Edgar Filing: GILAT SATELLITE NETWORKS LTD

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM T-3

APPLICATION FOR QUALIFICATION OF INDENTURE
UNDER THE TRUST INDENTURE ACT OF 1939

GILAT SATELLITE NETWORKS LTD.
(Name of Applicant)

21 Yegia Kapayim Street
Kiryat Aryeh, Petach Tikva, 49130 Israel
(Address of Principal Executive Offices)

SECURITIES TO BE ISSUED UNDER THE
INDENTURE TO BE QUALIFIED

TITLE OF CLASS AMOUNT
4.00% Convertible Notes due 2012 $88,754,000

Approximate date of issuance: March 13, 2003

Name and address of agent for service: Copy to:
Tim Perrott Antonia E. Stolper, Esq.
Spacenet Inc. Shearman & Sterling
c/o Gilat Satellite Networks Ltd. 599 Lexington Avenue
1750 Old Meadow Road New York, New York 10022-6069
McLean, Virginia 22102

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1. General Information

(a) Gilat Satellite Networks Ltd. (the "Company") is a corporation.

(b) The Company was organized under the laws of the State of Israel.

2. Securities Act Exemption Applicable

The Company proposes to issue, as part of a plan of arrangement (the "Plan
of Arrangement"), its 4.00% Convertible Notes due 2012 (the "New Notes").
Pursuant to the Plan of Arrangement, (i) in exchange for the aggregate principal
amount of $350,000,000 of the Company's outstanding 4.25% Convertible
Subordinated Notes due 2005 (the "Existing Notes"), the Company will issue
202,083,908 of its ordinary shares, par value NIS 0.01 per share (the "Ordinary
Shares") and $83,254,000 of the New Notes; and (ii) of the $102,000,000 in
principal amount due from the Company to Bank Hapoalim B.M. ("Bank Hapoalim"),
$25,500,00 will be converted into 18,488,590 Ordinary Shares, $5,100,000 will be
converted into New Notes of the same principal amount and the remaining debt
amount of $71,400,000 will remain as a loan on revised terms. In addition, the
Company will issue an aggregate principal amount of $200,000 of New Notes to
each of Itzhak Swary Ltd. and Zellermayer, Pelossof & Co., in connection with
their roles as financial advisor and legal counsel, respectively, to holders of
the Existing Notes in connection with the Plan of Arrangement. The Plan of
Arrangement is being implemented pursuant to Section 350 of the Israeli
Companies Law - 1999 (the "Companies Law"). The Application for Proposed Plan of
Arrangement as Submitted to Court is attached as Exhibit D to the Proxy
Solicitation (as defined below), which is included as Exhibit T3E-1 hereto.

On November 14, 2002, the Company submitted an application to the District
Court of Tel-Aviv-Yafo (the "Israeli Court") for permission to convene meetings
of the holders of the Existing Notes, Bank Hapoalim and other creditors of the
Company whom the Plan is intended to bind (the "Other Creditors"). At the
hearing of the application on November 17, 2002, the Israeli Court approved the
convening of the meetings of the holders of the Existing Notes, Bank Hapoalim
and the Other Creditors (the "Meetings") on February 5, 2003. In connection with
the Meetings, the Company sent to the trustee for the Existing Notes and
registered holders of the Existing Notes a proxy solicitation statement, dated
January 6, 2003 (the "Proxy Solicitation") for the purposes of soliciting votes
in favor of the Plan of Arrangement. The Proxy Solicitation stated that if the
Plan of Arrangement was to be approved at the Meetings, an application would be
filed with the Israeli Court for the approval of the Plan of Arrangement and
notices would be published and mailed to certain holders of the Existing Notes
specifying that the application had been filed and that objections to the Plan
of Arrangement may be filed with the Israeli Court within ten days of the
publication of the notice or receipt of the notice, as the case may be, but in
any event no later than February 27, 2003. The Proxy Solicitation also set forth
that the Israeli Court had set March 6, 2003 as the date for a hearing to
approve the Plan of Arrangement. Any person who has filed an objection will have
a right to appear at the court hearing. The Plan of Arrangement was approved by
the requisite votes at each of the Meetings. On February 11, 2003, the Company
applied to the Israeli Court to sanction the Plan of Arrangement. On February
11, 2003, the Company sent to its material creditors, including the trustee for
the Existing Notes, Bank Hapoalim, the Other Creditors, and its material
shareholders, a copy of the Company's application to the Israeli Court to
sanction the Plan of Arrangement, which included the results of the vote at the
Meetings. On February 14, 2003, the Company also published a notice in three
newspapers with wide circulation in Israel and in the New York Times giving
notice of the application and stating that persons may object to the Plan of
Arrangement by submitting their objections to the Israeli Court by February 24,
2003. At the hearing of the Israeli Court on March

6, 2003, the terms and conditions of the Plan of Arrangement was approved. The
consummation of the Plan of Arrangement is scheduled to take place on or about
March 13, 2003 (the "Closing Date"). A copy of the order of court, dated March
6, 2003, is attached hereto as Exhibit T3D.

