

5. This Amended and Restated Certificate of Incorporation is being filed in
connection with the Corporation's initial public offering of its securities.
Upon the closing of such initial public offering, each share of Class A
Preferred Stock, and each share of Class B Preferred Stock, previously
outstanding will be automatically converted, pursuant to the terms of the
respective Certificates of Designation with respect such classes, into 2.85
shares of Common Stock, par value $.001. Following such conversion, each
certificate evidencing shares of either of such classes shall be deemed to
evidence the same number of shares of Common Stock, par value $.001, and each
holder of record of a certificate for one or more shares of such class shall be
entitled to receive as soon as practicable, and without surrender of such
certificate, a certificate or certificates representing 1.85 additional shares
of Common Stock, par value $.001 for each one share of preferred stock of such
class representative by the certificate of such holder.

6. Whenever a compromise or arrangement is proposed between this corporation
and its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware, may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of Section 279 of

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Title 8 of the Delaware Code order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-fourths (3/4) in
value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this corporation as
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders,
of this corporation, as the case may be, and also on this corporation.

7. A director of the Corporation shall not be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that this provision shall not eliminate or limit the liability of a
director (i) for any breach of his duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit.

8. The Board of Directors shall have power without the assent or vote of the
stockholders to make, alter, amend, change, add to or repeal the By-Laws of the
Corporation.

9. This amendment and restatement has been duly adopted in accordance with
Sections 242 and 245 of the General Corporation Law.
IN WITNESS of the foregoing I have executed this certificate this __ day of
January, 1997.

-----------------------------------------
David E. Hershberg, Chairman of the Board of
Directors
Attest:

- ----------------------------------
Thomas A. DiCicco, Secretary

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Exhibit 10.14

WORLDCOMM SYSTEMS, INC. 1997 STOCK INCENTIVE PLAN
ARTICLE ONE.
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1997 Stock Incentive Plan is intended to promote the interests of
Worldcomm Systems, Inc., a Delaware corporation, by providing eligible persons
with the opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them to
remain in the service of the Corporation.
Capitalized terms shall have the meanings assigned to such terms in
Article Eight.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity programs:
(i) the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,
(ii) the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants
(iii) the Stock Issuance Program under which eligible
persons may, at the discretion of the Plan Administrator, be issued shares of
Common Stock directly, either through the immediate purchase of such shares or
as a bonus for services rendered the Corporation (or any Parent or Subsidiary),
(iv) the Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock; and
(v) the Director Fee Option Grant Program under which
non-employee Board members may elect to have all or any portion of their annual
retainer fee otherwise payable in cash applied to a special option grant.
B. The provisions of Article One and Article Seven shall apply to
all equity programs under the Plan and shall accordingly govern the interests of
all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. Prior to the Section 12 Registration Date, both the Discretionary
Option Grant and Stock Issuance Programs shall be administered by the Board.
B. Beginning with the Section 12 Registration Date, the Compensation
Committee shall have sole and exclusive authority to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders and shall have sole and exclusive authority to administer the Salary
Investment Option Grant Program with respect to all eligible individuals.
Administration of the Discretionary Option Grant and Stock Issuance Programs
with respect to all other persons eligible to participate in those programs may,
at the Board's discretion,

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be vested in the Compensation Committee, or the Board may retain the power
to administer those programs with respect to all such persons.
C. Members of the Compensation Committee shall serve for such period
of time as the Board may determine and may be removed by the Board at any time.
D. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant, Salary Investment Option Grant and Stock Issuance
Programs under its jurisdiction or any option or stock issuance thereunder.
E. Service on the Compensation Committee shall constitute service as
a Board member, and members of each such committee shall accordingly be entitled
to full indemnification and reimbursement as Board members for their service on
such committee. No member of the Compensation Committee shall be liable for any
act or omission made in good faith with respect to the Plan or any option grants
or stock issuances under the Plan.
F. Administration of the Automatic Option Grant Program and Director
Fee Option Grant Programs shall be self-executing in accordance with the terms
of those programs, and no Plan Administrator shall exercise any discretionary
functions with respect to option grants or stock issuances made under those
programs.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option
Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the board Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain

