GLOBECOMM SYSTEMS INC, 10-K, 1999-09-28

GLOBECOMM SYSTEMS INC
10-K, 1999-09-28
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 1999

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission file number 000-22839

Globecomm Systems Inc.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-3225567
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

45 Oser Avenue, Hauppauge, NY 11788
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(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (516) 231-9800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
None None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.001 par value
- --------------------------------------------------------------------------------

Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No

Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

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While it is difficult to determine the number of shares owned by
non-affiliates, the registrant estimates that the aggregate market value of
outstanding Common Stock on September 24, 1999, based upon the average bid and
asked prices of such Common Stock on the Nasdaq National Market on September 24,
1999 held by non-affiliates was approximately $74.8 million. For this
computation, the registrant has excluded the market value of all shares of its
Common Stock reported as beneficially owned by officers, directors and certain
significant stockholders. Such exclusion shall not be deemed to constitute an
admission that any such stockholder is an affiliate of the registrant.

As of September 24, 1999, there were outstanding 9,269,163 shares of
the registrant's Common Stock, par value $.001.

DOCUMENTS INCORPORATED BY REFERENCE

Proxy Statement of Globecomm Systems Inc. relative to the 1999 Annual
Meeting of Stockholders to be held on November 17, 1999, which is incorporated
by reference into Part III of this Annual Report on Form 10-K.

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PART I
ITEM I. BUSINESS

OVERVIEW

Globecomm Systems Inc. (the "Company" or "GSI"), incorporated in
Delaware on August 17, 1994, 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"), Internet Service Providers
("ISPs"), government entities, 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.
During fiscal 1997, the Company established a subsidiary, NetSat Express, Inc.
("NetSat Express"), to develop service revenues by providing high-speed,
satellite-delivered data communications to developing markets worldwide. More
recently, the Company, in concert with NetSat Express, has begun supplying
end-to-end service solutions bundled with the facilities at both ends of the
service provided. These end-to-end services are provided as part of our strategy
to offer enterprise service solutions. The Company's enterprise service
solutions typically are comprised of ground segment systems and networks in
combination with terrestrial and space segment services to provide end-to-end
service solutions.

The combination of GSI as a ground segment systems and network
provider, and NetSat Express as a satellite-delivered data communications
services provider, allows us to provide end-to-end solutions and services to
enterprises globally. Solutions include engineering and implementation of
satellite communications and terrestrial communications technology. Services
include provision of Internet connectivity, Intranet extension, media
distribution and other network services on a global basis. NetSat Express is
currently providing Internet access to customers who have limited or no access
to terrestrial network infrastructure capable of supporting the economical
delivery of such services.

In this Annual Report on Form 10-K, the terms "GSI" and "the Company"
refer to Globecomm Systems Inc. and its subsidiaries, except where it is clear
such terms mean only Globecomm Systems Inc. For financial information about
industry segments and foreign operations, see Note 13 and 14, respectively of
the Notes to the Consolidated Financial Statements.

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

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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, and enterprise network service solutions portion
of the market and has recently expanded into the satellite-delivered data
communications services market through NetSat Express.

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 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 under served 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 the Company
for customers 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 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.

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GSI GROUND SEGMENT SYSTEMS AND NETWORKS, AND ENTERPRISE SERVICE SOLUTIONS

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 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. The Company also designs and
implements end-to-end service solutions for enterprises globally. These
solutions include all necessary terrestrial and satellite facilities required to
implement the optimal solution as designed by the Company. Enterprise service
solutions are operated and maintained by the Company, and we believe provide
competitive service levels.

Ground Segment Systems and Networks

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 (MBB2001(TM)). 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, China, Mexico, Taiwan 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") (CTF2001(TM)). 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

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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, Hong Kong, Vietnam, Malaysia, Spain, numerous countries in Africa and
the United States. The Company typically sells these earth stations at prices
ranging from approximately $100,000 to $300,000.

Compact Earth Station Family (CES2001(TM)). 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 to 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. The Company
typically sells these earth stations at prices ranging from approximately
$20,000 to $45,000.

Militarized Tactical Earth Station Family. This family of 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 to 3 meter antennas, 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). Prices for these systems range from approximately $250,000 to $1.0
million, depending on the configuration. This technology is now being applied to
a 3 meter X-band antenna used by the U.S. Army.

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. The latest model, the Explorer Ku,
incorporates technology from the Compact Earth Station product line to minimize
cost, size and weight. 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. The Company has sold a number of digital
flyaway earth stations as part of the enterprise service solution described
below. The Company markets these earth stations at prices ranging from
approximately $50,000 to $350,000 depending on configuration.

Earth Station Management Systems (AxxSys(TM)). The Company's earth
station systems typically employ monitor and control software for system
maintenance developed by the Company using the Compass software product licensed
from its strategic supplier, Newpoint Technologies, Inc. ("Newpoint
Technologies"). 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.

Mobile Products. This group of products serve the mobile satellite
services market with mobile high speed data and voice terminals, and
customizable mobile systems. The Company offers the Explorer II, an Inmarsat
high speed data terminal for use in news gathering, emergency communications,
data gathering, and other applications requiring mobility and high speed data at
64 Kbps. The Company integrates this product with ancillary equipment for the

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broadcasting, oil exploration, and other industries which require Internet
Protocol connectivity, video conferencing, store and forward video, secure
communications and other applications.

Ground Segment Systems and Networks Installations

The following are examples of ground segment systems and networks sold
by the Company, or in the process of being installed:

Worldspace Processed Feeder Link Stations. The Company developed and
began the supply of uplink stations for the new Digital Audio Radio Satellite
System to start service in 1999. This system will distribute broadcast radio to
low cost satellite receivers for customers in Africa, Asia and Latin America.
During fiscal 1999, Worldspace launched the Afristar satellite, the first in the
series of three satellites for global coverage. The Company installed the first
two Processed Feeder Link Stations, and completed proof of performance testing
with actual satellite receivers that will be sold to consumers in Africa.

Telecom South Africa Intelsat Standard B Earth Station. The Company was
awarded a contract to supply an Intelsat Standard B earth station in April 1999.
The Company delivered this earth station and completed installation in South
Africa in 45 days. This was an example of the responsiveness of the Company and
the focus of its project team on meeting the customer's needs.

Central Asian Air Traffic Control Network. The Company was awarded a
contract by Thomson CSF to provide four ground segment systems in a star network
configuration for use in providing communications between airports in Central
Asia. This private network includes voice compression multiplex and a network
monitor and control system for remote control and monitor of all facilities in
the network.

Enterprise Service Solutions

The following are examples of enterprise service solutions currently
being implemented:

DS3 Internet Trunk for Telecommunications Service Provider. The Company
is under contract to provide a bundled service of terrestrial and satellite
high-speed connectivity for a major telecommunications service provider. The
service will provide a one way DS3 (45 Mbps) link from Los Angeles to five
points of presence in Australia to complement fiber optic connections currently
being used by a major ISP in Australia. This is an example of the Company's
capability to design, implement and operate end to end data communication
services for Internet Access.

Data Communications Service for Transportable Earth Stations. The
Company is under contract to provide a bundled service that interfaces customer
provided terrestrial facilities with Company provided uplink, satellite, network
management and 24 hour a day by 7 day a week services. The Company is also
providing transportable earth stations based on its product line of Customizable
Earth Stations. The customer benefits from "one stop shopping" for all hardware
and satellite services required to meet its needs.

Sonangol Telecommunications Network. The Company is providing a
satellite and cellular telecommunications network for Sonangol, U.E.E.
("Sonangol"), a large oil consortium with operations in remote areas of Africa.
This project bundles the hardware, transponder capacity leases, international
teleport services and operations support to insure that Sonangol has reliable
telecommunications in previously unserved areas. In addition, the Company
operates a billing system on behalf of Sonangol from its offices in Happauge.
The network reaches 15 remote African cities by satellite and provides an
international link to the companies offices in Houston. All cities are provided
with switching systems for wired telephony services. Key locations are provided
with Global Systems for Mobile Communications ("GSM") cellular systems. The
Company innovated the use of satellite communications to link remote GSM base
stations to the mobile subscriber switch allowing the network to serve several
small locations from a single mobile subscriber switch.

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NETSAT EXPRESS SERVICES

The Company's NetSat Express 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 Express
provides Internet access services, which are referred to as Access Plus, through
a one-way and two-way satellite uplink/downlink using satellite ground segment
equipment and supported by the NetSat Express Network Operations Center.

NetSat Express offers a range of options and equipment to permit
value-added resellers to deliver reliable, cost-effective turnkey solutions to
their customers. These options include Access Plus Enterprise, which allows
customers to share a broadcast carrier, thereby providing the benefit of a
committed information rate with burstability to the maximum data rate of the
carrier. In addition, the traffic management option allows the customer to have
control over the assignment of committed information rates to its points of
presence within its own enterprise broadcast carrier.

NetSat Express is currently providing its services in Europe on the
Orion 1 satellite, in the Americas on the SatMex 5 satellite, in Africa and the
Middle East on the New Skies 803 satellite, and in Asia on the Intelsat 701
satellite.

STRATEGIC 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 making equity investments in suppliers, such as Shiron
Satellite Communications (1996), Ltd. ("Shiron"), Newpoint Technologies, Armer
Communications Engineering Services, Inc. ("Armer") and McKibben Communications,
LLC ("McKibben Communications"). The strategic supplier relationships with
Shiron and Newpoint Technologies 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. McKibben Communications provides a West
Coast presence for the Company's satellite-delivered data communication
services.

In addition to being a strategic supplier, McKibben Communications is a
strategic customer which provides the Company access to earth station projects
for McKibben Communications and its customers in the television broadcast
industry. For further information on the Company's equity investments see Note 5
of the Notes to Consolidated Financial Statements.

SELLING AND MARKETING

The Company markets its products and services to prime communications
infrastructure contractors, PTTs, ISPs, government entities, other
telecommunications carriers, producers and distributors of news and
entertainment content and other corporations. The Company utilizes sales
representatives in foreign countries and also has selling and marketing offices
in Hauppauge, New York, Atlanta, Georgia, Hong Kong, and its recently opened
office in the United Kingdom operated by its recently established Globecomm
Systems Europe Limited subsidiary. As of June 30, 1999, the Company employed 39
persons with marketing responsibility, of which 16 were engaged in marketing on
a full-time basis.

Selling and marketing of ground segment systems and networks, and
enterprise service solutions is accomplished through a "project team" approach
which identifies, develops and maintains customer accounts by grouping sales
representatives, marketing executives, business execution teams and account

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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 Express'
satellite-delivered data communications services is carried out primarily
through 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. Certain members of the Company's senior management
play a role in developing and maintaining relationships with local value added
resellers and local partners. NetSat Express is seeking to expand its marketing
capabilities and enter into new regions of operations.

CUSTOMERS

The Company's customers include prime communications infrastructure
contractors, PTTs, ISPs, government entities, other telecommunications carriers,
producers and distributors of news and entertainment content and other
corporations. The Company typically relies upon a small number of customers for
a large portion of its revenues. For example, approximately 24.2% of the
Company's revenues in fiscal 1999 were derived from sales to three customers.
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 June 30, 1999, the Company's backlog was approximately $63.7 million
(approximately 65% of which is expected to be delivered during fiscal 2000)
compared with approximately $43.6 million at June 30, 1998. 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. 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. For example, at June 30, 1999, $8.0 million, or approximately 12.6% of
the Company's backlog, was accounted for by a contract between the Company and
Transworld Communications Services, Inc. The Company cannot assure that this
contract or any other in its backlog will not be cancelled or revised. See "Risk
Factors-Risk of Customer Concentration."

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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 been certified by 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 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-Quarterly
Fluctuations," "-Risk of Fixed-Price Contracts " 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 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 Customizable Systems. For
the years ended June 30, 1999, 1998 and 1997, the Company has incurred
approximately $1.3 million, $1.2 million and $0.6 million, respectively, in
internal research and development expenses.

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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 and ComSat RSI
and (ii) system integrators such as IDB Systems, a division of MCI WorldCom Inc.
In the satellite-delivered data communications 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. 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 significantly lower
prices or bundled with other products. 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. See "Risk Factors-Intense Competition;
Limited Barriers to Entry."

INTELLECTUAL PROPERTY

The Company currently has two patents in the United States, a patent
pending in the United States and a Patent Cooperation Treaty ("PCT")
application, corresponding to one of the United States patents, is pending in a
number of foreign jurisdictions. The Company also intends to seek further
patents on its technology, if appropriate. The Company has filed applications
for trademark registration of Globecomm Systems Inc. in the United States and
various other countries, has received a trademark for NetSat Express, Inc. in
the United States, and has filed applications for trademark registration of
NetSat Express, Inc. in various other countries. The Company intends to seek
registration of other trademarks in the future. See "Risk Factors-Proprietary
Technology; Risk of Infringement."

GOVERNMENT REGULATIONS

The Company is subject to various federal laws and regulations, which
may have negative effects on the Company. The Company operates earth stations in
Hauppauge, New York, subject to FCC Rules and Regulations. The Company has
obtained certain licenses from the FCC for both domestic and international
operation of its earth stations and must operate the earth stations in
compliance with FCC Rules and Regulations for the terms of the licenses. These
licenses generally should be renewed by the FCC, so long as the Company is in
compliance with the FCC Rules and Regulations. The Company cannot offer
assurances that any

11
<PAGE>

necessary additional licenses will be granted by the FCC.

Generally, non-U.S. citizens or their representatives, foreign
governments, or corporations otherwise subject to control by non-U.S. citizens
may not directly own more than 20% of a licensee or may not indirectly own more
than 25% of a licensee, through a parent corporation or other controlling
entity, under the FCC Rules and Regulations. The FCC may grant waivers of its
foreign ownership policy to allow for increased indirect investment in a
licensee by an entity based in a World Trade Organization ("WTO") member
country. For an entity based in a non-WTO member country, the FCC will allow
increased indirect investment only if a licensee can show that the non-WTO
member country allows "effective competitive opportunities" for U.S. based
entities. Failure to comply with these policies may result in an order to divest
the offending alien ownership, fines, denial of license renewal, and or license
revocation proceedings against the licensee by the FCC. The Company has no
knowledge of any present foreign ownership which would result in a violation of
the FCC Rules and Regulations. The Company may, in the future, be required to
seek a waiver of the FCC Rules and Regulations regarding foreign ownership, if
such ownership exceeds the aforementioned benchmarks.

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.

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 Child Online Protection
Act, enacted in the United States in 1998, imposes civil and criminal penalties
on Internet content providers who fail to restrict minor's access to material
that is deemed "harmful" to them. However, this act is currently enjoined and
its constitutionality is being adjudicated. 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

12
<PAGE>

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.

The sale of the Company's ground segment systems, and networks, and
enterprise service solutions 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 the Company's products into certain other countries, the products must
satisfy the technical requirements of that particular country. 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.

EMPLOYEES

As of June 30, 1999, the Company had 149 full-time employees, including
76 in engineering and program management, 31 in the manufacturing, manufacturing
support group, and network operations, 16 in sales and marketing, and 26 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.

ITEM 2. PROPERTIES

The Company owns approximately 122,000 square feet of space in a
facility on approximately seven acres located at 45 Oser Avenue, Hauppauge, New
York. These premises house the principal offices and production facilities of
the Company and NetSat Express. The Company has a 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 $1,970, which rental
amount increases in years two and three of the lease. In addition, the Company
has recently entered into a five-year lease at a base monthly rent of $3,600 for
office and operations facilities for its Globecomm Systems Europe Limited
subsidiary which commenced operations subsequent to June 30, 1999 in the United
Kingdom.

ITEM 3. LEGAL PROCEEDINGS

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

13
<PAGE>

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's Common Stock is quoted on the Nasdaq National Market
under the symbol "GCOM". The fiscal 1999 and 1998 high and low sales prices are
as follows:

High Low
---------------------------

First Quarter Fiscal 1999 $ 9.25 $ 3.00
Second Quarter Fiscal 1999 6.75 3.625
Third Quarter Fiscal 1999 7.875 4.25
Fourth Quarter Fiscal 1999 12.00 5.125

First Quarter Fiscal 1998 (from August 13, 1997
through September 30, 1997) 19.875 11.75
Second Quarter Fiscal 1998 19.875 10.50
Third Quarter Fiscal 1998 16.00 8.75
Fourth Quarter Fiscal 1998 14.50 8.25

At September 24, 1999, there were approximately 2,700 stockholders of
record of the Company's Common Stock, as shown in the records of the Company's
transfer agent.

At the close of the Nasdaq National Market on September 24, 1999, the
Company's market price per share was $9.875.

As of June 30, 1999, the Company had not declared or paid dividends on
its Common Stock since inception and does not expect to pay dividends in the
foreseeable future.

The effective date of the Company's first registration statement (the
"Registration Statement") filed on Form S-1 (Registration No. 333-22425) under
the Securities Act of 1933, as amended, was August 7, 1997. The class of
securities registered was Common Stock. The offering commenced on August 8, 1997
and all securities were sold in the offering. The managing underwriters for the
offering were PaineWebber Incorporated and C.E. Unterberg, Towbin.

Pursuant to the Registration Statement, the Company registered and sold
3,162,500 shares of Common Stock for an aggregate offering price of $31,625,000.
The Company incurred total expenses in the offering of approximately $3,721,000
of which approximately $2,214,000 represented underwriting discounts and
commissions and approximately $1,507,000 represented other expenses. All such
payments were direct or indirect payments to others. The net offering proceeds
to the Company after deducting the total expenses was approximately $27,904,000.

From the effective date of the Registration Statement to June 30, 1999,
the net offering proceeds were used to fund $8.0 million in capital expenditures
and investing activities and the remaining $19.9 million for working capital
purposes, increased selling and marketing efforts, and increased internal
research and development expenses. All such payments were direct or indirect
payments to others.

14
<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 17, 1994
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED (INCEPTION)
JUNE 30, JUNE 30, JUNE 30, JUNE 30, THROUGH JUNE 30,
1999 1998 1997 1996 1995
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues...................................... $ 49,058 $ 58,105 $ 36,220 $ 13,476 $ 72
Costs of revenues............................. 43,516 49,532 32,060 11,238 58
---------------------------------------------------------------------------------
Gross profit.................................. 5,542 8,573 4,160 2,238 14
---------------------------------------------------------------------------------
Operating expenses:
Network operations.......................... 514 - - - -
Selling and marketing....................... 5,183 4,187 3,282 1,915 346
Research and development.................... 1,325 1,188 649 712 -
General and administrative.................. 6,040 5,010 3,449 1,945 772
Terminated acquisition costs................ 972 - - - -
Write-down of investments................... 679 - - - -
---------------------------------------------------------------------------------
Total operating expenses...................... 14,713 10,385 7,380 4,572 1,118
---------------------------------------------------------------------------------
Loss from operations.......................... (9,171) (1,812) (3,220) (2,334) (1,104)
Interest income, net.......................... 979 1,266 276 89 39
---------------------------------------------------------------------------------
Loss before minority interests in operations
of consolidated subsidiary................ (8,192) (546) (2,944) (2,245) (1,065)
Minority interests in operations of
consolidated subsidiary................... - - 275 - -
---------------------------------------------------------------------------------
Net loss...................................... $ (8,192) $ (546) $ (2,669) $ (2,245) $(1,065)
=================================================================================
Basic and diluted net loss per common share... $ (0.90) $ (0.06)
================================
Shares used in the calculation of basic and
diluted net loss per common share......... 9,109 8,553
================================
Pro forma basic and diluted net loss per
common share (unaudited).................. $ (0.44)
================
Shares used in the calculation of pro forma
basic and diluted net loss per common
share (unaudited) (1) 6,086
================
OTHER CONSOLIDATED OPERATING DATA:
EBITDA (2).................................... $ (7,904) $ (1,096) $ (2,858) $ (2,141) $(1,036)
Cash flows used in operating activities....... (4,408) (5,678) (1,958) (2,510) (454)
Cash flows used in investing activities....... (4,435) (7,342) (8,221) (1,714) (593)
Cash flows (used in) provided by financing
activities................................ (555) 29,198 11,908 4,151 4,554
Capital expenditures ......................... 3,818 3,678 6,765 339 437
Backlog at end of period (3) ................. 63,746 43,572 40,807 11,588 7,716
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997 1996 1995
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........... $ 11,944 $ 21,342 $ 5,164 $ 3,435 $ 3,507
Working capital..................... 19,450 31,461 6,379 4,727 2,663
Total assets........................ 58,010 58,619 33,286 9,503 6,375
Long-term liabilities............... - - 18 74 109
Total Stockholders' equity... 36,257 44,014 15,996 5,730 3,207
</TABLE>

15
<PAGE>

(1) Computed on the basis described in Note 10 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
similarly 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."

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Annual Report on Form 10-K 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 Annual Report on Form 10-K.