The New Notes will be issued pursuant to an indenture, to be dated as of
the Closing Date, between the Company, as issuer, and The Bank of New York, as
trustee (the "Indenture"), which is the subject of this application.

The Company relies upon the exemption set forth in Section 3(a)(10) of the
Securities Act of 1933, as amended (the "Securities Act"), as the basis for the
issuance of the New Notes pursuant to the Indenture without registration under
the Securities Act.

AFFILIATIONS

3. Affiliates

The following table sets forth a list of entities that may be deemed
affiliates of the Company as of the date of this application, including their
respective percentages of voting securities, or other bases of control.

Percentage of Voting Securities held, directly
Name of Affiliate or indirectly, by the Company

Gilat Florida Inc. 100%
Gilat Satellite Networks (Holland) B.V. 100%
Spacenet Ireland, Ltd. 100%
Spacenet Inc. 100%
Gilat do Brasil Ltda. 100%
Gilat Satellite Solutions (Mexico) S.A. de C.V. 100%
Gilat Satellite Networks (Mexico) S.A. de C.V. 100%
Gilat Satellite Networks (Thailand) Ltd. 100%
Gilat Satellite Networks (South Africa) (Pty) Ltd. 100%
Norrison Trading Ltd. 100%
Gilat Satellite Networks India Private Limited 100%
Spacenet International Services Inc. 100%
Servicio Satelital S.A. 100%
Spacenet Services License Sub. Inc. 100%
Tridom Corporation 100%
Spacenet Real Estate Holdings, LLC 100%
Spacenet International Ventures Inc. 100%
Spacenet International Holdings Inc. 100%
Gilat Satellite Networks (Hong Kong) Ltd. 100%
Deterministic Inc. 100%
Gilat Europe AB 100%
Gilat Satellite Networks (Ukraine) TOV 99%
Gilat Satellite Solutions (Philippines) Inc. 99%
Guatemala Satelital S.A. 97.45%
Gilat to Home Peru S.A. 97.45%
Gilat Networks Colombia S.A. ESP 97.45%
Gilat Satellite Networks Colombia S.A. ESP 97.45%

Gilat to Home Latin America (Netherlands 97.45%
Antilles) N.V.
Gilat to Home Latin America (Holland) N.V. 97.45%
Gilat Colombia S.A. ESP 97.45%
Gilat to Home Chile S.A. 97.45%
Gilat to Home Larga Distancia Chile S.A. 97.45%
GTH Israel Ltd. 97.45%
Gilat Latin America, Inc. 97.45%
Gilat Satellite Networks Inc. 97.45%
rStar Corporation 85%
StarBand Latin America (Holland) B.V. 85%
Gilat to Home Florida Inc. 85%
Gilat to Home Brasil Holdings Ltda. 85%
Gilat to Home Brasil Ltda. 85%
Gilat to Home Peru Holding B.V. 70%
Gilat to Home Costa Rica S.A. 60%
Satlynx S.A. 50%
Satlynx GmbH 50%
Satlynx Ltd. 50%
Satlynx B.V. 50%
Satlynx s.r.o. 50%
Satlynx s.r.l. 50%
Satlynx (Europe) s.r.l. 50%
StarBand Communications 40%
KSAT Satellite Networks 35%

As of the date of this application, SES Capital Belgium S.A. owns 18.44% of
the Ordinary Shares of the Company and may therefore be deemed to be an
affilate.

Upon the consummation of the Plan of Arrangement, the following entity may
be deemed to be an affiliate of the Company based on the relationships set forth
below:

Bank Hapoalim will own approximately 14% of the Ordinary Shares of the
Company and continue to be a lender to the Company. The amount of loan
outstanding to Bank Hapoalim upon the consummation of the Plan of
Arrangement will be US$71,400,000. Further, upon the effectiveness of
an amendment to the Company's articles of association contemplated to
be proposed at the Company's next annual general meeting of
shareholders, Bank Hapoalim will have the right to appoint a director
on the board of directors of the Company for each 7% of the Company's
Ordinary Shares that it owns.