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outstanding and (ii) with respect to stock issuances under the Stock Issuance
Program, which eligible persons are to receive stock issuances, the time or
times when such issuances are to be made, the number of shares to be issued
to each Participant, the vesting schedule (if any) applicable to the issued
shares and the consideration for such shares.
D. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
E. The individuals eligible to participate in the Automatic Option
Grant Program shall be limited to those individuals who first become
non-employee Board members on or after the Underwriting Date, whether through
appointment by the Board or election by the Corporation's stockholders,
excluding, however, any such individual who either (i) has otherwise been in the
prior employee of the Corporation, or (ii) serves as a member of the Board
pursuant to contractual rights granted to certain groups of stockholders in
connection with their purchase of stock in the Corporation.
F. All non-employee Board members shall be eligible to participate
in the Director Fee Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed
800,000 shares. Such authorized share reserve is comprised of (i) the number of
shares which remain available for issuance, as of the Plan Effective Date, under
the Predecessor Plans as last approved by the Corporation's stockholders,
including the shares subjects the outstanding options to be incorporated into
the Plan and the additional shares which would otherwise be available for future
grant, plus (ii) an additional increase of 200,000 shares authorized by the
Board but subject to stockholder approval prior to the Section 12 Registration
Date.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of each calendar
year during the term of the Plan, beginning with the 1998 calendar year, by an
amount equal to one percent (1%)] of the shares of Common Stock outstanding on
the last trading day of the immediately preceding calendar year. No Incentive
Options may be granted on the basis of the additional shares of Common Stock
resulting from such annual increases.
C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 500,000 shares of Common Stock in the aggregate per calendar year,
beginning with the 1997 calendar year.
D. Shares of Common Stock subject to outstanding options (including
options incorporated into this Plan from the Predecessor Plans) shall be
available for subsequent issuance under the Plan to the extent those options
expire or terminate for any reason prior to exercise in full. Unvested shares
issued under the Plan and subsequently canceled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall

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accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance.
E. If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted options, separately exercisable stock appreciation rights and direct
stock issuances under the Plan per calendar year, (iii) the number and/or class
of securities for which automatic option grants are to be made under the
Automatic Option Grant Program to new and continuing non-employee Board members
(iv) the number and/or class of securities and the exercise price per share in
effect under each outstanding option under the Plan and (v) the number and/or
class of securities and price per share under each outstanding option
incorporated into this Plan from the Predecessor Plans. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO.
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Six and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and

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valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable written instructions to (a) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (b) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm in
order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator and
set forth in the documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be exercised subsequently by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution.
(iii) Should the Optionee's Service be terminated
for Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than the
number of vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable exercise
period or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the option
has not been exercised. However, the option shall, immediately upon the
Optionee's cessation of Service, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option is to

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remain exercisable following the Optionee's cessation of Service from the
limited period otherwise in effect for that option to such greater period of
time as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the option term,
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the number of
vested shares of Common Stock for which such option is exercisable at the time
of the Optionee's cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested had the Optionee
continued in Service, or
(iii) do both of the above.
D. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or by the laws of descent
and distribution following the Optionee's death. A Non-Statutory Option shall
not be assignable or transferable except that it may, in connection with the
Optionee's estate plan, be assigned in whole or in part during the Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established exclusively for the benefit of one or more such family members. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Article One, Article Two and Article Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to Employees.
B. Exercise Price. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. Dollar Limitation. The aggregate Fair Market Value of the shares
of