OVERVIEW

Since the Company's inception, substantially all of the Company's
revenue has been generated by its ground segment systems, and networks, and
enterprise service solutions business. Contracts for these ground segment
systems, and networks, and enterprise service solutions have been in virtually
all cases fixed-price contracts. Profitability of such contracts is subject to
inherent uncertainties as to the cost of performance. In addition to possible
errors or omission 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 contract could have a
material adverse effect on the Company's business, financial condition and
results of operations. The period from contract award through installation of
ground segment systems, and networks, and enterprise service solutions 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 satellite-delivered data communications 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.

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. In addition, cost of revenues relating to Internet
access service fees consists primarily of satellite space segment charges and
Internet connectivity fees. Network operations expenses consist primarily of
cost associated with the operation of NetSat Express' Network Operations Center
on a twenty-four hour a day, seven day a week basis including costs of personnel
and teleport service costs. 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. General and administrative expenses consist of
expenses associated with the Company's management, accounting, contract and
administrative functions. The Company anticipates that network operations,

16
<PAGE>

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.

RESULTS OF OPERATIONS

The following table sets forth certain operating data as a percentage
of total revenues for the years indicated:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C>
PERCENTAGE OF TOTAL REVENUES:
Revenues.............................................. 100.0% 100.0% 100.0%
Costs of revenues..................................... 88.7 85.2 88.5
--------------------------------------------------------
Gross profit.......................................... 11.3 14.8 11.5

Operating expenses:
Network operations.................................. 1.0 - -
Selling and marketing............................... 10.6 7.2 9.1
Research and development............................ 2.7 2.1 1.8
General and administrative.......................... 12.3 8.6 9.5
Terminated acquisition costs........................ 2.0 - -
Write-down of investments........................... 1.4 - -
--------------------------------------------------------
Total operating expenses.............................. 30.0 17.9 20.4
--------------------------------------------------------
Loss from operations.................................. (18.7) (3.1) (8.9)

Interest income, net.................................. 2.0 2.2 0.8
--------------------------------------------------------
Loss before minority interests in operations of
consolidated subsidiary.............................. (16.7) (0.9) (8.1)
Minority interests in operations of consolidated
subsidiary........................................... - - 0.7
--------------------------------------------------------
Net loss.............................................. (16.7)% (0.9)% (7.4)%
========================================================
</TABLE>

FISCAL YEARS ENDED JUNE 30, 1999 AND 1998

Revenues. Revenues, which were primarily derived from sales of ground
segment systems and networks, decreased by $9.0 million, or 15.6%, to $49.1
million for the fiscal year ended June 30, 1999 compared to $58.1 million for
the fiscal year ended June 30, 1998. The decrease relates primarily to the
decrease in the shipment and /or completion of ground segment systems and
networks contracts as a result of a decline in the bookings of contract orders
due to the continuing difficult economic conditions in the Pacific Rim, Russia
and other international markets. The Company expects the trend in revenues that
adversely affected its results of operations for the fiscal year ended June 30,
1999 to continue to adversely impact the Company. These trends include the
difficult economic conditions in the Pacific Rim region, Russia and other
international markets and the decrease in bookings received by the Company from
these regions.

Gross Profit. Gross profit decreased by $3.0 million, or 35.4%, to $5.5
million for the fiscal year ended June 30, 1999 from $8.6 million for the fiscal
year ended June 30, 1998. The decrease was primarily due to the decrease in the
shipment and/or completion of ground segment systems and networks contracts.
Gross profit as a percentage of revenues decreased to 11.3% for the fiscal year
ended June 30, 1999 from 14.8% for the fiscal year ended June 30, 1998. The
decrease was due primarily to a significant negotiated contract in the second
and third quarters of fiscal 1998, which resulted in a higher gross profit
margin for the fiscal year ended June 30, 1998, as well as, pricing pressures in
the marketplace.

17
<PAGE>

Network Operations. Network operations expenses for the fiscal year
ended June 30, 1999 were $0.5 million and related to the implementation of
NetSat Express' Network Operations Center on a twenty-four hour a day, seven day
a week basis during the current fiscal year.

Selling and Marketing. Selling and marketing expenses increased by $1.0
million, or 23.8%, to $5.2 million for fiscal year ended June 30, 1999 from $4.2
million for the fiscal year ended June 30, 1998. The increase was primarily due
to the increase in marketing and bid and proposal efforts in the Americas and
Africa, as well as the related increase in sales and marketing personnel.

Research and Development. Research and development expenses increased
by $0.1 million, or 11.5%, to $1.3 million for the fiscal year ended June 30,
1999 from $1.2 million for the fiscal year ended June 30,1998. The increase was
primarily due to the development of the Explorer-Ku Multimedia Portable
Satellite Earth Station, offset by a decrease in costs associated with custom
solutions.

General and Administrative. General and administrative expenses
increased by $1.0 million, or 20.6%, to $6.0 million for fiscal year ended June
30, 1999 from $5.0 million for the fiscal year ended June 30, 1998, and
increased as a percentage of revenues to 12.3% for the fiscal year ended June
30, 1999 from 8.6% for the fiscal year ended June 30, 1998. The increase in
general and administrative expenses resulted mainly from an increase in
personnel and related expenses.

Terminated Acquisition Costs. Terminated acquisition costs of
approximately $1.0 million for fiscal year ended June 30, 1999, relate to
certain legal, accounting and other expenses associated with the termination of
a proposed acquisition of a mobile satellite communications business during the
first quarter of the fiscal year ended June 30, 1999 due to the determination
that such acquisition was not in the best interest of the Company's
stockholders.

Write-down of investments. Write-down of investments of approximately
$0.7 million for fiscal year ended June 30, 1999, related to two investments
which were written-down in the fourth quarter ended June 30, 1999. The Company's
management's evaluated the investments and believed it would be appropriate to
write-down the investments to zero.

Interest Income Net of Interest Expense. Interest income decreased by
$0.3 million to $1.0 million for the fiscal year ended June 30, 1999 from $1.3
million for the fiscal year ended June 30, 1998. This decrease was primarily due
to the reduction of cash and cash equivalents from June 30, 1998 to June 30,
1999.

NetSat Express. The Company's consolidated subsidiary, NetSat Express,
experienced an increase in revenues of $2.0 million, or 287.9%, to $2.7 million
for the year ended June 30, 1999 from $0.7 million for the fiscal year ended
June 30, 1998. The increase resulted from the implementation of Access Plus
services in January 1998, as well as an increase in the equipment sales and
activations. The loss from operations associated with NetSat Express increased
by $0.4 million, or 26.9%, to $2.1 million for the year ended June 30, 1999 from
$1.7 million for the fiscal year ended June 30, 1998. The increase was primarily
associated with an increase in general and administrative expenses relating to
an increase in personnel to support the overall growth of NetSat Express and the
implementation of operating NetSat Express' Network Operations Center on a
twenty-four hour a day, seven day a week basis during the year.

FISCAL YEARS ENDED JUNE 30, 1998 AND 1997

Revenues. Revenues, which were primarily derived from sales of ground
segment systems and networks and enterprise service solutions, increased by
$21.9 million, or 60.4%, to $58.1 million for the fiscal year ended June 30,
1998 from $36.2 million for the fiscal year ended June 30, 1997. The increase
was primarily the result of a negotiated contract with Sonangol, U.E.E. as well
as an overall increase in the number of shipments and/or completion of contracts
as the Company continued to expand its businesses. Revenues for the three month
period ended June 30, 1998 decreased by 25.2% to $11.0 million from $14.7
million for the same period in the previous year as a result of the decline in
bookings in previous quarters as a result of the economic conditions in the

18
<PAGE>

Pacific Rim region, Russia and other international markets. The Company expects
the trend in revenues that adversely affected its results of operations for the
three-month period ended June 30, 1998 to continue to impact the Company. These
trends include the difficult economic conditions in the Pacific Rim region,
Russia and other international markets and the decrease in bookings received by
the Company from these regions.

Gross Profit. Gross profit increased by $4.4 million to $8.6 million
for the fiscal year ended June 30, 1998 from $4.2 million for the fiscal year
ended June 30, 1997. The increase was primarily due to the increase in the
shipment of ground segment systems and networks, and enterprise service
solutions. Gross profit as a percentage of revenues were 14.8% for the fiscal
year ended June 30, 1998 compared to 11.5% for the fiscal year ended June 30,
1997. The increase was due primarily to a significant negotiated contract with
Sonangol, U.E.E., which resulted in higher gross profit margin offset in part by
an increase in orders awarded through a competitive bidding process, which
typically result in lower gross profit margins than negotiated contracts.

Selling and Marketing. Selling and marketing expenses increased by $0.9
million, or 27.6%, to $4.2 million for the fiscal year ended June 30, 1998 from
$3.3 million for the fiscal year ended June 30, 1997. The increase was primarily
due to the increase in the number of bids and proposals prepared by the Company,
as well as an increase in marketing personnel from 25 at June 30, 1997 to 35 at
June 30, 1998. Selling and marketing expenses as a percentage of revenues were
7.2% for the fiscal year ended June 30, 1998 compared to 9.1% for the fiscal
year ended June 30, 1997.

Research and Development. Research and development expenses increased
by $0.5 million, or 83.1%, to $1.2 million for the fiscal year ended June 30,
1998 from $0.6 million for the fiscal year ended June 30, 1997 due to an
increase in development costs associated with custom solutions. Research and
development expenses as a percentage of revenues increased to 2.1% for the
fiscal year ended June 30, 1998 from 1.8% for the fiscal year ended June 30,
1997.

General and Administrative. General and administrative expenses
increased by $1.6 million, or 45.3%, to $5.0 million for the fiscal year ended
June 30, 1998 from $3.4 million for the fiscal year ended June 30, 1997, but
decreased as a percentage of revenues to 8.6% for the fiscal year ended June 30,
1998 from 9.5% for the fiscal year ended June 30, 1997. The increase in general
and administrative expenses resulted primarily from an increase of approximately
$0.7 million in legal and other costs associated with operating a public
company, and an increase of approximately $0.5 million in personnel and related
expenses to support the continued growth of the Company's business.

Interest Income Net of Interest Expense. Interest income increased by
$1.0 million to $1.3 million for the fiscal year ended June 30, 1998 from $0.3
million for the fiscal year ended June 30, 1997. The increase was primarily the
result of the investment of remaining net proceeds from the Company's initial
public offering.

NetSat Express. During the fiscal year ended June 30, 1998, the
Company's consolidated subsidiary NetSat Express experienced an increase in
revenues of approximately $0.6 million to approximately $0.7 million from
approximately $0.1 million for the year ended June 30, 1997. The increase
resulted from the implementation of Access Plus services in January 1998, an
increase in the number of PC Vector equipment sales and related activations. The
increase in loss from operations associated with NetSat Express of approximately
$0.2 million to $1.7 million for the fiscal year ended June 30, 1998 from $1.5
million for the year ended June 30, 1997 was mainly attributable to initial
start up costs associated with providing Access Plus and PC Vector services.

YEAR 2000

19
<PAGE>

each of the above areas including identification and assessment of potential
Year 2000 issues, identification and contact with key suppliers or institutions
based on their relative risks associated with product integrity and continued
product deliveries and service. Until such reviews are complete, the Company
will not be able to completely evaluate whether its IT and non-IT systems will
need to be modified or replaced. The Company has incurred only nominal costs to
date and estimates at this time that the total Year 2000 costs will not be
material. The Company is continuing its assessment which may necessitate
refinement of its estimate over time. There can be no assurance, however, that
costs associated with the Company's Year 2000 Compliance Plan will not be higher
than anticipated which could have a material adverse effect on the Company's
business, results of operations and financial condition.

In association with the Company's Year 2000 Compliance Plan, the
Company has developed contingency plans for certain critical applications. These
contingency plans may include, among other actions, manual workarounds,
increasing inventories and adjusting staffing strategies. There can be no
assurance such contingency plans, once developed, will be adequate.

Since the Company's Year 2000 Compliance Plan is ongoing, all potential
Year 2000 issues have not yet been identified. Therefore the potential impact of
these issues on the Company's financial condition and results of operations can
not be determined at this time. If IT and non-IT systems used by the Company or
its suppliers, the product integrity of products provided to the Company by its
suppliers, or the software applications or hardware used in systems integrated
and sold by the Company, fail or experience significant difficulties related to
the Year 2000, the Company's results of operations and financial condition could
be materially affected. In addition, there can be no assurance that equipment
operated by third parties that interface with or contain the Company's products
will timely achieve Year 2000 compliance. Furthermore, if the Company's ground
segment systems, and networks, and enterprise service solutions and
satellite-delivered data communication services were unable to be used by the
Company's customers because of Year 2000 compliance problems, there can be no
assurance that the Company's customers will not commence litigation against the
Company for such systems and networks failure. Any of the foregoing could result
in a material adverse effect on the Company's business, financial condition and
results of operations.

20
<PAGE>

QUARTERLY RESULTS

The following tables set forth certain unaudited financial information
for each of the eight fiscal quarters in the period ended June 30, 1999. The
Company believes that this information has been presented on the same basis as
the audited Consolidated Financial Statements appearing elsewhere in the Annual
Report on Form 10-K 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 of
operations when read in conjunction with the audited Consolidated Financial
Statements of the Company and related Notes thereto included elsewhere in this
Annual Report on Form 10-K. The operating results for any quarter are not
necessarily indicative of the operating results for any future period. Certain
quarters in fiscal 1999 have been reclassed to conform to the current year
presentation.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR.31, JUNE 30,
1997 1997 1998 1998 1998 1998 1999 1999
-------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues.................... $ 14,591 $ 16,269 $ 16,261 $ 10,984 $ 13,293 $ 11,882 $ 6,498 $ 17,385
Costs of revenues........... 12,919 13,902 13,294 9,417 11,673 10,246 5,714 15,883
-------------------------------------------------------------------------------------------------

Gross profit................ 1,672 2,367 2,967 1,567 1,620 1,636 784 1,502

Operating expenses:
Network operations....... - - - - 98 106 113 197
Selling and marketing.... 831 966 1,167 1,223 1,031 1,293 1,315 1,544
Research and development. 280 304 287 317 291 259 412 363
General and administrative 1,088 1,153 1,235 1,534 1,290 1,366 1,474 1,910
Terminated acquisition
costs ............ - - - - 972 - - -
Write-down of investments - - - - - - - 679
-------------------------------------------------------------------------------------------------
Total operating expenses.... 2,199 2,423 2,689 3,074 3,682 3,024 3,314 4,693
-------------------------------------------------------------------------------------------------
(Loss) income from operations (527) (56) 278 (1,507) (2,062) (1,388) (2,530) (3,191)
Interest income, net........ 264 379 291 332 338 272 204 165
-------------------------------------------------------------------------------------------------
Net (loss) income........... $ (263) $ 323 $ 569 $ (1,175) $ (1,724) $ (1,116) $(2,326) $ (3,026)
=================================================================================================

PERCENTAGE OF TOTAL REVENUES:
Revenues.................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of revenues........... 88.5 85.5 81.8 85.7 87.8 86.2 87.9 91.4
--------------------------------------------------------------------------------------------------

Gross profit................ 11.5 14.5 18.2 14.3 12.2 13.8 12.1 8.6

Operating expenses:
Network operations....... - - - - 0.7 0.9 1.7 1.1
Selling and marketing.... 5.7 5.9 7.2 11.1 7.8 10.9 20.2 8.9
Research and development. 1.9 1.8 1.7 2.9 2.2 2.2 6.3 2.1
General and administrative 7.5 7.1 7.6 14.0 9.7 11.5 22.8 11.0
Terminated acquisition
costs................. - - - - 7.3 - - -
Write-down of investments - - - - - - - 3.9
--------------------------------------------------------------------------------------------------

Total operating expenses.... 15.1 14.8 16.5 28.0 27.7 25.5 51.0 27
--------------------------------------------------------------------------------------------------

(Loss) income from operations (3.6) (0.3) 1.7 (13.7) (15.5) (11.7) (38.9) (18.4)
Interest income, net........ 1.8 2.3 1.8 3.0 2.5 2.3 3.1 1.0
--------------------------------------------------------------------------------------------------

Net (loss) income........... (1.8)% 2.0% 3.5% (10.7)% 13.0% 9.4% 35.8% 17.4%
==================================================================================================
</TABLE>

21
<PAGE>

and general economic conditions in the U.S. and abroad, such as the difficult
economic conditions and currency devaluations in the Pacific Rim region, Russia
and other international markets which have adversely impacted and may continue
to adversely impact the Company's quarterly results. 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

At June 30, 1999, the Company had working capital of $19.5 million,
including cash and cash equivalents of $11.9 million, restricted cash of $3.5
million, accounts receivable of $18.1 million, inventories of $6.4 million and
prepaid and other current assets of $1.2 million, offset by $18.7 million in
accounts payable and $3.0 million in accrued expenses and other current
liabilities.

The Company has experienced negative cash flow from operations since
its inception. Net cash used in operating activities for the fiscal years ended
June 30, 1999, 1998, and 1997 was $4.4 million, $5.7 million, and $2.0 million ,
respectively.

Several factors had a major effect on the Company's liquidity during
the fiscal year ended June 30, 1999. First, the Company had a $4.4 million
negative cash flow from operations, which primarily relates to the net loss of
$8.2 million and increase in inventory of $4.8 million reflecting the timing of
purchases to support future shipments and/or completion of ground segment
systems and networks, offset by an increase in accounts payable and accrued
expenses of $6.9 million. The second factor affecting liquidity during the
fiscal year ended June 30, 1999 was the Company's investment activities. During
the fiscal year ended June 30, 1999, the Company purchased $3.8 million in fixed
assets and through its Stock Repurchase Program, repurchased $0.5 million or
114,200 shares of the Company's common stock. In addition, during the first
quarter ended September 30, 1998, the Company purchased a $1.5 million equity
interest in McKibben Communications, LLC.

The Company has incurred losses since its inception and, therefore, has
not been subject to federal income taxes. Through June 30, 1999, the Company,
for income tax purposes, has generated net operating loss carryforwards of
approximately $14.1 million which may be available to reduce future taxable
income and future tax liabilities. These carryforwards expire through 2019. 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. The
exercise of options or warrants or in connection with future sales of equity
could limit the Company's ability to utilize the aforementioned carryforwards to
reduce future taxable income and tax liabilities. 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 has a $9.0 million credit facility consisting of a $5.0
million secured domestic line of credit and a $4.0 million secured export-import
guaranteed line of credit. Each line of credit bears interest at the prime rate
(7.75% as of June 30, 1999) plus 1.0% per annum and is collateralized by a first
security interest on all the Company's assets.

In August 1999, NetSat Express completed a private placement of common
stock yielding gross proceeds of $10.0 million. These proceeds are to be used to
fund NetSat Express' operations and expand marketing initiatives as well as
expected engineering and facilities growth over the coming year. Management
anticipates that NetSat Express will experience negative cash flow as a result
of these additional capital investments required for continued development of
its operations and losses from operations for at least the next 12 months.

The Company expects that its cash and working capital requirements for
its operating activities will continue to increase as the Company expands its
operations.

The Company's future capital requirements will depend upon many
factors, including the success of the Company's marketing efforts in the ground
segment systems, and networks, and enterprise

22
<PAGE>

service solutions business, and the satellite-delivered data communications
services business, the nature and timing of customer orders, the extent to which
it is able to locate additional strategic suppliers in whose technology it
wishes to invest, the extent to which it must conduct research and development
efforts internally and potential acquisitions of complementary businesses,
products or technologies. Based on current plans, the Company believes that its
existing capital resources will be sufficient to meet its capital requirements
through June 30, 2000. However, no assurance can be given that there will be no
change that would consume available resources significantly before such time.
Additional funds may not be available when needed and even if available,
additional funds may be raised through financing arrangements and/or the
issuance of preferred or common stock or convertible securities on terms and
prices significantly more favorable than those of the currently outstanding
common stock, which could have the effect of diluting or adversely affecting the
holdings or rights of existing stockholders of the Company. If adequate funds
are not available, the Company will be required to delay, scale back or
eliminate certain of its operating activities, including without limitation,
the timing and extent of its marketing programs, the extent and timing of hiring
additional personnel and its research and development activities. No assurance
can be given that additional financing will be available to the Company on
acceptable terms, or at all.

RISK FACTORS

HISTORY OF NET LOSSES AND ACCUMULATED DEFICIT

The Company has incurred significant net 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 has incurred net losses since inception and
has incurred net losses of $8.2 million, $0.5 million and $2.7 million during
the fiscal years ended June 30, 1999, 1998 and 1997, respectively (which amounts
for fiscal years ended June 30, 1999, 1998 and 1997 include net losses of $2.1
million, $1.7 million and $1.5 million, respectively for NetSat Express'
satellite-delivered data communication services business) and will incur further
losses as it attempts to expand its businesses. The Company's ability to expand
its ground segment systems, and networks, and enterprise service solutions
business and satellite-delivered data communication services business and
generate additional revenues and positive operating and net income is dependent,
in large part, on its ability to obtain new contracts and the profitability of
such contracts, and there can be no assurance that the Company will generate
significant additional revenues or report quarterly or annual positive operating
or net income. As of June 30, 1999, the Company had an accumulated deficit of
$14.7 million. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources."

