Microcell Telecommunications et al. - MRRS Decision

MRRS Decision

Headnote

Section 233 of Regulation - Issuer is a connected issuer of one of the underwriters - Related underwriter exempted fromclause 224(1)(b) of Regulation where there is participation by an independent agent corresponding to that required bysection 2.1 of proposed Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts.

Applicable Ontario Statute

Securities Act, R.S.O. 1990, c.S.5, as am.

Applicable Ontario Regulation

Regulation made under the Securities Act, R.R.O. 1990, Reg.1015, as am., ss. 219(1), 224(1)(b) and, 233, Part XIII.

Applicable Ontario Rule

Proposed Multi-Jurisdictional Instrument 33-105 Underwriting Conflicts, (1998), 21 OSCB 788, as amended (1999), 22OSCB 149.

IN THE MATTER OF THE CANADIAN SECURITIES LEGISLATION OF

THE PROVINCES OF BRITISH COLUMBIA,

NEWFOUNDLAND, QUÉBEC AND ONTARIO

AND

IN THE MATTER OF THE MUTUAL RELIANCE REVIEW SYSTEM FOR

EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF MICROCELL TELECOMMUNICATIONS INC.

AND

IN THE MATTER OF BMO NESBITT BURNS INC.

CIBC WORLD MARKETS INC.

J.P. MORGAN SECURITIES CANADA INC.

NATIONAL BANK FINANCIAL INC.

MRRS DECISION DOCUMENT

WHEREAS an application has been received by the British Columbia Securities Commission, the SecuritiesCommission of Newfoundland, the Québec Securities Commission and the Ontario Securities Commission (the"Commissions") from BMO Nesbitt Burns Inc. ("Nesbitt"), CIBC World Markets Inc. ("CIBC WM"), J.P. MorganSecurities Canada Inc. ("J.P. Morgan Canada") and National Bank Financial Inc. ("NBF"), (collectively, the"Underwriters") for a decision pursuant to the Canadian securities legislation (the "Legislation") of Alberta, BritishColumbia, Newfoundland, Québec and Ontario (the "Jurisdictions") that the restrictions against acting as an underwriterwith respect to the conflict of interest rules contained in the Legislation (the "Independent Underwriter Requirement")shall not apply to the Underwriters in connection with a public offering by Microcell Telecommunications Inc. ("Microcell")of 3,703,704 Class B Non-Voting shares (the "Shares") at a price of $27.00 per Share by way of a short form prospectus(the "Prospectus") filed with all securities commissions in Canada, and a registration statement filed with the UnitedStates Securities and Exchange Commission, of which 2,032,659 Shares for aggregate gross proceeds of $54,881,793million have been underwritten by the underwriters (the "Underwritten Offering") and the balance of 1,671,045 Sharesfor gross proceeds of $45,118,215 will be subscribed for by Telesystem Ltd. and VoiceStream Wireless Corporationpursuant to a concurrent purchase covered by the Prospectus (the "Concurrent Purchase", and collectively with theUnderwritten Offering the "Offering").

AND WHEREAS pursuant to the Mutual Reliance System for Exemptive Relief Applications (the "System"),the Québec Securities Commission is the Principal Regulator for this application.

AND WHEREAS the Underwriters have represented to the Commissions that:

1. Microcell is a corporation that was incorporated under the Canada Business Corporations Act and its headoffice is located in Montreal, Québec. Microcell is involved in the design and deployment of wirelesscommunications services.

2. Microcell is a reporting issuer in all provinces of Canada and its Shares are listed for trading on The TorontoStock Exchange and quoted on the Nasdaq National Market.

3. Microcell filed on January10, 2001 a preliminary short form prospectus (the "Preliminary Prospectus") in orderto issue pursuant to the Offering, a total of 3,703,704 Shares for an aggregate consideration of $100,000,008.The Preliminary Prospectus was filed with the securities commissions and similar regulatory authorities of eachprovince under the Mutual Reliance Review System for Prospectuses with Québec as its designatedjurisdiction. Microcell intends to file a final short form Prospectus on or about January 17, 2001.

4. The proportionate share of the Underwritten Offering to be underwritten by each of the members of theunderwriting syndicate offering the Shares is as follows:

Underwriter ProportionateShare
Nesbitt 27.5%
Merrill Lynch Canada Inc. ("Merrill") 27.5%
CIBC WM 15%
J.P. Morgan Canada 10%
NBF 10%
RBC Dominion Securities ("RBCDS") 10%

5. Nesbitt is a wholly-owned subsidiary of BMO Nesbitt Burns Corporation Limited, an indirect majority-ownedsubsidiary of Bank of Montreal ("BMO"); CIBC WM is a wholly-owned subsidiary of the Canadian Imperial Bankof Commerce (the "CIBC"); J.P. Morgan Canada is a wholly-owned subsidiary of J.P. Morgan Chase & Co.("J.P. Morgan") and NBF is an indirect wholly-owned subsidiary of National Bank of Canada ("National"). BMO,CIBC, J.P. Morgan and National are hereinafter referred to as the "Related Banks".

6. Nesbitt, CIBC WM, J.P. Morgan Canada and NBF are subsidiaries of banks which are members of a syndicateof financial institutions (the "Microcell Lenders") that has made credit facilities available to Microcell (the"Microcell Loan Facilities"). The Microcell Loan Facilities provide for an aggregate maximum availability of$750 million, of which, as at December 31, 2000, approximately

$54.7 million was owed to the banks that control the Underwriters. Microcell is in good financial condition andis not in default under the Microcell Loan Facilities.