Some of the Company's directors and executive officers listed in Item 4 may
be deemed to be affiliates of the Company by virtue of their positions.

MANAGEMENT AND CONTROL

4. Directors and Executive Officers

The following table lists the names and offices held by all directors and
executive officers of the Company as of the date of this application. The
mailing address of each of the individuals listed in the following table is:

c/o Gilat Satellite Networks Ltd.
21 Yegia Kapayim Street
Kiryat Aryeh, Petach Tikva, 49130 Israel

Name Office

Yoel Gat...................... Chairman of the Board of Directors and Chief Executive Officer and
Vice President
Amiram Levinberg.............. President and Director
Shlomo Tirosh................. Director
Lori Kaufmann................. Director
Erez Antebi .................. Chief Operating Officer and Executive Vice President
Yoav Leibovitch............... Chief Financial Officer and Vice President, Finance
Joshua Levinberg.............. Senior Vice President, Business Development
William I. Weisel............. General Counsel and Vice President
Arik Keshet................... Chief Engineer and Vice President
Dr. Gideon Kaplan............. Vice President, Research and Development
Ori Gilliam................... Vice President, Broadband
Tal Meirzon................... Vice President, Marketing
Glenn Katz.................... Vice President, Customer Service
Hanan Gefen................... Vice President, Defense Accounts

5. Principal Owners of Voting Securities

As of the date of this application:

Percentage of Voting
Name and Complete Securities Owned
Mailing Address Title of Class Owned Amount Owned

SES Capital Belgium S.A. L-6815 Ordinary Shares 4,308,000 18.44%
Chateau de Betzdorf, Luxembourg

As described in Item 3, immediately following the consummation of the Plan
of Arrangement: (i) Bank Hapoalim will own approximately 35,636,000 Ordinary
Shares, representing approximately 14% of the Company's voting securities. The
mailing address of Bank Hapoalim is 41 Rothchild Blvd., Zion House, Tel Aviv,
Israel; and (ii) SES Capital Belgium S.A. will own less than 10% of the Ordinary
Shares.

UNDERWRITERS

6. Underwriters

(a) Within three years prior to the date of filing of this application, no
person has acted as an underwriter of any securities of the Company that are
outstanding on the date of filing this application.

(b) There are no underwriters of the securities that are the subject of
this application.

CAPITAL SECURITIES

7. Capitalization

(a) As of the date of this application:

Title of Class Amount Authorized Amount Outstanding
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Ordinary Shares, par value NIS 0.01 per share 300,000,000 23,855,922*
4.25% Convertible Subordinated Notes due 2005 $420,000,000 aggregate $350,000,000 aggregate
principal amount principal amount

Upon consummation of the Plan of Arrangement (i) the Existing Notes will be
cancelled; (ii) $88,754,000 aggregate principal amount of the New Notes will be
issued; (iii) 202,083,908 Ordinary Shares will be issued to the holders of the
Existing Notes; and (iv) 18,488,590 Ordinary Shares will be issued to Bank
Hapoalim; and (v) 1,067,728 Ordinary Shares will be issued to IBM Credit LLC.

(b) Each holder of Ordinary Shares is entitled to one vote for each share
held by such person of record or in such person's name on all matters submitted
to a vote of shareholders without regard to whether the vote is conducted by a
show of hands, by written ballot or by any other means. The holders of Ordinary
Shares vote as one class. The Ordinary Shares do not have cumulative voting
rights. The holders of Ordinary Shares do not have preemptive, subscription,
redemption or conversion rights.

INDENTURE SECURITIES

8.Analysis of Indenture Provisions

The following is a general description of certain provisions of the
Indenture to be qualified and is subject in its entirety by reference to the
form of the Indenture to be qualified, filed as Exhibit T3C hereto. Terms used
below have the meanings ascribed to them in the Indenture.