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Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one calendar year shall
not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted. The provisions of this
Section C shall apply to options previously issued under the Corporation's
Incentive Stock Option Plan, and shall be in substitution for the limitation set
forth in Section 2.05 of such Plan.
D. 10% Stockholder. If any Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable with respect to the total number of shares of Common Stock at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding.
D. In the event of a Change in Control each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to be
effective date of the Change in Control, become fully exercisable with respect
to the total number of shares of Common Stock at the time subject to such option
and may be exercised for any or all of those shares as fully-vested shares of
Common Stock. Each option so accelerated shall remain exercisable for
fully-vested shares until the earlier of (i) the expiration of the option term
or (ii) the expiration of the one (1)-year period measured from the effective
date of the Optionee's cessation of Service. In addition, all of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Change in Control shall immediately terminate, and
the shares subject to those terminated repurchase rights shall accordingly vest
in full.
E. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Statutory
Option under the Federal tax laws.
F. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge,

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consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights, limited stock
appreciation rights or both.
B. The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to elect
between the exercise of the underlying option for shares of Common Stock and the
surrender of that option in exchange for a distribution from the Corporation in
an amount equal to the excess of (a) the Fair Market Value (on the option
surrender date) of the number of shares in which the Optionee is at the time
vested under the surrendered option (or surrendered portion thereof) over (b)
the aggregate exercise price payable for such shares.
(ii) No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the time of the actual option
surrender or at any earlier time. If the surrender is so approved, then the
distribution to which the Optionee shall be entitled may be made in shares of
Common Stock valued at Fair Market Value on the option surrender date, in cash,
or partly in shares and partly in cash, as the Plan Administrator shall in its
sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by
the Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion thereof) on
the option surrender date and may exercise such rights at any time prior to the
later of (a) five (5) business days after the receipt of the rejection notice or
(b) the last day on which the option is otherwise exercisable in accordance with
the terms of the documents evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock appreciation
right shall have the unconditional right (exercisable for a thirty (30)-day
period following such Hostile Take-Over) to

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surrender each such option to the Corporation, to the extent the option is at
the time exercisable for vested shares of Common Stock. In return for the
surrendered option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (a) the Take-Over Price of
the shares of Common Stock which are at the time vested under each
surrendered option (or surrendered portion thereof) over (b) the aggregate
exercise price payable for such shares. Such cash distribution shall be paid
within five (5) days following the option surrender date.
(iii) Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such option
surrender and cash distribution.
(iv) The balance of the option (if any) shall remain
outstanding and exercisable in accordance with the documents evidencing such
option.
ARTICLE THREE.
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Compensation Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for those calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his base salary for that calendar year by an
amount not less than Five Thousand Dollars ($5,000.00) nor more than Fifty
Thousand Dollars ($50,000.00). The Compensation Committee shall have complete
discretion to determine whether to approve the filed authorization in whole or
in part. To the extent the Compensation Committee approves the authorization,
the individual who filed that authorization shall be granted an option under the
Salary Investment Grant Program on or before the last trading day in January for
the calendar year for which the salary reduction is to be in effect. All grants
under the Salary Investment Option Grant Program shall be at the sole discretion
of the Compensation Committee.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
that each such document shall comply with the terms specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

<PAGE>

B. Number of Option Shares. The number of shares of Common Stock
subject to the option shall be determined pursuant to be following formula
(rounded down to the nearest whole number):
X = A/(B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount of the approved reduction in the Optionee's base
salary for the calendar year, and
B is the Fair Market Value per share of Common Stock on the option grant
date.
C. Exercise and Term of Options. The Option shall become exercisable
in a series of twelve (12) successive equal monthly installments upon the
Optionee's completion of each calendar month of Service in the calendar year for
which the salary reduction is in effect. Each option shall have a maximum term
of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
term or (ii) the three (3)-year period measured from the date of such cessation
of Service. Should the Optionee die while holding one or more options under this
Article Three, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Service (less any shares subsequently purchased by Optionee prior
to death), by the personal representative of the Optionee's estate or by the
person or person to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution. Such right of
exercise shall lapse, and the option shall terminate upon the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the three (3)-year period
measured from the date of the Optionee's cessation of Service. However, the
option shall, immediately upon the Optionee's cessation of Service for any
reason, terminate and cease to remain outstanding with respect to any and all
shares of Common Stock for which the option is not otherwise at that time
exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKEOVER
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
The option

