As filed with the Securities and Exchange Commission on May 5, 2000
Securities Act File No. 333-________
Investment Company Act File No. 811-________
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM N-2
Registration Statement Under The Securities Act of 1933 |X|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. __ |_|
and/or
Registration Statement Under The Investment Company Act of 1940 |X|
Amendment No.___ |_|
(check appropriate box or boxes)
-----------------------------
Gilat DBS, Inc.
(Exact Name of Registrant as Specified in Charter)
(Address of Principal Executive Offices)
c/o Gilat Communications, Inc.
1651 Old Meadow Road
McLean, Virginia 22102
Registrant's Telephone Number, including Area Code: (703) 749-1600
-------------------------------------
(Name and Address of Agent for Service)
Gilat Communications, Inc.
1651 Old Meadow Road
McLean, Virginia 22102
------------------------------------------------------
With copies to:
GENE KLEINHENDLER, ADV. LEONARD B. MACKEY, JR., ESQ.
Kleinhendler & Halevy, Law Offices RICHARD HOROWITZ, ESQ.
30 Kalisher Street, 6th Floor Clifford Chance Rogers & Wells LLP
Tel Aviv, Israel 65257 200 Park Avenue
Tel: (972-3) 510-7575 New York, NY 10166
Fax: (972-3) 510-7528 Tel: (212) 878-8000
Fax:212-878-8375
----------------------------
Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement.
---------------------------
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. |X|
--------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
==========================================================================================
Proposed
Proposed Maximum
Amount Offering Aggregate Amount Of
Title of Securities Being Price Offering Registration
Being Registered Registered Per Share Price(1) Fee
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock $.001 Par Value........ 23,753 Shares $4.21 $100,000 $26.40
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933.
(2) Previously paid.
-------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
===============================================================================
<PAGE>
CROSS-REFERENCE SHEET
Parts A and B of the Prospectus
<TABLE>
<CAPTION>
Items in Parts A and B of Form N-2 Location in Prospectus
---------------------------------- ----------------------
<S> <C> <C>
1. Outside Front Cover............................ Front Cover Page
2. Inside Front and Outside Back Cover Page....... Front Cover Page; Inside Front Cover Page; Outside Back
Cover Page
3. Fee Table and Synopsis......................... Prospectus Summary
4. Financial Highlights........................... Not Applicable
5. Plan of Distribution........................... Not Applicable
6. Selling Stockholders........................... Not Applicable
7. Use of Proceeds................................ Use of Proceeds
8. General Description of the Registrant.......... Cover Page; Prospectus Summary; The Company; Investment
Restrictions; Investment Objective and Policies; Risk
Factors; Description of Capital Stock
9. Management..................................... Prospectus Summary; Management of the Company; Custodian;
Transfer Agent and Registrar; Description of Capital
Stock
10. Capital Stock, Long-Term Debt, and Other
Securities.................................. Description of Capital Stock; Taxation
11. Defaults and Arrears on Senior Securities...... Not Applicable
12. Legal Proceedings.............................. Not Applicable
13. Table of Contents of the Statement of
Additional Information...................... Not Applicable
14. Cover Page..................................... Not Applicable
15. Table of Contents.............................. Not Applicable
16. General Information and History................ Prospectus Summary; The Company
17. Investment Objective and Policies.............. Prospectus Summary; Investment Objective and Policies;
Investment Restrictions
18. Management..................................... Prospectus Summary; Management of the Company
19. Control Persons and Principal Holders of
Securities.................................. Not Applicable
20. Investment Advisory and Other Services......... Prospectus Summary; Management of the Company;
Custodians; Transfer Agent and Registrar; Experts
21. Brokerage Allocation and Other Practices....... Not Applicable
22. Tax Status..................................... Taxation
23. Financial Statements........................... Financial Statement and Report of Independent Auditor
</TABLE>
- ------------
Pursuant to Part B: Statement of Additional Information, all information
required to be set forth in Part B: Statement of Additional Information has been
included in Part A: The Prospectus.
<PAGE>
PROSPECTUS
Gilat DBS, Inc.
------------------
____ Shares of Common Stock
Issuable Upon Exercise of
Rights to Subscribe for Such Shares
------------------
Gilat DBS, Inc. (the "Company") is issuing non-transferable rights to the
stockholders of Gilat Communications Ltd. (other than certain excluded
stockholders). You will receive one right for each share of common stock of
Gilat Communications Ltd. that you own on the record date, which is ______,
2000. These rights entitle you to subscribe for shares of the common stock the
Company. You may purchase one share of common stock of the Company for every one
right you receive.
The rights are not transferable and, therefore, may not be purchased or
sold. The rights will not be traded on any securities exchange or other market.
The common stock of the Company will not be traded on any securities exchange or
other market. An investment in the Company is suitable only if you have no need
for liquidity with respect to your investment and you can bear the economic risk
of your investment for an indefinite period of time, including the possible
complete loss of your investment.
This offer will expire at 5:00 P.M., New York City time, on _______, 2000
unless the Company extends the offering as described in this Prospectus. A
minimum of 20% of the rights offered must be exercised if any shares of the
Company's common stock are to be issued.
------------------
Per Share Total
--------- -----
Subscription Price........... $4.21 $____
Estimated Proceeds to Company* $____ $____
- -------------
The estimated proceeds to the Company assumes all of the shares offered are
purchased at the subscription price.
* After deduction of expenses incurred by the Company related to the offering
estimated at $350,000.
------------------
The Company is a non-diversified, closed-end management investment
company. The Company's investment objective is long-term capital appreciation.
In seeking to achieve this objective, the Company will invest all of its assets
in the ordinary shares of DBS Satellite Services (1998) Ltd. ("DBS Satellite").
DBS Satellite is an Israeli company that obtained a license in January 1999 from
the Ministry of Communications of the State of Israel to provide direct,
multi-channel pay television broadcasts via satellite in Israel. DBS Satellite
is a new company with no operating history and uncertain prospects for making
money. It is not anticipated that shares of DBS Satellite will be traded on any
securities exchange or other market for the foreseeable future. There is no
assurance that a public market will ever exist for shares of DBS Satellite. The
Company's business is the holding of DBS Satellite shares, and it does not
intend to enter into any other business. There can be no assurance that the
Company will achieve its investment objective.
The Company's investment in DBS Satellite is extremely speculative and
involves substantial risks. See the "Risk Factors" section on page ___ of this
Prospectus for a more comprehensive discussion of risks.
This Prospectus sets forth concisely the information about the Company
that a prospective investor ought to know before investing. Investors are
advised to read and retain it for future reference.
------------------
Neither the Securities and Exchange Commission (the "SEC") nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this Prospectus. Any representation to the
contrary is a criminal offense.
------------------
All references in this Prospectus to "dollars" or "$" are to United States
dollars, and all references in this Prospectus to "NIS" are to New Israeli
Shekels.
------------------
The date of this Prospectus is ________________, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY.............................................................
THE COMPANY....................................................................
THE OFFER......................................................................
USE OF PROCEEDS................................................................
RISK FACTORS...................................................................
INVESTMENT OBJECTIVE AND POLICIES..............................................
INVESTMENT RESTRICTIONS........................................................
MANAGEMENT OF THE COMPANY......................................................
COMPANY EXPENSES...............................................................
NET ASSET VALUE................................................................
TAXATION.......................................................................
DESCRIPTION OF CAPITAL STOCK...................................................
CUSTODIAN......................................................................
EXPERTS........................................................................
LEGAL MATTERS..................................................................
ADDITIONAL INFORMATION.........................................................
FINANCIAL STATEMENT AND REPORT OF INDEPENDENT AUDITOR..........................
2
<PAGE>
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PROSPECTUS SUMMARY
This summary highlights some information from this Prospectus. It may not
contain all of the information that is important to you. To understand the
offer fully, you should read the entire Prospectus carefully, including the
risk factors.
Purpose of the Offer
The Company is offering the stockholders of Gilat Communications Ltd. ("Gilat
Communications"), other than certain Excluded Stockholders (as defined below),
rights to acquire the Company's common stock for the purpose of participating in
the business of DBS Satellite Services (1998) Ltd. ("DBS Satellite"). DBS
Satellite is an Israeli company that recently obtained a license from the
Ministry of Communications (the "MOC") of the State of Israel to provide direct
television broadcasts via satellite in Israel. Gilat Communications originally
acquired the right to purchase 10% of the issued capital of DBS Satellite.
However, the MOC ruled that Gilat Communications could not own shares in DBS
Satellite, because DIC Communications & Technology Ltd. ("DIC") and PEC Israel
Economic Corporation ("PEC"), two of the principal stockholders of Gilat
Communications, also own a controlling interest in one of Israel's cable
television operators. To comply with the MOC's ruling, Gilat Communications
transferred its right to acquire such shares in DBS Satellite to Gilat DBS Ltd.
("Gilat DBS"). On February 22, 2000, Gilat DBS acquired the right to purchase an
additional 5% of the issued capital of DBS Satellite.
On May __, 2000, after certain regulatory and legal issues relating generally to
direct broadcasts via satellite in Israel were resolved by the MOC, the Company
and Gilat DBS entered into an assignment agreement, pursuant to which Gilat DBS
transferred to the Company the right to acquire up to 6.455% (the "Maximum
Company Percentage") of the issued capital of DBS Satellite. The Company
Percentage was determined based on the aggregate percentage ownership interest
in Gilat Communications held by the stockholders of Gilat Communications, other
than the Excluded Stockholders, on January 21, 1999, the date Gilat
Communications filed a Form 6-K with the SEC that consisted of a press release
announcing its general intention to spin off its interest in DBS Satellite to
stockholders.
All stockholders of Gilat Communications will have the right to participate in
this offering except for S.L.T. Holdings Ltd., Amiram Levinberg, Gideon Kaplan,
Joshua Levinberg, L.F.H. Israel Australia Investments Company Ltd., Migdal
Insurance Company Ltd., DIC and PEC (collectively, the "Excluded Stockholders").
The net proceeds of this offering (after reimbursing Gilat DBS for certain
related costs and expenses and retaining a portion of such proceeds to pay the
Company's estimated annual operating expenses for its first three fiscal years)
will be used by the Company to acquire up to 6.455% of the issued capital of DBS
Satellite. The actual percentage of the issued capital of DBS Satellite that
will be acquired by the Company (the "Actual Company Percentage") will be
determined by multiplying (x) the Maximum Company Percentage by (y) the
proportion which the actual number of shares subscribed for in this offering
bears to the total number of shares offered in this offering. Gilat DBS has
retained the right to acquire all of the ordinary shares of DBS
- --------------------------------------------------------------------------------
3
<PAGE>
- --------------------------------------------------------------------------------
Satellite that are not acquired by the Company with the net proceeds of this
offering. See "Fee Table," "The Offer" and "Use of Proceeds."
Important Terms of the Offer
Aggregate number of shares offered
Number of non-transferable rights
issued to each stockholder
One right for each whole share of Gilat Communications owned on the record date.
Subscription ratio
One share for every one right (1-for-1)
Subscription price per share
$4.21
Minimum percentage of rights that must be exercised if any shares are to be
issued
20%
Important Dates to Remember
Event Date
----- ----
Record Date........................................ _____________, 2000*
Subscription Period................................ _____________, 2000
to __________, 2000*
Expiration Date.................................... _____________, 2000*
Subscription Certificates
and Payment for Shares Due......................... _____________, 2000*
Notice of Guaranteed Delivery Due +................. _____________, 2000*
Payments and Subscription
Certificates for Guarantees of
Delivery Due....................................... _____________, 2000*
Confirmation Mailed to Participants................ _____________, 2000*
- ---------------------------------
* Unless the offer is extended.
+ A stockholder exercising rights must deliver either (i) a subscription
certificate and payment for shares or (ii) a notice of guaranteed delivery by .,
2000, unless the offer is extended.
The Company currently does not expect to pay dividends, as the Company's sole
anticipated source of revenues will be dividends which may be paid out by DBS
Satellite. DBS Satellite's dividend policy is that after it has experienced at
least eight consecutive quarters of positive free cash flow, it will make annual
or semi-annual dividend distributions to its shareholders, pro-rata to their
respective holdings, of cash available in excess of reserves necessary to fund
DBS Satellite's investments and operations for at least one year.
Method for Exercising Rights
If you wish to exercise your rights, you may do so in the following
- -------------------------------------------------------------------------------
4
<PAGE>
- -------------------------------------------------------------------------------
ways:
(1) Complete and sign the subscription certificate. Mail it in the
envelope provided or deliver the completed and signed subscription certificate
with payment in full to the Subscription Agent at the address indicated on the
subscription certificate. Your completed and signed subscription certificate and
payment must be received by 5:00 P.M., New York City time, on ________, 2000,
unless the offer is extended.
(2) Contact your broker, banker or trust company, which can arrange, on
your behalf, to guarantee delivery of payment and delivery of a properly
completed and executed subscription certificate pursuant to a notice of
guaranteed delivery by the close of business on the third business day after the
expiration date of the offer. A fee may be charged for this service. The notice
of guaranteed delivery must be received by 5:00 P.M., New York City time, on the
expiration date of the offer.
Non-Transferability of Rights
The rights are not transferable and, therefore, may not be purchased or sold.
The rights will not be traded on any securities exchange or other market.
Offering Expenses
Offering expenses are estimated at $350,000. The offering expenses will be paid
by the Company from the proceeds of the offering.
Use of Proceeds
The estimated maximum net proceeds of this offering are approximately
[$28,600,000]. This figure assumes that all rights offered are exercised, all
shares subscribed for are sold at a subscription price of $4.21 per share, and
offering expenses estimated at approximately $350,000 are paid by the Company.
The estimated minimum net proceeds of this offering are approximately
[$5,700,000]. This figure assumes that the minimum percentage (20%) of rights
offered are exercised, shares subscribed for are sold at a subscription price of
$4.21 per share, and offering expenses estimated at approximately $350,000 are
paid by the Company. The Company will invest the net proceeds of this offering
to acquire up to 6.455% of the issued capital of DBS Satellite. A portion of the
net proceeds will be used to reimburse Gilat DBS for certain related costs and
expenses, including a portion of its cost of acquiring the rights to purchase
the issued capital of DBS Satellite. In addition, a portion of the net proceeds
will be retained by the Company to pay its annual operating expenses for its
first three fiscal years, which are estimated to total in the aggregate
approximately $550,000. See "Fee Table" and "Use of Proceeds."
The Company anticipates that its investment in DBS Satellite will occur over a
12 to 18 month period based on the cash needs of DBS Satellite, with
approximately ___% of the net proceeds being invested in __ months. The proceeds
of this offering will be held in U.S. Government securities and other high
quality, short-term money market instruments until they are invested in DBS
Satellite.
The Company
The Company is a non-diversified, closed-end management investment company.
- --------------------------------------------------------------------------------
5
<PAGE>
Investment Objective and Policies
The Company's investment objective is long-term capital appreciation. In seeking
to achieve this objective, the Company will invest the net proceeds of this
offering to acquire up to 6.455% of the issued capital of DBS Satellite. The
Company's business is the holding of DBS Satellite shares, and it does Policies
not intend to enter into any other business.
Investment Management
The Company will not be managed like a typical closed-end investment company.
The Company will be internally managed by its Board of Directors and its
officers and will not have any separate investment adviser.
Company Expenses
All the expenses of the Company (including the offering expenses) will be paid
by the Company from the proceeds of this offering. A portion of the net proceeds
will be retained by the Company to pay its estimated annual operating expenses
for its first three fiscal years. See "Fee Table" and "Company Expenses."
Business of DBS Satellite
DBS Satellite is an Israeli company which recently obtained a license from the
MOC to provide direct television broadcasts via satellite in Israel. These
broadcasts, via satellite pay-television, involve transmissions to individual
consumer satellite receiving equipment, using digital compression encryption
technologies. The shareholders of DBS Satellite include leading companies in the
Israeli communications market that have pooled their collective resources and
experience for the introduction of direct television broadcasts via satellite in
Israel. For a detailed description of the business of DBS Satellite, see
"Investment Objective and Policies."
Risk Factors
The following summarizes some of the matters that you should consider before
investing in the Company in connection with this offering.
Risk Factors Relating to the Company
The Company intends to invest all of its assets in DBS Satellite, a company with
no operating history and uncertain prospects for making money. The success of
the Company therefore is dependent entirely on the results of the operations of
DBS Satellite. DBS Satellite has not yet commenced operations and therefore has
no operating history. It is therefore difficult to predict future operating
results for DBS Satellite.
The Company does not expect to have any operating income. The Company
anticipates that DBS Satellite will experience operating and net losses for the
initial few years of operations.
The Company's common stock will not be traded on any securities exchange or
other market. There is no assurance that a public market will ever exist for the
Company's common stock. The Company, in the sole discretion of the Board of
Directors, may offer to repurchase its common stock if shares of DBS Satellite
trade on a securities exchange or other market, which may or may not occur.
Thus, you may be able to sell your shares of the Company only if you can find an
investor willing to buy them.
- --------------------------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
Risk Factors Relating to DBS Satellite
DBS Satellite may be unable to compete with other companies that currently offer
multi-channel pay television services in Israel. When DBS Satellite commences
operations, it will face competition primarily from current and future cable
providers, from future DBS broadcast licensees and from regional direct-to-home
satellite broadcast providers. Some of these competitors are more experienced
and can devote more capital to these services.
DBS television broadcasting is new to the Israeli market and unless it becomes
popular DBS Satellite will not make money. To become profitable, DBS Satellite
must attain a level of market penetration which is higher than the penetration
yet achieved by any other DBS provider anywhere in the world. There is no
assurance that DBS Satellite will succeed in capturing the required market share
to achieve profitability. Furthermore, the Israeli market is small and,
therefore, DBS may not make money.
DBS Satellite operates in a highly regulated market. The Israeli government may
impose additional restrictions on DBS television broadcast services or may take
away DBS Satellite's license. The provision of DBS services in Israel is
regulated by the MOC. The MOC can restrict DBS Satellite's flexibility to
increase prices and change programming. Such restrictions could limit DBS
Satellite's plans to increase its revenues. The MOC may revoke, suspend or amend
the license granted to DBS Satellite under certain circumstances, including, but
not limited to, the failure by DBS Satellite to commence full scale operations
by July 21, 2000.