INHERENT RISK OF INTERNATIONAL OPERATIONS

For the fiscal year ended June 30, 1999, 44% of the Company's revenues
are derived from sales to customers outside the United States. 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, the decrease in the
value of foreign currencies relative to the U.S. dollar, such as the currency
devaluations in the Pacific Rim region, Russia and other international
currencies, has adversely affected and may continue to adversely affect the
demand for the Company's ground segment systems, and networks, and enterprise
network service solutions business and satellite-delivered data communication
services business by increasing the price of the Company's products and services
in the currency of the countries in which they are sold. The economic and
monetary crisis in the Pacific Rim countries, including Korea, Malaysia,
Thailand, Philippines, Indonesia and other countries in the region, as well as
the economic and monetary declines in Russia, has resulted in a decreased demand
in such countries and other foreign regions for capital equipment such as the
ground segment systems, and networks, and enterprise network service solutions
supplied by the Company and NetSat Express' satellite-delivered data
communications services. The difficult economic conditions in the Pacific Rim
region, Russia and other international markets and the decrease in bookings
received by the Company from these and other foreign regions have adversely
effected the Company's results of operations for the fiscal year ended June
30,1999 and the Company expects that these negative trends will continue to
adversely impact it. Additional risks inherent to the Company's international

23
<PAGE>

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, and enterprise network service solutions,
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.

QUARTERLY FLUCTUATIONS

The Company may continue to 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, delays in the booking of new contracts,
the demand for the Company's ground segment systems, and networks, and
enterprise network service solutions and NetSat Express' satellite-delivered
data communications, the introduction of new or enhanced products and services
by the Company or NetSat Express or their 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 in the U.S. and abroad, such as the difficult economic
conditions and currency devaluations in the Pacific Rim region, Russia and other
international markets which have adversely impacted, and may continue to,
adversely impact the Company's quarterly results. See "Inherent Risk of
International Operations". 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.

INTENSE COMPETITION; LIMITED BARRIERS TO ENTRY

The markets for both ground segment systems, and networks, and
enterprise network service solutions business and satellite-delivered data
communication services business 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.

The Company anticipates that its competitors may develop or acquire
competing products or products that provide functionality that is similar to
that provided by the Company's products and may be offered at significantly
lower prices or bundled with other products. 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

24
<PAGE>

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.

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."

ADDITIONAL FINANCING REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING

The Company has incurred negative cash flows from operations in each
year since its inception. The Company expects that its cash and working capital
requirements for its operating activities will continue to increase as the
Company expands its operations. The Company anticipates that its capital
resources are adequate to satisfy its capital requirements through June 30, 2000
at its current level of operations. However, no assurance can be given that
there will be no change that would consume available resources significantly
before such time. Additional funds may not be available when needed and even if
available, additional funds may be raised through financing arrangements and/or
the issuance of preferred or common stock or convertible securities on terms and
prices significantly more favorable than those of the currently outstanding
common stock, which could have the effect of diluting or adversely affecting the
holdings or rights of existing stockholders of the Company. If adequate funds
are not available, the Company will be required to delay, scale back or
eliminate certain of its operating activities, including without limitation, the
timing and extent of its marketing programs, the extent and timing of hiring
additional personnel and its research and development activities. No assurance
can be given that additional financing will be available to the Company on
acceptable terms, or at all.

RELIANCE ON STRATEGIC RELATIONSHIPS

The Company is dependent on certain customers and suppliers for the
development and expansion of its ground segment systems, and networks, and
enterprise network service solutions business and satellite-delivered data
communication services 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."

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.

RISK OF CUSTOMER CONCENTRATION

The Company typically relies upon a small number of customers for a
large portion of its revenues. For example, approximately 24% of the Company's
revenues in fiscal 1999 were derived from sales to three customers. At June 30,
1999, $8.0 million, or approximately 12.6% of the Company's backlog was
accounted for by a contract between the Company and Transworld Communications
Services, Inc. The Company expects that in the near term a significant portion
of its revenues will continue to be derived from a limited number of customers
(the identity of whom may vary from period to period) 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.

25
<PAGE>

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 systems, and networks, and enterprise network service
solutions business and satellite-delivered data communication services business,
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, and 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.

RISK OF FIXED-PRICE CONTRACTS

Virtually all of the Company's contracts for installation of ground
segment systems, and networks, and enterprise network service solutions 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 "Risk of Customer Concentration."

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 enterprise network service
solutions business and satellite-delivered data communication services business
will come from customers in developing countries. There can be no assurance that
such increases in demand will occur or 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
satellite-delivered data communication services business, also 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 ground segment systems,
and networks, and enterprise network service solutions business and
satellite-delivered data communication services business, 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 and satellite-delivered data communications 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

26
<PAGE>

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.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are
coded to accept only two digit entries in the data code field. These data code
fields will need to accept four digit entries to distinguish 21st century dates.
As a result, computer systems and/or software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance.

The Company is in the process of assessing the anticipated costs,
problems and uncertainties associated with Year 2000 issues. The Company has
initiated a Year 2000 Compliance Plan which includes information technology
("IT") and non-IT systems requiring or which may require modification or
conversion, and supplier, facilities and other operations (such as financial and
banking systems) readiness. The Company has substantially completed reviews of
each of the above areas including identification and assessment of potential
Year 2000 issues, identification and contact with key suppliers or institutions
based on their relative risks associated with product integrity and continued
product deliveries and service. Until such reviews are complete, the Company
will not be able to completely evaluate whether its IT and non-IT systems will
need to be modified or replaced. The Company has incurred only nominal costs to
date and estimates at this time that the total Year 2000 costs will not be
material. The Company is continuing its assessment which may necessitate
refinement of its estimate over time. There can be no assurance, however, that
costs associated with the Company's Year 2000 Compliance Plan will not be higher
than anticipated which could have a material adverse effect on the Company's
business, results of operations and financial condition.

In association with the Company's Year 2000 Compliance Plan, the
Company is currently developing contingency plans for certain critical
applications. These contingency plans may include, among other actions, manual
workarounds, increasing inventories and adjusting staffing strategies. There can
be no assurance such contingency plans, once developed, will be adequate.

Since the Company's Year 2000 Compliance Plan is ongoing, all
potential Year 2000 issues have not yet been identified. Therefore the potential
impact of these issues on the Company's financial condition and results of
operations can not be determined at this time. If IT and non-IT systems used by
the Company or its suppliers, the product integrity of products provided to the
Company by its suppliers, or the software applications or hardware used in
systems integrated and sold by the Company, fail or experience significant
difficulties related to the Year 2000, the Company's results of operations and
financial condition could be materially affected. In addition, there can be no
assurance that equipment operated by third parties that interface with or
contain the Company's products will timely achieve Year 2000 compliance.
Furthermore, if the Company's ground segment systems, and networks, and
enterprise network service solutions and satellite-delivered data communication
services were unable to be used by the Company's customers because of Year 2000
compliance problems, there can be no assurance that the Company's customers will
not commence litigation against the Company for such systems and networks
failure. Any of the foregoing could result in a material adverse effect on the
Company's business, financial condition and results of operations.

DEPENDENCE UPON SUPPLIERS; SOLE AND LIMITED SOURCES OF SUPPLY

27
<PAGE>

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" and "Quarterly Fluctuations".

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 operates earth stations in
Hauppauge, New York, subject to FCC Rules and Regulations. The Company has
obtained certain licenses from the FCC for both domestic and international
operation of its earth stations and must operate it in compliance with FCC Rules
and Regulations for the terms of the licenses. These licenses generally should
be renewed by the FCC so long as the Company is in compliance with the FCC Rules
and Regulations. The Company cannot offer assurances that any necessary
additional licenses will be granted by the FCC.

28
<PAGE>

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 Child Online Protection Act, enacted in the United States in 1998, imposes
civil and criminal penalties on Internet content providers who fail to restrict
minor's access to material that is deemed "harmful" to them. However, this act
is currently enjoined and its constitutionality is being adjudicated. 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.

The sale of the Company's ground segment systems, and networks, and
enterprise network service solutions 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 the Company's products into certain other countries, the
products must satisfy the technical requirements of that particular country. 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.

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 $0.5
million for each of Messrs. Miller, 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.

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.

29
<PAGE>

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.

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.

The Company currently has two patents in the United States, a patent
pending in the United States and a PCT application, corresponding to one of the
United States patents, is pending in a number of foreign jurisdictions. The
Company also 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 applications for trademark registration of
Globecomm Systems Inc. in the United States and various other countries, has
received a trademark for NetSat Express in the United States, and has filed
applications for trademark registration of NetSat Express in various other
countries. The Company intends to seek registration of other trademarks 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 in
connection with related goods and services.

RISK OF CONCENTRATED OWNERSHIP

As of September 24, 1999, the Company's officers and directors, and
their affiliates beneficially own approximately 2.3 million shares, constituting
approximately 23% 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.

30
<PAGE>

POSSIBLE VOLATILITY OF STOCK PRICE

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."

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to a variety of risks, including foreign
currency exchange rate fluctuations relating to certain purchases from foreign
vendors. In the normal course of business, the Company assesses these risks and
has established policies and procedures to manage its exposure to fluctuations
in foreign currency values.

The Company's objective to managing its exposure to foreign
currency exchange rate fluctuations is to reduce the impact of adverse
fluctuations in earnings and cash flows associated with foreign currency
exchange rates for certain purchases from foreign vendors, if applicable.
Accordingly, the Company utilizes foreign currency forward contracts to hedge
its exposure on firm commitments denominated in foreign currency. As of June 30,
1999, the Company had no such foreign currency forward contracts.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is incorporated by reference to
the Consolidated Financial Statements listed in Item 14(a) of Part IV of the
Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Certain information in response to this item is incorporated herein by
reference to "Election of Directors" and "Executive Officers" in Globecomm
Systems Inc.'s Proxy Statement to be filed with the Securities and Exchange
Commission (the "SEC"). Information on compliance with section 16(a) of the
Exchange Act is incorporated herein by reference to "Compliance with Reporting
Requirements" in the Registrant's Proxy Statement to be filed with the SEC.

ITEM 11. EXECUTIVE COMPENSATION

Information in response to this item is incorporated herein by
reference to "Executive Compensation and Other Information" in the Registrant's
Proxy Statement to be filed with the SEC.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information in response to this item is incorporated herein by
reference to "Security Ownership of Certain Beneficial Owners and Management" in
the Registrant's Proxy Statement to be filed with the SEC.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

31
<PAGE>

Information in response to this item is incorporated herein by
reference to "Certain Transactions" in the Registrant's Proxy Statement to be
filed with the SEC.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) (1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors.................................................................. F-1
Consolidated Balance Sheets as of June 30, 1999 and 1998........................................ F-2
Consolidated Statements of Operations for the years ended June 30, 1999, 1998 and 1997.......... F-3
Consolidated Statements of Changes in Stockholders' Equity for the years ended June 30,
1999, 1998 and 1997........................................................................... F-4
Consolidated Statements of Cash Flows for the years ended June 30, 1999, 1998 and 1997.......... F-5
Notes to Consolidated Financial Statements...................................................... F-6

(2) INDEX TO CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

Schedule II -- Valuation and Qualifying Accounts................................................. S-1

All other schedules for which provision is made in the applicable
accounting regulation from the Securities and Exchange Commission are
not required under the related instructions or are inapplicable, and
therefore have been omitted.
</TABLE>

(3)EXHIBITS

Exhibit No.

3.1 Amended and Restated Certificate of Incorporation (filed herewith)

3.3 Amended and Restated By-laws of the Registrant (filed herewith)

4.2 See Exhibits 3.1 and 3.3 for provisions of the Amended and Restated
Certificate of Incorporation and Amended and Restated By-laws of the
Registrant defining rights of holders of Common Stock of the
Registrant. (incorporated by reference to Exhibit 4.2 of the
Registrant's Registration Statement on Form S-1, File No. 333-22425
(the "Registration Statement"))

10.1 Form of Registration Rights Agreement dated as of February 1997
(incorporated by reference to exhibit 10.1 of the Registration
Statement).

10.2 Form of Registration Rights Agreement dated May 30, 1996 (incorporated
by reference to exhibit 10.2 of the Registration Statement).

10.3 Form of Registration Rights Agreement dated December 31, 1996, as
amended (incorporated by reference to exhibit 10.3 of the Registration
Statement).

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
(incorporated by reference to exhibit 10.4 of the Registration
Statement).

10.5 Investment Agreement dated February 12, 1996 by and between Shiron
Satellite Communications (1996) Ltd. and the Registrant (incorporated
by reference to exhibit 10.5 of the Registration Statement).

32
<PAGE>

10.6* Stock Purchase Agreement dated as of August 30, 1996 by and between
C-Grams Unlimited Inc. and the Registrant (incorporated by reference to
exhibit 10.6 of the Registration Statement).

10.7 Memorandum of Understanding dated December 18, 1996 by and between
NetSat Express, Inc. and Applied Theory Communications, Inc.
(incorporated by reference to exhibit 10.7 of the Registration
Statement).

10.8 Stock Purchase Agreement dated as of August 23, 1996 by and between
NetSat Express, Inc. and Hughes Network Systems, Inc. (incorporated by
reference to exhibit 10.8 of the Registration Statement).

10.9 Employment Agreement dated as of January 27, 1997 between the
Registrant and David E. Hershberg (incorporated by reference to exhibit
10.9 of the Registration Statement).

10.10 Employment Agreement dated as of January 27, 1997 between the
Registrant and Kenneth A. Miller (incorporated by reference to exhibit
10.10 of the Registration Statement).

10.11 Purchase and Sale Agreement, 45 Oser Avenue, Hauppauge, New York, dated
December 12, 1996 by and between Eaton Corporation and the Registrant
(incorporated by reference to exhibit 10.13 of the Registration
Statement).

10.12 1997 Stock Incentive Plan (incorporated by reference to exhibit 10.14
of the Registration Statement).

10.13 Investment Agreement dated August 21, 1998 by and between McKibben
Communications LLC and the Registrant (incorporated by reference to
Exhibit 10.13 of the Company's Annual Report on Form 10K for the year
ended June 30, 1998).

10.14 1999 Employee Stock Purchase Plan (incorporated by reference to Exhibit
99.8 of the S-8 of the S-8 Registration Statement)

10.15 Rights Agreement, dated as of December 3, 1998, between the Company and
American Stock Transfer and Trust Company, which includes the form of
Certificate of Designation for the Series A Junior Participating
Preferred Stock as Exhibit A, the form of Rights Certificate as Exhibit
B and the Summary of Rights to Purchase Series A Preferred Shares as
Exhibit C (incorporated by reference to Exhibit 4 of Company's Current
Report on Form 8-K dated December 3, 1998)

10.16 Common Stock Purchase Agreement dated August 11, 1999 between NetSat
Express, Inc. and Globix Corporation.

10.17 Series A Preferred Stock Purchase Agreement dated August 11, 1999
between NetSat Express, Inc. and George Soros.

21.1 Subsidiary of the Registrant (filed herewith).

23.1 Consent of Ernst & Young LLP (filed herewith).

27 Financial Data Schedule (filed herewith).

* Confidential treatment granted for portions of this agreement.

(B) REPORTS ON FORM 8-K

None

33
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report to be
signed on its behalf of the undersigned, thereunto duly authorized.

GLOBECOMM SYSTEMS INC.
<TABLE>
<CAPTION>
Date
----

<S> <C>
By: /s/ David E. Hershberg 9/28/99
------------------------------------------------------- -------
David E. Hershberg, Chairman of the Board and
Chief Executive Officer
</TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
<S> <C>
Date

By: /s/ David E. Hershberg 9/28/99
------------------------------------------------------- -------
David E. Hershberg, Chairman of the Board and
Chief Executive Officer (Principal Executive Officer)

By: /s/ Andrew C. Melfi 9/28/99
------------------------------------------------------- -------
Andrew C. Melfi, Vice President and Chief Financial Officer (Principal Financial
and Accounting Officer)

By: /s/ Kenneth A. Miller
------------------------------------------------------- -------
Kenneth A. Miller, President and Director 9/28/99

By: /s/ Donald G. Woodring 9/28/99
------------------------------------------------------- -------
Donald G. Woodring, Vice President and Director

By: /s/ Stephen C. Yablonski 9/28/99
------------------------------------------------------- -------
Stephen C. Yablonski, Vice President and Director

By: /s/ Herman Fialkov 9/28/99
------------------------------------------------------- -------
Herman Fialkov, Director

By: /s/ Shelley A. Harrison 9/28/99
------------------------------------------------------- -------
Shelley A. Harrison, Director
</TABLE>

34
<PAGE>

By: /s/ Benjamin Duhov 9/28/99
------------------------------------------------------- -------
Benjamin Duhov, Director

By: /s/ C.J. Waylan 9/28/99
------------------------------------------------------- -------
C.J. Waylan, Director

By: /s/ A. Robert Towbin 9/28/99
------------------------------------------------------- -------
A. Robert Towbin, Director

<PAGE>

REPORT OF INDEPENDENT AUDITORS

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

We have audited the accompanying consolidated balance sheets of
Globecomm Systems Inc. at June 30, 1999 and 1998 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the three years in the period ended June 30, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These consolidated financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits 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 audits provide 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 June 30, 1999 and 1998, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended June 30, 1999, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

/S/ ERNST & YOUNG LLP

Melville, New York
August 24, 1999, except for the last paragraph of
Note 16. Subsequent Events, as to which the date is September 14, 1999

F-1

<PAGE>

GLOBECOMM SYSTEMS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................... $ 11,944 $ 21,342
Restricted cash......................................................................... 3,486 4,416
Accounts receivable, net................................................................ 18,147 18,017
Inventories, net........................................................................ 6,419 1,656
Prepaid expenses and other current assets............................................... 1,207 635
-----------------------------
Total current assets...................................................................... 41,203 46,066

Fixed assets, net......................................................................... 12,684 10,165
Investments............................................................................... 2,961 2,093
Other assets, net of accumulated amortization of $197 in 1999 and $100 in 1998............ 1,162 295
-----------------------------

Total assets.............................................................................. $ 58,010 $ 58,619
=============================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................................................ $ 18,749 $ 13,042
Deferred revenue........................................................................ 299 103
Accrued payroll and related fringe benefits............................................. 859 632
Accrued commissions..................................................................... 72 216
Other accrued expenses.................................................................. 1,774 594
Capital lease obligations............................................................... - 18
-----------------------------

Total current liabilities................................................................. 21,753 14,605

Commitments and contingencies

Stockholders' equity:
Preferred stock, $.001 par value, 3,000,000 shares authorized:
Class A Convertible, shares authorized, issued and outstanding: none in
1999 and 1998...................................................................... - -
Class B Convertible, shares authorized, issued and outstanding: none in
1999 and 1998...................................................................... - -
Series A Junior Participating, shares authorized, issued and outstanding: none in
1999 and 1998...................................................................... - -
Common stock, $.001 par value, 22,000,000 shares authorized, shares issued: 9,365,489 in
1999 and 9,165,908 in 1998............................................................. 9 9
Additional paid-in capital.............................................................. 52,061 50,530
Accumulated deficit..................................................................... (14,717) (6,525)
Deferred compensation................................................................... (293) -
Treasury stock, at cost, 139,638 shares in 1999 and none in 1998........................ (803) -
------------------------------
Total stockholders' equity................................................................ 36,257 44,014
------------------------------
Total liabilities and stockholders' equity................................................ $ 58,010 $ 58,619
==============================
</TABLE>

See accompanying notes.

F-2
<PAGE>

GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
----------------------------------------------------
<S> <C> <C> <C>
Revenues.................................................................... $ 49,058 $ 58,105 $ 36,220
Costs of revenues........................................................... 43,516 49,532 32,060
----------------------------------------------------
Gross profit................................................................ 5,542 8,573 4,160
----------------------------------------------------
Operating expenses:
Network operations........................................................ 514 - -
Selling and marketing..................................................... 5,183 4,187 3,282
Research and development.................................................. 1,325 1,188 649
General and administrative................................................ 6,040 5,010 3,449
Terminated acquisition costs.............................................. 972 - -
Write-down of investments................................................. 679 - -
----------------------------------------------------
Total operating expenses.................................................... 14,713 10,385 7,380
----------------------------------------------------
Loss from operations........................................................ (9,171) (1,812) (3,220)
Interest income, net of interest expense of $1, $5 and $22 in 1999,
1998 and 1997, respectively............................................... 979 1,266 276
----------------------------------------------------
Loss before minority interests in operations of consolidated
subsidiary............................................................... (8,192) (546) (2,944)
Minority interests in operations of consolidated subsidiary................. - - 275
----------------------------------------------------
Net loss.................................................................... $ (8,192) $ (546) $ (2,669)
====================================================
Basic and diluted net loss per common share................................. $ (0.90) $ (0.06)
===================================
Shares used in the calculation of basic and diluted net loss per common
share.................................................................... 9,109 8,553
===================================
Pro forma basic and diluted net loss per common share (unaudited)........... $ (0.44)
=================
Shares used in the calculation of pro forma basic and diluted net loss
per common share (unaudited)............................................. 6,086
=================
</TABLE>

See accompanying notes.

