Securities Law & Instruments

Headnote

Dual application for exemptive relief -- Equity line of credit distribution -- Company to enter into an equity purchase agreement with a purchaser acting as an underwriter to distribute shares of the Company through the facilities of the TSX in the context of an equity line of credit distribution -- Company granted exemption from the Prospectus Disclosure Requirements, subject to conditions -- Subscriber granted exemption from the Dealer Registration Requirement and Prospectus Delivery Requirement, subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25(1), 71, 74(1), 147.

National Instrument 44-101 Short Form Prospectus Distributions.

National Instrument 44-102 Shelf Distributions.

TRANSLATION

June 22, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(the "Jurisdictions")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

MEDICAGO INC. (the "Company"),

YA GLOBAL MASTER SPV LTD. (the "Subscriber")

AND YORKVILLE ADVISORS, LLC (the "Manager",

and together with the Company and the Subscriber,

the "Filers")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (each, a "Decision Maker") has received an application from the Filers for a decision under the securities legislation of the Jurisdictions (collectively, the "Legislation"):

(a) that the following prospectus disclosure requirements under the Legislation (the "Prospectus Disclosure Requirements") do not fully apply to the Company in connection with the Distribution (as defined below):

(i) the statement in the Prospectus Supplement (as defined below) respecting statutory rights of withdrawal and rescission in the form prescribed by item 20 of Form 44-101F1 of Regulation 44-101 respecting Short Form Prospectus Distributions ("Regulation 44-101"); and

(ii) the statements in the Base Shelf Prospectus (as defined below) required by subsections 5.5(2) and (3) of Regulation 44-102 respecting Shelf Distributions ("Regulation 44-102");

(b) that the prohibition from acting as a dealer unless the person is registered as such (the "Dealer Registration Requirement") does not apply to the Subscriber and the Manager in connection with the Distribution; and

(c) that the requirement that a dealer send a copy of the Prospectus (as defined below) to a subscriber or purchaser in the context of a distribution (the "Prospectus Delivery Requirement") does not apply to the Subscriber, the Manager or the dealer(s) through whom the Subscriber sells the Shares (as defined below) and that, as a result, rights of withdrawal or rights of rescission, price revision or damages for non-delivery of the Prospectus do not apply in connection with the Distribution,

(collectively, the "Exemptive Relief Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for dual application):

(a) the Autorité des marchés financiers is the principal regulator for this application;

(b) the Filers have provided notice that subsection 4.7(1) of Regulation 11-102 respecting Passport System ("Regulation 11-102") is intended to be relied upon in the provinces of Alberta and British Columbia; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in Regulation 14-101 respecting Definitions and Regulation 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filers:

The Company

1. The Company is incorporated under Part IA of the Companies Act (Québec) and its head office is located at 1020, route de l'Église, Suite 600 in Québec, province of Québec.

2. The Company is a biotechnology company focused on developing highly effective and affordable vaccines based on proprietary manufacturing technologies and Virus-Like Particles (VLP).

3. The Company is a reporting issuer under the securities legislation of the provinces of Alberta, British Columbia, Ontario and Québec (collectively, the "Provinces") and is not in default of the securities legislation of any jurisdiction of Canada.

4. The authorized share capital of the Company currently consists of an unlimited number of common shares (the "Shares"), without par value, and an unlimited number of preferred shares, without par value, issuable in series. As at May 25, 2010, a total of 118,231,856 Shares were issued and outstanding and no preferred shares were issued and outstanding.

5. The Shares are listed for trading on the Toronto Stock Exchange (the "TSX"). Based on their closing price of $0.43 on May 27, 2010, the market capitalization of the Company was approximately $50,840,000.

6. The Company is qualified to file a short form prospectus under section 2.2 of Regulation 44-101 and therefore is also qualified to file a base shelf prospectus under Regulation 44-102.

7. The Company intends to file with the securities regulator in each of the Provinces a base shelf prospectus pertaining to various securities of the Company, including the Shares (such base shelf prospectus and any amendment thereto, the "Base Shelf Prospectus").

8. The statements required by subsections 5.5(2) and (3) of Regulation 44-102 contained in the Base Shelf Prospectus will be qualified by adding the following statement: "except in cases where an exemption from such delivery requirements has been obtained."

The Subscriber and the Manager

9. The Subscriber is an Exempt Company incorporated in the Cayman Islands with limited liability and its head office is located at 101 Hudson Street, Suite 3700 in Jersey City, New Jersey, United-States.

10. The Subscriber is managed by the Manager, a limited liability company incorporated under the laws of Delaware and having its head office at 101 Hudson Street, Suite 3700, in Jersey City, New Jersey, United-States.

11. Neither the Subscriber nor the Manager is a reporting issuer or registered as a registered firm as defined in Regulation 31-103 respecting Registration Requirements and Exemptions in any jurisdiction of Canada. The Subscriber and the Manager are not in default of securities legislation in any jurisdiction of Canada.