DBS Satellite relies on complex technology which may fail or be superseded, in
which case it may lose market share. DBS Satellite risks theft, loss and damage
of the satellites essential to providing broadcast services. Furthermore, if
there are delays or cost overruns in connection with the construction of the DBS
Satellite broadcasting system, DBS Satellite may not make money.
DBS Satellite may need to raise additional money to finance its operations or
other cash requirements. There is no assurance that future financing, if needed,
will be available on favorable terms, if at all. In addition, future financing
could dilute the Company's interest in DBS Satellite and could subject DBS
Satellite to restrictive covenants that may limit its ability to take certain
actions.
Israel has engaged in armed conflicts. DBS Satellite is incorporated under the
laws of the State of Israel, where it also maintains its headquarters and most
of its operations. Political, economic and military conditions in Israel will
directly influence the future operating results of DBS Satellite.
It is not anticipated that DBS Satellite's shares will be traded on any
securities exchange or other market for the foreseeable future. There is no
assurance that a public market will ever exist for shares of DBS Satellite.
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7
<PAGE>
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You should carefully consider your ability to assume the foregoing risks before
making an investment in the Company. An investment in shares of the Company is
not appropriate for all investors.
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8
<PAGE>
FEE TABLE
Annual Expenses (as a percentage of net assets):
Management Fees..................................................... 0.00%
Other Expenses(1)................................................... 3.20%
Administrative Expenses(1)............................1.28%
Professional Fees(1)................................1.05%
Directors Fees(1)...................................0.87%
Total Annual Expenses(1)............................................ 3.20%
(1) Amounts are based on estimated amounts for the Fund's current fiscal year
assuming that the minimum percentage of rights are exercised. If more than
the minimum percentage of rights are exercised, the Company's Total Annual
Expenses as a percentage of net assets would be lower.
Example:
Cumulative Expenses Paid for the
Period of:
----------------------------------
1 year 3 years 5years 10 years
Aninvestor would pay the following expenses on a $1,000 investment, assuming
a 5% annual return throughout the periods
indicated............................... $__ $__ $___ $___
The foregoing fee table and example are intended to assist investors in
understanding the costs and expenses that an investor in the Company will bear.
The tables above and the assumption in the Example of a 5% annual return
are required by Securities and Exchange Commission regulations applicable to all
investment companies. The Example should not be considered as a representation
of past or future expenses or annual rates of return. Actual expenses or annual
rates of return may be more or less than those assumed for purposes of the
Example.
9
<PAGE>
THE COMPANY
The Company, incorporated in Maryland on May 3, 2000 is a non-diversified,
closed-end management investment company registered under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Company's investment objective is
long-term capital appreciation. In seeking to achieve this objective, the
Company will invest all of its assets to purchase up to 6.455% of the issued
capital of DBS Satellite. No assurance can be given that the Company's
investment objective will be realized. Due to the substantial risks inherent in
investing in a Company that invests all of its assets in one company, the
Company should not be considered a complete investment program.
THE OFFER
Purpose of the Offer
The Company is offering the stockholders of Gilat Communications (other
than the Excluded Stockholders) rights to acquire the Company's common stock for
the purpose of participating in the business of DBS Satellite. DBS Satellite is
an Israeli company that obtained a license in January 1999 from the MOC of the
State of Israel to provide direct television broadcasts via satellite in Israel.
Gilat Communications originally acquired the right to purchase 10% of the issued
capital of DBS Satellite. However, the MOC ruled that Gilat Communications could
not own shares in DBS Satellite, because DIC and PEC, two of the principal
stockholders of Gilat Communications, also own a controlling interest in one of
Israel's cable television operators. To comply with the MOC's ruling, Gilat
Communications transferred its right to acquire such shares in DBS Satellite to
Gilat DBS. On February 22, 2000, Gilat DBS acquired the right to purchase an
additional 5% of the issued capital of DBS Satellite.
On May __, 2000, after certain regulatory and legal issues relating
generally to direct broadcasts via satellite in Israel were resolved by the MOC,
the Company and Gilat DBS entered into an assignment agreement (the "Assignment
Agreement"), pursuant to which Gilat DBS transferred to the Company the right to
acquire up to 6.455% (the "Maximum Company Percentage") of the issued capital of
DBS Satellite. The Maximum Company Percentage was determined based on the
aggregate percentage ownership interest in Gilat Communications held by
stockholders of Gilat Communications other than the Excluded Stockholders on
January 21, 1999, the date Gilat Communications filed a Form 6-K with the SEC
that consisted of a press release announcing its general intention to spin off
its interest in DBS Satellite to stockholders.
All Record Date Stockholders (as defined below) will have the right to
participate in this offering. The net proceeds of this offering (after
reimbursing Gilat DBS for certain related costs and expenses and retaining a
portion of such proceeds to pay the Company's estimated annual operating
expenses for its first three fiscal years) will be used by the Company to
acquire up to 6.455% of the issued capital of DBS Satellite. The Actual Company
Percentage will be determined by multiplying (x) the Maximum Company Percentage
by (y) the proportion which the actual number of shares subscribed for in the
Offer bears to the total number of shares offered in the Offer. See "Use of
Proceeds."
Terms of the Offer
The Company is issuing to all stockholders of record of Gilat
Communications, except the Excluded Stockholders ("Record Date Stockholders"),
as of the close of business on ____________, 2000 (the "Record Date"),
non-transferable rights ("Rights") entitling the holders thereof to subscribe
for an aggregate of ________ shares (the "Shares") of the Company's Common Stock
(the "Offer"). Each Record Date Stockholder is being issued one Right for each
whole share of Gilat Communications owned on the Record Date. Only Record Date
Stockholders will be issued Rights and will be entitled to participate in the
Offer. The Rights entitle the holders thereof to subscribe for one Share for
every one
10
<PAGE>
Right held (1-for-1) (the "Subscription"). Record Date Stockholders
who exercise their Rights will receive Shares in the same proportion to their
percentage interest in Gilat Communications, except that the share holdings in
Gilat Communications of DIC and PEC will be excluded in determining each Record
Date Stockholder's percentage interest in Gilat Communications. Record Date
Stockholders purchasing Shares in the Subscription are hereinafter referred to
as "Exercising Rights Holders."
Rights may be exercised at any time during the subscription period (the
"Subscription Period"), which commences on , 2000 and ends at 5:00 P.M., New
York City time, on _______, 2000, unless extended by the Company (the
"Expiration Date"). The Rights are evidenced by Subscription Certificates
("Subscription Certificates") that will be mailed to Record Date Stockholders.
For purposes of determining the maximum number of Shares a stockholder may
acquire pursuant to the Offer, stockholders whose shares are held of record by
[Cede & Co. ("Cede")], as nominee for [The Depository Trust Company ("DTC")], or
by any other depository or nominee will be deemed to be the holders of the
Rights that are issued to [Cede] or such other depository or nominee on their
behalf.
A minimum of 20% of the Rights must be exercised in order for any Shares
to be issued.
The Company will not offer or sell any Shares that are not subscribed for
pursuant to the Offer. Pursuant to the Assignment Agreement, Gilat DBS has
retained the right to acquire all of the ordinary shares of DBS Satellite that
are not acquired by the Company with the net proceeds of the Offer.
Subscription Price
The Subscription Price will be $4.21 per share.
Non-Transferability of Rights
The rights are not transferable and, therefore, may not be purchased or
sold. The rights will not be traded on any securities exchange or other market.
Expiration of the Offer
The Offer will expire at 5:00 P.M., New York City time, on , 2000, unless
extended by the Company. The Rights will expire on the Expiration Date and
thereafter may not be exercised. Any extension of the Offer will be followed as
promptly as practicable by announcement thereof. Such announcement will be
issued no later than 9:00 A.M., New York City time, on the next Business Day
following the previously scheduled Expiration Date. Stockholders may contact the
Company's Subscription Agent, American Stock Transfer & Trust Company, Inc. (at
the telephone number listed below) after the Expiration Date to inquire as to
whether the Offer has been extended. Without limiting the manner in which the
Company may choose to make such announcement, the Company will not, unless
otherwise required by law, have any obligation to publish, advertise or
otherwise communicate any such announcement other than by making a release to
the Dow Jones News Service or such other means of announcement as the Company
deems appropriate.
Subscription Agent
The subscription agent is American Stock Transfer & Trust Company, Inc.
(the "Subscription Agent"). The Subscription Agent will receive for its
administrative, processing, invoicing and other services as subscription agent,
a fee estimated to be approximately $10,000, which includes reimbursement for
estimated out-of-pocket expenses related to the Offer. The Subscription Agent
also is the Company's transfer agent and registrar for the Common Stock.
Questions regarding the Subscription Certificates should be directed to the
Subscription Agent, 40 Wall Street, 46th Floor, New York, New York 10005; Record
Date Stockholders also may consult their brokers or nominees.
Completed Subscription Certificates must be sent together with proper
payment of the Subscription Price for all Shares subscribed for in the
Subscription to the Subscription Agent by one of
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the methods described below. Alternatively, Notices of Guaranteed Delivery may
be sent by facsimile to 1-718-921-8336 to be received by the Subscription Agent
prior to 5:00 P.M., New York City time, on the Expiration Date. Facsimiles
should be confirmed by telephone at 1-718-921-8206. The Company will accept only
properly completed and executed Subscription Certificates actually received at
any of the addresses listed below, prior to 5:00 P.M., New York City time, on
the Expiration Date or by the close of business on the [third] Business Day
after the Expiration Date following timely receipt of a Notice of Guaranteed
Delivery. See "Payment for Shares" below.
(1) BY FIRST CLASS MAIL:
American Stock Transfer & Trust Company, Inc.
40 Wall Street, 46th Floor
New York, New York 10005
(2) BY OVERNIGHT COURIER:
American Stock Transfer & Trust Company, Inc.
40 Wall Street, 46th Floor
New York, New York 10005
(3) BY HAND:
American Stock Transfer & Trust Company, Inc.
40 Wall Street, 46th Floor
New York, New York 10005
Delivery to an address other than one of the addresses listed above will not
constitute valid delivery.
Method for Exercising Rights
Rights are evidenced by Subscription Certificates that will be mailed to
Record Date Stockholders or, if a stockholder's shares of are held by [Cede] or
any other depository or nominee on their behalf, to [Cede] or such depository or
nominee. Rights may be exercised by completing and signing the Subscription
Certificate that accompanies this Prospectus and mailing it in the envelope
provided, or otherwise delivering the completed and signed Subscription
Certificate to the Subscription Agent, together with payment in full for the
Shares of the Subscription Price by the Expiration Date. Rights also may be
exercised by contacting your broker, banker or trust company. They can arrange
on your behalf to guarantee delivery of payment and delivery of a properly
completed and executed Subscription Certificate pursuant to a Notice of
Guaranteed Delivery. The Notice of Guaranteed Delivery must be received by the
Subscription Agent by the Expiration Date as set forth below. The Subscription
Agent will not honor a Notice of Guaranteed Delivery unless a properly completed
and executed Subscription Certificate and full payment for the Shares is
received by the Subscription Agent by the close of business on __________, 2000,
the [third] Business Day after the Expiration Date. A fee may be charged for
this service. Completed Subscription Certificates must be received by the
Subscription Agent prior to 5:00 P.M., New York City time, on the Expiration
Date at one of the addresses set forth above (unless the guaranteed delivery
procedures are complied with as described below under "Payment for Shares," in
which case Notices of Guaranteed Delivery are due on the Expiration Date).
Stockholders Who Are Record Owners. Record Date Stockholders can choose
between either option to exercise their Rights as described below under "Payment
for Shares." If time is of the essence, option (2) under "Payment for Shares"
below will permit delivery of the Subscription Certificate and payment after the
Expiration Date.
Stockholders Whose Shares Are Held by a Nominee. Stockholders whose Gilat
Communications' shares are held by a nominee, such as a bank, broker or trustee,
must contact that nominee to exercise their Rights. In such case, the nominee
will complete the Subscription Certificate on behalf of such
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Stockholder and arrange for proper payment by one of the methods described below
under "Payment for Shares."
Nominees. Nominees who hold Gilat Communications' shares of for the
account of others should notify the beneficial owners of such shares as soon as
possible to ascertain such beneficial owners' intentions and to obtain
instructions with respect to the Rights. If the beneficial owner so instructs,
the nominee should complete the Subscription Certificate and submit it to the
Subscription Agent with the proper payment as described below under "Payment for
Shares."
Payment for Shares
Stockholders who wish to acquire Shares pursuant to the Offer may choose
between the following methods of payment:
(1) A Record Date Stockholder may send the Subscription Certificate
together with payment for the Shares acquired in the Subscription to the
Subscription Agent based on the Subscription Price of $ per share. A
subscription will be accepted when payment, together with a properly
completed and executed Subscription Certificate, is received by the
Subscription Agent's office at one of the addresses set forth above no
later than 5:00 P.M., New York City time, on the Expiration Date. The
Subscription Agent will deposit all checks and money orders received by it
for the purchase of Shares into a segregated interest-bearing account (the
interest from which will accrue to the benefit of the Company) pending
proration and distribution of Shares. A PAYMENT PURSUANT TO THIS METHOD
MUST BE IN U.S. DOLLARS BY MONEY ORDER OR CHECK DRAWN ON A BANK OR BRANCH
LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO GILAT DBS, INC. AND MUST
ACCOMPANY A PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION CERTIFICATE FOR
SUCH SUBSCRIPTION CERTIFICATE TO BE ACCEPTED. EXERCISE BY THIS METHOD IS
SUBJECT TO ACTUAL COLLECTION OF CHECKS BY 5:00 P.M., NEW YORK CITY TIME,
ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT
LEAST FIVE BUSINESS DAYS TO CLEAR, STOCKHOLDERS ARE STRONGLY URGED TO PAY,
OR ARRANGE FOR PAYMENT, BY MEANS OF A CERTIFIED OR CASHIER'S CHECK OR
MONEY ORDER.
(2) Alternatively, a Record Date Stockholder may acquire shares, and
a subscription will be accepted by the Subscription Agent if, prior to
5:00 P.M., New York City time, on the Expiration Date, the Subscription
Agent has received a Notice of Guaranteed Delivery by facsimile (telecopy)
or otherwise from a bank or a trust company [or a NYSE member]
guaranteeing delivery of (i) payment of the Subscription Price of $ per
share for the Shares subscribed for in the Subscription and (ii) a
properly completed and executed Subscription Certificate. The Subscription
Agent will not honor a Notice of Guaranteed Delivery unless a properly
completed and executed Subscription Certificate and full payment for the
Shares is received by the Subscription Agent by the close of business on ,
2000, the [third] Business Day after the Expiration Date.
On a date within [eight] Business Days following the Expiration Date (the
"Confirmation Date"), the Subscription Agent will send to each Exercising Rights
Holder (or, if shares are held by [Cede] or any other depository or nominee, to
[Cede] or such other depository or nominee) a confirmation showing (i) the
number of Shares purchased pursuant to the Subscription, and total purchase
price of the shares, and (ii) any additional amount payable by such Record Date
Stockholder to the Company or any excess to be refunded by the Company to such
Stockholder, in each case based on the Subscription Price. Any additional
payment required from a Record Date Stockholder must be received by the
Subscription Agent within ten business days after the Confirmation Date. Any
excess payment to be refunded by the Company to a Record Date Stockholder will
be mailed by the Subscription Agent to such Record Date
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Stockholder as promptly as possible. All payments by an Exercising Rights Holder
must be in U.S. dollars by money order or check drawn on a bank or branch
located in the United States and payable to GILAT DBS, INC.
If a Record Date Stockholder who acquires Shares pursuant to the
Subscription does not make payment of any additional amounts due by the tenth
business day after the Confirmation Date, the Company reserves the right to take
any or all of the following actions: (i) sell such subscribed and unpaid-for
shares to other Record Date Stockholders, (ii) apply any payment actually
received toward the purchase of the greatest whole number of shares that could
be acquired by such Record Date Stockholder upon the exercise of the
Subscription and/or (iii) exercise any and all other rights or remedies to which
the Company may be entitled.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE COMPANY WILL BE AT THE ELECTION AND RISK OF THE
EXERCISING RIGHTS HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO
ENSURE DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00
P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL
CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO
PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY
ORDER.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company, in its sole discretion, may waive any
defect or irregularity, or permit a defect or irregularity to be corrected,
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as the Company
determines in its sole discretion. The Subscription Agent will not be under any
duty to give notification of any defect or irregularity in connection with the
submission of Subscription Certificates or incur any liability for failure to
give such notification.
Exercising Rights Holders will have no right to rescind their subscription
after receipt of their payment for Shares by the Subscription Agent.
Delivery of Share Certificates
Certificates representing Shares acquired in the Subscription will be
mailed promptly after the expiration of the Offer once full payment for such
Shares has been received and cleared. Stockholders whose shares of Gilat
Communications are held of record by [Cede] or by any other depository or
nominee on their behalf or their broker-dealer's behalf will have any Shares
acquired in the Subscription credited to the account of [Cede] or such other
depository or nominee. Stock certificates will not be issued for Shares credited
to Plan accounts.
Federal Income Tax Consequences of the Offer
The federal income tax consequences to Record Date Stockholders with
respect to the Offer will be as follows:
1. The distribution of Rights to Record Date Stockholders will be a
taxable distribution to such Stockholders to the extent of the fair market
value of the Rights on the date of distribution. The Rights and Shares are
not transferable and will not be traded on any securities exchange or
market. Therefore, the fair market value of the Rights on the date of
distribution must be determined independently by the Record Date
Stockholders.
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2. The Record Date Stockholders will acquire a tax basis in their
Rights equal to the fair market value of the Rights.
3. No gain or loss will be recognized to the Exercising Rights
Holders until a subsequent sale or other disposition of the Shares
received upon exercise. See "Taxation" for a summary of the tax treatment
of a subsequent sale or other disposition. The Exercising Rights Holders
will acquire a tax basis in their Shares equal to the sum of the
Subscription Price paid plus the tax basis which they acquired in the
Rights upon distribution of the Rights by Gilat Communications.
4. Record Date Stockholders who fail to exercise their Rights will
recognize a capital loss to the extent of their adjusted tax basis in the
Rights.
The foregoing is a general summary of the material federal income tax
consequences of the Offer under the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and Treasury regulations presently in effect that
are generally applicable to Record Date Stockholders, and does not cover state
or local taxes. The Code and such regulations are subject to change by
legislative or administrative action, which may be retroactive. Exercising
Rights Holders should consult their tax advisers regarding specific questions as
to federal, state or local taxes. See "Taxation."