F-3
<PAGE>

GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1997, JUNE 30, 1998 AND JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
-----------------------------
CLASS A CLASS B COMMON STOCK ADDITIONAL
----------------------------- -------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996.... 156 $ - - $ - 3,769 $ 4 $ 9,036 $(3,310)
Sale of convertible preferred
stock to investors, net of
issuance costs of $2,623;
paid in cash of $1,135 and
53 shares of stock........ 485 1 10,964
Sale of convertible preferred
stock to investor......... 16 - 257
Exercise of warrants........ 107 - 563
Sale of convertible preferred
stock to investor......... 30 - 824
Issuance of common stock in
exchange for minority shares
in subsidiary............. 30 - 243
Options granted to employees
and directors............. 83
Net loss.................... (2,669)
-----------------------------------------------------------------------
Balance at June 30, 1997.... 172 - 515 1 3,906 4 21,970 (5,979)
Conversion of convertible
preferred stock into common
stock.................... (172) - (515) (1) 1,958 2 (1)
Proceeds from initial public
offering, net of issuance
costs of $3,721........... 3,163 3 27,901
Proceeds from exercise of
stock options............. 132 - 534
Proceeds from exercise of
warrants.................. 7 - 55
Options granted to employees
and directors............. 71
Net loss.................... (546)
-----------------------------------------------------------------------
Balance at June 30, 1998.... - - - - 9,166 9 50,530 (6,525)
Issuance of common stock in
exchange for minority shares
in subsidiary............. 43 - 250
Issuance of common stock in
connection with
acquisition ............. 50 - 406
Proceeds from exercise of
stock options ............ 39 - 148
Exercise of stock options in
exchange for shares of
common stock.............. 49 - 258
Issuance of common stock in
connection with employee
stock purchase plan....... 18 - 94
Purchases of treasury stock.
Options granted to employees
and directors............. 75
Grant of employee stock
options................... 300
Amortization of deferred
compensation..............
Net loss.................... (8,192)
-----------------------------------------------------------------------
Balance at June 30, 1999.... - $ - - $ - 9,365 $ 9 $ 52,061 $(14,717)
=======================================================================

TREASURY STOCK TOTAL
DEFERRED -------------- STOCKHOLDERS'
COMPENSATION SHARES AMOUNT EQUITY
------------------------------------------
<S> <C> <C> <C> <C>
Balance at June 30, 1996.... $ - - $ - $ 5,730
Sale of convertible preferred
stock to investors, net of
issuance costs of $2,623;
paid in cash of $1,135 and
53 shares of stock........ 10,965
Sale of convertible preferred
stock to investor......... 257
Exercise of warrants........ 563
Sale of convertible preferred
stock to investor......... 824
Issuance of common stock in
exchange for minority shares
in subsidiary............. 243
Options granted to employees
and directors............. 83
Net loss.................... (2,669)
------------------------------------------
Balance at June 30, 1997.... - - - 15,996
Conversion of convertible
preferred stock into common
stock.................... -
Proceeds from initial public
offering, net of issuance
costs of $3,721........... 27,904
Proceeds from exercise of
stock options............. 534
Proceeds from exercise of
warrants.................. 55
Options granted to employees
and directors............. 71
Net loss.................... (546)
------------------------------------------
Balance at June 30, 1998.... - - - 44,014
Issuance of common stock in
exchange for minority shares
in subsidiary............. 250
Issuance of common stock in
connection with
acquisition ............. 406
Proceeds from exercise of
stock options ............ 148
Exercise of stock options in
exchange for shares of
common stock.............. 26 (258) -
Issuance of common stock in
connection with employee
stock purchase plan....... 94
Purchases of treasury stock. 114 (545) (545)
Options granted to employees
and directors............. 75
Grant of employee stock
options................... (300) -
Amortization of deferred
compensation.............. 7 7
Net loss.................... (8,192)
------------------------------------------
Balance at June 30, 1999.... $(293) 140 $ (803) $36,257
==========================================
</TABLE>

See accompanying notes.

F-4
<PAGE>

GLOBECOMM SYSTEMS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------------------------
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
-----------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss............................................................... $ (8,192) $ (546) $ (2,669)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization........................................ 1,267 716 362
Stock compensation expense........................................... 82 71 83
Provision for doubtful accounts..................................... 100 40 -
Loss on disposal of fixed assets..................................... 129 - -
Write-down of investments............................................ 679 - -
Minority interests in operations of consolidated subsidiary.......... - - (275)
Changes in operating assets and liabilities:
Accounts receivable.............................................. (230) (3,707) (12,351)
Inventories, net................................................. (4,763) 664 (943)
Prepaid expenses and other current assets........................ (572) (328) (73)
Other assets..................................................... (74) 68 (1)
Accounts payable................................................. 5,707 (3,047) 13,322
Deferred revenue................................................. 196 76 27
Accrued payroll and related fringe benefits...................... 227 194 221
Accrued commissions and other accrued expenses................... 1,036 121 339
-----------------------------------------------------------
Net cash used in operating activities.................................. (4,408) (5,678) (1,958)
-----------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of investments............................................... (1,547) (785) (1,069)
Purchases of fixed assets.............................................. (3,818) (3,678) (6,765)
Payment of organization costs.......................................... - - (81)
Restricted cash........................................................ 930 (2,879) (306)
-----------------------------------------------------------
Net cash used in investing activities.................................. (4,435) (7,342) (8,221)
-----------------------------------------------------------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net............................... 94 28,665 -
Proceeds from sales of preferred stock, net............................ - - 12,046
Proceeds from exercise of warrants..................................... - 55 563
Proceeds from exercise of stock options................................ 148 534 -
Purchases of treasury stock............................................ (545) - -
Investment from minority stockholders.................................. - - 275
Repayment of loan to stockholder....................................... - - 150
Repayment of loans payable to stockholder.............................. - - (315)
Payment of deferred offering costs..................................... (234) - (761)
Payments under capital leases.......................................... (18) (56) (50)
-----------------------------------------------------------
Net cash (used in) provided by financing activities.................... (555) 29,198 11,908
-----------------------------------------------------------
Net (decrease) increase in cash and cash equivalents................... (9,398) 16,178 1,729
Cash and cash equivalents at beginning of year......................... 21,342 5,164 3,435
-----------------------------------------------------------
Cash and cash equivalents at end of year............................... $ 11,944 $ 21,342 $ 5,164
===========================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest................................................. $ 1 $ 5 $ 51
===========================================================
</TABLE>

See accompanying notes

F-5
<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999

1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Globecomm 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. During fiscal
1997, the Company established a subsidiary, NetSat Express, Inc. ("NetSat
Express"), to develop service revenues by providing high-speed, satellite-
delivered data communications to developing markets world wide. In addition, the
Company offers enterprise service solutions which are typically comprised of
ground segment systems and networks in combination with terrestrial and space
segment services to provide end-to-end service solutions.

On July 18, 1997, the Board of Directors authorized and, on August 5,
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
22,000,000 and preferred stock to 3,000,000, and changed the par value of its
common and preferred stock to $.001. All common stock, stock options and warrant
data has been restated to reflect the stock split.

The Company has incurred operating losses since its inception and had
an accumulated deficit at June 30, 1999 of approximately $14,717,000. 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 as the
Company expands its operations. Management believes that its existing capital
resources will be sufficient to meet its working capital needs through June 30,
2000 (see Note 16).

2. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in 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.

NetSat Express revenues are derived primarily from Internet access
service fees and sales of hardware and equipment. Service revenue from Internet
access is recognized ratably over the period services are provided. Sales of
hardware and equipment are recognized upon shipment. Payments received in
advance of providing Internet access service are deferred until the period such
services are provided and are presented as deferred revenue in the accompanying
consolidated balance sheets.

F-6
<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COST OF REVENUES

In addition to contract costs, cost of revenues relating to Internet
access service fees consist primarily of satellite space segment charges and
Internet connectivity fees. Cost of revenues associated with hardware and
equipment sales consist primarily of the purchase of the related products.

NETWORK OPERATIONS

Network operations expense consist primarily of costs associated with
the operation of the Network Operation Center (the "NOC"), including teleport
services and maintaining a twenty-four hour a day, seven-day a week staff to
monitor the operations of the NOC.

RESEARCH AND DEVELOPMENT

Research and development expenditures are expensed as incurred.

INVENTORIES

Inventories, which consist primarily of work-in-progress from costs
incurred in connection with specific customer contracts, are stated at the lower
of cost (using the first-in, first-out method of accounting) or market value,
less customer progress payments.

CASH EQUIVALENTS

The Company classifies all highly liquid financial instruments with a
maturity of three months or less when purchased as cash equivalents.

FIXED ASSETS

Fixed assets are stated at cost less accumulated depreciation and
amortization. Depreciation is calculated using the straight-line method over
the estimated useful lives of the assets ranging from three to twenty-five
years. Amortization of assets held under capital leases is calculated using the
straight-line method over the estimated useful lives of the assets. Amortization
of leasehold improvements is calculated using the straight-line method over the
shorter of the lease term or estimated useful lives of the improvement.

INCOME TAXES

Income taxes are provided using the liability method. Accordingly,
deferred tax assets and liabilities are recognized for future tax consequences
attributable to the difference between the carrying amount of the assets and
liabilities for financial statement and income tax purposes, as determined under
the enacted tax laws and rates that will be in effect when the differences are
expected to reverse.

F-7
<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FAIR VALUE OF FINANCIAL INSTRUMENTS

The recorded amounts of the Company's cash and cash equivalents,
accounts receivable, accounts payable, and accrued liabilities approximate their
fair values principally because of the short-term nature of these items.

STOCK-BASED COMPENSATION

The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and complies with the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based-Compensation"
("Statement 123").

GOODWILL

Goodwill represents excess of the purchase price over the fair value of
net assets acquired. Amortization expense relating to goodwill is amortized on a
straight-line basis over periods ranging from five to ten years. Such amounts
are included in other assets in the accompanying consolidated balance sheets.

LONG-LIVED ASSETS

When impairment indicators are present, the Company reviews the
carrying value of its assets in determining the ultimate recoverability of their
unamortized values using future undiscounted cash flow analyses expected to be
generated by the assets. If such assets are considered impaired, the impairment
recognized is measured by the amount by which the carrying amount of the asset
exceeds the future discounted cash flows. Assets to be disposed of are reported
at the lower of the carrying amount or fair value, less cost to sell.

The Company evaluates the periods of amortization continually in
determining whether later events and circumstances warrant revised estimates of
useful lives. If estimates are changed, the unamortized cost will be allocated
to the increased or decreased number of remaining periods in the revised lives.

F-8

<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SEGMENT DISCLOSURES

Effective June 30, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("Statement 131"). Statement 131 supersedes Statement of
Financial Accounting Statement No. 14, "Financial Reporting for Segments of a
Business Enterprise". Statement 131 establishes standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports.

Statement 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The Company
operates in two business segments, its Ground Segment Systems and Networks
Segment, through Globecomm Systems Inc. and its Data Communications Services
Segment, through NetSat Express (see Note 13).

RECLASSIFICATIONS

Certain balances in the prior years have been reclassified to conform
to the current year presentation.

3. INVENTORY

Inventory consists of the following:

JUNE 30, 1999 JUNE 30, 1998
-----------------------------------------
(IN THOUSANDS)

Raw materials and component parts.... $ 87 $ 78
Work-in-progress..................... 9,975 3,576
---------------------------------
10,062 3,654

Less progress payments............... 3,643 1,998
---------------------------------

$ 6,419 $ 1,656
=================================

F-9
<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

4. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------------------------
(IN THOUSANDS)
<S> <C> <C>
Land............................................... $ 1,750 $ 1,750
Building and improvements.......................... 5,309 5,261
Computer equipment................................. 1,410 1,437
Machinery and equipment............................ 2,469 844
Network Operations Center.......................... 749 565
Satellite earth station equipment.................. 630 148
Furniture and fixtures............................. 987 933
Leasehold improvements............................. 29 29
Equipment under capital leases..................... 159 159
Construction-in-progress........................... 1,481 158
-----------------------------
14,973 11,284
Less accumulated depreciation and amortization..... 2,289 1,119
-----------------------------
$12,684 $10,165
=============================
</TABLE>

5. INVESTMENTS

Investments consist of the following:

<TABLE>
<CAPTION>
JUNE 30, 1999 JUNE 30, 1998
------------------------------
(IN THOUSANDS)
<S> <C> <C>
Shiron Satellite Communications (1996), Ltd.
("Shiron") (a)................................ $ 285 $ 285
Euro Broadcasting Corporation
("Euro") (b).................................. - 440
Newpoint Technologies, Inc.
("Newpoint Technologies") (c)................. 950 950
Armer Communications Engineering Services, Inc.
("Armer") (d)................................. 200 200
Joint Communications Technology Corp.
("JCTC") (e).................................. - 214
McKibben Communications, LLC
("McKibben") (f).............................. 1,522 -
Other.............................................. 4 4
-----------------------------
$ 2,961 $2,093
=============================
</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 a total of a 20% interest of Shiron in accordance with the terms

F-10
<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

5. INVESTMENTS (CONTINUED)

of the purchase agreement. As of June 30, 1999, the Company's interest
in Shiron was diluted to 8.91%.

(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. During August 1997, the Company
exercised its option to purchase an additional 10% for $200,000. During
December 1998, the Company purchased an additional 100,000 shares of
Euro's common stock for $25,000. During June 1999, the Company's
management evaluated this investment and believed it would be
appropriate to write-down this investment to zero and recorded a charge
to operations of approximately $465,000.

(c) On August 30, 1996, the Company purchased 5% of the common stock of
Newpoint Technologies, a New Hampshire corporation, for approximately
$400,000. In May 1997, the Company purchased an additional 1.6% for
$150,000. In August and September 1997, the Company purchased
additional common stock of Newpoint Technologies for $400,000. As of
June 30, 1999, the Company's interest in Newpoint Technologies has
been diluted to 10.3%.

(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.

(e) On January 13, 1998, the Company purchased 6.7% of the common stock of
JCTC, a New Jersey corporation, for approximately $214,000. The Company
has a two-year option to purchase an additional 6.7% for $200,000. In
addition, the Company has an additional option to purchase up to a
total of 20% interest in JCTC provided the Company has purchased the
first option. The price of the second option will be the then current
market price or the last price for which JCTC's common stock has been
sold. During June 1999, the Company's management evaluated this
investment and believed it would be appropriate to write-down this
investment to zero and recorded a charge to operations of approximately
$214,000.

(f) On August 20, 1998, the Company purchased 18.75% of the future profits,
losses and equity (subject to certain liquidation and income
preferences) of McKibben, a California limited liability corporation,
for $1.5 million. The Company has a two-year option to purchase up to
an additional 11.25% for $1.5 million and has an anti-dilution
provision. Furthermore, the Company has an "Absolute Option", whereby
it has the right to buy up to 20% of the equity of McKibben at any time
prior to the sale of substantially all of the assets or an Initial
Public offering of McKibben.

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 investees.

F-11

<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

6. TERMINATED ACQUISITION COSTS

During the year ended June 30, 1999, the Company incurred certain costs
in connection with an attempt to acquire another company. During the first
quarter of fiscal 1999, the Company terminated this proposed acquisition and as
a result incurred costs of approximately $972,000 representing legal, accounting
and other acquisition related costs which have been charged to operations.

7. COMMON STOCK

ISSUANCE OF COMMON STOCK IN CONNECTION WITH ACQUISITION

On May 25, 1999, the Company acquired the business of Global-Net, Inc.
("Global-Net"), a wireless local loop telephone network solutions business,
located in New York, in exchange for 50,000 shares of the Company's common stock
with a fair market value of $8.125 per share on the date of acquisition. The
purchase agreement provides for additional consideration to be paid by the
Company if certain revenue goals are met during the fifteen months subsequent to
the acquisition date. Had this acquisition been consummated as of July 1, 1997,
the unaudited pro forma revenues and results of operations would not have been
considered material for the years ended June 30, 1999 and 1998. The purchase
price of approximately $406,000 has been allocated to goodwill and is being
amortized over five-years.

SALES OF COMMON STOCK

During March 1999, a minority shareholder in NetSat Express agreed to
exchange 840,000 shares of convertible preferred stock (representing
approximately 14%) of NetSat Express for 42,553 shares in the Company. The
shares in the Company were valued at $5.875 per share at the date of the
agreement. Accordingly, the Company recorded goodwill of approximately $250,000
in connection with this transaction, which is being amortized over five-years.
During May 1999, the Company exercised its right to convert its 840,000 shares
of convertible preferred stock into 840,000 shares of common stock of NetSat
Express.

In August 1997, the Company completed an initial public offering of
3,162,500 shares of common stock for an aggregate offering price of
$31,625,000. The Company incurred total expenses in the offering of
approximately $3,721,000 of which approximately $2,214,000 represented
underwriting discounts and commissions and approximately $1,507,000 represented
other related expenses. The net offering proceeds to the Company after
deducting the total expenses were approximately $27,904,000.

During November 1996, a minority shareholder in NetSat Express agreed
to exchange 19,000 shares (representing approximately 2%) of NetSat Express for
approximately 30,000 shares in the Company. The shares in the Company were
valued at $8.07 per share at the date of the agreement. Accordingly, the Company
recorded goodwill of approximately $243,000, which is being amortized over
ten-years.

In June 1995, the Company completed a private placement offering in
which the Company issued approximately 1,219,000 shares of common stock to
various investors. Proceeds from the issuance of these shares totaled
approximately $5,032,000, including approximately $861,000 of stock
subscriptions received in July 1995, and net of related expenses of
approximately $1,402,000. In satisfaction of these related expenses, the
Company paid approximately $670,000 in cash and issued approximately 156,000
shares of its common stock valued at approximately $732,000. Additionally, in
connection with this offering, the Company sold to one of its investors for
approximately $4,000, a five-year warrant to purchase approximately 107,000
shares of the Company's common stock at a price of $5.26 per share. The warrant
contains certain anti-dilution provisions as specified in the warrant
agreement. On January 24, 1997, the investor exercised the outstanding warrant.

F-12
<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

7. COMMON STOCK (CONTINUED)

STOCK ISSUED TO CONSULTANTS

During November 1996, the Company issued a ten-year warrant to five
consultants for future services to purchase an aggregate of approximately
64,000 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. During the year ended June
30, 1998, warrants to purchase 6,700 shares of common stock were exercised. No
warrants were exercised during the year ended June 30, 1999.

ISSUANCE OF COMMON STOCK AS COMMISSION

In November 1995, the Company issued approximately 37,000 shares of its
common stock to an investor, or 1% of the then outstanding share capital. This
issuance resulted in approximately $174,000 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. Such amount was included in selling and marketing expense in
the accompanying consolidated statement of operations during the year ended June
30, 1997, 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.

TREASURY STOCK

On September 1, 1998, the Company's Board of Directors authorized the
repurchase of up to $2.0 million of the Company's outstanding common stock. The
repurchase program allows for purchases to be made intermittently, through open
market and privately negotiated transactions. Timing, price, quantity and the
manner of purchase are at the discretion of the Company's management subject to
compliance with the applicable securities laws. During the year ended June 30,
1999, the Company repurchased approximately 114,000 shares of the Company's
common stock under the repurchase program for an aggregate purchase price of
approximately $545,000.

During June 1999, an employee of the Company surrendered approximately
26,000 shares of the Company's common stock, with the fair market value at time
of surrender of $10.125 per share, in exchange for the exercise of approximately
49,000 stock options with exercise prices ranging from $4.68 to $8.07.
Accordingly, the Company recorded approximately 26,000 shares in treasury stock,
which amounted to approximately $258,000, and issued approximately 49,000 shares
of the Company's common stock to the employee.

F-13

<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

8. CONVERTIBLE PREFERRED STOCK

In December 1996, the Company issued approximately 485,000 shares
(including approximately 53,000 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 anti-dilution provisions related to a sale of common stock to an
investor during the year ended June 30, 1996, the Company issued approximately
29,000 shares of Class B Convertible at $28.00 per share.