(a) Defaults under the Indenture; Withholding of Notice of Default

The Indenture provides that each of the following constitutes an event of
default:

(i) default for thirty days in the payment of interest or principal
due during 2010 and 2011;

(ii) default in the payment of any principal or premium, if any, when
due at maturity or otherwise, including, without limitation,
failure by the Company to purchase Securities tendered for
purchase pursuant to a Change of Control Offer;

(iii) failure for 60 days after the receipt of written notice from the
Trustee or from the holders of at least 25% in aggregate
principal amount of the Securities to comply with other covenants
and agreements contained in the Indenture or the Securities;

(iv) default under any mortgage, indenture or instrument, including
the Security Documents, under which there

may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any of its
material subsidiaries (or the payment of which is guaranteed by
the Company or any of its material subsidiaries), whether the
indebtedness or guarantee existed on the Closing Date or is
created thereafter, which default (a) is caused by a failure to
pay when due principal or interest on the indebtedness within the
grace period provided in the indebtedness (which failure
continues beyond any applicable grace period) or (b) results in
the acceleration of the indebtedness prior to its express
maturity (without such acceleration being rescinded or annulled)
and, in each case, the principal amount of the indebtedness,
together with the principal amount of any other indebtedness
under which there has been default in payment or the maturity of
which has been accelerated, aggregates $15,000,000 or more, which
default in payment is not cured or acceleration is not annulled,
within 30 days after the receipt of written notice to comply as
provided in the indenture; and

(v) certain events of bankruptcy or insolvency with respect to the
Company or any of its material subsidiaries.

If a Default or Event of Default occurs and is continuing and if it is
actually known to the Trustee, the Trustee will mail to Noteholders a notice of
Default or Event of Default within 90 days after it occurs. Except where the
Default or Event of Default relates to the failure to pay any principal, premium
or interest, the Trustee may withhold the notice if and so long as a committee
of its Responsible Officers in good faith determines that withholding the notice
is in the interests of the Noteholders.

If an Event of Default (other than Events of Default relating to bankruptcy
or insolvency) occurs and is continuing, the Trustee or the Noteholders of at
least 25% in aggregate principal amount of the then outstanding New Notes may
declare the principal of, premium on, and accrued and unpaid interest on the New
Notes to be due and payable immediately. If an Event of Default relating to
bankruptcy or insolvency occurs, the principal of, premium on, and accrued and
unpaid interest on the New Notes will ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Noteholder.

The Noteholders of a majority in aggregate principal amount of the then
outstanding Securities, by notice to the Trustee, may rescind an acceleration
and its consequences if (i) the rescission would not conflict with any judgment
or decree; (ii) all amounts payable to the Trustee under the Indenture have been
paid; and (iii) all existing Events of Default have been cured or waived, except
for the nonpayment of principal, premium or interest that has become due solely
because of the acceleration.

(b) Authentication and Delivery of Securities; Application of Proceeds

Two Officers of the Company shall sign the Securities by manual or
facsimile signature. A Security shall not be entitled to any benefits under the
Indenture or otherwise be valid until authenticated by the manual signature of
an authorized signatory of the Trustee. The signature shall be conclusive
evidence that the Security has been authenticated under the Indenture. Upon a
written order of the Company signed by two Officers, the Trustee shall
authenticate the Securities in accordance with the Indenture and deliver such
authenticated Securities as directed in such order. The Trustee may appoint one
or more authenticating agents acceptable to the Company to

authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so and has the same rights as an Agent to deal with
the Company or an Affiliate of the Company. Each Security shall be dated the
date of its authentication.

There will be no proceeds (and therefore no application of such proceeds)
from the issuance of the Securities, because the Securities will be issued to
the holders of the Existing Notes, Bank Hapoalim and the Other Creditors,
pursuant to the Plan of Arrangement, in satisfaction or partial satisfaction of
their respective claims.

Under the terms of the Pledge Agreement, the pledge, assignment and
security interest granted thereby shall terminate and all rights to the
Collateral shall revert to the Company upon the later to occur of (i) the
payment in full of the Secured Obligations (as defined in the Pledge Agreement)
to the Collateral Agent in cash and (ii) the absence of any further obligations
of the Company in respect of the Secured Obligations. Upon any such termination,
the Collateral Agent will, at the Company's expense, execute and deliver to the
Company such documents as the Company shall reasonably request to evidence such
termination.

Further, under the terms of the Charge Agreement, the Security Interests
shall be released, reassigned and discharged when the Company fully,
indefeasibly and irrevocably pays in full the Secured Sums (as defined in the
Charge Agreement). Any such absolute and unconditional release, reassignment or
discharge will be subject to a provision on the avoidance of payments under the
Charge Agreement.