<PAGE>

shall remain so exercisable until the earlier of (i) the expiration of the
ten (10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Service.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his outstanding option grants. The optionee shall in return the entitled to a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the shares of Common Stock at the time subject to each
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No approval or consent of the Board
or any Plan Administrator shall be required in connection with such option
surrender and cash distribution.
D. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganized or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
IV.REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
ARTICLE FOUR.
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below.
A. Purchase Price.
1. The purchase price per share shall be fixed by the Plan
Administrator, but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Seven,
shares of Common Stock may be issued under the Stock Issuance Program for any of
the following items of consideration which the Plan Administrator may deem
appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any
Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock Issuance
Program

<PAGE>

may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock which
would otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction
B. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall automatically terminate, and the shares of Common
Stock subject to those terminated rights shall immediately vast upon a Change in
Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the

<PAGE>

Corporation until the Participant's interest in such shares vests or may be
issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.

ARTICLE FIVE.
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. Option Grants. Each elibible individual who is first elected or
appointed as a non-employee Board member at any time on or after the
Underwriting Date shall automatically be granted, on the date of such initial
election or appointment, a Non-Statutory Option to purchase 15,000 shares of
Common Stock, provided such individual has not previously been in the employ of
the corporation (or any Parent or Subsidiary).
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. Option Term.. Each option shall have a term of ten (10) years
measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be exercisable
for those option shares which have vested. During the period of service as a
member of the Board, each 15,000-share grant shall vest to the extent of one
third of the number of shares granted thereby (5,000 shares), on the first
anniversary of the date of grant, and cumulatively to the extent of an
additional one-third, on each of the next two succeeding anniversaries, so that
on the third anniversary of the date of grant (provided service as a Board
member has continued throughout the period), the options granted to any Eligible
Director shall be fully vested.
E. Termination of Board Service. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution) shall have a twelve (12)-month period
following the date of such cessation of Board service in which to exercise each
such option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number of vested
shares of Common Stock for which the option is exercisable at the time of the
Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at the time
subject to the option shall

<PAGE>

immediately vest so that such option may, during the twelve (12)-month
exercise period following such cessation of Board service, be exercised for
all or any portion of those shares as fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable after
the expiration of the option term. Upon the expiration of the twelve (12)-month
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares for
which the option has not been exercised. However, the option shall, immediately
upon the Optionee's cessation of Board service for any reason other than death
or Permanent Disability, terminate and cease to be outstanding to the extent the
option is not otherwise at that time exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as fully-
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, each automatic option grant shall terminate and cease to
be outstanding.
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his outstanding automatic option grants. The Optionee shall in return the
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. No approval or consent
of the Board or any Plan Administrator shall be required in connection with such
option surrender and cash distribution.
D. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS

<PAGE>

The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made under
the Discretionary Option Grant Program.
ARTICLE SIX.
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
Each non-employee Board member may elect to apply all or any portion of
the annual retainer he otherwise payable in cash for his service on the Board to
the acquisition of a special option grant under this Director Fee Option Grant
Program. Such election must be filed with the Corporation's Chief Financial
Officer prior to the first day of the calendar year for which the annual
retainer fee which is the subject of that election is otherwise payable. Each
non-employee Board member who files such a timely election shall automatically
be granted an option under this Director Fee Option Grant Program on the first
trading days in January in the calendar year for which the annual retainer fee
which is the subject of that election would otherwise be payable.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchase shares must be made on the
Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(running down to the nearest whole number);
X = A/B x 66 2/3%), where,
X is the number of option shares,
A is the portion of the annual retainer fee subject to be non-employee
Board member's election, and
B is the Fair Market Value per share of Common Stock on the option grant
date.
C. Exercise an Term of Options. The option shall become exercisable
for fifty percent (50%) of the option shares upon the Optionee's completion of
six (6) months of Board service in the calendar year for which is or her
election under this Director Fee Option Grant Program is in effect, and the
balance of the option shares shall become exercisable in a series of six (6)
successive equal monthly installments upon the Optionee's completion of each
additional month