On May 30, 1996, the Company issued approximately 156,000 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 approximately 16,000 shares of Class A Convertible at $16.00 per
share to an investor.

The Class A Convertible and Class B Convertible outstanding at the
time of the Company's initial public offering in August 1997 was converted into
approximately 1,958,000 shares of common stock.

9. STOCK OPTION AND STOCK PURCHASE PLANS

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

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.

On February 26, 1997, the Company's Board of Directors authorized, and
the stockholders subsequently approved, the 1997 Stock Incentive Plan ("1997
Plan"), which serves as a successor plan to the Employee Stock Option Plan and
Director Stock Option Plan. The 1997 Plan provides for an increase of 285,000
shares to previously existing stock option plans, among other matters.

On September 23, 1998, the Company's Board of Directors approved an
increase of 181,335 shares to the 1997 Plan. At June 30, 1999, the remaining
shares available for grant under the 1997 Plan was 234,248.

On September 23, 1998, the Board of Directors adopted, and the
stockholders subsequently approved, the 1999 Employee Stock Purchase Plan ("1999
Plan"). Pursuant to the 1999 Plan, 400,000 shares of the Company's common stock
will be reserved for issuance. The 1999 Plan is intended to provide eligible
employees of the Company, and its participating affiliates, the opportunity to
acquire a propriety interest in the Company at 85% of fair market value at date
of issuance through participation in the payroll-deduction based employee stock
purchase plan. During the year ended June 30, 1999, the Company issued 18,529
shares of its common stock to participating employees in connection with the
1999 Plan.

F-14

<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

9. STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)

EMPLOYEE PLAN

The following table summarizes activity in employee stock options (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
-----------------------------------------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION PRICE OPTION PRICE
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year. 1,667 $ 7.22 1,546 $ 6.19 820 $ 4.46
Grants..................... 305 $ 7.54 206 $ 13.98 733 $ 8.15
Exercised.................. (60) $ 5.09 (75) $ 4.42 - $ -
Canceled................... (6) $ 10.64 (10) $ 7.84 (7) $ 7.39
--------- ------- ------- -------- ------ -------
Balance, end of year....... 1,906 $ 7.32 1,667 $ 7.22 1,546 $ 6.19
========= ======= ======= ======== ====== =======
Weighted-average fair
value of options
granted during the year. $ 3.94 $ 7.96 $ 3.56
======= ======== =======
</TABLE>

As a result of stock options granted during the years ended June 30,
1997, 1996 and 1995, the Company recorded compensation expense of approximately
$75,000, $56,000 and $43,000 during the years ended June 30, 1999, 1998 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 June 30,
1999, remaining compensation expense to be recorded through the year ended June
30, 2001 was approximately $234,000. As of June 30, 1999, approximately 941,000
employee stock options were exercisable.

DIRECTOR PLAN

Pursuant to the Director Stock Option Plan, in June 1995, the Company
granted certain outside directors options to purchase approximately 128,000
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, 1998 and 1997, of $15,000 and $40,000, respectively, based on the fair
market value of the shares at the date of grant. As of June 30, 1998, there was
no additional compensation expense to be recorded relating to these grants.
During January 1997, an additional outside director was granted approximately
43,000 options at $8.07 per share, the estimated fair value of such shares on
the date of grant. During November 1997, an additional outside director was
granted 15,000 options at $15.75 per share, the fair value of such shares on the
date of grant. Approximately, 100,500 options were outstanding of which
approximately 76,000 options were exercisable at June 30, 1999, and
approximately 28,500 options were exercised during the year ended June 30, 1999.

F-15

<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

9. STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)

NETSAT EXPRESS' STOCK OPTION PLAN

In May 1999, NetSat Express' Board of Directors authorized, and the
stockholders subsequently approved, the 1999 Stock Incentive Plan ("1999
Incentive Plan"), which provides for the granting of 1,980,000 options to
purchase shares of NetSat Express' common stock. Options granted under the 1999
Incentive Plan may be issued to either employees, consultants or non-employee
directors of NetSat Express or employees of the Company. Options granted to
employees generally vest annually in equal installments over a four-year period
commencing on the date of grant and expire ten years from the date of grant.
Options granted to directors generally vest annually in equal installments over
a three-year period commencing on the date of grant and expire the earlier of
ten-years from the date of grant or one-year from concluding service as director
of NetSat Express.

In connection with the adoption of the 1999 Incentive Plan, NetSat
Express granted options to purchase 847,506 shares of its common stock with
exercise prices ranging from $3.00 to $5.00 per share to its employees and to
employees of Globecomm Systems Inc., with a weighted-average exercise price of
$4.66 per share, and granted options to purchase 30,000 shares of its common
stock with an exercise price of $5.00 per share to its directors at fair market
value at date of grant. As of June 30, 1999, options to purchase approximately
364,000 shares of NetSat Express' common stock were exercisable.

In connection with options to purchase 150,000 shares of common stock
granted during May 1999, NetSat Express recorded deferred compensation of
approximately $300,000 based on the difference between the fair market value of
the common stock and the exercise prices of the options at the date of grant.
Deferred compensation is being amortized over the vesting period of the options.
The amount recognized as expense during the year ended June 30, 1999 was
approximately $7,000.

FAIR VALUE DISCLOSURES

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 of the options granted under the Company's 1997 and 1999 Plans were
estimated at date of grant using a Black-Scholes option pricing model with the
following assumptions for the years ended June 30, 1999, 1998 and 1997:
risk-free interest rate of 6.5%, volatility factor of the expected market price
of the Company's common stock of .91 (1999), .51 (1998) and .40 (1997), a
weighted-average expected life of the option of six-years and no dividend
yields. The fair value of the options granted under the NetSat Express 1999
Incentive Plan was estimated at date of grant using the minimum value option
pricing model with the following assumptions for the year ended June 30, 1999:
no dividend yield, weighted-average expected life of the options of 4.25 years
and a risk free interest rate of 6.0%.

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 under the Black-Scholes
option valuation model.

F-16
<PAGE>
GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

9. STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)

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>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
---------------------------------------------------------

<S> <C> <C> <C>
Pro forma net loss (in thousands)........................... $ (9,851) $ (1,868) $ (3,433)
========== ======== =========
Basic and diluted pro forma net loss per common share....... $ (1.08) $ (0.22) $ (0.56)
========== ======== =========
</TABLE>

The following tables summarize information about employee and director stock
options outstanding at June 30, 1999 (option amounts in thousands):

WEIGHTED-
AVERAGE
RANGE OF REMAINING
EXERCISE OPTIONS OPTIONS CONTRACTUAL
PRICES OUTSTANDING EXERCISABLE LIFE (YEARS)
- -----------------------------------------------------------------------------
$3.51 - $5.06 1,776 980 6.7
$5.50 - $8.09 633 284 7.6
$9.00 - $13.25 342 82 8.7
$14.13 - $18.38 134 35 8.3

=============================================================================
$3.51 - $18.38 2,885 1,381 7.4
=============================================================================

The Company and NetSat Express have reserved approximately 2,942,300
shares of its common stock for issuance upon exercise of all outstanding options
and warrants at June 30, 1999.

10. BASIC AND DILUTED LOSS PER SHARE AND PRO FORMA BASIC AND DILUTED LOSS PER
SHARE

Basic loss per share for the years ended June 30, 1999 and 1998 is
based on the weighted-average number of common shares outstanding during the
period. Diluted loss per share for the years ended June 30, 1999 and 1998
excluded the effect of approximately 321,000 and 891,000 stock options,
respectively, and approximately 23,000 warrants in 1999 and 1998, as the effect
of inclusion would have been anti-dilutive as the Company reported net losses
for the years ended June 30, 1999 and 1998.

Pro forma basic loss per share for the year ended June 30, 1997 is
based on the weighted-average number of shares of common stock outstanding
including the conversion of the Class A and Class B Convertible Preferred Stock
into common stock, which occurred upon the consummation of the Company's initial
public offering. However, in accordance with Staff Accounting Bulletin 98 of the
Securities and Exchange Commission, options to purchase common stock for nominal
consideration have been reflected in diluted loss per share for all periods
presented in a manner similar to a stock split, even if anti-dilutive.
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 occurred in connection with the initial public offering.

F-17

<PAGE>
GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

11. PENSION PLAN

The Company maintains 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,
1999, 1998 and 1997. The plan also provides for discretionary contributions by
the Company. The Company contributed approximately $317,000, $242,000 and
$117,000 to the 401(k) plan during the years ended June 30, 1999, 1998 and
1997, respectively. There were no discretionary contributions made by the
Company during the years ended June 30, 1999, 1998 and 1997.

12. INCOME TAXES

As a result of losses incurred from inception, the Company has
available net operating loss carryforwards ("NOL's") of approximately $14.1
million ($8.6 million and $5.5 million for the Company and NetSat Express,
respectively) for income tax purposes which expire through 2019. However, as a
result of significant ownership changes and separate company limitations it is
anticipated that an annual limitation will be applied to the Company's
utilization of the NOL's.

F-18

<PAGE>
GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

12. INCOME TAXES (CONTINUED)

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:

JUNE 30, JUNE 30,
1999 1998
(IN THOUSANDS)
------------------------------
Deferred tax liabilities:
Projects in progress........................ $ - $ 157
Depreciation and amortization............... 192 153
------------------------------
Total deferred tax liabilities 192 310
Deferred tax assets:
Net operating loss carryforwards............ 5,660 3,294
Projects in progress........................ 270 -
Accruals and reserves....................... 333 116
Write-down of investments................... 272 -
Non-cash compensation charge................ 33 -
------------------------------
Total deferred tax assets..................... 6,568 3,410
Valuation allowance for deferred tax assets... 6,376 3,100
------------------------------

Net deferred tax assets....................... 192 310
------------------------------
Net deferred taxes............................ $ - $ -
==============================

Approximately $455,000 of the valuation allowance, if recognized, will
be allocated directly to stockholders' equity relating to non-qualified
dispositions of stock option exercises. For the years ended June 30, 1999, 1998
and 1997, the valuation allowance increased $3,276,000, $691,000 and
$1,179,000, respectively.

13. SEGMENT INFORMATION

The Company operates through two business segments. Its Ground Segment
Systems and Networks Segment, through Globecomm Systems Inc., is engaged in the
design, assembly and installation of ground segment systems and network
solutions for the complex and changing communications requirements of its
customers. The Company's ground segment 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. Its Data
Communications Services Segment, through the NetSat Express subsidiary, is
engaged in providing high-speed, satellite-delivered data communications to
developing markets worldwide. NetSat Express is currently providing Internet
access to customers who have limited or no access to terrestrial network
infrastructure capable of supporting the economical delivery of such services.

The Company's reportable segments are business units that offer
different products and services. The reportable segments are each managed
separately because they provide distinct products and services.

F-19

<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

13. SEGMENT INFORMATION (CONTINUED)

The following is business segment information as of and for the years ended June
30, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JUNE 30, JUNE 30, JUNE 30,
1999 1998 1997
-----------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Ground Segment Systems and Networks......................... $ 46,397 $ 57,419 $ 36,169
Data Communications Services................................ 2,661 686 51
-------------------------------------------
Total revenues................................................ $ 49,058 $ 58,105 $ 36,220
===============================================

Loss from operations:
Ground Segment Systems and Networks......................... $ (7,070) $ (157) $ (1,766)
Data Communications Services................................ (2,101) (1,655) (1,454)
Interest income, net.......................................... 979 1,266 276
Minority interests in operations of consolidated
subsidiary.................................................. - - 275
----------------------------------------------

Net Loss...................................................... $ (8,192) $ (546) $ (2,669)
===============================================

JUNE 30, 1999 JUNE 30, 1998 JUNE 30, 1997
-----------------------------------------------
(IN THOUSANDS)
Assets:
Ground Segment Systems and Networks......................... $ 62,664 $ 60,894 $ 34,201
Data Communications Services................................ 3,200 1,279 152
Intercompany eliminations................................... (7,854) (3,554) (1,040)
-----------------------------------------------

Total assets.................................................. $ 58,010 $ 58,619 $ 33,313
===============================================

Depreciation and amortization:
Ground Segment Systems and Networks......................... $ 1,007 $ 628 $ 338
Data Communications Services................................ 260 88 24
-----------------------------------------------

Total depreciation and amortization........................... $ 1,267 $ 716 $ 362
===============================================

Expenditures for long-lived assets:
Ground Segment Systems and Networks......................... $ 2,907 $ 2,879 $ 6,686
Data Communications Services................................ 911 799 79
-----------------------------------------------

Total expenditures for long-lived assets...................... $ 3,818 $ 3,678 $ 6,765
===============================================
</TABLE>

F-20
<PAGE>
GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

14. SIGNIFICANT CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK

The Company designs, assembles and installs satellite ground segment
systems and networks and provides data communications services for customers in
diversified geographic locations. Concentration of credit risk with respect to
accounts receivables is limited due to the limited number of customers and that
a substantial portion of accounts receivables are related to balances owed by
major satellite communication companies. The timing of cash realization is
determined based upon the contract or service agreement with the customers. The
Company performs ongoing credit evaluations of its customers' financial
condition and in most cases requires a letter of credit or cash in advance for
foreign customers. Allowances related to account receivable at June 30, 1999 and
1998, are approximately $107,000 and $40,000, respectively. Credit losses have
been within management expectations.

No one customer accounted for more than 10% of sales for the year ended
June 30, 1999. Sales to one major customer accounted for approximately 29% and
two major customers accounted for approximately 42% (29% and 13%) of the
Company's net revenues for the years ended June 30, 1998 and 1997,
respectively.

Revenues from foreign sales as a percentage of total consolidated revenue:

Year Ended Year Ended Year Ended
June 30, June 30, June 30,
1999 1998 1997
---------- ---------- ----------
Africa 14% 33% 1%
South America 11% 1% -
Asia 10% 17% 28%
Europe 7% 9% 11%
Middle East 2% 9% -
---- ---- ----
44% 69% 40%

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. Substantially all cash and cash equivalents are held in two
financial institutions at June 30, 1999 and 1998. Cash equivalents are comprised
of short-term debt instruments, certificates of deposit of 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.

15. COMMITMENTS AND CONTINGENCIES

LINE OF CREDIT

The Company has a $9.0 million credit facility, as amended, consisting
of (1) a $5.0 million secured domestic line of credit and (2) a $4.0 million
secured export-import guaranteed line of credit. Each line of credit bears
interest at the prime rate (7.75% at June 30, 1999) plus 1% per annum and is
collateralized by a first security interest on all the Company's assets. Such
line of credit expires in December 1999. The amended credit facility contains
certain financial covenants, which the Company is in compliance with at June
30, 1999. As of June 30, 1999 and 1998, no amounts were outstanding under such
credit facility.

LETTERS OF CREDIT

The Company utilizes standby letters of credit to secure certain bid
proposals and performance guarantees, while NetSat Express utilizes standby
letters of credit to secure certain service agreements with third party vendors
in the normal course of business. As of June 30, 1999, NetSat Express had a
standby letter of credit outstanding of approximately $185,000, which is
secured by the Company's domestic credit facility. The Company provides cash
collateral for a majority of these letters of credit. As of June 30, 1999 and
1998, cash collateral related to bid proposals amounted to $0 and $588,000,
respectively, and cash collateral related to performance guarantees amounted to
approximately $3,486,000, and $3,828,000, respectively. These amounts are

F-21
<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

15. COMMITMENTS AND CONTINGENCIES (CONTINUED)

included in restricted cash in the accompanying consolidated balance sheets.

LEASE COMMITMENTS

The Company currently leases satellite space segment services, office
space and other equipment under various operating leases which expire in various
years through 2002. As leases expire, it can be expected that in the normal
course of business they will be renewed or replaced. Most lease agreements
contain renewal options.

Future minimum payments under non-cancelable operating leases for
satellite space segment services, office space and other equipment with terms of
one-year or more, consist of the following at June 30, 1999 (in thousands):

2000........................ $ 1,689
2001........................ 521
2002........................ 11
--------------
$ 2,221
==============

Rent expense for satellite space segment services, office space and
other equipment was approximately $1,042,000, $279,000 and $315,000 for the
years ended June 30, 1999, 1998 and 1997, respectively.

Pursuant to several NetSat Express Internet access service agreements,
NetSat Express is the lessor of satellite earth station equipment which leases
are classified as operating leases and expire at various dates through 2004.
Equipment under these operating leases are included in fixed assets in the
accompanying consolidated balance sheets and have a net book value of
approximately $524,000 and $136,000 at June 30, 1999 and 1998. At June 30, 1999,
future minimum lease payments to be received form equipment under operating
leases are approximately as follows:

2000........................ $ 243
2001........................ 227
2002........................ 114
2003........................ 21
2004........................ 18
--------------
$ 623
==============

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. Effective November 1998, such employment agreements increased to an
aggregate amount of $400,000 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-22

<PAGE>

GLOBECOMM SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)

16. SUBSEQUENT EVENTS

On August 11, 1999, NetSat Express completed a private placement of
1,000,000 shares of its Series A Participating Preferred Stock and 1,000,000
shares of common stock yielding gross proceeds of $10,000,000. The preferred
stock has preference in liquidation and each share of preferred stock is
convertible into one share of common stock at the option of the holder at any
time, or automatically following the third anniversary of the date of issuance,
or following the period of sixty consecutive days on which the price per share
of the common stock is equal to or greater than $7.50 per share.

The holders of Preferred Stock shall be entitled to receive an annual
dividend on the anniversary date of issuance equal to 0.166667 shares of common
stock for each share of Preferred Stock until the third anniversary date of the
Preferred Stock issuance provided that if the fair market value of the common
stock issued as dividends is less than $2,500,000, the holders of the Preferred
Stock will be entitled to receive a special dividend equal to the shortfall.
Additionally, the holder of the Preferred Stock may purchase services from
NetSat Express at cost and payment for such services, at the option of the
holder, may be either in dollars or shares of the NetSat Express' common stock
valued at fair market value. In connection with the sale of preferred stock and
common stock, NetSat Express paid an investment advisor a fee of $500,000 and
issued a warrant to purchase 100,000 shares of common stock at $6.00 per share
which expires in five years.

On August 11, 1999, the Company contributed $3,500,000 of the amount it
was owed at June 30, 1999 from NetSat Express as additional paid-in capital and
entered into a promissory note agreement with NetSat Express for the repayment
of the balance which approximated $3,582,000. The promissory note is due and
payable in seven-years and accrues interest (payable monthly) at a variable rate
equal to the Company's cost of funds, which is currently at the prime rate plus
1%. Amounts owed by NetSat Express to the Company pursuant to the Master
Operating Agreement and for any advances made subsequent to June 30, 1999 are
payable currently.

On September 14, 1999, NetSat Express signed a 15-year lease for
satellite space segment on the SatMex 5 satellite. This satellite will provide
NetSat Express the capability of providing its services to the Caribbean Islands
and the North, South and Central America regions covered by the SatMex 5
satellite. The annual lease payments for this space segment is approximately
$1,386,000 for a total commitment of approximately $20.8 million over the
15-year lease term.

F-23
<PAGE>

GLOBECOMM SYSTEMS INC.

SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
ADDITIONS
---------------------------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER ACCOUNTS- DEDUCTIONS- BALANCE AT END
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1999:
Reserves and allowances deducted from asset
accounts:
Reserve for estimated doubtful
accounts receivable................... $ 40,000 $ 100,000 $ - $ (33,000)(a) $ 107,000
Valuation allowance on deferred tax
assets............................... 3,100,000 - 3,276,000(b) - 6,376,000
=================================================================================
$3,140,000 $ 100,000 $3,276,000 $ (33,000) $6,483,000
=================================================================================
Year ended June 30, 1998:
Reserves and allowances deducted from asset
accounts:
Reserve for estimated doubtful
accounts receivable..................... $ - $ 40,000 $ - $ - $ 40,000
Valuation allowance on deferred tax
assets................................ 2,409,000 - 691,000(b) - 3,100,000
=================================================================================
$2,409,000 $ 40,000 $ 691,000 $ - $3,140,000
=================================================================================
Year ended June 30, 1997:
Reserves and allowance deducted from asset
accounts:
Valuation allowance on deferred tax
assets................................ 1,230,000 - 1,179,000(b) - 2,409,000
=================================================================================
$1,230,000 $ - $1,179,000 $ - $2,409,000
=================================================================================
</TABLE>

(a) Reduction in allowance due to write-off of accounts receivable balance.

(b) Record a valuation allowance for deferred tax assets.

S-1
<PAGE>

INDEX TO EXHIBITS:

Exhibit No.

3.1 Amended and Restated Certificate of Incorporation (filed herewith)

3.3 Amended and Restated By-laws of the Registrant (filed herewith)

10.1 Form of Registration Rights Agreement dated as of February 1997
(incorporated by reference to exhibit 10.1 of the Registration
Statement).