The Distribution Agreement

12. The Company entered into a standby equity distribution agreement on May 13, 2010 with the Subscriber (the "Distribution Agreement") pursuant to which the Subscriber has agreed to subscribe for, and the Company has the right but not the obligation to issue and sell, up to $10,000,000 of Shares (the "Aggregate Commitment Amount") over a period of 36 months in a series of drawdowns.

13. Under the Distribution Agreement, the Company has the sole ability to determine the timing and the amount of each drawdown, subject to certain conditions, including a maximum investment amount per drawdown and the Aggregate Commitment Amount.

14. The subscription price per Share and therefore the number of Shares to be issued to the Subscriber for each drawdown will be calculated based on a predetermined percentage discount from the daily volume-weighted average price of the Shares traded on the TSX (or the TSX Venture Exchange, the New York Stock Exchange or NASDAQ, provided that the Shares are listed for trading on such exchange (each, "Another Exchange")) over a period of ten trading days following a drawdown notice sent by the Company (the "Drawdown Pricing Period"). The Company may fix in such drawdown notice a minimum purchase price below which it will not issue any Shares for any given trading day.

15. On the 11th trading day following the date of each drawdown notice (each, a "Settlement Date"), the amount of the drawdown will be paid by the Subscriber in consideration for the relevant number of newly issued Shares.

16. At the time of each drawdown notice and at each Settlement Date, the Company will make a representation to the Subscriber that the Base Shelf Prospectus, as supplemented (the "Prospectus"), contains full, true and plain disclosure of all material facts relating to the Company and the Shares. The Company would therefore be unable to issue, or decide to issue, Shares when it is in possession of undisclosed information that would constitute a material fact or a material change.

17. On or after each Settlement Date, the Subscriber may seek to sell all or a portion of the Shares subscribed under the drawdown.

18. During the term of the Distribution Agreement, the Subscriber and its affiliates, associates or insiders, as a group, will not own at any time, directly or indirectly, Shares representing more than 9.9 % of the issued and outstanding Shares.

19. The Subscriber, the Manager and their affiliates, associates or insiders, will not hold a "net short position" in Shares during the term of the Distribution Agreement. However, the Subscriber may, after the receipt of a drawdown notice, seek to short-sell Shares to be subscribed for under the drawdown, or engage in hedging strategies, in order to reduce the economic risk associated with its commitment to subscribe for Shares, provided that:

(a) the Subscriber and the Manager comply with applicable rules of the TSX (and/or Another Exchange, as the case may be) and applicable securities regulation;

(b) the Subscriber, the Manager and their affiliates, associates or insiders, will not, during the Drawdown Pricing Period, directly or indirectly, sell Shares or grant any right to purchase or acquire any right to dispose of, nor otherwise dispose for value of, any securities of the Company or any securities convertible into or exchangeable for any securities of the Company, for gross proceeds in aggregate exceeding the amount of the drawdown; and

(c) notwithstanding the foregoing, the Subscriber, the Manager and their affiliates, associates or insiders, will not, directly or indirectly, sell Shares or grant any right to purchase or acquire any right to dispose of, nor otherwise dispose for value of, any securities of the Company or any securities convertible into or exchangeable for any securities of the Company, between the time of delivery of a drawdown notice and the filing of the press release announcing the drawdown.

20. No extraordinary commission or consideration will be paid by the Subscriber or the Manager to a person or company in respect of the disposition of Shares by the Subscriber to purchasers who purchase the same on the TSX (and/or Another Exchange, as the case may be) through dealer(s) engaged by the Subscriber (the "TSX Purchasers").

21. The Subscriber and the Manager have also agreed, in effecting any disposition of Shares, not to engage in any sales, marketing or solicitation activities of the type undertaken by underwriters in the context of a public offering. More specifically, each of the Subscriber and the Manager will not (a) advertise or otherwise hold itself out as a dealer, (b) purchase or sell securities as principal from or to customers, (c) carry a dealer inventory in securities, (d) quote a market in securities, (e) extend, or arrange for, the extension of credit in connection with transactions of securities of the Company, (f) run a book of repurchase and reverse repurchase agreements, (g) use a carrying broker for securities transactions, (h) lend securities for customers, (i) guarantee contract performance or indemnify the Company for any loss or liability from the failure of the transaction to be successfully consummated, or (j) participate in a selling group.

22. The Subscriber and the Manager will not solicit offers to purchase Shares in any jurisdiction of Canada and will sell the Shares to TSX Purchasers through one or more dealer(s) unaffiliated with the Subscriber, the Manager and the Company.