<PAGE>

of Board service during that calendar year. Each option shall have a maximum
term of ten (10) years measured from the option grant date.
D. Termination of Board Service. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) Should be Optionee cease Board service or any reason
(other than death or Permanent Disability) while holding one or more options
under this Director She Option Grant Program, then each such option shall remain
exercisable, for any or all of the shares for which the option is exercisable at
the time of such cessation of Board service, until the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of such cessation of Board service.
However, each option held by the Optionee under this Director Fee Option Grant
Program at the time of his cessation of Board service shall immediately
terminate and cease to remain outstanding with respect to any and all shares of
Common Stock for which the option is not otherwise at that time exercisable.
(ii) Should the Optionee's service as a Board member cease
by reason of death or Permanent Disability, then each option held by such
Optionee under this Director Fee Option Grant Program shall immediately become
exercisable for all the shares of Common Stock at the time subject to that
option, and the option may be exercised for any or all of those shares as
fully-vested shares until the earlier of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of such cessation of Board service.
(iii) Should the Optionee die after cessation of Board
service but while holding one or more options under this Director Fee Option
Grant Program, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Board service (list any shares subsequently purchased by Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. Such
right of exercise shall lapse, and the option shall terminate, upon the earlier
of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's cessation of Board
service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to be effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable with respect to be total number of
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully-vested shares of Common Stock. The
option shall

<PAGE>

remain so exercisable until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Service.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his outstanding option grants. The optionee shall in return be entitled to a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the shares of Common Stock at the time subject to each
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No approval or consent of the Board
or any Plan Administrator shall be required in connection with such option
surrender and cash distribution.
D. The grant of options under the Director Fee Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganized or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee Option
Grant Program shall be the same as the terms in effect for option grants under
the Discretionary Option Grant Program.
ARTICLE SEVEN.
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Discretionary Option Grant Program or the
purchase price for shares issued under the Stock Issuance Program by delivering
a full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of such shares under the
Plan shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program or Director Fee Option

<PAGE>

Grant Program) with the right to use shares of Common Stock in satisfaction
of all or part of the Taxes incurred by such holders in connection with the
exercise of their options or the vesting of their shares. Such right may be
provided to any such holder in either or both of the following formats:
(i) Stock Withholding: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
(ii) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised or the shares
vest, one or more shares of Common Stock previously acquired by such holder
(other than in connection with the option exercise or share vesting triggering
the Taxes) with an aggregate Fair Market Value equal to the percentage of the
Taxes (not to exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately upon the Plan
Effective Date. However, the Salary Investment Option Grant Program shall not be
implemented until such time as the Compensation Committee may deem appropriate.
Options may be granted under the Discretionary Option Grant or Automatic Option
Grant Program at any time on or after the Plan Effective Date. However, no
options granted under the Plan may be exercised, and no shares shall be issued
under the Plan, until the Corporation's stockholders approve the Plan. If such
stockholder approval is not obtained within twelve (12) months after the Plan
Effective Date, then all options previously granted under the Plan shall
terminate and cease to be outstanding, and no further options shall be granted
and no shares shall be issued under the Plan.
B. The Plan shall serve as the successor to the Predecessor Plan,
and no further option grants for direct stock issuances shall be made under the
Predecessor Plan after the Section 12 Registration Date. All options outstanding
under the Predecessor Plan on the Section 12 Registration Date shall be
incorporated into the Plan at that time and shall be treated as outstanding
options under the Plan. However, except as explicitly provided otherwise in this
Plan, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of holders of such incorporated options with respect to their acquisition of
shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions and Changes in Control, may, in the Plan
Administrator's discretion, the extended to one or more options incorporated
from the Predecessor Plan which do not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest of (i) __, 2007, (ii)
the date on which all shares available for issuance under the Plan shall have
been issued as fully-vested shares or (iii) the termination of all outstanding
options in connection with a Corporate Transaction. Upon such Plan termination,
all outstanding option grants and unvested stock issuances shall thereafter
continue to have force and effect in accordance with the provisions of the
documents evidencing