Employee Plan Considerations
Record Date Stockholders that are employee benefit plans subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (including
corporate savings and 401(k) plans), plans of self-employed individuals and
individual retirement accounts (collectively, "Retirement Plans") should be
aware that additional contributions of cash to the Retirement Plan (other than
rollover contributions or trustee-to-trustee transfers from other Retirement
Plans) in order to exercise Rights would be treated as contributions to the
Retirement Plan and, when taken together with contributions previously made, may
result in, among other things, excise taxes for excess or nondeductible
contributions. In the case of Retirement Plans qualified under Section 401(a) of
the Internal Revenue Code and certain other Retirement Plans, additional cash
contributions could cause the maximum contribution limitations of Section 415 of
the Internal Revenue Code or other qualification rules to be violated.
Retirement Plans and other tax exempt entities, including governmental
plans, also should be aware that if they borrow in order to finance their
exercise of Rights, they may become subject to the tax on unrelated business
taxable income ("UBTI") under Section 511 of the Internal Revenue Code. If any
portion of an Individual Retirement Account ("IRA") is used as security for a
loan, the portion so used will be treated as distributed to the IRA depositor.
ERISA contains fiduciary responsibility requirements, and ERISA and the
Internal Revenue Code contain prohibited transaction rules that may impact the
exercise of Rights. Due to the complexity of these rules and the penalties for
noncompliance, Retirement Plans should consult with their counsel and other
advisers regarding the consequences of their exercise of Rights under ERISA and
the Internal Revenue Code.
Important Dates to Remember
Event Date
- ----- ----
Record Date...................................... ____________, 2000
Subscription Period.............................. ____________, 2000 to
____________, 2000*
Expiration Date.................................. ____________, 2000*
Subscription Certificates and Payment for Shares Due+ ____________, 2000*
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Notice of Guaranteed Delivery Due+............... ____________, 2000*
Payments and Subscription Certificates for
Guarantees of Delivery Due....................... ____________, 2000*
Confirmation to Participants..................... ____________, 2000*
- --------------
* Unless the Offer is extended.
+ A Record Date Stockholder exercising Rights must deliver either (i) a
Subscription Certificate and payment for Shares or (ii) a Notice of
Guaranteed Delivery by __________, 2000, unless the Offer is extended.
USE OF PROCEEDS
If all the Rights are exercised at the Subscription Price of $4.21 per
Share, the net proceeds of the Offer to the Company are estimated to be
approximately $[28,600,000]. If the minimum percentage of Rights is exercised at
the Subscription Price of $4.21 per Share, the net proceeds of the Offer to the
Company are estimated to be approximately $[5,700,000]. Offering expenses
estimated at approximately $350,000 will be paid by the Company from the
proceeds of the Offering. The Company will invest the net proceeds to acquire up
to 6.455% of the issued capital of DBS Satellite. A portion of the net proceeds
will be retained by the Company to pay its annual operating expenses for its
first three fiscal years, which are estimated to total in the aggregate
approximately $550,000. A portion of the net proceeds will be used to reimburse
Gilat DBS for certain related costs and expenses incurred by Gilat DBS,
including a portion (the "Company Expense Portion") of its cost of acquiring the
rights to purchase the issued capital of DBS Satellite. The amount of the
Company Expense Portion will be calculated based on the proportion which the
number of ordinary shares of DBS Satellite actually purchased by the Company
bears to the total number of ordinary shares of DBS Satellite which Gilat DBS
was entitled to purchase prior to entering into the Assignment Agreement.
The Company anticipates that its investment in DBS Satellite will occur
over a 12 to 18 month period based on the cash needs of DBS Satellite, with
approximately ___% of the net proceeds being invested in __ months. The proceeds
of this offering will be held in U.S. Government securities and other high
quality, short-term money market instruments until they are invested in DBS
Satellite.
RISK FACTORS
An investment in the Company is subject to a number of risks and special
considerations, including the following:
Risk Factors Relating to the Company
The Company intends to invest all of its assets in DBS Satellite, a
company with no operating history and uncertain prospects for making money. The
success of the Company is therefore entirely dependent on the results of the
operations of DBS Satellite. DBS Satellite has not yet commenced operations and
therefore has no operating history. It is therefore difficult to predict future
operating results for DBS Satellite. (See "Investment Objective and Policies"
for a discussion of the business of DBS Satellite).
The Company does not expect to have any operating income. The Company
anticipates that DBS Satellite will experience operating and net losses for the
initial few years of operations. There is no certainty as to whether and when
losses may cease.
The Company will have a limited ability to affect corporate decisions of
DBS Satellite. Bezeq -- The Israel Telecommunications Corporation Ltd. ("Bezeq")
is entitled to appoint four of the eleven directors of DBS Satellite. Bezeq,
which holds 30% of the ordinary shares of DBS Satellite, also
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has the right to veto any nomination for chief executive officer and other key
management positions of DBS Satellite. Accordingly, Bezeq will have significant
influence on corporate decisions. The Company will have a relatively limited
ability to influence corporate decisions. The other ordinary shares of DBS
Satellite are owned by Leedan Investment Agencies (1994) Ltd. (12.5%), Eurocom
D.B.S. Ltd. (30%), Hapoalim Electronic Communications Ltd. (12.5%), and Gilat
DBS (8.545%--assuming full subscription of the Rights), respectively.
There is no public market for the shares of the Company. The Company's
common stock will not be traded on any securities exchange or other market.
There is no assurance that a public market will ever exist for the Company's
common stock. The Company, in the sole discretion of the Board of Directors, may
offer to repurchase its common stock if shares of DBS Satellite trade on a
securities exchange or other market, which may or may not occur. Thus, you may
be able to sell your shares of the Company only if you can find an investor
willing to buy them.
The Company does not have an established dividend policy and may not pay
dividends. Under Israeli law, Israeli companies may pay cash dividends only from
retained earnings. The sole anticipated source of revenues for the Company will
be dividends which may be paid out by DBS Satellite. DBS Satellite's dividend
policy is that after it has experienced at least eight consecutive quarters of
positive free cash flow, DBS Satellite will make annual or semi-annual dividend
distributions to its shareholders, pro-rata to their respective holdings, of
cash available in excess of reserves necessary to Company DBS Satellite's
investments and operations for at least one year. DBS Satellite's dividend
policy is subject to shareholder approval.
The Company is a registered investment company. The Company is subject to
the provisions of the 1940 Act and the rules promulgated thereunder, which may
restrict or otherwise limit the ability of the Company to engage in certain
transactions, including, but not limited to, transactions with an affiliated
person.
The Company is a "non-diversified" investment company. The classification
of the Company as a "non-diversified" investment company means that the
percentage of the Company's assets that may be invested in the securities of a
single issuer is not limited by the 1940 Act. A "diversified" investment company
is required by the 1940 Act generally, with respect to 75% of its total assets,
to invest not more than 5% of such assets in the securities of a single issuer.
Since all of the Company's assets will be invested in the securities of one
issuer, the net asset value of the Company will be more sensitive to changes in
the market value of a single issuer than other investment companies.
Risk Factors Relating to DBS Satellite
DBS Satellite may be unable to compete with other companies that currently
offer multi-channel pay television services in Israel. Television broadcasting
in Israel is highly competitive. When DBS Satellite commences operations, it
will face competition primarily from current and future cable providers, from
future DBS broadcast licensees and from regional direct-to-home ("DTH")
satellite broadcast providers. Some of these competitors have more experience
than DBS Satellite in providing television broadcast services. Some can also
devote more capital to these services than DBS Satellite. In Israel, cable
service has penetrated the market to a level of more than 68%, which is one of
the highest penetrations anywhere in the world, and comparable to the rate of
penetration in the U.S.
In addition, television programming may in the future be delivered to
customers in Israel by other means, such as fixed stationary satellite services,
wireless cable, local multipoint distribution system, which is a form of
terrestrially distributed wireless broadband communication technology using the
Ka frequency spectrum for the distribution of voice, video and data, the use of
fiber optic cable and digital compression of television signals over existing
telephone lines and the use of asynchronous digital services lines and
asynchronous transfer mode technologies, which are two advanced transmission
technologies using hardware and software on existing telephone lines giving them
a higher capacity to
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carry video signals on fixed line platforms for video and video on demand
deliveries to customers. Competition from any of these could result in pricing
pressure or loss of market share and adversely effect DBS Satellite's revenues
and profitability.
DBS television broadcasting is new to the Israeli market and unless it
becomes popular DBS Satellite will not make money. To become profitable, DBS
Satellite must attain a level of market penetration which is higher than the
penetration yet achieved by any other DBS provider anywhere in the world. There
is no certainty that that DBS Satellite will succeed in capturing the required
market share to achieve profitability. If DBS Satellite fails to develop and
execute a successful business strategy or achieve customer acceptance, or
encounters unforeseen circumstances, the operating results of DBS Satellite will
be adversely affected.
Furthermore, DBS television broadcasting is a relatively new industry
worldwide. DBS broadcasting has not yet proven to be economically viable in the
United States where it was introduced in 1994. Presently, DBS providers in the
United States have a collective subscriber base of over twelve million
households, representing approximately 13% of the potential market.
Nevertheless, all of the DBS providers in the United States report that they are
operating at a deficit. Even if DBS Satellite achieves wide customer acceptance,
There is no certainty that cannot assure you that it will attain profitability.
The Israeli DBS market is small, and therefore DBS Satellite may not make
money. DBS Satellite's future revenues are expected to derive primarily from DBS
television broadcasts in the State of Israel. Israel has approximately 1,700,000
households and the relatively small size of the Israeli market will limit the
potential profitability of DBS Satellite.
If DBS Satellite does not obtain adequate programming, it will not obtain
enough market share to make money. DBS Satellite's success depends on, among
other things, obtaining or developing affordable and popular programming for its
subscribers. DBS Satellite may not be able to obtain or develop enough
competitive programming to meet its needs. This would reduce demand for DBS
Satellite's broadcast services, limiting their revenues. DBS Satellite relies on
other programming suppliers for most of its programming. DBS Satellite may not
be able to gain access to Israel cable television programming which is currently
among the most popular programming. Furthermore, the license granted to DBS
Satellite requires minimum amounts of Hebrew language programming. However,
there is only a limited amount of Hebrew language programming available. DBS
Satellite must, therefore, repackage other programming into Hebrew. DBS
Satellite also plans to commit substantial resources to obtaining and developing
new programming. DBS Satellite may not, however, successfully implement its
programming plans.
DBS Satellite operates in a highly regulated market. The Israeli
government may impose additional restrictions on its ability to offer DBS
television broadcast services or may take away its license. The provision of DBS
services in Israel is regulated by the MOC. The MOC can restrict DBS Satellite's
flexibility to increase prices and change programming. Such restrictions could
limit DBS Satellite's plans to increase its revenues. The MOC may revoke,
suspend or amend the license granted to DBS Satellite under certain
circumstances, including, but not limited to, the failure by DBS Satellite to
commence full scale operations by July 21, 2000. In such event the business,
financial condition and results of operations of DBS Satellite would be
adversely affected. Furthermore, the business prospects of DBS Satellite could
be adversely affected by the adoption of new laws, policies or regulations, or
changes in the interpretation or application of existing laws, policies and
regulations, that modify the present regulatory environment.
The license granted to DBS Satellite is presently limited to a right to
provide DBS television broadcast services. To become profitable, DBS Satellite
may need to more efficiently utilize its DBS infrastructure by offering
additional services such as distance learning, internet access and other
interactive services such as banking, security and commerce. DBS Satellite would
require a modification of the existing license from the MOC to provide such
additional services. A request has been made by
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DBS Satellite to provide Internet access services. If DBS Satellite does not
receive such license modification, or request or receive any additional license
modification, or fails to successfully integrate the additional services into
its television broadcast business, DBS Satellite's operating results will be
negatively affected.
If there are delays or cost overruns in connection with the construction
of the DBS Satellite broadcasting system, DBS Satellite may not make money. DBS
Satellite will incur significant expenditures in completing the construction and
deployment of its system for providing DBS television broadcasts and in
beginning services. DBS Satellite may not be able to obtain sufficient financing
on favorable terms when needed to successfully launch its DBS services and
thereafter to provide planned services. Delays, cost overruns and increased
costs associated with any shortfall in estimated levels of operating cash flows
may reduce profitability and increase the need for additional funds. In such
case, DBS Satellite may need to obtain additional financing. There is no
certainty that such financing will be available or that, if available, it will
be available on terms favorable to DBS Satellite.
DBS Satellite relies on complex technology which may fail or be
superseded, in which case it may lose market share. DBS Satellite's DBS system
will be highly complex and will require the integration of technologically
diverse and advanced components. New applications and adaptations of existing
technology and significant software are integral to the DBS System. Unforeseen
problems in the integration of the DBS System may occur that could adversely
affect performance, cost or timely deployment and operation of the DBS System.
Technology in the satellite television industry is subject to rapid change.
Keeping pace with such technological developments can result in significant
additional expense which would adversely affect profitability.
The Company anticipates that a significant number of DBS subscribers will
reside in apartment buildings. DBS installation requirements for an apartment
building are significantly more complex than for a single residence. If DBS
Satellite fails to achieve satisfactory and cost effective technical solutions
for this problem, its ability to market its products and achieve a strong
subscriber base will be harmed.
DBS Satellite risks satellite loss or reduced performance, in which case
it may lose revenues. DBS Satellite will use satellite transmissions to provide
broadcast services for the DBS System. Satellites have a limited useful life and
are subject to risks, including damage that impairs or shortens their commercial
performance. Factors which may affect the useful life of a satellite include the
quality of its construction, the durability of its component parts and the
precision of launch and orbital positioning. The minimum design life of
satellites is typically 6-12 years. The loss, damage or destruction of the
satellite utilized by DBS Satellite as a result of military actions or acts of
war, anti-satellite devices, electrostatic storm or collision with space debris
would have an adverse affect on DBS Satellite. DBS Satellite does not carry
insurance against such risks. DBS Satellite intends to evaluate the possibility
of securing insurance covering risks of loss of revenue due to disruptions in
service as a result of a fault in the satellite. The Company cannot predict
however, the specific longevity of the satellite to be used by DBS Satellite.
DBS Satellite's operating results may be adversely affected in the event the
useful life of such satellite is significantly shorter than 10 years. In the
event that the satellite to be used by DBS Satellite ceases to operate, DBS
Satellite may face difficulties in finding alternative satellite transponder
capacity for DBS Satellite's services within a short time period. This could
reduce the availability of DBS Satellite's offered programming, harm its
subscriber base and significantly increase the costs to DBS Satellite for
providing its satellite-based services.
DBS Satellite risks loss from theft. The delivery of subscription
programming requires the use of encryption technology to help prevent signal
theft or "piracy." DBS Satellite has entered into a letter of intent with a
vendor to provide an encryption and conditional access system. There can be no
assurance however, that the encryption technology to be utilized by DBS
Satellite will be totally effective. If DBS Satellite's encryption technology is
compromised in a manner which is not promptly corrected, DBS Satellite's
revenues and its ability to contract for programming would be adversely
affected.
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DBS Satellite may need to raise additional money to finance its operations
or other cash requirements. There is no assurance that future financing, if
needed, will be available on favorable terms, if at all. In addition, future
financing could dilute the Company's interest in DBS Satellite and could subject
DBS Satellite to restrictive covenants that may limit its ability to take
certain actions.
Exercise of the guaranty given to MOC may result in a financial obligation
of DBS Satellite. DBS Satellite delivered to the State of Israel a bank
guarantee for NIS 30,000,000 (approximately $7.35), linked to the Israeli
Consumer Price Index, to secure the performance of all terms and conditions of
the license granted to DBS Satellite to provide DBS services, which, if
exercised, may result in a significant financial obligation of DBS Satellite.
If DBS Satellite shareholders are overly competitive among themselves
about providing services to DBS Satellite, DBS Satellite may not be profitable.
DBS Satellite has granted to each of its existing shareholders a right of first
offer to provide services to DBS Satellite in areas in which such shareholder
has relevant experience and expertise. The shareholders of DBS Satellite have
overlapping capabilities and occasionally compete with each other in some of
these areas. For DBS Satellite to succeed, its shareholders must successfully
cooperate with each other to integrate their respective contributions towards
achieving the goals of DBS Satellite. If the shareholders of DBS Satellite do
not effectively coordinate their efforts or if any shareholder acts in a manner
contrary to the interests of DBS Satellite, the operating results of DBS
Satellite may be adversely affected.
The High Court of Justice of Israel may decide that the license to offer
DBS services is void. Certain Israeli cable television operators filed a
petition with the High Court of Justice of Israel requesting a determination
that the license that was given to DBS Satellite is void because an unlawful and
discriminative advantage would result to Bezeq, a principal shareholder in DBS
Satellite. Alternatively, the cable operators claimed that the license should be
suspended until one of the following changes in the market place occurs. First,
until the cable operators are allowed to compete with Bezeq in the
communications industry in Israel. Second, until Bezeq ceases to be a public
company. Third, until regulations making structural, managerial and fiscal
distinctions between Bezeq and DBS operators are adopted. In addition, the cable
operators requested that the High Court of Justice allow them to provide tiered
pricing and services to their customers, a service which DBS Satellite is
allowed to provide to its customers in order to allow it to penetrate the
television broadcasting market. The decision of the High Court of Justice of
Israel has not yet been given. If the cable operators are successful in their
petitions, it may have an adverse impact on the success of DBS Satellite.
If cable operators obtain permission to offer additional communications
services, DBS Satellite will have additional competition. The cable operators
have been negotiating a settlement of their dispute relating to their requests
to provide additional communications services, to offer tiered pricing and
services, and to programming content issues. The latest arrangement reached
would allow the cable operators to offer tiered pricing and services only after
DBS Satellite has been operating for at least nine months. This settlement has
not yet received approval of the Restrictive Trade Practices Tribunal and,
therefore, is not yet deemed to be binding as a court judgment. If the
settlement is modified, the cable operators would present more competition to
DBS Satellite and this could adversely affect the success of DBS Satellite.
If antennae installation is prohibited because of environmental concerns
or construction licensing restrictions, DBS Satellite will not be able to
provide services and will not make money. DBS broadcasting requires the
installation of receiving antennae in residential areas. Antennae installations
in other countries have encountered opposition due to concerns about the
environment. Antennae installations in Israel require building and construction
licenses from local planning authorities. Opposition to the installation of
receiving antennae in Israel may disrupt DBS Satellite's ability to provide DBS
services and negatively affect operating results.