10.2 Form of Registration Rights Agreement dated May 30, 1996 (incorporated
by reference to exhibit 10.2 of the Registration Statement).

10.3 Form of Registration Rights Agreement dated December 31, 1996, as
amended (incorporated by reference to exhibit 10.3 of the Registration
Statement).

10.6* Stock Purchase Agreement dated as of August 30, 1996 by and between
C-Grams Unlimited Inc. and the Registrant (incorporated by reference
to exhibit 10.6 of the Registration Statement).

10.9 Employment Agreement dated as of January 27, 1997 between the
Registrant and David E. Hershberg (incorporated by reference to
exhibit 10.9 of the Registration Statement).

10.10 Employment Agreement dated as of January 27, 1997 between the
Registrant and Kenneth A. Miller (incorporated by reference to exhibit
10.10 of the Registration Statement).

10.11 Purchase and Sale Agreement, 45 Oser Avenue, Hauppauge, New York,
dated December 12, 1996 by and between Eaton Corporation and the
Registrant (incorporated by reference to exhibit 10.13 of the
Registration Statement).

10.12 1997 Stock Incentive Plan (incorporated by reference to exhibit 10.14
of the Registration Statement).

10.14 1999 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 99.8 of the S-8 of the S-8 Registration Statement)

Summary of Rights to Purchase Series A Preferred Shares as Exhibit C
(incorporated by reference to Exhibit 4 of Company's Current Report on
Form 8-K dated December 3, 1998)

10.16 Common Stock Purchase Agreement dated August 11, 1999 between NetSat
Express, Inc. and Globix Corporation.

10.17 Series A Preferred Stock Purchase Agreement dated August 11, 1999
between NetSat Express, Inc. and George Soros.

21.1 Subsidiary of the Registrant (filed herewith).

23.1 Consent of Ernst & Young LLP (filed herewith).

27 Financial Data Schedule (filed herewith).

* Confidential treatment granted for portions of this agreement.

<PAGE>

NETSAT EXPRESS, INC.

COMMON STOCK PURCHASE AGREEMENT

AUGUST 11, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purchase and Sale of Stock...................................................1
1.1. Sale and Issuance of Common Stock...................................1
1.2. Closing.............................................................1

2. Representations and Warranties of the Company................................1
2.1. Organization, Good Standing and Qualification.......................1
2.2. Capitalization and Voting Rights....................................1
2.3. Subsidiaries........................................................2
2.4. Authorization.......................................................2
2.5. Valid Issuance of Common Stock and Series A Preferred Stock.........3
2.6. Governmental Consents...............................................3
2.7. Offering............................................................3
2.8. Litigation..........................................................3
2.9. Compliance with Other Instruments...................................4
2.10. Agreements; Action..................................................4
2.11. Related-Party Transactions..........................................5
2.12. Financial Statements................................................5
2.13. Changes.............................................................5
2.14. Tax Returns.........................................................6
2.15. Permits.............................................................7
2.16. Environmental and Safety Laws.......................................7
2.17. Disclosure..........................................................7
2.18. Business Plan.......................................................7
2.19. Registration Rights.................................................8
2.20. Corporate Documents; Minute Books...................................8
2.21. Title to Property and Assets........................................8
2.22. Insurance...........................................................8
2.23. Employee Benefit Plans..............................................8
2.24. Labor Agreements and Actions........................................8
2.25. Status of Intellectual Property.....................................9

3. Representations and Warranties of Investor...................................9
3.1. Authorization.......................................................9
3.2. Purchase Entirely for Own Account..................................10
3.3. Disclosure of Information..........................................10
3.4. Investment Experience..............................................10
3.5. Accredited Investor................................................10
3.6. Restricted Securities..............................................10
3.7. Further Limitations on Disposition.................................10
3.8. Legends............................................................11
3.9. Tax Advisors.......................................................11
3.10. Investor Counsel...................................................11
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4. Conditions of Investor's Obligations at Closing.............................11
4.1. Representations and Warranties.....................................12
4.2. Performance........................................................12
4.3. Compliance Certificate.............................................12
4.4. Qualifications.....................................................12
4.5. Proceedings and Documents..........................................12
4.6. Opinion of Company Counsel.........................................12
4.7. Investors'Rights Agreement.........................................12
4.8. Technology Agreement...............................................12
4.9. Contribution Agreement.............................................12
4.10. Stockholders Agreement.............................................12

5. Conditions of the Company's Obligations at Closing..........................13
5.1. Representations and Warranties.....................................13
5.2. Payment of Purchase Price..........................................13
5.3. Qualifications.....................................................13
5.4. Investors'Rights Agreement.........................................13
5.5. Technology Agreement...............................................13
5.6. Stockholders Agreement.............................................13

6. Miscellaneous...............................................................13
6.1. Survival...........................................................13
6.2. Successors and Assigns.............................................13
6.3. Governing Law......................................................13
6.4. Titles and Subtitles...............................................13
6.5. Notices............................................................14
6.6. Finder's Fee.......................................................14
6.7. Expenses...........................................................14
6.8. Amendments and Waivers.............................................14
6.9. Severability.......................................................14
6.10. Entire Agreement...................................................15
6.11. Counterparts.......................................................15
</TABLE>

SCHEDULE A Schedule of Exceptions

EXHIBIT A Amended and Restated Certificate of Incorporation

EXHIBIT B List of Stockholders

EXHIBIT C Investors' Rights Agreement

EXHIBIT D Opinion of Counsel for the Company

EXHIBIT E Technology Agreement

EXHIBIT F Stockholders Agreement

<PAGE>

COMMON STOCK PURCHASE AGREEMENT

THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made on the
11th day of August, 1999, by and between NetSat Express, Inc., a Delaware
corporation (the "Company"), and Globix Corporation, a Delaware corporation
("Investor").

THE PARTIES HEREBY AGREE AS FOLLOWS:

1. Purchase and Sale of Stock.

1.1. Sale and Issuance of Common Stock.

(a) The Company shall adopt and file with the Secretary of State of
Delaware on or before the Closing (as defined below) the Amended and Restated
Certificate of Incorporation in the form attached hereto as Exhibit A (the
"Restated Certificate").

(b) Subject to the terms and conditions of this Agreement, Investor
agrees to purchase at the Closing and the Company agrees to sell and issue to
Investor at the Closing 1,000,000 shares of the Company's Common Stock for a
purchase price of $5,000,000.

1.2. Closing. The purchase and sale of the Common Stock shall take
place at the offices of Brobeck, Phleger & Harrison LLP, 1633 Broadway, New
York, New York 10019 at 11:00 a.m., on August 11, 1999 or at such other time and
place as the Company and Investor mutually agree upon orally or in writing
(which time and place are designated as the "Closing"). At the Closing the
Company shall deliver to Investor a certificate representing the Common Stock
that Investor is purchasing against payment of the purchase price therefor by
wire transfer.

2. Representations and Warranties of the Company. The Company hereby
represents and warrants to Investor that, except as set forth on a Schedule of
Exceptions (the "Schedule of Exceptions") furnished Investor and counsel for
Investor prior to execution hereof and attached hereto as Schedule A, which
exceptions shall be deemed to be representations and warranties as if made
hereunder:

2.1. Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own its properties and assets and to carry on it business as now conducted and
as presently proposed to be conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a material adverse effect on its business or properties.

2.2. Capitalization and Voting Rights. The authorized capital of the
Company consists of:

(a) Preferred Stock. 4,000,000 shares of Preferred Stock, par value
$.001 (the "Preferred Stock"), of which 1,000,000 shares have been designated
Series A Participating Preferred Stock (the "Series A Preferred Stock") and all
of which will be sold pursuant to the Series A Preferred Stock Purchase
Agreement (the "Preferred Stock Agreement") by and among

<PAGE>

the Company and the parties thereto (to be executed and closed simultaneously
with the Closing). The rights, privileges and preferences of the Series A
Preferred Stock are stated in the Restated Certificate.

(b) Common Stock. 26,000,000 shares of common stock, par value $.001
("Common Stock"), of which 6,000,000 shares are issued and outstanding.

(c) The outstanding shares of Common Stock are owned by the
stockholders and in the numbers specified in Exhibit B hereto.

(d) The outstanding shares of Common Stock are all duly and validly
authorized and issued, fully paid and nonassessable, and were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities.

(e) Except for (i) the conversion privileges of the Series A Preferred
Stock to be issued under the Preferred Stock Agreement, (ii) dividends payable
on the Series A Preferred Stock pursuant to the Restated Certificate, and (iii)
currently outstanding options to purchase 877,536 shares of Common Stock granted
to employees or consultants pursuant to the Company's 1999 Stock Incentive Plan
(the "Option Plan"), there are not outstanding any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. In addition to
the aforementioned options, the Company has reserved an additional 1,102,464
shares of its Common Stock for purchase upon exercise of options to be granted
in the future under the Option Plan. Except as set forth in the Investors'
Rights Agreement (as defined below) and the Stockholders Agreement (as defined
below), the Company is not a party or subject to any agreement or understanding,
and, to the Company's knowledge, there is no agreement or understanding between
any persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.

2.3. Subsidiaries. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.

2.4. Authorization. All corporate action on the part of the Company,
its officers, directors and stockholders necessary for the authorization,
execution and delivery of this Agreement, the Investors' Rights Agreement dated
the date hereof, by and among the Company and the signatories thereto, the form
of which is attached hereto as Exhibit C (the "Investors' Rights Agreement"),
the Stockholders Agreement dated the date hereof, by and among the Company and
the signatories thereto, the form of which is attached hereto as Exhibit F (the
"Stockholders Agreement"), the Preferred Stock Agreement, and the Technology
Agreement dated the date hereof, by and between the Company and the Investor,
the form of which is attached hereto as Exhibit E, the performance of all
obligations of the Company hereunder and thereunder, and the authorization (or
reservation for issuance), sale and issuance of the Common Stock being sold
hereunder, the Series A Preferred Stock being sold under the Preferred Stock
Agreement and the Common Stock issuable upon conversion of the Series A
Preferred Stock has been taken or will be taken prior to or simultaneously with
the Closing. This Agreement and the Investors' Rights Agreement constitute valid
and legally binding obligations of the Company,

<PAGE>

enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Investors' Rights Agreement may be
limited by applicable federal or state securities laws.

2.5. Valid Issuance of Common Stock and Series A Preferred Stock. The
Common Stock that is being purchased by Investor hereunder, when issued, sold
and delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and will be free of restrictions on transfer, other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. The Series A
Preferred Stock that is being purchased by parties under the Preferred Stock
Agreement, when issued, sold and delivered in accordance with the terms of the
Preferred Stock Agreement for the consideration expressed therein, will be duly
and validly issued, fully paid and nonassessable and will be free of
restrictions on transfer, other than restrictions on transfer under the
Preferred Stock Agreement and the Investors' Rights Agreement and under
applicable state and federal securities laws. The Common Stock issuable upon
conversion of the Series A Preferred Stock purchased under the Preferred Stock
Agreement has been duly and validly reserved for issuance and, upon issuance in
accordance with the terms of the Restated Certificate, will be validly issued,
fully paid and nonassessable and will be free of restrictions on transfer under
the Preferred Stock Agreement and the Investors' Rights Agreement and under
applicable state and federal securities law.

2.6. Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement or the Preferred Stock Agreement, except for
filings required pursuant to applicable federal and state securities laws and
blue sky laws, which filings will be effected within the required statutory
period.

2.7. Offering. Subject in part to the truth and accuracy of Investor's
representations set forth in Section 3 of this Agreement, the offer, sale and
issuance of the Common Stock as contemplated by this Agreement are exempt from
the registration requirements of the Securities Act of 1933, as amended (the
"Act"), and the qualification or registration requirements of the applicable
blue sky laws. Neither the Company nor any authorized agent acting on its behalf
will take any action hereafter that would cause the loss of such exemptions.

2.8. Litigation. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement or the Preferred Stock Agreement
or the right of the Company to enter into such agreements or to consummate the
transactions contemplated hereby or thereby, or that might result, either
individually or in the aggregate, in any material adverse changes in the
business, assets or condition of the Company, financially or otherwise, or any
change in the current equity ownership of the Company. There is no material
action, suit, proceeding, claim, arbitration or investigation ("Action") pending
(or, to the Company's knowledge, currently

<PAGE>

threatened) against the Company, its activities, properties or assets or, to the
Company's knowledge, against any officer, director or employee of the Company in
connection with such officer's, director's or employee's relationship with, or
actions taken on behalf of, the Company. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or that the Company
intends to initiate.

2.9. Compliance with Other Instruments. The Company is not in violation
of any provision of its Restated Certificate or Bylaws nor, to its knowledge, of
any instrument, judgment, order, writ, decree or contract, statute, rule or
regulation ("Instruments") to which the Company is subject, except for any
violation of an Instrument that individually or in the aggregate would not have
a material adverse effect on the condition, financial or otherwise, or
operations of the Company. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any violation, or be in conflict with or constitute, with or without
the passage of time and giving of notice, either a default under the Restated
Certificate, Bylaws or any Instrument or an event that results in the creation
of any lien, charge or encumbrance upon any assets of the Company or the
suspension, revocation, impairment, forfeiture or nonrenewal of any material
permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.

2.10. Agreements; Action. (a) Except for agreements explicitly
contemplated hereby and except as set forth on the Schedule of Exceptions, there
are no agreements, understandings or proposed transactions between the Company
and any of its officers, directors, affiliates or any affiliate thereof.

(b) Except as set forth on the Schedule of Exceptions, there are no
agreements, understandings, instruments, contracts, proposed transactions,
judgments, orders, writs or decrees to which the Company is a party or by which
it is bound that may involve (i) obligations (contingent or otherwise) of, or
payments to the Company, in excess of $50,000, other than obligations of, or
payments to, the Company arising from purchase or sale agreements entered into
in the ordinary course of business, (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company, other than
licenses arising from the purchase of "off the shelf" or other standard
products, (iii) provisions restricting or affecting the development, manufacture
or distribution of the Company's products or services, or (iv) indemnification
by the Company with respect to infringements of proprietary rights, other than
indemnification obligations arising from purchase or sale agreements entered
into in the ordinary course of business.

(c) Except as set forth on the Schedule of Exceptions, the Company has
not (i) declared or paid any dividends or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (ii) incurred
any indebtedness for money borrowed or any other liabilities individually in
excess of $100,000 or, in the case of indebtedness and/or liabilities
individually less than $100,000, in excess of $200,000 in the aggregate, (iii)
made any loans or advances to any person, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than for the purpose of the sale of its services in the
ordinary course of business.

<PAGE>

(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.

2.11. Related-Party Transactions. No employee, officer or director of
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. Except as set forth on the Schedule of Exceptions, to
the best of the Company's knowledge, none of such persons has any direct or
indirect ownership interest in any firm or corporation with which the Company is
affiliated or with which the Company has a business relationship, or any firm or
corporation that competes with the Company, except that employees, officers or
directors of the Company and members of their immediate families may own up to
5% of the stock in publicly traded companies that may compete with the Company.
No member of the immediate family of any officer or director of the Company is
directly or indirectly interested in any material contract with the Company.

2.12. Financial Statements. The Company has delivered to Investor its
audited financial statements (balance sheet and statement of operations,
statement of stockholders' equity and statement of cash flows, including notes
thereto) at June 30, 1999 and 1998, and for the fiscal years then ended (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein. Except as set
forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to June 30, 1999 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.

2.13. Changes. Since June 30, 1999 there has not been:

(a) except as set forth on the Schedule of Exceptions, any change in
the assets, liabilities, financial condition or operating results of the Company
from that reflected in the Financial Statements, except changes in the ordinary
course of business that have not been, in the aggregate, materially adverse;

(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of the Company;

<PAGE>

(d) except as set forth on the Schedule of Exceptions, any satisfaction
or discharge of any lien, claim or encumbrance or payment of any obligation by
the Company, except in the ordinary course of business and that is not material
to the assets, properties, financial condition, operating results or business of
the Company;

(e) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject, except as set forth on the Schedule of Exceptions;

(f) any material change in any compensation arrangement or agreement
with any employee; or

(g) any agreement or commitment by the Company to do any of the things
described in this Section 2.13.

2.14. Tax Returns. (a) The Company has filed or caused to be filed, or
has properly filed extensions for, all tax returns, reports, forms and other
such documents ("Tax Returns") that are required to be filed and has paid or
caused to be paid all Taxes as shown on said returns and on all material
assessments received by it to the extent that such Taxes have become due, except
Taxes the validity or amount of which is being contested in good faith by
appropriate proceedings and with respect to which adequate reserves, in
accordance with generally accepted accounting principles in effect from time to
time ("GAAP"), have been set aside. Such Tax Returns are true and correct in all
material respects. The Company has paid or caused to be paid, or has established
reserves in accordance with GAAP for all Tax liabilities applicable to the
Company for all fiscal years that have not been examined and reported on by the
taxing authorities (or closed by applicable statutes). Except as disclosed in
the Schedule of Exceptions, no additional Tax assessment against the Company has
been heretofore proposed by any Governmental Authority and remains outstanding
for which provision has not been made on its balance sheet. Except as set forth
on the Schedule of Exceptions, no waivers of the statute of limitation or
extension of time within which to assess any Tax have been affirmatively granted
by the Company. The Schedule of Exceptions sets forth the tax year through which
United States federal income tax returns of the Company have been examined and
closed.

(b) Except as set forth on the Schedule of Exceptions, with respect to
all Tax Returns of the Company, (i) no audit is in progress and no extension of
time is in force with respect to any date on which any Tax Return was or is to
be filed and no waiver or agreement is in force for the extension of time for
the assessment or payment of any Tax; and (ii) to our knowledge, there is no
unassessed deficiency proposed or threatened against the Company.

(c) Except as set forth on the Schedule of Exceptions, the Company has
not agreed to make any adjustments under section 481 of the Code that would
survive the Closing by reason of a change of accounting method or otherwise
prior to Closing.

<PAGE>

(d) None of the respective assets of the Company is required to be
treated as being owned by any Person, other than the Company, pursuant to the
"safe harbor" leasing provisions of Section 168(f)(8) of the Code.

As used in this Agreement, "Tax" or "Taxes" means any federal, state,
county, local, foreign and other taxes (including, without limitation, income,
profits, premium, estimated, excise, sales, use, occupancy, gross receipts,
franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.

As used in this Agreement, "Governmental Authority" means the
government of any nation, state or other political subdivision thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.

2.15. Permits. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business, the lack of
which could materially and adversely affect the business, properties or
financial condition of the Company. The Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.

2.16. Environmental and Safety Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.

2.17. Disclosure. The Company has fully provided Investor with all the
information that Investor has requested for deciding whether to purchase the
Common Stock. Neither this Agreement (including all the exhibits and schedules
hereto) nor any other statements or certificates made or delivered in connection
herewith contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading
in light of the circumstances under which they were made.

2.18. Business Plan. The Business Plan dated July 1999, previously
delivered to Investor has been prepared in good faith by the Company and does
not contain any untrue statement of a material fact nor does it omit to state a
material fact necessary to make the statements made therein not misleading,
except that with respect to projections contained in the Business Plan, the
Company represents only that such projections were prepared in good faith and
that the Company reasonably believes there is a reasonable basis for such
projections. There has been no material adverse change in the assets, business,
properties or financial or other condition of the Company since July 1, 1999
that would cause the Business Plan to no longer be valid.

<PAGE>

2.19. Registration Rights. Except as provided in the Investors' Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.

2.20. Corporate Documents; Minute Books. Except for amendments
necessary to satisfy representations and warranties or conditions contained
herein (the forms of which amendments have been approved by Investor), the
Restated Certificate and Bylaws of the Company are in the form previously
provided to counsel for Investor. The minute books of the Company provided to
Investor contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.

2.21. Title to Property and Assets. The property and assets the Company
owns are owned by the Company free and clear of all mortgages, liens, loans and
encumbrances, except (i) as reflected in the Financial Statements, (ii) for
statutory liens for the payment of current taxes that are not yet delinquent,
and (iii) for liens, encumbrances and security interests that arise in the
ordinary course of business and minor defects in title, none of which,
individually or in the aggregate, materially impair the Company's ownership or
use of such property or assets. With respect to the property and assets it
leases, the Company is in material compliance with such leases and, to its
knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances, subject to clauses (i)-(iii).

2.22. Insurance. The Company has fire and casualty insurance policies
with such coverages in amounts (subject to reasonable deductibles) customary for
companies similarly situated.

2.23. Employee Benefit Plans. Except as set forth on the Schedule of
Exceptions, the Company does not have any Employee Benefit Plan as defined in
the Employee Retirement Income Security Act of 1974.