<PAGE>

such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect the rights and obligations with respect
to options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations in order to preserve the
deductibility or other tax treatment of options and shares granted hereunder, or
the exemption of recipients of such shares or options from Section 16(b) of the
1934 Act.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically canceled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option
under the Plan and the issuance of any shares of Common Stock (i) upon the
exercise of any option or (ii) under the Stock Issuance Program shall be subject
to the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including (to
the extent required) the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the NASDAQ National
Market, if applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue

<PAGE>

in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person's Service at any time for any reason, with or without cause.
ARTICLE EIGHT.
DEFINITIONS
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option
grant program in effect under the Plan.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control means a change of control of the Corporation of
a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the 1934 Act whether or not the
Corporation is then subject to such reporting requirement; provided, however,
that, without limitation, such a Change in Control shall be deemed to have
occurred if:
(i) any person or group (as such terms are used in connection
with Sections 13(d) and 14(d) of the Act) becomes the "beneficial owner" (as
defined in Rule 13d-3 and 13d-5 under the Act), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company's then outstanding securities;
(ii) the Company is a party to a merger, consolidation, sale of
assets or other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of Directors
thereafter; or
(iii) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute at least a
majority of the Board of Directors.
Notwithstanding the foregoing provisions of this Section C, a "Change in
Control" will not be deemed to have occurred solely because of the acquisition
of securities of the Company (or any reporting requirement under the Act
relating thereto) by an employee benefit plan maintained by the Company for its
employees.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean a stockholder-approved sale,
transfer or other disposition of all or substantially all of the Corporation's
assets in complete liquidation or dissolution of the Corporation.
G. Compensation Committee shall mean the committee of two (2) or
more

<PAGE>

Independent Directors appointed by the Board to administer the Discretionary
Option Grant and Stock Issuance Programs with respect to Section 16 Insiders
and to administer the Salary Investment Option Grant Program with respect to
all eligible individuals.
H. Corporation shall mean Worldcomm Systems, Inc., a Delaware
corporation, and its successors.
I. Director Fee Option Grant Program shall mean the special stock
option grant in effect for non-employee Board members under Article Six of the
Plan.
J. Discretionary Option Grant Program shall mean the discretionary
option grant program in effect under the Plan.
K. Eligible Director shall mean a non-employee Board member eligible
to participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
L. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
M. Exercise Date shall mean the date on which the Corporation shall
have received written notice of the option exercise.
N. Fair Market Value per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the NASDAQ
National Market, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question, as such price
is reported on the NASDAQ National Market or any successor system. If there is
no closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation
exists.
(iii) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal to the
price per share at which the Common Stock is sold in the initial public offering
pursuant to the Underwriting Agreement.
(iv) For purposes of any option grants made prior to the
Underwriting Date, or after the Underwriting Date if the Common Stock is not at
the time traded on the Nasdaq National Market or any Stock Exchange, the Fair
Market Value shall be determined by the Plan Administrator after taking into
account such factors as it deems appropriate.
O. Hostile Take-Over shall mean the acquisition, directly or
indirectly, by any