The Prospectus Supplements

23. The Company intends to file with the securities regulator in each of the Provinces a prospectus supplement to the Base Shelf Prospectus (each, a "Prospectus Supplement") within two business days after the Settlement Date for each drawdown under the Distribution Agreement.

24. The Prospectus Supplement will include (i) the number of Shares issued to the Subscriber, (ii) the price per Share paid by the Subscriber, (iii) the information required by Regulation 44-102, including the disclosure required by subsection 9.1(3) of Regulation 44-102, and (iv) the following statement:

Securities legislation in certain of the provinces of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment are not delivered to the purchaser, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province. However, such rights and remedies will not be available to purchasers of common shares distributed under this prospectus because the prospectus will not be delivered to purchasers, as permitted under a decision document issued by the Autorité des marchés financiers on June 22, 2010.

The securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment contain a misrepresentation, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province. Such remedies remain unaffected by the non-delivery of the prospectus, as permitted under the decision document referred to above.

The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province for the particulars of these rights or consult with a legal adviser.

(the "Amended Statement of Rights").

25. The Base Shelf Prospectus, as supplemented by each Prospectus Supplement, will qualify (a) the distribution of Shares to the Subscriber on the Settlement Date, and (b) the disposition of Shares to TSX Purchasers during the period that commences on the date of issuance of a drawdown notice and ends on the earlier of (i) the date on which the disposition of such Shares has been completed or (ii) the 40th day following the relevant Settlement Date (collectively, the "Distribution").

26. The Prospectus Delivery Requirement is not workable in the context of the Distribution because the TSX Purchasers will not be readily identifiable as the dealer(s) acting on behalf of the Subscriber may combine the sell orders made under the Prospectus with other sell orders and the dealer(s) acting on behalf of the TSX Purchasers may combine a number of purchase orders.

27. The Prospectus Supplement will contain an underwriter's certificate in the form set out in section 2.2 of Appendix B to Regulation 44-102 signed by the Subscriber.

28. At least three business days prior to the filing of any Prospectus Supplement, the Company will provide for comment to the Decision Makers a draft of such Prospectus Supplement.

Press Releases / Continuous Disclosure

29. The Company has filed on May 13, 2010, on SEDAR (i) a press release and a material change report disclosing certain terms of the Distribution Agreement, including the Aggregate Commitment Amount, and (ii) a copy of the Distribution Agreement.

30. The Company will promptly issue and file on SEDAR a press release upon the issuance of each drawdown notice, disclosing the aggregate amount of the drawdown, the maximum number of Shares to be issued and the minimum price per Share, if any.

31. On or after each Settlement Date, the Company will:

(a) promptly issue and file on SEDAR a press release disclosing:

(i) the number of Shares issued to, and the price per Share paid by, the Subscriber;

(ii) that the Base Shelf Prospectus and the relevant Prospectus Supplement are or will shortly be available on SEDAR and specifying how a copy of these documents can be obtained; and

(iii) the Amended Statement of Rights; and

(b) within ten days, file on SEDAR a material change report if the relevant Distribution constitutes a material change under applicable securities legislation, disclosing at a minimum the information required in subparagraph (a) above.

32. The Company will also disclose in its financial statements and MD&A filed on SEDAR, for each financial period, the number and price of Shares issued to the Subscriber pursuant to the Distribution Agreement.

Deliveries upon Request

33. The Company will deliver to the Decision Makers and to the TSX (and/or Another Exchange, as the case may be), upon request, a copy of each drawdown notice delivered by the Company to the Subscriber under the Distribution Agreement.

34. The Subscriber and the Manager will make available to the Decision Makers, upon request, full particulars of trading and hedging activities by the Subscriber or the Manager (and, if required, trading and hedging activities by their respective affiliates, associates or insiders) in relation to securities of the Company during the term of the Distribution Agreement.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Makers to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemptive Relief Sought is granted, provided that:

(a) as it relates to the Prospectus Disclosure Requirements,

(i) the Company comply with the representations in paragraphs 8, 24, 25, 30, 31 and 33; and

(ii) the number of Shares distributed by the Company under the Distribution Agreement does not exceed:

A. in any 12 month period, 10 % of the aggregate number of Shares outstanding calculated at the beginning of such period; and

B. during the term of the Distribution Agreement, 19.9 % of the aggregate number of Shares outstanding calculated at the date of execution of the Distribution Agreement;

(b) as it relates to the Prospectus Delivery Requirement and the Dealer Registration Requirement, the Subscriber and the Manager, as the case may be, comply with the representations in paragraphs 19, 20, 21, 22, 27 and 34; and

(c) this decision will only apply to Distributions completed within 25 months following the date of the receipt for the Base Shelf Prospectus, and this decision will terminate 25 months after the receipt for the Base Shelf Prospectus.

"Jean Daigle"
Director, Corporate Finance
 
"Mario Albert"
Superintendent, Client Services,
Compensation and Distribution