2.24. Labor Agreements and Actions. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the Company's
knowledge, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the Company's knowledge, threatened, that could have a
material adverse effect on the assets, properties, financial condition,
operating results or business of the Company, nor is the Company aware of any
labor organization activity involving its employees. The Company is not aware
that any officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the foregoing. The employment of
each officer and employee of the Company is terminable at the will of the
Company. The Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
agreement. To its knowledge, the Company has complied in all material respects
with all applicable state and federal equal employment opportunity and other
laws related to employment.

<PAGE>

2.25. Status of Intellectual Property.

(a) To the Company's knowledge, the Company owns or has sufficient
licenses to use all of the material patents, patent applications, registered
trademarks, trademark applications, copyright registrations and applications
therefor which are necessary for the conduct of the business. Except as set
forth on the Schedule of Exceptions:

(i) The patents owned by the Company and patent applications
(collectively, "Patent Rights") are owned by the Company free and clear of all
mortgages, liens, charges or encumbrances whatsoever. No licenses have been
granted with respect to the Patent Rights and the Company has not received
written notice from any third party claiming that its practice of the inventions
covered by the Patent Rights or the patents or patents application licensed to
the Company would infringe the patent rights of such third party.

(ii) The copyright registrations and pending applications owned
by the Company are owned by the Company free and clear of all mortgages, liens,
charges or encumbrances whatsoever. Except for licenses granted to end users in
accordance with the Company's standard terms, no licenses have been granted with
respect to any of the Company's copyrighted material and the Company has not
received written notice from any third party claiming that any of its activities
in the conduct of its business as presently conducted infringe the copyrights of
such third party.

(iii) The trademark registrations and pending applications owned
by the Company are owned by the Company free and clear of all mortgages, liens,
charges or encumbrances whatsoever. No licenses have been granted with respect
to any of such trademarks or applications and the Company has not received
notice from any third party claiming that any of its activities in the conduct
of its business as presently conducted infringe the trademarks, trade names or
trade dress of such third party.

(b) Except as set forth on the Schedule of Exceptions, all technical
information and know-how in possession of the Company relating to the design or
manufacture of products sold, and services performed, by it, including without
limitation methods of manufacture, lab journals, manufacturing, engineering and
other drawings, design and engineering specifications and similar items
recording or evidencing such information is owned by the Company free and clear
of all mortgages, liens, charges or encumbrances whatsoever.

3. Representations and Warranties of Investor. Investor hereby
represents, warrants and covenants that:

3.1. Authorization. Investor has full power and authority to enter into
this Agreement, the Investors' Rights Agreement and the Stockholders Agreement,
and each such agreement constitutes its valid and legally binding obligation,
enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.

<PAGE>

3.2. Purchase Entirely for Own Account. This Agreement is made with
Investor in reliance upon Investor's representation to the Company, which by
Investor's execution of this Agreement Investor hereby confirms, that the Common
Stock to be received by Investor will be acquired for investment for Investor's
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Investor has no present intention of
selling, granting any participation in or otherwise distributing the same. By
executing this Agreement, Investor further represents that Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person or to any third person,
with respect to any Common Stock.

3.3. Disclosure of Information. Investor has received all the
information it has requested in deciding whether to purchase the Common Stock.
Investor further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Common Stock and the business, properties, prospects and
financial condition of the Company. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of Investor to rely thereon.

3.4. Investment Experience. Investor has invested in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Common Stock. Investor also represents
it has not been organized for the purpose of acquiring the Common Stock.

3.5. Accredited Investor. Investor is an "accredited investor" within
the meaning of Securities and Exchange Commission ("SEC") Rule 501 of Regulation
D, as presently in effect.

3.6. Restricted Securities. Investor understands that the Common Stock
it is purchasing is characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Common Stock may be resold without registration
under the Act only in certain limited circumstances. In the absence of an
effective registration statement covering the Common Stock or an available
exemption from registration under the Act, the Common Stock must be held
indefinitely. In this connection, Investor represents that it is familiar with
SEC Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Act, including without limitation the Rule 144
condition that current information about the Company be available to the public.
Such information is not now available and the Company has no present plans to
make such information available.

3.7. Further Limitations on Disposition. Without in any way limiting
the representations set forth above, Investor further agrees not to make any
disposition of all or any portion of the Common Stock unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3 and the Investors' Rights Agreement, and:

<PAGE>

(a) There is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or

(b) (i) Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if requested by
the Company, Investor shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company that such disposition will not
require registration of such shares under the Act. It is agreed that the Company
will not require opinions of counsel for transactions made pursuant to Rule 144
except in unusual circumstances.

(c) Notwithstanding the provisions of subsections (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by Investor that is a corporation to a wholly owned subsidiary of such
corporation if the transferee agrees in writing to be subject to the terms
hereof to the same extent as if it were an original Investor hereunder.

3.8. Legends. It is understood that the certificates evidencing the
Common Stock may bear one or all of the following legends:

(a) "These securities have not been registered under the Securities Act
of 1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."

(b) Any legend required by the applicable blue sky laws.

3.9. Tax Advisors. Investor has reviewed with Investor's own tax
advisors the federal, state and local tax consequences of this investment, where
applicable, and the transactions contemplated by this Agreement. Investor is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents and understands that Investor (and not the
Company) shall be responsible for Investor's own tax liability that may arise as
a result of this investment or the transactions contemplated by this Agreement.

3.10. Investor Counsel. Investor acknowledges that Investor has had the
opportunity to review this Agreement, the exhibits and the schedules attached
hereto and the transactions contemplated by this Agreement with Investor's own
legal counsel. Investor is relying solely on Investor's legal counsel and not on
any statements or representations of the Company or any of the Company's agents,
including Brobeck, Phleger & Harrison LLP, for legal advice with respect to this
investment or the transactions contemplated by this Agreement.

4. Conditions of Investor's Obligations at Closing. The obligations of
Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
thereto:

<PAGE>

4.1. Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.

4.2. Performance. The Company shall have performed and complied with
all agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing,
including, without limitation, adoption and filing with the Secretary of State
of the State of Delaware of the Restated Certificate.

4.3. Compliance Certificate. The Chief Executive Officer of the Company
shall deliver to Investor at the Closing a certificate stating that the
conditions specified in Sections 4.1 and 4.2 have been fulfilled. The Secretary
of the Company shall deliver to Investor at the Closing a certificate as to the
resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of this Agreement and the Preferred Purchase Agreement
and each exhibit hereto and thereto to which it is a signatory and the
consummation of the transactions contemplated herein and therein.

4.4. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Common Stock pursuant to this Agreement shall be duly obtained and effective as
of the Closing.

4.5. Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Investor's counsel, and they shall have received all such counterpart original
and certified or other copies of such documents as they may reasonably request.

4.6. Opinion of Company Counsel. Investor shall have received from
Brobeck, Phleger & Harrison LLP, counsel for the Company, an opinion, dated as
of the Closing, in the form attached hereto as Exhibit D.

4.7. Investors' Rights Agreement. The Company and Investor shall have
entered into the Investors' Rights Agreement in the form attached as Exhibit C.

4.8. Technology Agreement. The Company and Investor shall have entered
into a Technology Agreement in the form attached hereto as Exhibit E.

4.9. Contribution Agreement. The Company and Globecomm Systems Inc.
shall have entered into the Contribution Agreement and such agreement shall be
in full force and effect.

4.10. Stockholders Agreement. The Company and Investor shall have
entered into a Stockholders Agreement in the form attached hereto as Exhibit F.

<PAGE>

5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to Investor under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions by Investor:

5.1. Representations and Warranties. The representations and warranties
of Investor contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing.

5.2. Payment of Purchase Price. Investor shall have delivered the
purchase price specified in Section 1.1(b).

5.3. Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Common Stock pursuant to this Agreement shall be duly obtained and effective as
of the Closing.

5.4. Investors' Rights Agreement. The Company and Investor shall have
entered into the Investors' Rights Agreement in the form attached as Exhibit C.

5.5. Technology Agreement. The Company and Investor shall have entered
into a Technology Agreement in the form attached hereto as Exhibit E.

5.6. Stockholders Agreement. The Company and Investor shall have
entered into a Stockholders Agreement in the form attached hereto as Exhibit F.

6. Miscellaneous.

6.1. Survival. The warranties, representations and covenants of the
Company and Investors contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing for a
period of one year and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of Investor or the Company.

6.2. Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of the Common Stock). Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

6.3. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York.

6.4. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

<PAGE>

6.5. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the address
as set forth on the signature page hereof or at such other address as such party
may designate by ten days advance written notice to the other parties hereto. A
copy of any notice sent to the Company shall be sent to Luci Staller Altman,
Esq., Brobeck, Phleger & Harrison LLP, 1633 Broadway, 47th Floor, New York, New
York 10019. A copy of any notice sent to the Investor shall be sent to Arnold N.
Bressler, Esq., Milberg Weiss Bershad Hynes & Lerach LLP, One Pennsylvania
Plaza, New York, New York 10119.

6.6. Finder's Fee. Except as set forth on the Schedule of Exceptions,
each party represents that it neither is nor will be obligated for any finders'
fee or commission in connection with this transaction. Investor agrees to
indemnify and to hold harmless the Company from any liability for any commission
or compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which Investor or
any of its officers, partners, employees or representatives is responsible. The
Company agrees to indemnify and hold harmless Investor from any liability for
any commission or compensation in the nature of a finders' fee (and the costs
and expenses of defending against such liability or asserted liability) for
which the Company or any of its officers, employees or representatives is
responsible.

6.7. Expenses. Irrespective of whether the Closing is effected, the
Company and Investor shall pay all costs and expenses that such party incurs
with respect to the negotiation, execution, delivery and performance of this
Agreement; provided that if the Closing is effected, the Company shall pay the
reasonable fees and expenses of one special counsel to Investor, not to exceed
$25,000.00. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the Investors' Rights Agreement, the
Stockholders Agreement or the Restated Certificate, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

6.8. Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and Investor. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon Investor, each
future holder of all such Common Stock and the Company.

6.9. Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

<PAGE>

6.10. Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.

6.11. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

NetSat Express, Inc.

By: /s/: Kenneth A. Miller
------------------------------
Kenneth A. Miller,
Chief Executive Officer

Address: 45 Oser Avenue
Hauppauge, NY 11788

GLOBIX CORPORATION

By: /s/ Mark Bell, President
------------------------------

Address: 295 Lafayette Street
New York, NY 10012

<PAGE>

NETSAT EXPRESS, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
AUGUST 11, 1999

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purchase and Sale of Stock...............................................................................1
--------------------------
1.1. Sale and Issuance of Series A Preferred Stock...................................................1
---------------------------------------------
1.2. Closing.........................................................................................1
-------

2. Representations and Warranties of the Company............................................................1
---------------------------------------------
2.1. Organization, Good Standing and Qualification...................................................1
---------------------------------------------
2.2. Capitalization and Voting Rights................................................................1
--------------------------------
2.3. Subsidiaries....................................................................................2
------------
2.4. Authorization...................................................................................2
-------------
2.5. Valid Issuance of Preferred and Common Stock....................................................3
--------------------------------------------
2.6. Governmental Consents...........................................................................3
---------------------
2.7. Offering........................................................................................3
--------
2.8. Litigation......................................................................................3
----------
2.9. Compliance with Other Instruments...............................................................4
---------------------------------
2.10. Agreements; Action..............................................................................4
------------------
2.11. Related-Party Transactions......................................................................5
--------------------------
2.12. Financial Statements............................................................................5
--------------------
2.13. Changes.........................................................................................5
-------
2.14. Tax Returns.....................................................................................6
-----------
2.15. Permits.........................................................................................7
-------
2.16. Environmental and Safety Laws...................................................................7
-----------------------------
2.17. Disclosure......................................................................................7
----------
2.18. Business Plan...................................................................................7
-------------
2.19. Registration Rights.............................................................................8
-------------------
2.20. Corporate Documents; Minute Books...............................................................8
---------------------------------
2.21. Title to Property and Assets....................................................................8
----------------------------
2.22. Insurance.......................................................................................8
---------
2.23. Employee Benefit Plans..........................................................................8
----------------------
2.24. Labor Agreements and Actions....................................................................8
----------------------------
2.25. Status of Intellectual Property.................................................................9
-------------------------------

3. Representations and Warranties of the Investors..........................................................9
-----------------------------------------------
3.1. Authorization...................................................................................9
-------------
3.2. Purchase Entirely for Own Account..............................................................10
---------------------------------
3.3. Disclosure of Information......................................................................10
-------------------------
3.4. Investment Experience..........................................................................10
---------------------
3.5. Accredited Investor............................................................................10
-------------------
3.6. Restricted Securities..........................................................................10
---------------------
3.7. Further Limitations on Disposition.............................................................11
----------------------------------
3.8. Legends........................................................................................11
-------
3.9. Tax Advisors...................................................................................11
------------
3.10. Investor Counsel...............................................................................11
----------------

i
<PAGE>

4. Conditions of Investor's Obligations at Closing.........................................................12
-----------------------------------------------
4.1. Representations and Warranties.................................................................12
------------------------------
4.2. Performance....................................................................................12
-----------
4.3. Compliance Certificates........................................................................12
-----------------------
4.4. Qualifications.................................................................................12
--------------
4.5. Proceedings and Documents......................................................................12
-------------------------
4.6. Opinion of Company Counsel.....................................................................12
--------------------------
4.7. Investors'Rights Agreement.....................................................................12
--------------------------
4.8. Contribution Agreement.........................................................................13
----------------------
4.9. Stockholders Agreement.........................................................................13
----------------------

5. Conditions of the Company's Obligations at Closing......................................................13
--------------------------------------------------
5.1. Representations and Warranties.................................................................13
------------------------------
5.2. Payment of Purchase Price......................................................................13
-------------------------
5.3. Qualifications.................................................................................13
--------------
5.4. Investors'Rights Agreement.....................................................................13
--------------------------
5.5. Stockholders Agreement.........................................................................13
----------------------

6. Miscellaneous...........................................................................................13
-------------
6.1. Survival.......................................................................................13
--------
6.2. Successors and Assigns.........................................................................13
----------------------
6.3. Governing Law..................................................................................13
-------------
6.4. Titles and Subtitles...........................................................................14
--------------------
6.5. Notices........................................................................................14
-------
6.6. Finder's Fee...................................................................................14
------------
6.7. Expenses.......................................................................................14
--------
6.8. Amendments and Waivers.........................................................................14
----------------------
6.9. Severability...................................................................................15
------------
6.10. Entire Agreement...............................................................................15
----------------
6.11. Counterparts...................................................................................15
------------
</TABLE>

SCHEDULE A Schedule of Investors

SCHEDULE B Schedule of Exceptions

EXHIBIT A Amended and Restated Certificate of Incorporation

EXHIBIT B List of Stockholders

EXHIBIT C Investors' Rights Agreement

EXHIBIT D Opinion of Counsel for the Company

EXHIBIT E Stockholders Agreement

ii
<PAGE>

SERIES A PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------

THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is made on the 11th day of August, 1999, by and between NetSat
Express, Inc., a Delaware corporation (the "Company"), and the investors listed
on Schedule A hereto (each, an "Investor" and collectively, the "Investors").

THE PARTIES HEREBY AGREE AS FOLLOWS:

1. Purchase and Sale of Stock.
--------------------------

1.1. Sale and Issuance of Series A Preferred Stock.
---------------------------------------------

(a) The Company shall adopt and file with the Secretary
of State of Delaware on or before the Closing (as defined below) the Amended
and Restated Certificate of Incorporation in the form attached hereto as
Exhibit A (the "Restated Certificate").

(b) Subject to the terms and conditions of this
Agreement, each Investor agrees, severally, to purchase at the Closing and the
Company agrees to sell and issue to each Investor at the Closing that number of
shares of the Company's Series A Preferred Stock, 1,000,000 shares in the
aggregate, set forth opposite each Investor's name on Schedule A hereto for the
purchase price set forth thereon, for an aggregate purchase price of $5,000,000.

1.2. Closing. The purchase and sale of the Series A
Preferred Stock shall take place at the offices of Brobeck, Phleger & Harrison
LLP, 1633 Broadway, New York, New York 10019 at 11:00 a.m., on August 11, 1999
or at such other time and place as the Company and each Investor mutually agree
upon orally or in writing (which time and place are designated as the
"Closing"). At the Closing the Company shall deliver to each Investor a
certificate representing the Series A Preferred Stock that such Investor is
purchasing against payment of the purchase price therefor by wire transfer.

2. Representations and Warranties of the Company. The
Company hereby represents and warrants to each Investor that, except as set
forth on a Schedule of Exceptions (the "Schedule of Exceptions") furnished each
Investor and counsel for Investors prior to execution hereof and attached hereto
as Schedule B, which exceptions shall be deemed to be representations and
warranties as if made hereunder:

2.1. Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to own its properties and assets and to carry on it business as
now conducted and as presently proposed to be conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business or properties.

2.2. Capitalization and Voting Rights. The authorized
capital of the Company consists of:

1
<PAGE>

(a) Preferred Stock. 4,000,000 shares of Preferred Stock,
par value $.001 (the "Preferred Stock"), of which 1,000,000 shares have been
designated Series A Participating Preferred Stock (the "Series A Preferred
Stock") and all of which will be sold pursuant to this Agreement. The rights,
privileges and preferences of the Series A Preferred Stock are stated in the
Restated Certificate.

(b) Common Stock. 26,000,000 shares of common stock, par
value $.001 ("Common Stock"), of which 6,000,000 shares are issued and
outstanding and of which 1,000,000 shares will be sold pursuant to the Common
Stock Purchase Agreement (the "Common Stock Purchase Agreement") by and between
the Company and Globix Corporation (to be executed and closed simultaneously
with the Closing).

(c) The outstanding shares of Common Stock are owned by
the stockholders and in the numbers specified in Exhibit B hereto.

(d) The outstanding shares of Common Stock are all duly
and validly authorized and issued, fully paid and nonassessable, and were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities.

(e) Except for (i) the conversion privileges of the Series
A Preferred Stock to be issued under this Agreement, (ii) dividends payable on
the Series A Preferred Stock pursuant to the Restated Certificate, and (iii)
currently outstanding options to purchase 877,536 shares of Common Stock granted
to employees or consultants pursuant to the Company's 1999 Stock Incentive Plan
(the "Option Plan"), there are not outstanding any options, warrants, rights
(including conversion or preemptive rights) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. In addition to
the aforementioned options, the Company has reserved an additional 1,102,464
shares of its Common Stock for purchase upon exercise of options to be granted
in the future under the Option Plan. Except as set forth in the Investors'
Rights Agreement (as defined below) and the Stockholders Agreement (as defined
below), the Company is not a party or subject to any agreement or understanding,
and, to the Company's knowledge, there is no agreement or understanding between
any persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.

2.3. Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in any
joint venture, partnership, or similar arrangement.

<PAGE>

Stock issuable upon conversion of the Series A Preferred Stock and the Common
Stock being sold under the Common Stock Purchase Agreement has been taken or
will be taken prior to or simultaneously with the Closing. This Agreement and
the Investors' Rights Agreement constitute valid and legally binding obligations
of the Company, enforceable in accordance with their respective terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable federal or state securities laws.

2.5. Valid Issuance of Preferred and Common Stock. The
Series A Preferred Stock that is being purchased by the Investors hereunder,
when issued, sold and delivered in accordance with the terms of this Agreement
for the consideration expressed herein, will be duly and validly issued, fully
paid and nonassessable and will be free of restrictions on transfer, other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series A Preferred Stock purchased under
this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Certificate, will be duly
and validly issued, fully paid and nonassessable and will be free of
restrictions on transfer, other than restrictions on transfer under this
Agreement and the Investors' Rights Agreement and under applicable state and
federal securities laws. The Common Stock that is being purchased by Globix
Corporation under the Common Stock Purchase Agreement, when issued, sold and
delivered in accordance with the terms of the Common Stock Purchase Agreement
for the consideration expressed therein, will be duly and validly issued, fully
paid and nonassessable and will be free of restrictions on transfer, other than
restrictions on transfer under the Common Stock Purchase Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
laws.

2.6. Governmental Consents. No consent, approval, order
or authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement or the Common Stock Purchase Agreement, except
for filings required pursuant to applicable federal and state securities laws
and blue sky laws, which filings will be effected within the required statutory
period.

2.7. Offering. Subject in part to the truth and accuracy
of Investor's representations set forth in Section 3 of this Agreement, the
offer, sale and issuance of the Series A Preferred Stock as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act of
1933, as amended (the "Act"), and the qualification or registration requirements
of the applicable blue sky laws. Neither the Company nor any authorized agent
acting on its behalf will take any action hereafter that would cause the loss of
such exemptions.

<PAGE>

Company to enter into such agreements or to consummate the transactions
contemplated hereby or thereby, or that might result, either individually or in
the aggregate, in any material adverse changes in the business, assets or
condition of the Company, financially or otherwise, or any change in the current
equity ownership of the Company. There is no material action, suit, proceeding,
claim, arbitration or investigation ("Action") pending (or, to the Company's
knowledge, currently threatened) against the Company, its activities, properties
or assets or, to the Company's knowledge, against any officer, director or
employee of the Company in connection with such officer's, director's or
employee's relationship with, or actions taken on behalf of, the Company. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.