<PAGE>

person or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) of beneficial ownership (within the meaning of
Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's stockholders which the Board does not recommend such
stockholders to accept.
P. Incentive Option shall mean an option which satisfies the
requirements of Code Section 422.
Q. Independent Director shall be a director who is not currently an
officer or otherwise employed by the Corporation, or a parent or subsidiary of
the Corporation; does not receive compensation directly or indirectly from the
Corporation, its parent or subsidiary for services rendered as a consultant or
in any capacity other than as a director, except for an amount for which
disclosure would not be required pursuant to Item 404(a) of Regulation S-K of
the Securities and Exchange Commission; does not possess an interest in any
other transaction for which disclosure would be required pursuant to Item 404(a)
of Regulation S-K; and is not engaged in a business relationship for which
disclosure would be required pursuant to Item 404(b) of Regulation S-K.
R. Involuntary Termination shall mean the termination of the Service
of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by
the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a
change in his position with the Corporation which materially reduces his level
of responsibility, (B) a reduction in his level of compensation (including base
salary, fringe benefits and participation in any corporate-performance based
bonus or incentive programs) by more than fifteen percent (15%) or (C) a
relocation of such individual's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected by
the Corporation without the individual's consent.
S. Misconduct shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
T. 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
U. Non-Statutory Option shall mean an option not intended to satisfy
the requirements of Code Section 422.
V. Optionee shall mean any person to whom an option is granted under
the Discretionary Option Grant, Salary Investment Option Grant, Automatic Option
Grant or Director

<PAGE>

Fee Option Grant Programs.
W. Parent shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
X. Participant shall mean any person who is issued shares of Common
Stock under the Stock Issuance Program.
Y. Permanent Disability or Permanently Disabled shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his usual duties as a Board member 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.
Z. Plan shall mean the Corporation's 1997 stock incentive Plan, as
set forth in this document.
AA. Plan Administrator shall mean the particular entity, whether the
Compensation Committee or the Board, which is authorized to administer the
Discretionary Option Grant, Salary Investment Option Grant and Stock Issuance
Programs with respect to one or more classes of eligible persons, to the extent
such entity is carrying out its administrative functions under those programs
with respect to the persons under its jurisdiction.
BB. Plan Effective Date shall mean ______, 1997, the date on which
the Plan was adopted by the Board.
CC. Predecessor Plans shall mean the Corporation's pre-existing
Incentive Stock Option Plan and Director Stock Option Plan in effect immediately
prior to the Plan Effective Date hereunder.
DD. Salary Investment Option Grant Program shall mean the salary
investment grant program in effect under the Plan.
EE. Section 12 Registration Date shall mean the date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.
FF. Section 16 Insider shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
GG. Service shall mean the performance of services to the Corporation
(or any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
HH. Stock Exchange shall mean either the American Stock Exchange or
the New York Stock Exchange.

<PAGE>

II. Stock Issuance Agreement shall mean the agreement entered into by
the Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
JJ. Stock Issuance Program shall mean the stock issuance program in
effect under the Plan.
KK. Subsidiary shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
LL. Take-Over Price shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take- Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
MM. Taxes shall mean the Federal, state and local income and
employment tax liabilities incurred by the holder of Non-Statutory Options or
unvested shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.
NN. 10% Stockholder shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock
OO. Underwriting Agreement shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
PP. Underwriting Date shall mean the date on which the Underwriting
Agreement is executed and priced in connection with the initial public offering
of the Common Stock.

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and
"Change in Independent Accountants" and to the use of our report dated January
24, 1997 (except for Note 1 as to which the date is , 1997), in
Amendment No. 1 to the Registration Statement (Form S-1 No. 333-22425) and
related Prospectus of Globecomm Systems Inc. for the registration of
shares of its common stock.

Ernst & Young LLP

Melville, New York

------------------------

The foregoing consent is in the form that will be signed upon (a) completion
of the split of outstanding shares of common stock and amendment to the
certificate of incorporation and (b) determination of the estimated initial
public offering price for purposes of computing shares used in per share
computations, as described in Notes 1 and 2, respectively, to the consolidated
financial statements.

/s/ Ernst & Young LLP

ERNST & YOUNG LLP

Melville, New York
May 6, 1997

<PAGE>
EXHIBIT 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated August 23, 1996, except
as to the stock split described in Note 1 which is as of , 1997,
relating to the financial statements of Globecomm Systems Inc., which appears in
such Prospectus. We also consent to the references to us under the headings
"Experts" and "Selected Consolidated Financial Data" in such Prospectus.
However, it should be noted that Price Waterhouse LLP has not prepared or
certified such "Selected Consolidated Financial Data".

/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
New York, New York
May 5, 1997

<PAGE>
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