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Due to currency fluctuations, DBS Satellite may not have enough NIS to pay
its obligations. DBS Satellite will incur a substantial portion of its expenses
outside Israel in dollars and other foreign currencies. However, most of DBS
Satellite's revenues will be in NIS. Consequently, if the NIS is devalued in
relation to the dollar, and other foreign currencies, DBS Satellite will use a
larger portion of its NIS revenues to cover its expenses denominated in foreign
currencies, which would adversely affect profitability.
Israel has engaged in armed conflicts. DBS Satellite is incorporated under
the laws of the State of Israel, where it also maintains its headquarters and
most of its operations. Political, economic and military conditions in Israel
will directly influence the future operating results of DBS Satellite. Since the
establishment of the State of Israel in 1948, Israel and its neighboring Arab
countries have engaged in a number of armed conflicts. A state of hostility,
varying in degree and intensity, has led to security and economic problems for
Israel. Despite the progress towards peace between Israel and its neighboring
Arab countries and the Palestinians, major hostilities may revive. Such
hostilities may hinder Israel's international trade and lead to economic
downturn. This, in turn, could have a material adverse effect on DBS Satellite's
operations and business.
Generally, male adult citizens and permanent residents of Israel under the
age of 51 are obligated to perform 14 to 31 days of military reserve duty
annually, depending on their age. Additionally, these residents may be called to
active duty at any time under emergency circumstances. The full impact on DBS
Satellite's workforce or business if some of DBS Satellite's officers and
employees are called upon to perform military service is difficult to predict.
There is no public market for shares of DBS Satellite. It is not
anticipated that DBS Satellite's shares will be traded on any securities
exchange or other market for the foreseeable future. There is no assurance that
a public market will ever exist for shares of DBS Satellite.
Forward-looking statements. Some of the information in this prospectus may
contain forward-looking statements. Such statements can be identified by the use
of forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate," "continue" or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other "forward-looking" information. When considering such
forward-looking statements, you should keep in mind the risk factors and other
cautionary statements in this prospectus. The risk factors noted in this section
and other factors noted throughout this prospectus, including certain risks and
uncertainties, could cause the actual results of the Company or DBS Satellite to
differ materially from those contained in any forward-looking statement.
You should carefully consider your ability to assume the foregoing risks
before making an investment in the Company. An investment in shares of the
Company is not appropriate for all investors.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Company is long-term capital appreciation.
In seeking to achieve this objective, the Company will invest the net proceeds
of the Offer (after reimbursing Gilat DBS for certain related costs and expenses
and retaining a portion of such proceeds to pay the Company's estimated annual
operating expenses for its first three fiscal years) to acquire up to 6.455% of
the issued capital of DBS Satellite. The business of the Company is the holding
of DBS Satellite shares, and it does not intend to enter into any other
business. The Company does not expect that its holding in DBS Satellite will
afford it representation on the Board of Directors of DBS Satellite or otherwise
give it an ability to exercise influence or control over DBS Satellite. To the
extent, however, that the Company does obtain such Board representation or
ability to exercise influence or control over DBS Satellite, the Company intends
to use such representation or ability to take such actions in respect of DBS
Satellite as
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the management of the Company believes is in the best interests of
the Company and its stockholders. A discussion of the business of DBS Satellite
follows.
Overview
DBS Satellite is an Israeli company which obtained a license in January
1999 from the MOC to provide direct television broadcasts via satellite ("DBS
services") in Israel. DBS services entail broadcasting, via satellite
pay-television, to individual consumer satellite receiving equipment, using
digital compression encryption technologies.
The shareholders of DBS Satellite include leading companies in the Israeli
communications market who have pooled their collective resources and experience
for the introduction of DBS services in Israel. The Company anticipates that DBS
Satellite will establish an extensive integrated communication infrastructure
which can be utilized in providing an array of additional services, such as
distance learning, internet access and other interactive services such as
banking, security and commerce.
The Company believes that DBS broadcasts enjoy the following competitive
strengths:
Tiered Programming. DBS Satellite will offer tiered programming to its
subscribers. This means that customers may subscribe to channels and to groups
of channels which are more closely tailored to their specific tastes and budgets
than those offered by the Israeli cable television providers. This option
reduces the need to pay for unwanted programming. In contrast, the cable
television providers currently only offer their subscribers a single programming
package on a flat, take-it or leave-it, fee basis. The cable operators are
negotiating with MOC and have petitioned the High Court of Justice in order to
allow them to also offer tiered programming. Most cable providers would need to
upgrade their equipment to include digital platforms in order to provide tiered
programming, in the event their license should be modified to allow them to
provide tiered programming. See "Risk Factors - Risk Factors Relating to DBS
Satellite."
Superior video and audio quality. DBS broadcasts are digital and offer superior
picture and audio quality to cable television signals which currently are
transmitted as analog broadcast signals over coaxial cables.
Regional access and rural area coverage. DBS broadcasts require limited ground
infrastructure as opposed to the extensive ground infrastructure required for
cable. Therefore, DBS broadcast more readily allows access regionally and
particularly in rural areas where cable infrastructure are lacking.
Additional pay services. DBS Satellite may offer additional services such as
pay-per-view and interactive programs, which customers may opt to have and pay
for on an as-used basis.
The Market
The Market for DBS in General. In 1982, the Federal Communications Commission of
the United States (the "FCC") allocated a spectrum within the Ku-band for DBS
services. Since its introduction in the United States in 1994, DBS broadcasting
has made significant inroads in the television broadcast services industry. DBS
providers in the United States have a collective subscriber base of over twelve
million households, representing approximately 13% of the potential market. The
principal factors behind the success in the United States are: (i) increased
access to multichannel television not previously afforded by the cable industry,
(ii) weak or non-existent cable infrastructure in rural and other areas and
(iii) expanded programming offerings, especially in sports, pay per view movies
and pay movie channels. The expanded programming offerings enable enhanced niche
programming (such as foreign language or special interests) and enhanced tiering
and packaging of programming to more closely reflect subscribers' interests. In
addition, DBS broadcasts offer picture quality which is superior to off air and
cable television. While DBS has made progress in obtaining market share, DBS is,
and is expected to remain, a
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distant second to the cable television operators in terms of United States
market share. DBS operators in Europe and Japan have successfully penetrated
their respective markets notwithstanding the use of satellite dishes of 24
inches or larger. DBS Satellite will use 24 inch satellite dishes for private
homes and 39 inch satellite dishes for apartment buildings. About two million
DBS receiver systems have been sold in Europe in the past several years.
The Market for DBS in Israel. The potential DBS market in Israel includes the
approximately 1.6 million households with television sets. Based upon recent
statistics compiled by MOC, approximately 1.1 million of the Israeli households
with television sets currently pay for programming.
The Company anticipates that DBS Satellite will be able to successfully
penetrate its target market by offering attractively priced high quality
programming which can be tailored to the tastes of subscribers. While the DBS
industry in the United States has experienced tremendous consumer acceptance
during its initial years of operation, a costly and extensive marketing effort
will be required to attain high levels of consumer acceptance in Israel.
Strategy
The Company believes that many of the factors behind the growth of the DBS
industry in the United States apply to the Israeli market as well. In addition,
the Company believes that the key elements of DBS Satellite's strategy are to:
Attract cable subscribers who are dissatisfied with their current programming
choices, service or pricing. A sizable number of current cable subscribers are
dissatisfied with the quality and cost of service provided by CATV operators in
Israel and the basic "all or nothing" programming package that they offer. These
dissatisfied cable subscribers represent a significant percentage of cable
subscribers in Israel and will potentially be attracted to DBS service.
Benefit from increased distribution of television programming. The television
market in Israel is experiencing significant growth in terms of the number of
programming providers (e.g., new ethnic, news or music channels). The Company
believes that Israeli television viewers will continue to want increasingly
varied programming.
Benefit from continuing technological advancements. Recent technological
advancements, such as the advent of high powered satellites (which made possible
the reduction in the size of satellite dishes) and the advent of the development
of digital compression technology, have increased signal transmission capacity
and lowered costs.
Offer service to areas without cable infrastructure. There are rural areas in
Israel with no cable television availability. The Company believes that
households in rural areas of Israel will find its satellite television products
and services attractive.
Penetrate ethnic market niches created by the diversity of the Israeli
population. The population of the State of Israel is comprised of a wide range
of ethnic and cultural groups, many of which have specific tastes and habits.
DBS broadcasting may be tailored to cater to the needs of these specific groups,
including foreign language and cultural programming, at a reasonable cost. The
Company believes that DBS Satellite can achieve a significant share of this
special market.
Offer advanced services not available on other infrastructure. DBS broadcasting
enables the provision of other services, such as the conduct of interactive
distance learning and provision of banking and security services, which may not
be obtained through other broadcast systems.
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In addition, the demand for television programming in industrialized
countries throughout the world, such as Germany and Great Britain, has recently
begun to approach the levels known historically in the United States. The
Company believes that Israel is part of this trend. DBS broadcasting is an
economical way to provide a wide range of programming to consumers in rural
areas.
Industry Overview
C-Band/DTH Industry. The direct-to-home satellite television ("DTH") industry
provides satellite transmitted television programming via analog signal at the
C-band radio frequency. DTH broadcasting typically requires dish sizes ranging
from 6 to 12 feet in diameter, depending upon geographic location and the number
of televisions per dish. The DTH industry also provides related products and
services, including hardware and software for the reception and decryption of
satellite television programming. Since the late 1970's, the availability of
satellite-delivered television programming has spurred the growth of the DTH
industry in the United States, particularly in rural areas. DTH service is not
lawfully available in Israel.
Direct Broadcast Satellites. The DBS television industry provides direct
broadcasts of television programming transmitted via a digital signal on the
Ku-band radio frequency, and related products and services. Transmissions at
Ku-band frequency enables the use of a receiving dish with a diameter as small
as 18 inches, in contrast to the 6 to 12 foot receivers required for C-band
transmissions. The signals are received on satellite components known as
transponders which receive signals from an uplink facility and retransmit them
back to earth for reception by appropriate satellite antennae. The advent of
digital compression technology permits the broadcast of up to ten channels of
programming per transponder.
The concept of DBS was introduced in 1982, however, it did not become
commercially viable until recently because (i) available satellite technology
did not allow for the power required to transmit to small dishes, (ii) digital
compression technology had not been adequately developed and (iii) prior to the
development of the sophisticated encryption technology in use today, piracy of
pay television signals was widespread. Today, DBS provides a cost efficient
point to multipoint transport of video, audio and data services.
DBS Ku-band frequency has overtaken the C-band technology worldwide as the
preferred delivery frequency of the multi-channel, satellite-delivered pay
television industry. This is primarily due to (i) the smaller antenna size, (ii)
the use of digital signal, (iii) more secure encryption and conditional access
systems and (iv) greater availability of programming as the industry becomes
more standardized worldwide. Currently, there are approximately five DBS
subscribers for each DTH subscriber in the United States.
Competition
Television broadcasting in Israel is highly competitive. When DBS
Satellite commences operations, it will face competition primarily from cable
television providers, from regional DTH broadcast providers and, in the future,
from fiber optic technologies providers. In Israel, off-air television is
currently broadcast on UHF and VHF bands which are received weakly in some areas
which results in reduced reception.
Cable Television. The cable television industry in Israel currently serves about
1.1 million subscribers, representing over 68% of the households that are passed
by cable. The three Israeli cable television providers Matav - Cable Systems
Media Ltd., Tevel Israel International Communications Ltd. and Golden Channels
and Co., began broadcasting in Israel in 1990 under franchise from the MOC. Each
of the cable television providers owns the exclusive right to provide cable
television broadcasts in their respective geographic region in Israel.
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The cable television providers cooperate with each other extensively. Such
cooperation includes the operation of physically interconnected broadcasting
systems, joint lobbying activities on behalf of the cable industry and the joint
acquisition of programming. I.C.P. - Israel Cable Programming Company Ltd.,
("ICP"), a jointly held subsidiary of the cable television providers,
coordinates the acquisition and packaging of programming content for the cable
television providers, thereby enhancing their collective program purchasing
power, as well as product awareness among consumers.
As established providers of programming, the cable television providers
are formidable competitors for many programming services, offering a single
package of approximately 40 channels at an average monthly subscription price of
approximately $40. One of the cable television providers also offers
pay-per-view movies on four different channels and another cable provider has
received MOC approval to do so, but has not yet begun to offer such services.
The programming offerings of the cable television providers include three
Israeli free to air channels which are terrestrially broadcast with signals
which can also be received "off-air" by simple rooftop or built-in television
antennae, and international channels such as CNN, MTV and Eurosport. In
addition, the cable television providers have created five Hebrew language
channels in the following programming categories: family programs, sports,
movies, children's programming and culture and science. These five channels,
together with Channel 2, one of the Israeli off-air channels, are the most
popular channels on Israeli television. Leading programming content providers
have entered agreements to provide programming to the cable television providers
and Channel 2.
Cable television providers further benefit from regulations which enabled
ICP to maintain control of the Movie and Family Channels and exclusive broadcast
rights to the programming on Children's Channel, Cultural Channel and Sport
Channel. These channels are simultaneously broadcast by all three cable
television providers and have effectively become the nationally "branded"
channels of the cable industry. As a result of a settlement agreement, which has
not yet received court approval from the Restrictive Trade Practices Tribunal,
ICP will be allowed to continue as a monopoly but it must make available to DBS
Satellite its programming. DBS Satellite will, for its part, pay significant
amounts each year for original productions of programs, including $7.5 million
in 2000 and $10 million in 2001.
DBS Satellite's ability to effectively compete with the cable television
providers is dependent on its ability to obtain a wide variety of programming at
reasonable costs. DBS Satellite has not yet established a subscriber base and
will therefore be at a relative disadvantage to cable television providers in
acquiring programming rights at reasonable costs. Furthermore, if the settlement
with ICP is not approved by the Restriction Trade Practices or is withdrawn by
ICP, DBS Satellite may not have access to popular programming to which cable
providers currently have exclusive rights.
Programming for DBS is generally available from studios and programmers on
the same terms as are offered to cable operators except with respect to these
programming to which the cable operators have acquired exclusive broadcast
rights. The Company believes that pay-per-view programming will also be
available to DBS providers on substantially the same terms as is available to
cable operators.
Cable television signals currently are transmitted as analog broadcast
signals over coaxial cables. DBS broadcasts are digital and offer superior
picture and audio quality. However, some of the cable television providers have
upgraded portions of their broadcast infrastructure to incorporate fiber optics
and the Company believes that all of the cable television providers are
implementing upgrades to their systems which will enable broadcasts via a
digital signal allowing each subscriber's television to be addressed
individually.
At present, cable television providers are restricted by the terms of
their respective licenses from providing internet or other interactive services,
except for some pilot transmissions which are limited to a small number of
households. However, the Company expects that the MOC will permit cable
television providers to provide these additional services, with the introduction
of DBS broadcasting to Israel and the opening of the domestic telecommunications
market to competition.
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The initial, up-front costs to consumers are a potential disadvantage of a
DBS system. In the United States, the retail cost of a DBS receiver system is
approximately $200 and more. The cable television providers only require a
minimal refunded deposit for their set top boxes. As has occurred in the US
market, it might be expected that DBS Satellite may mitigate this disadvantage
by offering creative finance options structured to result in minimum monthly
payments which are competitive with cable rates.
Other DBS Operators. The Cable and Satellite Broadcasting Council ("CSB
Council"), an authority established by the Israeli government under the
Telecommunications Law, has approved the grant of a DBS television broadcasting
license to IDBC, a company controlled by a group of prominent businessmen
including Eric Benhamou, the president and chief executive officer of 3Com
Corporation. Based on newspaper reports, Gilat DBS believes that IDBC entered
into agreements regarding equipment, services and content with Canal Plus, a
leading international provider of DBS broadcasts and services. Gilat DBS
believes that IDBC has not fulfilled the requirements of the CSB Council for the
license, such as depositing a guarantee with the MOC, and that the approval
granted may have lapsed. It is theoretically possible that the CSB Council could
grant an unlimited number of DBS television broadcasting licenses to applicants,
though Gilat DBS is not aware of any other applicants. If IDBC or any other
entity commences DBS broadcasting in Israel, DBS Satellite would be subject to
pricing pressure and loss of market share which would adversely affect DBS
Satellite's revenues and profitability.
Unlicensed Regional DTH Broadcast Providers. Three experienced regional DTH
broadcast service providers are currently broadcasting regionally with reception
picked up in Israel and their receiving equipment can be found in Israel,
primarily in rural areas. The DTH providers are operating without a license and
do not pay license or royalty fees to the MOC. These DTH broadcast providers may
be able to attract subscribers who might otherwise have become subscribers of
DBS Satellite.
In addition, television programming may in the future be delivered to
customers in Israel by other means, such as the use of fiber optic cable and
digital compression over existing telephone lines and the use of asynchronous
digital service lines and asynchronous transfer mode technologies as fixed line
platforms for video and video on demand deliveries to customers. Authorization
by the MOC of these or any other technologies for multichannel television
broadcasts may further increase competition.
The DBS System
Operation of the DBS System. DBS Satellite's DBS system will integrate a number
of technological advances, including digital compression video programming. The
Company believes that the combination of these elements in the DBS system will
provide consumers with affordable access to a broad spectrum of entertainment
and informational products, home shopping and similar services, educational
services and databases. Timely delivery of product and equipment under these
agreements described which form the basis for operations is critical to the
successful commencement of operations of the DBS System.
The Satellite. On April 14, 1999, DBS Satellite entered into an agreement with a
satellite owner, Spacecom Satellite Communication Services Ltd., the terms of
which guarantee the availability of 3.5 hi-powered Ku band transponders (and an
option for an additional transponder) for uplink transmission and downlink
reception transmissions which are sufficiently centered on Israel to enable the
use of small receiving disk antennae of the kind used for DBS services. The
agreement addresses the respective liabilities and insurance obligations of the
parties and sets the payment terms.
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Other Components.