(d) Satisfaction and Discharge of the Indenture

The Indenture will be discharged and cease to be of further effect (except
as to any surviving rights of conversion, registration of transfer or exchange
of Securities therein expressly provided for and except for certain obligations
which survive until otherwise terminated or discharged) when:

(i) all Securities authenticated and delivered (other than Securities
which have been destroyed, lost or stolen and which have been
replaced or paid, and Securities for whose payment money has been
deposited in trust and thereafter repaid to the Company) have
been delivered to the Trustee for cancellation; or

(ii) all Securities that have not been delivered to the Trustee for
cancellation (a) have become due and payable, or (b) will become
due and payable at the final maturity date within one year, and
the Company, in the case of (a) or (b) above, has irrevocably
deposited or caused to be irrevocably deposited with the Trustee
as funds in trust for the purpose cash in an amount sufficient to
pay and discharge the entire indebtedness on the Securities not
delivered to the Trustee for cancellation, for principal,
premium, if any, and interest, if any, to the date of such
deposit (in the case of Securities which have become due and
payable) or to the final maturity date, as the case may be, in
all other cases;

(iii) the Company has paid or caused to be paid all other sums payable
under the Indenture by the Company; and

(iv) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions
precedent provided for in the Indenture relating to the
satisfaction and discharge of the Indenture have been complied
with.

(e) Evidence of Compliance with Conditions

The Company is required to deliver to the Trustee, within 120 days after
the end of each fiscal year of the Company, an Officers' Certificate stating
that a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under, and complied with the covenants
and conditions contained in, the Indenture, and further stating, as to each such
Officer signing the certificate, that to the best of such Officer's knowledge
the Company has kept, observed, performed and fulfilled each and every covenant,
and complied with the covenants and conditions contained in the Indenture and is
not in default (without regard to periods of grace or notice requirements) in
the performance or observance of any of the terms, provisions and conditions
thereof (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which such Officer may have knowledge)
and that to the best of such Officer's knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of,
premium on or interest on, the Securities are prohibited. In addition, the
Indenture requires the Company to notify the Trustee in writing within five
Business Days of becoming aware of a Default, an Event of Default or a default
in the performance of any covenant, agreement or condition contained in the
Indenture or under any other mortgage, indenture or instrument, as described in
Item (a) above.

9. Other Obligors

There are no other obligors under the Indenture.

Content of Application for Qualification. This application for
qualification comprises:

(a) Pages number 1 to 11 consecutively.

(b) The statement of eligibility and qualification on form T-1 of The Bank
of New York, as proposed Trustee under the Indenture to be qualified (included
as Exhibit 25.1 hereto).

(c) The following exhibits in addition to those filed as part of the
statement of eligibility and qualification of such Trustee:

Exhibit T3A Articles of Association of the Company, as amended and
restated. (Incorporated by reference to Exhibit 1.2 to the
Annual Report on Form 20-F filed by the Company on July 2,
2001).

Exhibit T3B Memorandum of Association, as amended. (Incorporated by
reference to Exhibit 1.1 to the Annual Report on Form 20-F
filed by the Company on July 2, 2001).

Exhibit T3C Form of the Indenture.

Exhibit T3D A Certified English translation of the Order of the
District Court of Tel-Aviv-Yafo, dated March 6, 2003,
approving the Plan of Arrangement.

Exhibit T3E-1 Proxy Solicitation, dated January 6, 2003. (Incorporated
by reference to Exhibit (a)(1) to the Schedule TO filed by
the Company on January 6, 2003.)

Exhibit T3E-2 Voting Instructions. (Incorporated by reference to Exhibit
(a)(2) to the Schedule TO filed by the Company on January
6, 2003.)

Exhibit T3E-3 Master Voting Instructions. (Incorporated by reference to
Exhibit (a)(3) to the Schedule TO filed by the Company on
January 6, 2003.)

Exhibit T3E-4 Solicitation of Voting Instructions. (Incorporated by
reference to Exhibit (a)(4) to the Schedule TO filed by
the Company on January 6, 2003.)

Exhibit T3E-5 Client Solicitation of Voting Instructions. (Incorporated
by reference to Exhibit (a)(5) to the Schedule TO filed by
the Company on January 6, 2003.)

Exhibit T3F Cross Reference Sheet.

Exhibit 25.1 Form T-1 qualifying The Bank of New York as Trustee under
the Indenture to be qualified.

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, Gilat Satellite Networks Ltd., a company organized and existing under
the laws of the State of Israel, has duly caused this application to be signed
on its behalf by the undersigned, thereunto duly authorized, and its seal to be
hereunto affixed and attested, all in the City of Petach Tikva, and the State of
Israel, on the 10th day of March, 2003.

GILAT SATELLITE NETWORKS LTD.

By: /s/ Yoav Leibovitch
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Name: Yoav Leibovitch
Title: Chief Financial Officer

(Seal)

Attest:

By: /s/ Rachel Prishkolinitc
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Name: Rachel Prishkolinitc
Title: Legal Counsel