Microcell is also indebted to each of BMO and CIBC in the amount of $56.4 million, respectively, for theissuance of standby letters of credit to support Microcell's participation in Industry Canada's upcoming auctionof additional PCS Spectrum in the 2 GHz frequency range.

Microcell is an affiliate of Look Communications Inc. (ALook@) because both corporations are ultimatelycontrolled by Telesystem Ltd. Look currently has a revolving credit facility (the ALook Loan Facility@) withBMO and Bank of Nova Scotia (the ALook Lenders@). The Look Loan Facility provides for an aggregatemaximum availability of $208 million and is fully drawn as of the date hereof.

Microcell Capital II Inc., a wholly owned subsidiary of Microcell, has entered into a binding term sheet (theATerm Sheet@) with Look to acquire from Look, 50% of the outstanding shares of Inukshuk Internet Inc.(AInukshuk@) on or before January 31, 2001 for a price of $150 million (the AInukshuk Acquisition@). Theremaining 50% of the outstanding shares of Inukshuk is already owned directly or indirectly by Microcell. Theclosing of the Inukshuk Acquisition is conditional upon the closing of the Offering. In connection with theexecution of the Term Sheet, the Look Lenders have agreed, among other things, to waive certain defaults ofLook. The purchase price to be received by Look pursuant to the Inukshuk Acquisition will be applied in partto reduce or repay indebtedness of Look to the Look Lenders.

Look may be considered a Aspecified party@, within the meaning ascribed to that term in the Proposed ConflictsInstrument (as defined below), if it were issuing the securities pursuant to the Offering. However, Microcell has not,during the 12 months preceding the Offering, undertaken any of the activities described in clauses (b)(i)(A) and (B) ofthe definition of Aspecified party@ set out in the Proposed Conflicts Instruments (as defined below) and it could notreasonably be expected that Microcell will undertake any of such activities within the 12 months following the end of theOffering.

Each of Nesbitt, CIBC WM, J.P. Morgan Canada and NBF is controlled by a bank that is a lender to Microcell andNesbitt is controlled by a bank that is a lender to Look. Neither the Microcell Lenders nor the Look Lenders participatedin the decision of Microcell to make the Offering, nor did any of such lenders participate in the determination of the termsof the distribution or in the use of proceeds thereof.

7. Furthermore, each of Merrill and RBC DS is independent of the Microcell Lenders and the Look Lenders andMicrocell is not a connected issuer of either Merrill or RBC DS.

8. Microcell may be considered a connected issuer (as that term is defined in the Proposed Multi-JurisdictionalInstrument 33-105 entitled Underwriting Conflicts (the AProposed Conflicts Instrument@) of theUnderwriters, thus the Underwriters do not comply with the proportionate requirement of the Legislation.

9. Microcell is not a Arelated issuer@ of any of the Underwriters as that term is defined in the Proposed ConflictsInstrument nor is Microcell a Aspecified party@ as that term is defined in the Proposed Conflicts Instrument.

10. Microcell is in good financial condition and is not in default under the Microcell Loan Facilities. Microcell hasno direct or indirect investment by way of loan, guarantee or equity ownership in Look and has no intention ofmaking any such investment.

11. The decision to issue the Shares, including the determination of the terms of such distribution was madethrough negotiations between Microcell and the members of the underwriting syndicate without the involvementof the Related Banks The Microcell Lenders and the Look Lenders did not participate in the decision ofMicrocell to make the Offering or in the determination of the terms of the distribution or the use of proceedsthereof.

12. As of date hereof, Microcell is neither a Aconnected issuer@ nor a Arelated issuer@ in relation to Merrill andRBC DS. Merrill and RBC DS have agreed to underwrite 27.5% and 10%, respectively, of the UnderwrittenOffering, have and will participate in the due diligence investigation and will review and participate in thepreparation of the preliminary and final short form prospectuses in respect of the Offering. Furthermore, all theunderwriters have participated in the process relating to setting and negotiating the price for the Shares to bedistributed pursuant to the Offering.

13. The certificate in each of the Preliminary Prospectus and the Prospectus will be signed by each member of theunderwriting syndicate including each of the Underwriters.

14. The Underwriters will not benefit in any manner from the Offering other than the payment of their fee inconnection with the Underwritten Offering.

15. The disclosure required by Schedule C of the Proposed Conflicts Instrument will be contained in the PreliminaryProspectus and in the Prospectus and the certificate in such prospectus will be signed by each of theUnderwriters.

AND WHEREAS pursuant to the Policy 12-201, this Decision Document evidences the decision of each Decision Maker;

AND WHEREAS each Decision Maker is satisfied that conditions or circumstances exist which are required by theLegislation to enable the Decision Maker to make the decision.

AND WHEREAS each Decision Maker is being satisfied to do so would not be prejudicial to the public interest;

IT IS THE DECISION by the Decision Maker pursuant to the Legislation that the Independent Underwriter Requirementshall not apply to the Offering provided that :

1. The independent underwriters Merrill and RBC DS participate in the Offering as stated in paragraph 12above;

2. the Prospectus contains the disclosure stated in paragraph 12 above;

3. the relationship between the Issuer and the member of the underwriting syndicate is disclosed in theProspectus.

DATED at Montréal, this 17th day of January 2001.

Jean Lorrain

Le directeur de la conformité et de l'application