Uplink Facility. The first step in the delivery of satellite programming to the
customer is the uplink of that programming to the satellite. Uplink is the
process by which signals are received from either the programming originator or
distributor and transmitted to a satellite. To uplink programming to the
satellite, DBS Satellite has constructed in Kfar Saba, Israel an uplink
facility. The uplink facility includes fiber optic lines and downlink antennas
to receive programming and other data at the facility, as well as an uplink
antenna of 9.3 meters (and a backup antenna of 4.8 meters), RF (transmission)
equipment and other equipment necessary for encoding, compression, conditional
access, the subscriber management system interface, encryption, modulation and
demodulation of the programming and data signals. The actual compression and
encryption of the programming signals will also be done at this facility.
Additionally, playback and audio centers and certain studio production
capabilities are found in the uplink facilities in order to enhance broadcast
offerings. The uplink facility equipment includes some redundancy which ensures
that the quality of broadcasting will not be adversely affected by inclement
weather.
Compression and Encryption System. On April 4, 1999, DBS Satellite entered into
an agreement with NDS Ltd. to provide the necessary equipment to digitize,
compress and encrypt the analog signals transmitted by programmers to DBS
Satellite's uplink facility. Digitized signals are then multiplexed and
modulated into a digital video broadcast for transmission to the satellite. Once
a customer has ordered programming from DBS Satellite, an authorization code
will be transmitted to such customer's satellite receiver, enabling the customer
to receive the programming.
Access Control System. On April 4, 1999, DBS Satellite contracted with NDS Ltd.
to provide access control systems, as well as smart cards to be used with each
DBS satellite receiver system which are necessary to receive the authorization
code to enable reception. The access control system is central to the security
of the network to prevent unauthorized viewing of programming. In the event the
equipment or access control systems fail to perform as intended, DBS Satellite's
plan of operations would be adversely affected. Further, the receiver has been
designed with the flexibility to modify the access control system in the event
of a security breach by either software download or "smart card" replacement.
However, the technology is still relatively new and success is not an absolute
certainty. In the event that such systems or products fail to operate as
intended at commencement of service or at any time thereafter, DBS Satellite's
business would be adversely affected if the vendors could not rapidly implement
corrective measures.
DBS Satellite Receiver Systems. A typical DBS satellite receiver system includes
an approximately 24 inch [60-100 centimeters] satellite receiver dish, including
a low noise block, an integrated receiver decoder ("IRD"), which processes and
descrambles these signals for television viewing, a remote control and related
components. Each household requires one satellite dish regardless of the number
of televisions which are in the household; however, each television in the
household which is used to view different channels requires a separate IRD. The
software in the IRD units may be changed by sending a revised version of the
software via satellite. A smart card interface, providing a simple and effective
method to authorize and deauthorize subscription programming, is also built into
the IRD unit. A "smart card" is comprised of microchips placed on a credit
card-sized access card. A smart card facilitates identification of the
subscriber's specific IRD and enables that IRD to receive specific channels,
allowing the data to be decrypted and passed on for audio and video compression.
After decompression, the digital audio and video are reconstructed into analog
format for display on a standard television set or on a personal computer.
Subscriber Management. On April 4, 1999, DBS Satellite entered into an agreement
with NDS Ltd. to acquire a subscriber management system. The system coordinates
and facilitates billing, installation and technical support, and the
authorization of the subscriber's units to receive particular programming.
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Services and Content. Under the framework agreement among the shareholders of
DBS Satellite, the shareholders intend to cause DBS Satellite to separate its
business activities into two distinct entities, one of which will provide DBS
services and the other will provide content for the DBS services provider and
others.
Regulatory Environment
Regulatory Overview; Telecommunications Law. All entities that provide
television broadcasting services in Israel are subject to the regulatory
authority of the MOC under the Telecommunications Law of 1982, as amended. The
Telecommunications Law prohibits the provision of television broadcasts, such as
those provided by DBS Satellite, except under licenses issued by the MOC.
In January 1998, the Telecommunications Law was amended to authorize the
provision of DBS services in Israel in accordance with certain guidelines
relating to, among other things, minimum eligibility requirements of licensees
and the commercial terms of the license.
Under the amendment, the MOC was granted broad discretion to address the
grievances of Israeli cable television operators who believe that their economic
rights were harmed by the authorization of DBS services. Possible remedies
include (i) extending the term of such cable operator's license, (ii) expanding
the scope of permitted services which the cable operator may provide and (iii)
improving the terms of the cable operator's license.
The Israeli cable television operators have reportedly been negotiating
with the MOC to allow them (i) to provide telecommunications services such as
internet and telephony and (ii) to offer tiered pricing and programming to their
customers instead of the flat rate monthly subscriber fee currently charged.
DBS Regulations. In 1998, the MOC issued a series of regulations setting forth
the procedures and conditions for the granting of a license for DBS
transmission. The DBS Regulations provide that the duration of a license will be
10 years. In addition, the DBS Regulations establish various requirements and
restrictions regarding licensees, including: (i) restrictions on ownership of a
licensee by television broadcasting or newspaper publishing companies or
political parties and their affiliates, or ownership by a licensee in any of
such other entities; (ii) minimum eligibility requirements, such as a minimum
net equity requirement of $40 million, and proven know-how and experience in
respect of DBS technology; (iii) compliance with MOC programming diversification
requirements; (iv) compliance with certain technological requirements in the DBS
Regulations, such as digital transmissions based on access control components;
and (v) minimum Hebrew language programming, including at least three Hebrew
language channels.
The License. On January 21, 1999, the MOC granted to DBS Satellite a
non-exclusive, non-transferable license to transmit television programming in
Israel via satellite, utilizing a multi-channel digital system. The license is
for an initial term of ten years, and may be renewed for additional terms of six
years, subject to approval of the Minister of Communications. In determining
whether to renew the license, the Minister must consider factors such as: (i)
performance under the license; (ii) ongoing ability to provide quality
broadcasting and services; (iii) ability to finance necessary technological
improvements in the DBS system; and (iv) the effect that the renewal of the
license would have on competition in the field of multi-channel television
transmissions to the public.
In consideration for the license, DBS Satellite paid a license fee of NIS
30 million (about $7.35 million) to the MOC. The license fee is deemed to be an
advance payment of future royalties by DBS Satellite as described below, and
will be set off in full against future royalty payment obligations to the MOC
under the license.
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DBS Satellite is obligated to pay quarterly royalties to the MOC in
accordance with the following rate schedule:
up to 250,000 subscribers or five years from the 1.5% of gross income
date of receiving the license
beyond 250,000 subscribers or five years from the 5.0% of gross income
date of receiving the license
In addition, DBS Satellite delivered to the State of Israel a bank
guarantee for NIS 30 million (about $7.5 million), linked to the Israeli
Consumer Price Index (the "Israeli CPI"), to secure the fulfillment of all terms
and conditions of the license. The guarantee will remain in effect until two
years after the term of the license. The MOC may reduce the amount of the
guarantee one year after DBS Satellite's operations have been approved by the
CSB Council. DBS Satellite is also required to indemnify the State of Israel
against any liability arising from DBS Satellite's utilization of the license.
Under the terms of the license, DBS Satellite must provide the following
programming to its subscribers:
(i) Basic Package - This package includes (i) all free to air broadcast
channels in the State of Israel, (ii) certain channels broadcast via
satellite which are not encrypted, such as CNN, MTV, VH-1 and Eurosport.
The basic package is to be provided to all subscribers and will be made
available beginning with the commencement of the DBS broadcasts.
(ii) Premium Package - Premium packages include additional groupings of
channels to be offered to subscribers upon the approval by the CSB Council
of DBS Satellite's operations.
(iii) Pay-Per-View - Five pay-per-view channels (one of which must provide
Hebrew language programs) shall be offered to subscribers, providing
programming on a pay-per-view basis.
Subscriber fees to be charged by DBS Satellite are subject to approval by
the CSB Council. Upon reaching 200,000 subscribers, DBS Satellite's programming
requirements and subscriber fee structure is subject to change.
The MOC may revoke the license in certain circumstances such as: (i)
breach of the terms of the license; (ii) failure by DBS Satellite to commence
full scale operations within eighteen months after the grant of the license
(i.e., July 21, 2000); (iii) cessation of transmissions for a period of fourteen
consecutive days, or (iv) upon request by DBS Satellite.
Any subcontracts for providing services under the license require the
approval of the CSB Council. Any change in the ownership of DBS Satellite is
subject to the prior approval of the Minister of Communications.
Prior to commencement of full-scale operations, DBS Satellite must
implement a trial phase to demonstrate the performance of the DBS System to the
CSB Council. Prior to approval of the CSB Council, DBS Satellite is not
authorized to charge subscribers for DBS services.
The license expressly excludes the right to construct and operate a
satellite or terrestrial transmitters.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies of the Company that
may not be changed without the approval of the holders of a majority of the
Company's outstanding voting securities (as defined in the 1940 Act. If a
percentage restriction on investment or use of assets set forth below is
29
<PAGE>
adhered to at the time a transaction is effected, later changes will not be
considered a violation of the restriction.
As a matter of fundamental policy:
1. The Company may not purchase any security of any company other than
DBS Satellite, but may purchase short-term, high quality debt
securities.
2. The Company may not buy or sell commodities or commodity contracts
or real estate or interests in real estate.
3. The Company may not make loans.
4. The Company may not act as an underwriter except to the extent that,
in connection with the disposition of portfolio securities, it may
be deemed to be an underwriter under applicable securities laws.
5. The Company may not issue senior securities or borrow money, except
in compliance with the 1940 Act.
The investment restrictions set forth in items 1 to 5 above and the
Company's investment objective are the Company's only fundamental policies --
i.e., policies that cannot be changed without the approval of a majority of the
Company's outstanding voting securities (as defined in the 1940 Act).
Under the 1940 Act, the vote of a majority of the outstanding voting
securities of an investment company, such as the Company, means the vote, at the
annual or a special meeting of the stockholders of such company duly called, (A)
of 67% or more of the voting securities present at such meeting, if the holders
of more than 50% of the outstanding voting securities of such company are
present or represented by proxy; or (B) of more than 50% of the outstanding
voting securities of such company, whichever is less.
MANAGEMENT OF THE COMPANY
The Board of Directors is responsible for the management and supervision
of the Company. The Board approves all significant agreements between the
Company and those companies that furnish services to the Company.
Investment Management
The Company will not be managed like a typical closed-end investment
company. The Company will be internally managed by its Board of Directors and
its officers and will not have any separate investment adviser.
Directors and Officers of the Company
The Directors and officers of the Company are listed below together with
their respective positions, ages and a brief statement of their principal
occupations during the past five years.
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Position with Company During Past Five Years
--------------------- --------------------- ----------------------
<S> <C> <C>
Shlomo Tirosh*(__) Chairman of the Board Chairman of the Board and Chief
__________________ and Chief Executive Executive of Gilat
__________________ Officer Communications since _________;
__________________ President of Gilat
Communications from _______ to
March 1999; Director of Gilat
Satellite Networks since
_________; Chairman of the Board
of Gilat Satellite Networks from
1987 to 1995.
30
<PAGE>
<CAPTION>
Principal Occupations
Name, Address and Age Position with Company During Past Five Years
--------------------- --------------------- ----------------------
<S> <C> <C>
Doron Klausner(__) Director Managing Director of the Israel
__________________ Foreign Trade Risks Insurance
__________________ Corporation Ltd. from 1994 to
__________________ the present; President, the
Berne Union; Director of the
Israel Management Center and The
Development Study Center Israel.
Dr. Michael Anghel(__) Director Senior Manager since 1977 and a
______________________ director since 1981 of DIC;
______________________ Director of Gilat Communications
______________________ from August 1990 to May 1999;
Director of Gilat Satellite
Networks, Elron Electronic
Industries Ltd., Orbotech Ltd.,
Elbit Ltd., Elbit Medical
Imaging Ltd., Elscint Ltd.,
American-Israeli Paper Mills
Ltd., NICE Systems Ltd., and
Logal Educational Software and
Systems Ltd.
</TABLE>
- ------------------------
* Mr. Tirosh is an interested person of the Company.
The Directors serve on the Board for terms of indefinite duration. A
Director's position in that capacity will terminate if such Director is removed,
resigns or is subject to various disabling events such as death or incapacity.
The Board of Directors has an Audit Committee. The Audit Committee makes
recommendations to the full Board of Directors with respect to the engagement of
independent accountants and reviews with the independent accountants the plan
and results of the audit engagement and matters having a material effect on the
Company's financial operations. The members of the Audit Committee are currently
Mr. Klausner and Mr. Anghel, none of whom is an "interested person" of the
Company as defined under the 1940 Act. The Chairman of the Audit Committee is
________. The Board of Directors does not have nominating or compensation
committees or other committees performing similar functions.
The Company pays each of its Directors who is not an interested person of
the Company an annual fee of $25,000, plus out-of-pocket expenses. Each of the
members of the Company's Audit Committee will receive an additional fee of $
______ for serving on such committee.
The Articles of Incorporation of the Company contain a provision permitted
under the Maryland General Corporation Law (the "MGCL") which by its terms
eliminates the personal liability of the Company's directors to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, subject to the requirements of the 1940 Act and certain qualifications
described below. The Articles of Incorporation and the By-Laws of the Company
provide that the Company will indemnify directors and officers of the Company to
the fullest extent permitted by the MGCL, subject to the requirements of the
1940 Act. Under Maryland law, a corporation may indemnify any director or
officer made a party to any proceeding by reason of service in that capacity
unless it is established that (1) the act or omission of the director or officer
was material to the matter giving rise to the proceeding and (A) was committed
in bad faith or (B) was the result of active and deliberate dishonesty; (2) the
director or officer actually received an improper personal benefit in money,
property or services; or (3) in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission was
31
<PAGE>
unlawful. The Articles of Incorporation further provide that to the fullest
extent permitted by the MGCL, and subject to the requirements of the 1940 Act,
no director or officer will be liable to the Company or its stockholders for
money damages. Under Maryland law, a corporation may restrict or limit the
liability of directors or officers to the corporation or its stockholders for
money damages, except to the extent that (1) it is proved that the person
actually received an improper benefit or profit in money, property, or services,
or (2) a judgment or other final adjudication adverse to the person is entered
in a proceeding based on a finding in the proceeding that the person's action,
or failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. Nothing in the
Articles of Incorporation or the By-Laws of the Company protects or indemnifies
a director, officer, employee or agent against any liability to which he would
otherwise be subject by reason of acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, or protects or
indemnifies a director or officer of the Company against any liability to the
Company or its stockholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
On ____________, 2000, Gilat Communications provided the initial
capitalization of the Company, purchasing ______ shares of common stock for
$100,000. As of _________, 2000, no director or officer of the Company owned any
shares of the Company's common stock.
COMPANY EXPENSES
All the expenses of the Company (including the expenses of the Offer) will
be paid by the Company from the proceeds of the Offering. A portion of the net
proceeds will be retained by the Company to pay its annual operating expenses
for its first three fiscal years, which are estimated to total in the aggregate
approximately $550,000. The Company has entered into a Services Agreement with
Gilat Communications, pursuant to which the Company will pay Gilat
Communications an annual fee of $40,000 for the provision of certain
administrative, financial and other services to the Company.
NET ASSET VALUE
The Company determines its NAV no less frequently than quarterly, on the
last business day of each quarter and at such other times as the Board of
Directors may determine, by dividing the value of the net assets of the Company
(the value of its assets less its liabilities, exclusive of capital stock and
surplus) by the total number of shares of Common Stock outstanding. In valuing
the Company's assets, it is necessary to value the securities of DBS Satellite.
Until the securities of DBS Satellite are traded on an exchange or otherwise
have market quotations that are readily available, such securities will be
valued at fair value as determined in good faith by, or under procedures
established by, the Board of Directors. The Board of Directors expects to value
such securities at the price the Company paid to acquire them until such time as
the Board of Directors receives reliable information regarding DBS Satellite or
its prospects that indicates that the long term value of the securities has
changed.
TAXATION
Federal Income Taxes
The following discussion is a summary of the federal income tax treatment
of the Company and the federal income tax consequences of the ownership and
disposition of the Shares by U.S. stockholders. This summary is for general
information only and may not address all of the federal income tax consequences
that may be relevant to the Company or to particular stockholders in light of
their individual circumstances or to stockholders subject to special treatment
under the Code, such as foreign
32
<PAGE>
stockholders, financial institutions, tax exempt organizations, insurance
companies, dealers in securities or currencies, persons that hold their Shares
as part of a straddle, synthetic security, conversion transaction, or other
integrated investment, and traders in securities who elect to apply
mark-to-market method of accounting. The following discussion is based upon the
provisions of the Code, its legislative history, Treasury regulations
promulgated thereunder, published rulings by the IRS and court decisions, all in
effect as of the date hereof, all of which authorities are subject to change or
differing interpretations, which changes or differing interpretations could
apply retroactively.
Taxation of the Company
The Company will be subject to federal income tax at a rate of up to 35%
on its taxable income. The Company's taxable income will include dividends and
capital gains received with respect to its investment in DBS Satellite
(including the amount of foreign taxes withheld). The Company should receive a
foreign tax credit for any foreign income or profits taxes paid with respect to
such dividends and capital gains. In addition, the Company should be entitled to
a foreign tax credit with respect to the certain foreign income and profits
taxes paid by DBS Satellite that are deemed to have been paid by the Company
under the Code.
Taxation of U.S. Stockholders in the Company
Taxation of Distributions
A U.S. stockholder generally will be required to include in gross income
as ordinary dividend income the amount of any distributions paid on the Shares
to the extent that such distributions are paid out of the Company's current or
accumulated earnings and profits as determined for federal income tax purposes.
Distributions in excess of the Company's earnings and profits will be applied
against and will reduce the U.S. stockholder's tax basis in its Shares and, to
the extent in excess of such tax basis, will be treated as gain from a sale or
exchange of such Shares.
Sale or Other Disposition of Shares
A U.S. stockholder generally will recognize gain or loss equal to the
difference between the amount realized on the disposition and the stockholder's
adjusted tax basis in the Shares. Capital gain or loss recognized by a
stockholder generally will be long-term capital gain or loss if the U.S.
stockholder held the Shares for more than one year before disposition. Long-term
capital gains are subject to tax at a maximum rate of 20% for individual
stockholders and 35% for corporate stockholders.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS A SUMMARY INCLUDED
FOR GENERAL INFORMATION PURPOSES ONLY. IN VIEW OF THE INDIVIDUAL NATURE OF TAX
CONSEQUENCES, EACH STOCKHOLDER IS ADVISED TO CONSULT HIS OWN TAX ADVISER WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO HIM OF PARTICIPATION IN THE COMPANY,
INCLUDING THE EFFECT AND APPLICABILITY OF FOREIGN, STATE, LOCAL AND OTHER TAX
LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
DESCRIPTION OF CAPITAL STOCK
Common Stock
The authorized capital stock of the Company is 10,000,000 shares of Common
Stock ($0.001 par value). Shares of the Company, when issued, will be fully paid
and nonassessable and will have no conversion, preemptive or other subscription
rights. Holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by stockholders and are not able to cumulate their
votes in the
33
<PAGE>
election of Directors. Thus, holders of more than 50% of the shares voting for
the election of directors have the power to elect 100% of the directors.