2.9. Compliance with Other Instruments. The Company is
not in violation of any provision of its Restated Certificate or Bylaws nor, to
its knowledge, of any instrument, judgment, order, writ, decree or contract,
statute, rule or regulation ("Instruments") to which the Company is subject,
except for any violation of an Instrument that individually or in the aggregate
would not have a material adverse effect on the condition, financial or
otherwise, or operations of the Company. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not result in any violation, or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under the
Restated Certificate, Bylaws or any Instrument or an event that results in the
creation of any lien, charge or encumbrance upon any assets of the Company or
the suspension, revocation, impairment, forfeiture or nonrenewal of any material
permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.

2.10. Agreements; Action. (a) Except for agreements
explicitly contemplated hereby and except as set forth on the Schedule of
Exceptions, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, affiliates or any
affiliate thereof.

(b) Except as set forth on the Schedule of Exceptions,
there are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company is a
party or by which it is bound that may involve (i) obligations (contingent or
otherwise) of, or payments to the Company, in excess of $50,000, other than
obligations of, or payments to, the Company arising from purchase or sale
agreements entered into in the ordinary course of business, (ii) the license of
any patent, copyright, trade secret or other proprietary right to or from the
Company, other than licenses arising from the purchase of "off the shelf" or
other standard products, (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services,
or (iv) indemnification by the Company with respect to infringements of
proprietary rights, other than indemnification obligations arising from purchase
or sale agreements entered into in the ordinary course of business.

<PAGE>

other liabilities individually in excess of $100,000 or, in the case of
indebtedness and/or liabilities individually less than $100,000, in excess of
$200,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than for the purpose of the sale
of its services in the ordinary course of business.

(d) For the purposes of subsections (b) and (c) above,
all indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual minimum
dollar amounts of such subsections.

2.11. Related-Party Transactions. No employee, officer
or director of the Company or member of his or her immediate family is indebted
to the Company, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any of them. Except as set forth on the Schedule
of Exceptions, to the best of the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except that
employees, officers or directors of the Company and members of their immediate
families may own up to 5% of the stock in publicly traded companies that may
compete with the Company. No member of the immediate family of any officer or
director of the Company is directly or indirectly interested in any material
contract with the Company.

2.12. Financial Statements. The Company has delivered
to each Investor its audited financial statements (balance sheet and statement
of operations, statement of stockholders' equity and statement of cash flows,
including notes thereto) at June 30, 1999 and 1998, and for the fiscal years
then ended (the "Financial Statements"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated and with each other. The
Financial Statements fairly present the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein.
Except as set forth in the Financial Statements, the Company has no material
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to June 30, 1999 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
the Financial Statements, which, in both cases, individually or in the
aggregate, are not material to the financial condition or operating results of
the Company. Except as disclosed in the Financial Statements, the Company is not
a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.

2.13. Changes. Since June 30, 1999 there has not been:

(a) except as set forth on the Schedule of Exceptions,
any change in the assets, liabilities, financial condition or operating results
of the Company from that reflected in

<PAGE>

the Financial Statements, except changes in the ordinary course of business that
have not been, in the aggregate, materially adverse;

(b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results or business of the Company;

(d) except as set forth on the Schedule of Exceptions,
any satisfaction or discharge of any lien, claim or encumbrance or payment of
any obligation by the Company, except in the ordinary course of business and
that is not material to the assets, properties, financial condition, operating
results or business of the Company;

(e) any material change or amendment to a material
contract or arrangement by which the Company or any of its assets or properties
is bound or subject, except as set forth on the Schedule of Exceptions;

(f) any material change in any compensation
arrangement or agreement with any employee; or

(g) any agreement or commitment by the Company to do
any of the things described in this Section 2.13.

2.14. Tax Returns. (a) The Company has filed or caused
to be filed, or has properly filed extensions for, all tax returns, reports,
forms and other such documents ("Tax Returns") that are required to be filed and
has paid or caused to be paid all Taxes as shown on said returns and on all
material assessments received by it to the extent that such Taxes have become
due, except Taxes the validity or amount of which is being contested in good
faith by appropriate proceedings and with respect to which adequate reserves, in
accordance with generally accepted accounting principles in effect from time to
time ("GAAP"), have been set aside. Such Tax Returns are true and correct in all
material respects. The Company has paid or caused to be paid, or has established
reserves in accordance with GAAP for all Tax liabilities applicable to the
Company for all fiscal years that have not been examined and reported on by the
taxing authorities (or closed by applicable statutes). Except as disclosed in
the Schedule of Exceptions, no additional Tax assessment against the Company has
been heretofore proposed by any Governmental Authority and remains outstanding
for which provision has not been made on its balance sheet. Except as set forth
on the Schedule of Exceptions, no waivers of the statute of limitation or
extension of time within which to assess any Tax have been affirmatively granted
by the Company. The Schedule of Exceptions sets forth the tax year through which
United States federal income tax returns of the Company have been examined and
closed.

(b) Except as set forth on the Schedule of Exceptions,
with respect to all Tax Returns of the Company, (i) no audit is in progress and
no extension of time is in force with respect to any date on which any Tax
Return was or is to be filed and no waiver or agreement is in force for the
extension of time for the assessment or payment of any Tax; and (ii) there is no
unassessed deficiency proposed or to our knowledge threatened against the
Company.

<PAGE>

(c) Except as set forth on the Schedule of Exceptions,
the Company has not agreed to make any adjustments under section 481 of the Code
that would survive the Closing by reason of a change of accounting method or
otherwise prior to Closing.

(d) None of the respective assets of the Company is
required to be treated as being owned by any Person, other than the Company,
pursuant to the "safe harbor" leasing provisions of Section 168(f)(8) of the
Code.

As used in this Agreement, "Tax" or "Taxes" means any federal,
state, county, local, foreign and other taxes (including, without limitation,
income, profits, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.

2.15. Permits. The Company has all franchises, permits,
licenses and any similar authority necessary for the conduct of its business,
the lack of which could materially and adversely affect the business, properties
or financial condition of the Company. The Company is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority.

2.16. Environmental and Safety Laws. The Company is not
in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.

2.17. Disclosure. The Company has fully provided each
Investor with all the information that such Investor has requested for deciding
whether to purchase the Series A Preferred Stock. Neither this Agreement
(including all the exhibits and schedules hereto) nor any other statements or
certificates made or delivered in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading in light of the circumstances
under which they were made.

2.18. Business Plan. The Business Plan dated July 1999,
previously delivered to each Investor has been prepared in good faith by the
Company and does not contain any untrue statement of a material fact nor does it
omit to state a material fact necessary to make the statements made therein not
misleading, except that with respect to projections contained in the Business
Plan, the Company represents only that such projections were prepared in good
faith and that the Company reasonably believes there is a reasonable basis for
such projections. There

<PAGE>

has been no material adverse change in the assets, business, properties or
financial or other condition of the Company since July 1, 1999 that would cause
the Business Plan to no longer be valid.

2.19. Registration Rights. Except as provided in the
Investors' Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.

2.20. Corporate Documents; Minute Books. Except for
amendments necessary to satisfy representations and warranties or conditions
contained herein (the forms of which amendments have been approved by the
Investors), the Restated Certificate and Bylaws of the Company are in the form
previously provided to counsel for the Investors. The minute books of the
Company provided to the Investors contain a complete summary of all meetings of
directors and stockholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.

2.21. Title to Property and Assets. The property and
assets the Company owns are owned by the Company free and clear of all
mortgages, liens, loans and encumbrances, except (i) as reflected in the
Financial Statements, (ii) for statutory liens for the payment of current taxes
that are not yet delinquent, and (iii) for liens, encumbrances and security
interests that arise in the ordinary course of business and minor defects in
title, none of which, individually or in the aggregate, materially impair the
Company's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company is in material compliance with such
leases and, to its knowledge, holds a valid leasehold interest free of any
liens, claims or encumbrances, subject to clauses (i)-(iii).

2.22. Insurance. The Company has fire and casualty
insurance policies with such coverages in amounts (subject to reasonable
deductibles) customary for companies similarly situated.

2.23. Employee Benefit Plans. Except as set forth on the
Schedule of Exceptions, the Company does not have any Employee Benefit Plan as
defined in the Employee Retirement Income Security Act of 1974.

2.24. Labor Agreements and Actions. The Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to the
Company's knowledge, has sought to represent any of the employees,
representatives or agents of the Company. There is no strike or other labor
dispute involving the Company pending, or to the Company's knowledge,
threatened, that could have a material adverse effect on the assets, properties,
financial condition, operating results or business of the Company, nor is the
Company aware of any labor organization activity involving its employees. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. The employment of each officer and employee of the Company is
terminable at the will of the Company. The Company is not a party to or bound by
any currently effective employment contract, deferred compensation

<PAGE>

agreement, bonus plan, incentive plan, profit sharing plan, retirement agreement
or other employee compensation agreement. To its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
employment opportunity and other laws related to employment.

2.25. Status of Intellectual Property.

(a) To the Company's knowledge, the Company owns or
has sufficient licenses to use all of the material patents, patent applications,
registered trademarks, trademark applications, copyright registrations and
applications therefor which are necessary for the conduct of the business.
Except as set forth on the Schedule of Exceptions:

(i) The patents owned by the Company and patent
applications (collectively, "Patent Rights") are owned by the Company free and
clear of all mortgages, liens, charges or encumbrances whatsoever. No licenses
have been granted with respect to the Patent Rights and the Company has not
received written notice from any third party claiming that its practice of the
inventions covered by the Patent Rights or the patents or patents application
licensed to the Company would infringe the patent rights of such third party.

(ii) The copyright registrations and pending
applications owned by the Company are owned by the Company free and clear of all
mortgages, liens, charges or encumbrances whatsoever. Except for licenses
granted to end users in accordance with the Company's standard terms, no
licenses have been granted with respect to any of the Company's copyrighted
material and the Company has not received written notice from any third party
claiming that any of its activities in the conduct of its business as presently
conducted infringe the copyrights of such third party.

(iii) The trademark registrations and pending
applications owned by the Company are owned by the Company free and clear of all
mortgages, liens, charges or encumbrances whatsoever. No licenses have been
granted with respect to any of such trademarks or applications and the Company
has not received notice from any third party claiming that any of its activities
in the conduct of its business as presently conducted infringe the trademarks,
trade names or trade dress of such third party.

(b) Except as set forth on the Schedule of Exceptions,
all technical information and know-how in possession of the Company relating to
the design or manufacture of products sold, and services performed, by it,
including without limitation methods of manufacture, lab journals,
manufacturing, engineering and other drawings, design and engineering
specifications and similar items recording or evidencing such information is
owned by the Company free and clear of all mortgages, liens, charges or
encumbrances whatsoever.

3. Representations and Warranties of the Investors.
Each Investor hereby represents, warrants and covenants that:

3.1. Authorization. Such Investor has full power and
authority to enter into this Agreement, the Investors' Rights Agreement and the
Stockholders Agreement, and each such agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms except (i)
as limited by applicable bankruptcy, insolvency, reorganization,

<PAGE>

moratorium and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities laws.

3.2. Purchase Entirely for Own Account. This Agreement
is made with such Investor in reliance upon such Investor's representation to
the Company, which by such Investor's execution of this Agreement Investor
hereby confirms, that the Series A Preferred Stock to be received by such
Investor and the Common Stock issuable upon conversation thereof (collectively,
the "Securities") will be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Investor has no present intention of
selling, granting any participation in or otherwise distributing the same. By
executing this Agreement, such Investor further represents that such Investor
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participation to such person or to any third
person, with respect to any Securities.

3.3. Disclosure of Information. Such Investor has
received all the information it has requested in deciding whether to purchase
the Series A Preferred Stock. Such Investor further represents that it has had
an opportunity to ask questions and receive answers from the Company regarding
the terms and conditions of the offering of the Series A Preferred Stock and the
business, properties, prospects and financial condition of the Company. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of such Investor to
rely thereon.

3.4. Investment Experience. Such Investor has invested in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series A
Preferred Stock.

3.5. Accredited Investor. Such Investor is an "accredited
investor" within the meaning of Securities and Exchange Commission ("SEC") Rule
501 of Regulation D, as presently in effect.

3.6. Restricted Securities. Such Investor understands that
the Securities it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such Securities may be resold without
registration under the Act only in certain limited circumstances. In the absence
of an effective registration statement covering the Securities (or the Common
Stock issued on conversion thereof) or an available exemption from registration
under the Act, the Series A Preferred Stock (and any Common Stock issued on
conversation thereof) must be held indefinitely. In this connection, such
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act,
including without limitation the Rule 144 condition that current information
about the Company be available to the

10
<PAGE>

public. Such information is not now available and the Company has no present
plans to make such information available.

3.7. Further Limitations on Disposition. Without in any
way limiting the representations set forth above, such Investor further agrees
not to make any disposition of all or any portion of the Series A Preferred
Stock unless and until the transferee has agreed in writing for the benefit of
the Company to be bound by this Section 3 and the Investors' Rights Agreement,
and:

(a) There is then in effect a registration statement
under the Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or

(b) (i) Such Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
requested by the Company, such Investor shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company that such disposition
will not require registration of such shares under the Act. It is agreed that
the Company will not require opinions of counsel for transactions made pursuant
to Rule 144 except in unusual circumstances.

(c) Notwithstanding the provisions of subsections (a)
and (b) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor to his or her spouse or to the siblings,
lineal descendants or ancestors of such partner or his or her spouse ("Family
Members") or to a trust established for the benefit of such Investor or Family
Member or to a charitable organization, if the transferee agrees in writing to
be subject to the terms hereof to the same extent as if he or she were an
original Investor hereunder.

3.8. Legends. It is understood that the certificates
evidencing the Series A Preferred Stock may bear one or all of the following
legends:

(a) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."

(b) Any legend required by the applicable blue sky laws.

3.9. Tax Advisors. Such Investor has reviewed with such
Investor's own tax advisors the federal, state and local tax consequences of
this investment, where applicable, and the transactions contemplated by this
Agreement. Investor is relying solely on such advisors and not on any statements
or representations of the Company or any of its agents and understands that
Investor (and not the Company) shall be responsible for Investor's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.

3.10. Investor Counsel. Such Investor acknowledges that
Investor has had the opportunity to review this Agreement, the exhibits and
the schedules attached hereto and the

<PAGE>

transactions contemplated by this Agreement with Investor's own legal counsel.
Investor is relying solely on Investor's legal counsel and not on any statements
or representations of the Company or any of the Company's agents, including
Brobeck, Phleger & Harrison LLP, for legal advice with respect to this
investment or the transactions contemplated by this Agreement.

4. Conditions of Investor's Obligations at Closing. The
obligations of each Investor under subsection 1.1(b) of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Investor who
does not consent thereto:

4.1. Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.

4.2. Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing, including, without limitation, adoption and filing with the
Secretary of State of the State of Delaware of the Restated Certificate.

4.3. Compliance Certificates. The Chief Executive Officer of
the Company shall deliver to each Investor at the Closing a certificate stating
that the conditions specified in Sections 4.1 and 4.2 have been fulfilled. The
Secretary of the Company shall deliver to each Investor at the Closing a
certificate as to the resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and the
Common Stock Purchase Agreement and each exhibit hereto and thereto to which it
is a signatory and the consummation of the transactions contemplated herein and
therein.

4.4. Qualifications. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.

4.5. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.

4.6. Opinion of Company Counsel. Each Investor shall have
received from Brobeck, Phleger & Harrison LLP, counsel for the Company, an
opinion, dated as of the Closing, in the form attached hereto as Exhibit D.

4.7. Investors' Rights Agreement. The Company and each
Investor shall have entered into the Investors' Rights Agreement in the form
attached as Exhibit C.

12
<PAGE>

4.8. Contribution Agreement. The Company and Globecomm
Systems Inc. shall have entered into the Contribution Agreement and such
agreement shall be in full force and effect.

4.9. Stockholders Agreement. The Company and each Investor
shall have entered into a Stockholders Agreement in the form attached hereto as
Exhibit E.

5. Conditions of the Company's Obligations at Closing. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
that Investor:

5.1. Representations and Warranties. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.

5.2. Payment of Purchase Price. The Investor shall have
delivered the purchase price specified in Section 1.1(b).

5.3. Qualifications. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with the lawful issuance
and sale of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.

5.4. Investors' Rights Agreement. The Company and each
Investor shall have entered into the Investors' Rights Agreement in the form
attached as Exhibit C.

5.5. Stockholders Agreement. The Company and each Investor
shall have entered into a Stockholders Agreement in the form attached hereto as
Exhibit E.

6. Miscellaneous.

6.1. Survival. The warranties, representations and covenants
of the Company and Investors contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing for a
period of one year and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Investors or the Company.

6.2. Successors and Assigns. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party, other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

6.3. Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to agreements among
New York residents entered into and to be performed entirely within New York.

13
<PAGE>

6.4. Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

6.5. Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day; (iii) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the address as set forth on the signature page hereof or at such other
address as such party may designate by ten days advance written notice to the
other parties hereto. A copy of any notice sent to the Company shall be sent to
Luci Staller Altman, Esq., Brobeck, Phleger & Harrison LLP, 1633 Broadway, 47th
Floor, New York, New York 10019. A copy of any notice sent to the Investors
shall be sent to Laura B. Sherman, Esq., Paul, Weiss, Rifkind, Wharton &
Garrison, 1615 L Street, NW Suite 1300, Washington, District of Columbia 20036.

6.6. Finder's Fee. Except as set forth on the Schedule of
Exceptions, each party represents that it neither is nor will be obligated for
any finders' fee or commission in connection with this transaction. Each
Investor agrees to indemnify and to hold harmless the Company from any liability
for any commission or compensation in the nature of a finders' fee (and the
costs and expenses of defending against such liability or asserted liability)
for which such Investor or any of its officers, partners, employees or
representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.

6.7. Expenses. Irrespective of whether the Closing is
effected, the Company and the Investors shall pay all costs and expenses that
such party incurs with respect to the negotiation, execution, delivery and
performance of this Agreement; provided that if the Closing is effected, the
Company shall pay the reasonable fees and expenses of one special counsel to the
Investors, not to exceed $25,000.00. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the Investors'
Rights Agreement, the Stockholders Agreement or the Restated Certificate, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.

6.8. Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock not previously sold to the public that is issued
or issuable upon conversion of the Series A Preferred Stock sold pursuant to
this Agreement. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each Investor, each future holder of all such
Securities and the Company.

14
<PAGE>

6.9. Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

6.10. Entire Agreement. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein.

6.11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.

NETSAT EXPRESS, INC.

By: /s/: Kenneth A. Miller
--------------------------------------------
Kenneth A. Miller, Chief Executive Officer

Address: 45 Oser Avenue
Hauppauge, NY 11788

INVESTORS:

/s/: Gary Gladstein
--------------------------------------------
George Soros
by Gary Gladstein attorney-in-fact

Address: 888 Seventh Avenue
New York, New York 10016

<PAGE>

EXHIBIT 21.1
Subsidiaries of the Registrant

NetSat Express, Inc. Delaware

Globecomm Systems Europe Limited United Kingdom

Note: Globecomm Systems Europe Limited commenced operations subsequent to
June 30, 1999.

<PAGE>

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP

We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 333-70527) pertaining to the Globecomm Systems Inc. 1997
Stock Incentive Plan and 1999 Employee Stock Purchase Plan of our report dated
August 24, 1999, except for the last paragraph of Note 16. Subsequent Events, as
to which the date is September 14, 1999, with respect to the consolidated
financial statements of Globecomm Systems Inc. included in the Annual Report
(Form 10-K) for the year ended June 30, 1999.

/s/ Ernst & Young LLP

Melville, New York
September 28, 1999

<PAGE>

EXHIBIT 27 - FINANCIAL DATA SCHEDULE

This schedule contains summary consolidated financial information extracted from
the Globecomm Systems Inc. Consolidated Financial Statements, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 11,944
<SECURITIES> 0
<RECEIVABLES> 18,147
<ALLOWANCES> 107
<INVENTORY> 6,419
<CURRENT-ASSETS> 41,203
<PP&E> 14,973
<DEPRECIATION> 2,289
<TOTAL-ASSETS> 58,010
<CURRENT-LIABILITIES> 21,753
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 36,248
<TOTAL-LIABILITY-AND-EQUITY> 58,010
<SALES> 49,058
<TOTAL-REVENUES> 49,058
<CGS> 43,516
<TOTAL-COSTS> 14,713
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> (8,192)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,192)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,192)
<EPS-BASIC> (0.90)
<EPS-DILUTED> (0.90)

</TABLE>