All shares of Common Stock are equal as to assets, earnings and the
receipt of dividends, if any, as may be declared by the Board of Directors out
of funds available therefor, however, the Company's Board of Directors has the
authority to classify and reclassify any authorized but unissued shares of
capital stock and to establish the rights and preferences of any such
reclassified shares. In the event of liquidation, dissolution or winding up of
the Company, each share of Common Stock is entitled to receive its proportion of
the Company's assets remaining after payment of all debts and expenses,
including any preferential liquidating distribution to holders of any preferred
stock issued by the Company.
Other offerings of the Company's shares will require approval of the
Company's Board of Directors and may require stockholder approval. Any such
additional offerings also would be subject to the requirements of the 1940 Act,
including the requirement that shares may not be sold at a price below the then
current NAV (exclusive of underwriting discounts and commissions), except in
connection with an offering to existing stockholders or with the consent of a
majority of the Company's shares.
The Company's Common Stock will not be traded on any securities exchange
or other market. There is no assurance that a public market will ever exist for
the Common Stock.
CUSTODIAN
Bank Hapoalim B.M., 1177 Avenue of the Americas, New York, New York 10036
(the "Custodian"), acts as the custodian for the Company's assets.
Under a custody agreement between the Custodian and the Company (the
"Custody Agreement"), the Custodian has agreed to hold all property of the
Company delivered to it in safekeeping in a segregated account, make payments of
cash from the Company's accounts for the purchase of securities for the Company,
endorse and collect all checks, drafts or other orders for payment of money
received as custodian for the Company, daily furnish the Company with
confirmations and a summary of all transfers to or from the account, collect and
receive for the account of the Company all income and other payments and
distributions, and prepare and maintain the books and records of the Company as
required by the 1940 Act, other applicable federal or state laws, rules or
regulations, or any federal or state regulatory body.
For its services, the Custodian receives a fee calculated based on ,
computed and payable monthly. In addition, the U.S. Custodian will be reimbursed
by the Company for any out-of-pocket expenses incurred by it in connection with
the performance of its duties under the Custody Agreement.
EXPERTS
The independent auditors of the Company will be PricewaterhouseCoopers
LLC. The business address of PricewaterhouseCoopers LLC is __________________.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed on for the
Company by Clifford Chance Rogers & Wells LLP, New York, New York[, and by its
special Maryland counsel, Piper & Marbury L.L.P., Baltimore, Maryland].
34
<PAGE>
ADDITIONAL INFORMATION
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of stockholders. As a result,
Company stockholders may not consider each year the election of Directors or the
appointment of auditors. However, the holders of at least a majority of the
shares outstanding and entitled to vote may require the Company to hold a
special meeting of stockholders for any purpose, including to remove a Director
from office. Company stockholders may remove a Director by the affirmative vote
of a majority of the Company's outstanding voting shares. In addition, the Board
will call a meeting of stockholders for the purpose of electing Directors if, at
any time, less than a majority of the Directors then holding office have been
elected by stockholders.
The Company has filed with the SEC in Washington, D.C. a registration
statement under the Securities Act, relating to the shares offered by this
prospectus. Further information concerning these shares and the Company may be
found in that registration statement on file with the SEC, of which this
prospectus constitutes a part. The Company also files reports and other
information with the SEC. The registration statements and these reports and
other information can be inspected, without charge, and copied, for a fee, at
the public reference facilities maintained by the SEC at 450 5th Street, N.W.,
Washington, D.C. 20549. The Company's filings are also available to the public
on the SEC's internet site (http://www.sec.gov).
35
<PAGE>
FINANCIAL STATEMENT AND REPORT
OF INDEPENDENT AUDITOR
[To be filed by amendment]
36
<PAGE>
FORM N-2
GILAT DBS, INC.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
1. Financial Statements:
Part A: Financial Highlights (not applicable).
Part B: Statement of Assets and Liabilities and
Independent Auditors' Report
2. Exhibits:
a. Charter of Registrant.
b. Bylaws of Registrant.
c. Not Applicable.
d. Not Applicable.
e. Not Applicable.
f. Not Applicable.
g. Not Applicable.
h. Not Applicable.
i. Not Applicable.
j. Custody Agreement.*
k. Not Applicable.
l. Opinion and Consent of Counsel.*
m. Not Applicable.
n. Consent of Independent Auditors.*
o. Not Applicable.
p. Not Applicable.
q. Not Applicable.
r. Not Applicable.
----------------------------------------
* To be filed by amendment
Item 25. Marketing Arrangements: Not Applicable.
Item 26. Other Expenses of Issuance and Distribution:*
C-1
<PAGE>
Registration fees $______
Legal fees $______
Accounting fees $______
Miscellaneous (mailing, etc.) $______
Total.....................................$______
----------------------------------------
* To be filed by amendment
Item 27. Persons Controlled by or Under Common Control with Registrant: None.
Item 28. Number of Holders of Securities as of May 5, 2000:
Title of Class Number of Recordholders
Common Stock 1
Item 29. Indemnification:
Reference is made to the provisions of Article SEVENTH of the
Registrant's Charter and Article VII of the Registrant's Bylaws,
each filed as an exhibit to this Registration Statement. Insofar as
indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised by the Securities and
Exchange Commission that such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
Item 30. Business and Other Connections of Investment Adviser:
Not Applicable.
Item 31. Location of Accounts and Records:
Custodian: ______________________________
______________________________
______________________________
Item 32. Management Services: Not Applicable.
Item 33. Undertakings:
C-2
<PAGE>
I. The Registrant undertakes to suspend the offering of shares until
the prospectus is amended if subsequent to the effective date of its
registration statement, the net asset value declines more than ten
percent from its net asset value as of the effective date of the
registration statement.
II. The Registrant undertakes that:
(a) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared
effective.
(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, its duly authorized
representative, in the City of New York, State of New York, on the 5th day of
May, 2000.
GILAT DBS, INC.
By: /s/ Shlomo Tirosh
-------------------------
Shlomo Tirosh, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons, in the
capacities indicated, on May 5, 2000.
Name Title
---- -----
/s/ Shlomo Tirosh Chairman of the Board
- ------------------------------------- (Principal executive officer
(Shlomo Tirosh) and financial and accounting
officer and Director)
/s/ Gene Kleinhendler Director
- -------------------------------------
(Gene Kleinhendler)
/s/ Heather A. Stone Director
- -------------------------------------
(Heather A. Stone)
C-4
<PAGE>
FORM N-2
GILAT DBS, INC.
EXHIBIT INDEX
(a) Charter of Registrant
(b) Bylaws of Registrant
C-5
EXHIBIT (a)
ARTICLES OF INCORPORATION
OF
GILAT DBS, INC.
THE UNDERSIGNED, Richard Horowitz, whose post office address is c/o
Clifford Chance Rogers & Wells LLP, 200 Park Avenue, New York, New York 10166,
being at least eighteen years of age, does hereby act as an incorporator, under
and by virtue of the general laws of the State of Maryland authorizing the
formation of corporations and with the intention of forming a corporation.
First: The name of the corporation (hereinafter called the "Corporation") is
Gilat DBS, Inc.
Second: The Corporation was formed for the following purposes:
(1) To act as a closed-end investment company of the management type
registered as such with the Securities and Exchange Commission pursuant to the
Investment Company Act of 1940, as amended.
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold all or part of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts
and on such terms and conditions and for such purposes and for such amount or
kind of consideration as may now or hereafter be permitted by law.
(4) To enter into management, supervisory, advisory, administrative,
underwriting and other contracts and otherwise do business with other
corporations, and subsidiaries or affiliates thereof, or any other firm or
organization, notwithstanding that the Board of Directors of the Corporation may
be composed in part of officers, directors or employees of such corporation,
firm or organization and, in the absence of fraud, the Corporation
(a)-1
<PAGE>
and such corporation, firm or organization may deal freely with each other and
neither such management, supervisory, advisory, administrative or underwriting
contract nor any other contract or transaction between the Corporation and such
corporation, firm or organization shall be invalidated or in any way affected
thereby.
(5) To do any and all additional acts and exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.
The Corporation shall be authorized to exercise and generally to
enjoy all of the powers, rights and privileges granted to, or conferred upon,
corporations by the General Laws of the State of Maryland now or hereafter in
force. Third: The post office address of the place at which the principal office
of the Corporation in the State of Maryland is located is c/o The Corporation
Trust Incorporated, 300 East Lombard Street, Baltimore, Maryland 21202.
The name of the Corporation's resident agent is the Corporation
Trust Incorporated, and its post office address is 300 East Lombard Street,
Baltimore, Maryland 21202. Said resident agent is a corporation of the State of
Maryland.
Fourth: Section 1. (1) The total number of shares of capital
stock that the Corporation has authority to issue is 10,000,000 shares of
capital stock of the par value of $0.001 each, having an aggregate par value of
$100,000, all of which are initially classified as "Common Stock."
(2) The following is a description of the preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the Common Stock of the
Corporation:
(a)-2
<PAGE>
(a) Each share of Common Stock shall have one vote, and, except as
otherwise provided in respect of any class of stock hereafter
classified or reclassified, the exclusive voting power for all
purposes shall be vested in the holders of the Common Stock.
(b) Subject to the provisions of law and any preferences of any
class of stock hereafter classified or reclassified, dividends,
including dividends payable in shares of another class of the
Corporation's stock, may be paid on the Common Stock of the
Corporation at such time and in such amounts as the Board of
Directors may deem advisable.
(c) In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of
the Common Stock shall be entitled, after payment or provision for
payment of the debts and other liabilities of the Corporation and
the amount to which the holders of any class of stock hereafter
classified or reclassified having a preference on distributions in
the liquidation, dissolution or winding up of the Corporation shall
be entitled, together with the holders of any other class of stock
hereafter classified or reclassified not having a preference on
distributions in the liquidation, dissolution or winding up of the
Corporation, to share ratably in the remaining net assets of the
Corporation.
Section 2. (1) Without the assent or vote of the stockholders, the
Board of Directors shall have the authority by resolution to classify or
reclassify any authorized but unissued shares of capital stock from time to time
by setting or changing in any one or more
(a)-3
<PAGE>
respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of the capital stock.
(2) The foregoing powers of the Board of Directors to classify or
reclassify any of the shares of capital stock shall include, without limitation,
subject to the provisions of the Charter, authority to classify or reclassify
any unissued shares of such stock into a class or classes of preferred stock,
preference stock, special stock or other stock, and to divide and classify
shares of any class into one or more series of such class, by determining,
fixing, or altering one or more of the following:
(a) The distinctive designation of such class or series and the
number of shares to constitute such class or series; provided that,
unless otherwise prohibited by the terms of such or any other class
or series, the number of shares of any class or series may be
decreased by the Board of Directors in connection with any
classification or reclassification of unissued shares and the number
of shares of such class or series may be increased by the Board of
Directors in connection with any such classification or
reclassification, and any shares of any class or series which have
been redeemed, purchased, otherwise acquired or converted into
shares of Common Stock or any other class or series shall become
part of the authorized capital stock and be subject to
classification and reclassification as provided in this
subparagraph;
(b) Whether or not and, if so, the rates, amounts and times at
which, and the conditions under which, dividends shall be payable on
shares of such class or series, whether any such dividends shall
rank senior or junior to or on a parity with the dividends payable
on any other class or series of stock, and the status of
(a)-4
<PAGE>
any such dividends as cumulative, cumulative to a limited extent or
non-cumulative and as participating or nonparticipating;
(c) Whether or not shares of such class or series shall have voting
rights, in addition to any voting rights provided by law and, if so,
the terms of such voting rights;
(d) Whether or not shares of such class or series shall have
conversion or exchange privileges and, if so, the terms and
conditions thereof, including provisions for adjustment of the
conversion or exchange rate in such events or at such times as the
Board of Directors shall determine;
(e) Whether or not shares of such class or series shall be subject
to redemption and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable and the amount per share payable in case of
redemption, which amount may vary under different conditions and at
different redemption dates; and whether or not there shall be any
sinking fund or purchase account in respect thereof, and if so, the
terms thereof;
(f) The rights of the holders of shares of such class or series upon
the liquidation, dissolution or winding up of the affairs of, or
upon any distribution of the assets of, the Corporation, which
rights may vary depending upon whether such liquidation, dissolution
or winding up is voluntary or involuntary and, if voluntary, may
vary at different dates, and whether such rights shall rank senior
or junior to or on a parity with such rights of any other class or
series of stock;
(g) Whether or not there shall be any limitations applicable, while
shares of such class or series are outstanding, upon the payment of
dividends or making of
(a)-5
<PAGE>
distributions on, or the acquisition of, or the use of moneys for
purchase or redemption of, any stock of the Corporation, or upon any
other action of the Corporation, including action under this
subparagraph, and, if so, the terms and conditions thereof; and
(h) Any other preferences, rights, restrictions, including
restrictions on transferability, and qualifications of shares of
such class or series, not inconsistent with law and the Charter of
the Corporation.
(3) For the purposes hereof and of any Articles Supplementary to the
Charter providing for the classification or reclassification of any Shares of
capital stock or of any other charter document of the Corporation (unless
otherwise provided in any such articles or document), any class or series of
stock of the Corporation shall be deemed to rank:
(a) prior to another class or series either as to dividends or upon
liquidation, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable on
liquidation, dissolution or winding up, as the case may be, in
preference or priority to holders of such other class or series;
(b) on a parity with another class or series either as to dividends
or upon liquidation, whether or not the dividend rates, dividend
payment dates or redemption or liquidation price per share thereof
be different from those of such others, if the holders of such class
or series of stock shall be entitled to receipt of dividends or
amounts distributable upon liquidation, dissolution or winding up,
as the case may be, in proportion to their respective dividend rates
or redemption or liquidation prices, without preference or priority
over the holders of such other class or series; and
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(c) junior to another class or series either as to dividends or upon
liquidation, if the rights of the holders of such class or series
shall be subject or subordinate to the rights of the holders of such
other class or series in respect of the receipt of dividends or the
amounts distributable upon liquidation, dissolution or winding up,
as the case may be.
(4) The provisions of Section 2 of this Article Fourth may not be
amended, altered or repealed except by vote of three-fourths of the shares of
capital stock of the Corporation outstanding and entitled to vote thereupon.
Section 3. The Board of Directors, without any action by the
stockholders of the Corporation, may amend these Articles of Incorporation from
time to time to increase or decrease the aggregate number of shares of stock or
the number of shares of stock of any class or series that the Corporation has
authority to issue.
Section 4. The Board of Directors is hereby empowered to authorize
the issuance from time to time of shares of any class of the Corporation's
capital stock, whether now or hereafter authorized, or securities convertible
into shares of any class or classes of its capital stock, whether now or
hereafter authorized.
Section 5. The Board of Directors is hereby empowered to authorize
the repurchase by the Corporation from time to time of shares of any class of
its capital stock, whether now or hereafter authorized, or securities
convertible into shares of any class or classes of its capital stock, whether
now or hereafter authorized, upon such terms, at such prices (which may be
determined by formula) and subject to such conditions (which may include
proration of shares tendered for repurchase) as the Board of Directors may
determine.
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Section 6. The presence in person or by proxy of the holders of
record of a majority of the aggregate number of shares of capital stock issued
and outstanding and entitled to vote thereat shall constitute a quorum for the
transaction of any business at all meetings of the stockholders except as
otherwise provided by law or in these Articles of Incorporation.
Section 7. Notwithstanding any provision of the General Laws of the
State of Maryland requiring action to be taken or authorized by the affirmative
vote of the holders of a designated proportion greater than a majority of the
shares of capital stock of the Corporation outstanding and entitled to vote
thereupon, such action shall, except as otherwise provided in these Articles of
Incorporation, be valid and effective if taken or authorized by the affirmative
vote of the holders of a majority of the total number of shares of capital stock
of the Corporation outstanding and entitled to vote thereupon voting together as
a single class.
Section 8. No holder of shares of capital stock of the Corporation
shall, as such holder, have any preemptive right to purchase or subscribe for
any part of any new or additional issue of stock of any class, or of rights or
options to purchase any stock, or of securities convertible into, or carrying
rights or options to purchase, stock of any class, whether now or hereafter
authorized or whether issued for money, for a consideration other than money or
by way of a dividend or otherwise, and all such rights are hereby waived by each
holder of capital stock and of any other class of stock or securities which may
hereafter be created.
Section 9. All persons who shall acquire capital stock in the
Corporation shall acquire the same subject to the provisions of these Articles
of Incorporation.
Section 10. (1) Except as otherwise provided in subsection 2 of this
Section 10 of this Article Fourth, the affirmative vote of at least
three-fourths of the shares of capital stock of
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the Corporation outstanding and entitled to vote thereupon voting together as a
single class shall be necessary to authorize any of the following actions:
(a) the conversion of the Corporation to an "open-end company" or
any amendment to these Articles of Incorporation to make the
Corporation's common stock a "redeemable security" (as such terms
are defined in the Investment Company Act of 1940);
(b) the merger or consolidation of the Corporation with or into any
other company (including, without limitation, a partnership,
corporation, joint venture, business trust, common law trust or any
other business organization) or share exchange in which the
Corporation is not the successor corporation;
(c) the dissolution or liquidation of the Corporation
notwithstanding any other provision in these Articles of
Incorporation;
(d) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) of all
or substantially all of the assets of the Corporation other than in
the ordinary course of the Corporation's business;
(e) a change in the nature of the business of the Corporation so
that it would cease to be an investment company registered under the
Investment Company Act of 1940; or
(f) the issuance or transfer by the Corporation (in one transaction
or a series of transactions) of any securities of the Corporation to
any other person in exchange for cash, securities or other property
having an aggregate fair market value of $1,000,000 or more
excluding (i) sales of any securities of the Corporation in
connection with a public offering thereof, (ii) issuances of any
securities of the
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Corporation pursuant to a dividend reinvestment plan adopted by the
Corporation or pursuant to a stock dividend and (iii) issuances of
any securities of the Corporation upon the exercise of any stock
subscription rights distributed by the Corporation.
(2) If the Board of Directors approves, by a vote of at least
seventy percent of the entire Board of Directors, any action listed in
subsection (1) of this Section 10 of this Article Fourth other than the action
described in clause (1)(f), the affirmative vote of only a majority of the
shares of capital stock of the Corporation outstanding and entitled to vote
thereupon voting together as a single class shall be necessary to authorize such
action. If the Board of Directors approves, by a vote of at least seventy
percent of the entire Board of Directors, an action described in clause (1)(f)
of this Section 10 of this Article Fourth, no shareholder vote shall be required
to authorize such action.
(3) The provisions of this Section 10 of this Article Fourth may not
be amended, altered or repealed except by the approval of at least three-fourths
of the shares of capital stock of the Corporation outstanding and entitled to
vote thereupon voting together as a single class. Fifth: The initial number of
directors of the Corporation is three (3), and the names of the directors who
shall act as such until the first annual meeting or until their successor or
successors are duly elected and qualified are Shlomo Tirosh, Gene Kleinhendler
and Heather A. Stone. The By-Laws of the Corporation may fix the number of
directors at a number other than three and may authorize the Board of Directors,
by the vote of a majority of the entire Board of Directors, to increase or
decrease the number of directors within a limit specified in the By-Laws,
provided that in no case shall the number of directors be less than the number
prescribed by law, and to fill the vacancies created by any such increase in the
number of directors. Unless otherwise
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provided by the By-Laws of the Corporation, the directors of the Corporation
need not be stockholders.
A director may be removed only with cause, and any such removal may be
made only by the stockholders of the Corporation.
The provisions of this Article Fifth may not be amended, altered or
repealed except by a vote of three-fourths of the shares of common stock of the
Corporation outstanding and entitled to vote thereupon.
Sixth: Section 1. All corporate powers and authority of the Corporation (except
as at the time otherwise provided by statute, by these Articles of Incorporation
or by the By-Laws) shall be vested in and exercised by the Board of Directors.
Section 2. The Board of Directors shall have the sole power to
adopt, alter or repeal the By-Laws of the Corporation except to the extent that
the By-Laws otherwise provide. The provisions of this Section 2 of this Article
Sixth may not be amended, altered or repealed except by vote of three-fourths of
the shares of capital stock of the Corporation outstanding and entitled to vote
thereupon voting together as a single class.
Section 3. The Board of Directors shall have the power from time to
time to determine whether and to what extent, and at what times and places and
under what conditions and regulations, the accounts and books of the Corporation
(other than the stock ledger) or any of them shall be open to the inspection of
stockholders; and no stockholder shall have any right to inspect any account,
book or document of the Corporation except to the extent permitted by statute or
the By-Laws.
Section 4. The Board of Directors shall have the power to determine,
as provided herein, or if a provision is not made herein, in accordance with
generally accepted accounting
(a)-11
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principles, what constitutes net income, total assets and the net asset value of
the shares of capital stock of the Corporation.
Section 5. The Board of Directors shall have the power to distribute
dividends from the funds legally available therefor in such amounts, if any, and
in such manner to the stockholders of record as of a date, as the Board of
Directors may determine.
Section 6. Without the assent or vote of the stockholders, the Board
of Directors shall have the power to authorize the issuance from time to time of
shares of the capital stock of any class of the Corporation, whether now or
hereafter authorized, and securities convertible into shares of capital stock of
the Corporation of any class or classes, whether now or hereafter authorized,
for such consideration as the Board of Directors may deem advisable.
Section 7. Without the assent or vote of the stockholders, the Board
of Directors shall have the power to authorize and issue obligations of the
Corporation, secured or unsecured, as the Board of Directors may determine, and
to authorize and cause to be executed mortgages and liens upon the real or
personal property of the Corporation.
Section 8. The provisions of Sections 6 and 7 of this Article Sixth
may not be amended, altered or repealed except by vote of three-fourths of the
shares of capital stock of the Corporation outstanding and entitled to vote
thereupon voting together as a single class.
Seventh: Section 1. To the fullest extent permitted by Maryland statutory or
decisional law, subject to the requirements of the Investment Company Act of
1940, as amended, no director or officer of the Corporation shall be personally
liable to the Corporation or its security holders for money damages. This
limitation on liability applies to events occurring at the time a person serves
as a director or officer of the Corporation whether or not such person is a
director or officer at the time of any proceeding in which such liability is
asserted. No amendment of
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these Articles of Incorporation or repeal of any provision hereof shall limit or
eliminate the benefits provided to directors and officers under this provision
in connection with any act or omission that occurred prior to such amendment or
repeal.
Section 2. The Corporation shall indemnify, to the fullest extent
permitted by law (including the Investment Company Act of 1940) as currently in
effect or as the same may hereafter be amended, any person made or threatened to
be made a party to any action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that such person or such
person's testator or intestate is or was a director or officer of the
Corporation or serves or served at the request of the Corporation any other
enterprises as a director or officer. To the fullest extent permitted by law
(including the Investment Company Act of 1940) as currently in effect or as the
same may hereafter be amended, expenses incurred by any such person in defending
any such action, suit or proceeding shall be paid or reimbursed by the
Corporation promptly upon receipt by it of an undertaking of such person to
repay such expenses if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation. The rights provided to any person
by this Section 2 of this Article Seventh shall be enforceable against the
Corporation by such person who shall be presumed to have relied upon it in
serving or continuing to serve as a director or officer as provided above. No
amendment of this Section 2 of this Article Seventh shall impair the rights of
any person arising at any time with respect to events occurring prior to such
amendment. For purposes of this Section 2 of this Article Seventh, the term
"Corporation" shall include any predecessor of the Corporation and any
constituent corporation (including any constituent of a constituent) absorbed by
the Corporation in a consolidation or merger; the term "other enterprise" shall
include any corporation, partnership, joint venture, trust or employee benefit
plan; service "at the request of the
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Corporation" shall include service as a director or officer of the Corporation
which imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; any
excise taxes assessed on a person with respect to an employee benefit plan shall
be deemed to be indemnifiable expenses; and action by a person with respect to
any employee benefit plan which such person reasonably believes to be in the
interest of the participants and beneficiaries of such plan shall be deemed to
be action not opposed to the best interests of the Corporation. The provisions
of this Section 2 of this Article Seventh shall be in addition to the other
provisions of this Article Seventh.
Section 3. Nothing in this Article Seventh protects or purports to
protect any director or officer against any liability to the Corporation or its
security holders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
Section 4. Each section or portion thereof of this Article Seventh
shall be deemed severable from the remainder, and the invalidity of any such
section or portion shall not affect the validity of the remainder of this
Article.
Eighth: The duration of the Corporation shall be perpetual.
Ninth: From time to time, any of the provisions of these Articles of
Incorporation may be amended, altered or repealed (including any amendment that
changes the terms of any of the outstanding stock by classification,
reclassification or otherwise), and other provisions that may, under the
statutes of the State of Maryland at the time in force, be lawfully contained in
articles of incorporation may be added or inserted, upon the vote of the holders
of a majority of the shares of common stock of the Corporation outstanding and
entitled to vote thereupon. If these Articles of Incorporation specifically so
provide, however, any such amendment, alteration,
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repeal, addition or insertion may be affected only upon the vote of
three-fourths of the shares of common stock of the Corporation outstanding and
entitled to vote thereupon. The provisions of the prior sentence may not be
amended, altered or repealed except by vote of three-fourths of the shares of
common stock of the corporation outstanding and entitled to vote thereupon. All
rights at any time conferred upon the stockholders of the Corporation by these
Articles of Incorporation are subject to the provisions of this Article Ninth.
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<PAGE>
IN WITNESS WHEREOF, I have executed these Articles of Incorporation
acknowledging the same to be my act, on May 2, 2000.
-----------------------------------
Incorporator
Witness:
- ------------------------
(a)-16
EXHIBIT (b)
GILAT DBS, INC.
A Maryland corporation
BY-LAWS
May 4, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I STOCKHOLDERS....................................................................1
Section 1.1. Place of Meeting....................................................1
Section 1.2. Annual Meetings.....................................................1
Section 1.3. Special Meetings....................................................1
Section 1.4. Notice of Meetings of Stockholders..................................2
Section 1.5. Record Dates........................................................2
Section 1.6. Quorum; Adjournment of Meetings.....................................3
Section 1.7. Voting and Inspectors...............................................3
Section 1.8. Conduct of Stockholders' Meetings...................................4
Section 1.9. Concerning Validity of Proxies, Ballots, etc........................4
Section 1.10. Action Without Meeting..............................................5
Section 1.11. Advance Notice of Stockholder Nominees for Director and Other
Stockholder Proposals.............................................5
ARTICLE II BOARD OF DIRECTORS.............................................................9
Section 2.1. Function of Directors...............................................9
Section 2.2. Number of Directors.................................................9
Section 2.3. Vacancies...........................................................9
Section 2.4. Increase or Decrease in Number of Directors.........................9
Section 2.5. Place of Meeting...................................................10
Section 2.6. Regular Meetings...................................................10
Section 2.7. Special Meetings...................................................10
Section 2.8. Notices............................................................10
Section 2.9. Quorum.............................................................11
Section 2.10. Executive Committee................................................11
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<CAPTION>
Section 2.11. Other Committees...................................................11
Section 2.12. Telephone Meetings.................................................12
Section 2.13. Action Without a Meeting...........................................12
Section 2.14. Compensation of Directors..........................................12
Section 2.15. Selection and Nomination of Non-Interested Directors...............12
ARTICLE III OFFICERS.....................................................................13
Section 3.1. Executive Officers.................................................13
Section 3.2. Term of Office.....................................................13
Section 3.3. Powers and Duties..................................................13
Section 3.4. Surety Bonds.......................................................14
ARTICLE IV CAPITAL STOCK.................................................................14
Section 4.1. Certificates for Shares............................................14
Section 4.2. Transfer of Shares.................................................14
Section 4.3. Stock Ledgers......................................................15
Section 4.4. Transfer Agents and Registrars.....................................15
Section 4.5. Lost, Stolen or Destroyed Certificates.............................15
ARTICLE V CORPORATE SEAL; LOCATION OF OFFICES; BOOKS; NET ASSET VALUE....................16
Section 5.1. Corporate Seal.....................................................16
Section 5.2. Location of Offices................................................16
Section 5.3. Books and Records..................................................16
Section 5.4. Net Asset Value....................................................16
ARTICLE VI FISCAL YEAR AND ACCOUNTANT....................................................16
Section 6.1. Fiscal Year........................................................16
Section 6.2. Accountant.........................................................17
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ARTICLE VII INDEMNIFICATION AND INSURANCE................................................17
Section 7.1. General............................................................17
Section 7.2. Indemnification of Directors and Officers..........................17
Section 7.3. Insurance..........................................................18
ARTICLE VIII CUSTODIAN...................................................................19
ARTICLE IX AMENDMENT OF BY-LAWS..........................................................19
</TABLE>
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GILAT DBS, INC.
By-Laws
ARTICLE I
Stockholders
Section 1.1. Place of Meeting. All meetings of the stockholders
should be held at the principal office of the Corporation in the State of
Maryland or at such other place within the United States as may from time to
time be designated by the Board of Directors and stated in the notice of such
meeting.
Section 1.2. Annual Meetings. If a meeting of the stockholders of
the Corporation is required by the Investment Company Act of 1940, as amended,
to elect the directors, then there shall be submitted to the stockholders at
such meeting the question of the election of directors, and a meeting called for
that purpose shall be designated the annual meeting of stockholders for that
year. In other years in which no action by stockholders is required for the
aforesaid election of directors, no annual meeting need be held.
Section 1.3. Special Meetings. Special meetings of the stockholders
for any purpose or purposes may be called by the Chairman of the Board, the
President, or a majority of the Board of Directors. Special meetings of
stockholders shall also be called by the Secretary upon receipt of the request
in writing signed by stockholders holding not less than a majority of the votes
entitled to be cast thereat. Such request shall state the purpose or purposes of
the proposed meeting and the matters proposed to be acted on at such proposed
meeting. The Secretary shall inform such stockholders of the reasonably
estimated costs of preparing and mailing such notice of meeting and upon payment
to the Corporation of such costs, the Secretary shall give notice as required in
this Article to all stockholders entitled to notice of such meeting. No special
meeting of stockholders need be called upon the request of the holders of common
stock entitled to cast less than a majority
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of all votes entitled to be cast at such meeting to consider any matter which is
substantially the same as a matter voted upon at any special meeting of
stockholders held during the preceding twelve months.
Section 1.4. Notice of Meetings of Stockholders. Not less than ten
days' and not more than ninety days' written or printed notice of every meeting
of stockholders, stating the time and place thereof (and the purpose of any
special meeting), shall be given to each stockholder entitled to vote thereat
and to each other stockholder entitled to notice of the meeting by leaving the
same with such stockholder or at such stockholder's residence or usual place of
business or by mailing it, postage prepaid, and addressed to such stockholder at
such stockholder's address as it appears upon the books of the Corporation. If
mailed, notice shall be deemed to be given when deposited in the mail addressed
to the stockholder as aforesaid.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in person or by proxy
or to any stockholder who, in writing executed and filed with the records of the
meeting, either before or after the holding thereof, waives such notice.
Section 1.5. Record Dates. The Board of Directors may fix, in
advance, a record date for the determination of stockholders entitled to notice
of or to vote at any stockholders meeting or to receive a dividend or be
allotted rights or for the purpose of any other proper determination with
respect to stockholders and only stockholders of record on such date shall be
entitled to notice of and to vote at such meeting or to receive such dividends
or rights or otherwise, as the case may be; provided, however, that such record
date shall not be prior to ninety days preceding the date of any such meeting of
stockholders, dividend payment date, date for the allotment of rights or other
such action requiring the determination of a record date; and further provided
that such record date
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shall not be prior to the close of business on the day the record date is fixed,
that the transfer books shall not be closed for a period longer than 20 days,
and that in the case of a meeting of stockholders, the record date or the
closing of the transfer books shall not be less than ten days prior to the date
fixed for such meeting.
Section 1.6. Quorum; Adjournment of Meetings. The presence in person
or by proxy of stockholders entitled to cast a majority of the votes entitled to
be cast thereat shall constitute a quorum at all meetings of the stockholders,
except as otherwise provided in the Articles of Incorporation. If, however, such
quorum shall not be present or represented at any meeting of the stockholders,
the holders of a majority of the stock present in person or by proxy shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote at such meeting shall be present, to a date not more than 120 days after
the original record date. At such adjourned meeting at which the requisite
amount of stock entitled to vote thereat shall be represented, any business may
be transacted which might have been transacted at the meeting as originally
notified.
Any meeting of stockholders, annual or special, may adjourn from
time to time to reconvene at the same or some other place, and notice need not
be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting.
Section 1.7. Voting and Inspectors. At all meetings, stockholders of
record entitled to vote thereat shall have one vote for each share of common
stock standing in his name on the books of the Corporation (and such
stockholders of record holding fractional shares, if any, shall have
proportionate voting rights) on the date for the determination of stockholders
entitled to vote at such meeting, either in person or by proxy appointed by
instrument in writing subscribed by such stockholder or his duly authorized
attorney.
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All elections shall be had and all questions decided by a majority
of the votes cast at a duly constituted meeting, except as otherwise provided by
statute or by the Articles of Incorporation or by these By-Laws.
At any election of Directors, the Chairman of the meeting may, and
upon the request of the holders of ten percent (10%) of the stock entitled to
vote at such election shall, appoint two inspectors of election who shall first
subscribe an oath or affirmation to execute faithfully the duties of inspectors
at such election with strict impartiality and according to the best of their
ability, and shall after the election make a certificate of the result of the
vote taken. No candidate for the office of Director shall be appointed such
Inspector.
Section 1.8. Conduct of Stockholders' Meetings. The meetings of the
stockholders shall be presided over by the Chairman of the Board, or if he is
not present, by the President, or if he is not present, by a vice president, or
if none of them is present, by a Chairman to be elected at the meeting. The
Secretary of the Corporation, if present, shall act as a Secretary of such
meetings, or if he or she is not present, an Assistant Secretary shall so act;
if neither the Secretary nor the Assistant Secretary is present, then the
meeting shall elect its Secretary.
Section 1.9. Concerning Validity of Proxies, Ballots, etc. At every
meeting of the stockholders, all proxies shall be received and taken in charge
of and all ballots shall be received and canvassed by the Secretary of the
meeting, who shall decide all questions touching the qualification of voters,
the validity of the proxies and the acceptance or rejection of votes, unless
inspectors of election shall have been appointed by the Chairman of the meeting,
in which event such inspectors of election shall decide all such questions.
Section 1.10. Action Without Meeting. Any action to be taken by
stockholders may be taken without a meeting if (1) all stockholders entitled to
vote on the matter consent to the action in writing, (2) all stockholders
entitled to notice of the meeting but not entitled to vote at it sign a
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<PAGE>
written waiver of any right to dissent and (3) said consents and waivers are
filed with the records of the meetings of stockholders. Such consent shall be
treated for all purposes as a vote at the meeting.
Section 1.11. Advance Notice of Stockholder Nominees for Director
and Other Stockholder Proposals.
(a) The matters to be considered and brought before any annual or
special meeting of stockholders of the Corporation shall be limited to only such
matters, including the nomination and election of directors, as shall be brought
properly before such meeting in compliance with the procedures set forth in this
Section 1.11.
(b) For any matter to be properly before any annual meeting of
stockholders, the matter must be (i) specified in the notice of annual meeting
given by or at the direction of the Board of Directors, (ii) otherwise brought
before the annual meeting by or at the direction of the Board of Directors or
(iii) brought before the annual meeting in the manner specified in this Section
1.11 by a stockholder of record or a stockholder (a "Nominee Holder") that holds
voting securities entitled to vote at meetings of stockholders through a nominee
or "street name" holder of record and can demonstrate to the Corporation such
indirect ownership and such Nominee Holder's entitlement to vote such
securities. In addition to any other requirements under applicable law and the
Articles of Incorporation and By-Laws of the Corporation, persons nominated by
stockholders for election as directors of the Corporation and any other
proposals by stockholders shall be properly brought before the meeting only if
notice of any such matter to be presented by a stockholder at such meeting of
stockholders (the "Stockholder Notice") shall be delivered to the Secretary of
the Corporation at the principal executive office of the Corporation not less
than 60 nor more than 90 days prior to the first anniversary date of the annual
meeting for the preceding year; provided, however, that, if and only if the
annual meeting is not scheduled to be held text
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commences 30 days before such anniversary date and ends 30 days after such
anniversary date (an annual meeting date outside such period being referred to
herein as an "Other Annual Meeting Date"), such Stockholder Notice shall be
given in the manner provided herein by the later of the close of business on (i)
the date 60 days prior to such Other Annual Meeting Date or (ii) the 10th day
following the date such Other Annual Meeting Date is first publicly announced or
disclosed. Any stockholder desiring to nominate any person or persons (as the
case may be) for election as a director or directors of the Corporation shall
deliver, as part of such Stockholder Notice: (i) a statement in writing setting
forth (A) the name of the person or persons to be nominated, (B) the number and
class of all shares of each class of stock of the Corporation owned of record
and beneficially by each such person, as reported to such stockholder by such
nominee(s), (C) the information regarding each such person required by paragraph
(b) of Item 22 of Rule 14a-101 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), adopted by the Securities and Exchange Commission
(or the corresponding provisions of any regulation or rule subsequently adopted
by the Securities and Exchange Commission applicable to the Corporation), (D)
whether such stockholder believes any nominee will be an "interested person" of
the Corporation (as defined in the Investment Company Act of 1940, as amended),
and, if not an "interested person", information regarding each nominee that will
be sufficient for the Corporation to make such determination, and (E) the number
and class of all shares of each class of stock of the Corporation owned of
record and beneficially by such stockholder; (ii) each such person's signed
consent to serve as a director of the Corporation if elected, such stockholder's
name and address; and (iii) in the case of a Nominee Holder, evidence
establishing such Nominee Holder's indirect ownership of, and entitlement to
vote, securities at the meeting of stockholders. Any stockholder who gives a
Stockholder Notice of any matter proposed to be brought before the meeting (not
involving nominees for director) shall deliver, as part of such Stockholder
Notice, the text of the proposal to
(b)-6
<PAGE>
be presented and a brief written statement of the reasons why such stockholder
favors the proposal and setting forth such stockholder's name and address, the
number and class of all shares of each class of stock of the Corporation owned
of record and beneficially by such stockholder, if applicable, any material
interest of such stockholder in the matter proposed (other than as a
stockholder) and, in the case of a Nominee Holder, evidence establishing such
Nominee Holder's indirect ownership of, and entitlement to vote, securities at
the meeting of stockholders. As used herein, shares "beneficially owned" shall
mean all shares which such person is deemed to beneficially own pursuant to
Rules 13d-3 and 13d-5 under the Exchange Act.
Notwithstanding anything in this Section 1.11 to the contrary, in
the event that the number of directors to be elected to the Board of Directors
of the Corporation is increased and either all of the nominees for director or
the size of the increased Board of Directors are not publicly announced or
disclosed by the Corporation at least 70 days prior to the first anniversary of
the preceding year's annual meeting, a Stockholder Notice shall also be
considered timely hereunder, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary of
the Corporation at the principal executive office of the Corporation not later
than the close of business on the 10th day following the first date all of such
nominees or the size of the increased Board of Directors shall have been
publicly announced or disclosed.
(c) Only such matters shall be properly brought before a special
meeting of stockholders as shall have been brought before the meeting pursuant
to the Corporation's notice of meeting. In the event the Corporation calls a
special meeting of stockholders for the purpose of electing one or more
directors to the Board of Directors, any stockholder may nominate a person or
persons (as the case may be), for election to such position(s) as specified in
the Corporation's notice of meeting, if the Stockholder Notice required by
clause (b) of this Section 1.11 hereof shall be delivered to the Secretary of
the Corporation at the principal executive office of the Corporation not
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later than the close of business on the 10th day following the day on which the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting is publicly announced or disclosed.
(d) For purposes of this Section 1.11, a matter shall be deemed to
have been "publicly announced or disclosed" if such matter is disclosed in a
press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission.
(e) In no event shall the adjournment of an annual meeting, or any
announcement thereof, commence a new period for the giving of notice as provided
in this Section 1.11. This Section 1.11 shall not apply to stockholder proposals
made pursuant to Rule 14a-8 under the Exchange Act.
(f) The person presiding at any meeting of stockholders, in addition
to making any other determinations that may be appropriate to the conduct of the
meeting, shall have the power and duty to determine whether notice of nominees
and other matters proposed to be brought before a meeting has been duly given in
the manner provided in this Section 1.11 and, if not so given, shall direct and
declare at the meeting that such nominees and other matters shall not be
considered.
ARTICLE II
Board of Directors Section
2.1. Function of Directors. The business and affairs of the
Corporation shall be conducted and managed by a Board of Directors. All powers
of the Corporation shall be exercised by or under the authority of the Board of
Directors, except as conferred on or reserved to the stockholders by statute.
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Section 2.2. Number of Directors. The Board of Directors shall
consist of not less than three nor more than fourteen Directors, as may be
determined from time to time by vote of a majority of the Directors then in
office. Directors need not be stockholders. The first Board of Directors shall
consist of the directors named in the Articles of Incorporation who shall hold
office until the first meeting of stockholders or until their successors have
been elected and qualified.
Section 2.3. Vacancies. In case of any vacancy in the Board of
Directors through death, resignation or other cause, other than an increase in
the number of Directors, subject to the provisions of law, a majority of the
remaining Directors, although a majority is less than a quorum, by an
affirmative vote, may elect a successor to hold office until the next annual
meeting of stockholders or until his successor is chosen and qualified.
Section 2.4. Increase or Decrease in Number of Directors. The Board
of Directors, by the vote of a majority of the entire Board, may increase the
number of Directors and may elect Directors to fill the vacancies created by any
such increase in the number of Directors until the next annual meeting of
stockholders or until their successors are duly chosen and qualified. The Board
of Directors, by the vote of a majority of the entire Board, may likewise
decrease the number of Directors to a number not less than that permitted by
law.
Section 2.5. Place of Meeting. The Directors may hold their meetings
within or outside the State of Maryland, at any office or offices of the
Corporation or at any other place as they may from time to time determine.
Section 2.6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such time and on such notice as the Directors may
from time to time determine.
The annual meeting of the Board of Directors shall be held as soon
as practicable after the annual meeting of the stockholders for the election of
Directors.
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Section 2.7. Special Meetings. Special meetings of the Board of
Directors may be held from time to time upon call of the Chairman of the Board,
the President, the Secretary or two or more of the Directors, by oral or
telegraphic or written notice duly served on or sent or mailed to each Director
not less than one day before such meeting.
Section 2.8. Notices. Unless required by statute or otherwise
determined by resolution of the Board of Directors in accordance with these
By-laws, notices to Directors need not be in writing and need not state the
business to be transacted at or the purpose of any meeting, and no notice need
be given to any Director who is present in person or to any Director who, in
writing executed and filed with the records of the meeting either before or
after the holding thereof, waives such notice. Waivers of notice need not state
the purpose or purposes of such meeting.
Section 2.9. Quorum. One-third of the Directors then in office shall
constitute a quorum for the transaction of business, provided that if there is
more than one Director, a quorum shall in no case be less than two Directors. If
at any meeting of the Board there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time until a
quorum shall have been obtained. The act of the majority of the Directors
present at any meeting at which there is a quorum shall be the act of the
Directors, except as may be otherwise specifically provided by statute or by the
Articles of Incorporation or by these By-Laws.
Section 2.10. Executive Committee. The Board of Directors may
appoint from the Directors an Executive Committee to consist of such number of
Directors (not less than two) as the Board may from time to time determine. The
Chairman of the Committee shall be elected by the Board of Directors. The Board
of Directors shall have power at any time to change the members of such
Committee and may fill vacancies in the Committee by election from the
Directors. When the Board of Directors is not in session, to the extent
permitted by law, the Executive Committee shall have and may exercise any or all
of the powers of the Board of Directors in the management and
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conduct of the business and affairs of the Corporation. The Executive Committee
may fix its own rules of procedure, and may meet when and as provided by such
rules or by resolution of the Board of Directors, but in every case the presence
of a majority shall be necessary to constitute a quorum. During the absence of a
member of the Executive Committee, the remaining members may appoint a member of
the Board of Directors to act in his place.
Section 2.11. Other Committees. The Board of Directors may appoint
from the Directors other committees which shall in each case consist of such
number of Directors (not less than two) and shall have and may exercise such
powers as the Board may determine in the resolution appointing them. A majority
of all the members of any such committee may determine its action and fix the
time and place of its meetings, unless the Board of Directors shall otherwise
provide. The Board of Directors shall have power at any time to change the
members and powers of any such committee, to fill vacancies and to discharge any
such committee. Section 2.12. Telephone Meetings. Members of the Board of
Directors or a committee of the Board of Directors may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means, subject to the provisions of the
Investment Company Act of 1940, constitutes presence in person at the meeting.
Section 2.13. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting, if a written consent to such action is
signed by all members of the Board or of such committee, as the case may be, and
such written consent is filed with the minutes of the proceedings of the Board
or such committee.
Section 2.14. Compensation of Directors. No Director shall receive
any stated salary or fees from the Corporation for his services as such if such
Director is, otherwise than by
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reason of being such Director, an interested person (as such term is defined by
the Investment Company Act of 1940) of the Corporation or of its investment
manager or principal underwriter. Except as provided in the preceding sentence,
Directors shall be entitled to receive such compensation from the Corporation
for their services as may from time to time be voted by the Board of Directors.
Section 2.15. Selection and Nomination of Non-Interested Directors.
Subject to approval by a majority of the directors of the Corporation, the
directors of the Corporation who are not interested persons of the Corporation
(as that term is defined in the Investment Company Act of 1940) shall select and
nominate the directors of the Corporation who are not interested persons of the
Corporation.
ARTICLE III
Officers
Section 3.1. Executive Officers. The executive officers of the
Corporation shall be chosen by the Board of Directors. These may include a
Chairman of the Board of Directors (who shall be a Director) and shall include a
President, a Secretary and a Treasurer. The Board of Directors or the Executive
Committee may also in its discretion appoint one or more Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers, agents and
employees, who shall have such authority and perform such duties as the Board of
Directors or the Executive Committee may determine. The Board of Directors may
fill any vacancy which may occur in any office. Any two offices, except those of
President and Vice President, may be held by the same person, but no officer
shall execute, acknowledge or verify any instrument in more than one capacity,
if such instrument is required by law or these By-Laws to be executed,
acknowledged or verified by two or more officers.
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Section 3.2. Term of Office. The term of office of all officers
shall be one year and until their respective successors are chosen and
qualified. Any officer may be removed from office at any time with or without
cause by the vote of a majority of the whole Board of Directors. Any officer may
resign his office at any time by delivering a written resignation to the
Corporation and, unless otherwise specified therein, such resignation shall take
effect upon delivery.
Section 3.3. Powers and Duties. The officers of the Corporation
shall have such powers and duties as shall be stated in a resolution of the
Board of Directors, or the Executive Committee and, to the extent not so stated,
as generally pertain to their respective offices, subject to the control of the
Board of Directors and the Executive Committee.
Section 3.4. Surety Bonds. The Board of Directors may require any
officer or agent of the Corporation to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940, as amended,
and the rules and regulations of the Securities and Exchange Commission) to the
Corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his duties
to the Corporation, including responsibility for negligence and for the
accounting of any of the Corporation's property, funds or securities that may
come into his hands.
ARTICLE IV
Capital Stock
Section 4.1. Certificates for Shares. Each stockholder of the
Corporation shall be entitled to a certificate or certificates for the full
number of shares of stock of the Corporation owned by him in such form as the
Board may from time to time prescribe.
Section 4.2. Transfer of Shares. Shares of the Corporation
shall be transferable on the books of the Corporation by the holder thereof in
person or by his duly authorized attorney or
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legal representative, upon surrender and cancellation of certificates, if any,
for the same number of shares, duly endorsed or accompanied by proper
instruments of assignment and transfer, with such proof of the authenticity of
the signature as the Corporation or its agents may reasonably require; in the
case of shares not represented by certificates, the same or similar requirements
may be imposed by the Board of Directors.
Section 4.3. Stock Ledgers. The stock ledgers of the Corporation,
containing the names and addresses of the stockholders and the number of shares
held by them respectively, shall be kept at the principal offices of the
Corporation or, if the Corporation employs a Transfer Agent, at the offices of
the Transfer Agent of the Corporation.
Section 4.4. Transfer Agents and Registrars. The Board of Directors
may from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates representing shares of capital stock thereafter issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
Section 4.5. Lost, Stolen or Destroyed Certificates. The Board of
Directors or the Executive Committee or any officer or agent authorized by the
Board of Directors or Executive Committee may determine the conditions upon
which a new certificate of stock of the Corporation of any class may be issued
in place of a certificate which is alleged to have been lost, stolen or
destroyed; and may, in its discretion, require the owner of such certificate or
such owner's legal representative to give bond, with sufficient surety, to the
Corporation and each Transfer Agent, if any, to indemnify it and each such
Transfer Agent against any and all loss or claims which may arise by reason of
the issue of a new certificate in the place of the one so lost, stolen or
destroyed.
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ARTICLE V
Corporate Seal; Location of
Offices; Books; Net Asset Value
Section 5.1. Corporate Seal. The Board of Directors may provide for
a suitable corporate seal, in such form and bearing such inscriptions as it may
determine. Any officer or director shall have the authority to affix the
corporate seal. If the Corporation is required to place its corporate seal to a
document, it shall be sufficient to place the word "(seal)" adjacent to the
signature of the authorized officer of the Corporation signing the document.
Section 5.2. Location of Offices. The Corporation shall have a
principal office in the State of Maryland. The Corporation may, in addition,
establish and maintain such other offices as the Board of Directors or any
officer may, from time to time, determine.
Section 5.3. Books and Records. The books and records of the
Corporation shall be kept at the places, within or without the State of
Maryland, as the directors or any officer may determine; provided, however, that
the original or a certified copy of the by-laws, including any amendments to
them, shall be kept at the Corporation's principal executive office.
Section 5.4. Net Asset Value. The value of the Corporation's net
assets shall be determined at such times and by such method as shall be
established from time to time by the Board of Directors.
ARTICLE VI
Fiscal Year and Accountant
Section 6.1. Fiscal Year. The fiscal year of the Corporation, unless
otherwise fixed by resolution of the Board of Directors, shall begin on the
first day of January and shall end on the last day of December in each year.
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Section 6.2. Accountant. The Corporation shall employ an independent
public accountant or a firm of independent public accountants as its Accountant
to examine the accounts of the Corporation and to sign and certify financial
statements filed by the Corporation. The employment of the Accountant shall be
conditioned upon the right of the Corporation to terminate the employment
forthwith without any penalty by vote of a majority of the outstanding voting
securities at any stockholders' meeting called for that purpose.
ARTICLE VII
Indemnification and Insurance
Section 7.1. General. The Corporation shall indemnify directors,
officers, employees and agents of the Corporation against judgments, fines,
settlements and expenses to the fullest extent authorized and in the manner
permitted, by applicable federal and state law.
Section 7.2. Indemnification of Directors and Officers. The
Corporation shall indemnify to the fullest extent permitted by law (including
the Investment Company Act of 1940, as amended) as currently in effect or as the
same may hereafter be amended, any person made or threatened to be made a party
to any action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person or such person's testator
or intestate is or was a director or officer of the Corporation or serves or
served at the request of the Corporation any other enterprise as a director or
officer. To the fullest extent permitted by law (including the Investment
Company Act of 1940) as currently in effect or as the same may hereafter be
amended, expenses incurred by any such person in defending any such action, suit
or proceeding shall be paid or reimbursed by the Corporation promptly upon
receipt by it of an undertaking of such person to repay such expenses if it
shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation. The rights provided to any person by this
Article VII
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shall be enforceable against the Corporation by such person who shall be
presumed to have relied upon it in serving or continuing to serve as a director
or officer as provided above. No amendment of this Article VII shall impair the
rights of any person arising at any time with respect to events occurring prior
to such amendment. For purposes of this Article VII, the term "Corporation"
shall include any predecessor of the Corporation and any constituent corporation
(including any constituent of a constituent) absorbed by the Corporation in a
consolidation or merger; the term "other enterprises" shall include any
corporation, partnership, joint venture, trust or employee benefit plan; service
"at the request of the Corporation" shall include service as a director or
officer of the Corporation which imposes duties on, or involves services by,
such director or officer with respect to an employee benefit plan, its
participants or beneficiaries; any excise taxes assessed on a person with
respect to an employee benefit plan shall be deemed to be indemnifiable
expenses; and action by a person with respect to any employee benefit plan which
such person reasonably believes to be in the interest of the participants and
beneficiaries of such plan shall be deemed to be action not opposed to the best
interests of the Corporation.
Section 7.3. Insurance. Subject to the provisions of the Investment
Company Act of 1940, as amended, the Corporation, directly, through third
parties or through affiliates of the Corporation, may purchase, or provide
through a trust fund, letter of credit or surety bond insurance on behalf of any
person who is or was a Director, officer, employee or agent of the Corporation,
or who, while a Director, officer, employee or agent of the Corporation, is or
was serving at the request of the Corporation as a Director, officer, employee,
partner, trustee or agent of another foreign or domestic corporation,
partnership joint venture, trust or other enterprise against any liability
asserted against and incurred by such person in any such capacity or arising out
of such person's position, whether or not the Corporation would have the power
to indemnify such person against such liability.
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ARTICLE VIII
Custodian
The Corporation shall have as custodian or custodians one or more
trust companies or banks of good standing, foreign or domestic, as may be
designated by the Board of Directors, subject to the provisions of the
Investment Company Act of 1940, as amended, and other applicable laws and
regulations; and the funds and securities held by the Corporation shall be kept
in the custody of one or more such custodians, provided such custodian or
custodians can be found ready and willing to act, and further provided that the
Corporation and/or the Custodians may employ such subcustodians as the Board of
Directors may approve and as shall be permitted by law.
ARTICLE IX
Amendment of By-Laws
The By-Laws of the Corporation may be altered, amended, added to or
repealed only by majority vote of the entire Board of Directors.
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