Medicago Inc. et al.

Decision

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), 14.7.

National Instrument 44-101 Short Form Prospectus Distributions.

National Instrument 44-102 Shelf Distributions.

TRANSLATION

September 18, 2012

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 "Corporation"),

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

and YORKVILLE ADVISORS, LLC (the "Manager",

and together with the Corporation and the Subscriber,

the "Filers")

DECISION

Background

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

a) the following prospectus disclosure requirements under the Legislation (the "Prospectus Disclosure Requirements") do not fully apply to the Corporation 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, revision of price or damages 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) 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) 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, as a result, rights of withdrawal or rights of rescission, revision of price 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 a dual application):

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

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

c) this 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 herein.

Representations

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

The Corporation

1. The Corporation is incorporated under Part 1A of the Companies Act (Québec) and is now existing under the Business Corporations Act (Québec) and its head office is located at 1020, route de l'Église, Suite 600, in Québec, province of Québec.

2. The Corporation is a reporting issuer under the securities legislation of each of the provinces of Alberta, British Columbia, Ontario and Québec and is not in default of any requirements of the securities legislation of any jurisdiction of Canada.

3. The Corporation's authorized share capital currently consists of an unlimited number of common shares without par value (the "Shares") and an unlimited number of preferred shares without par value issuable in series. As at August 14, 2012, a total of 246,850,858 Shares were outstanding and no preferred shares were issued and outstanding.

4. The Shares are listed for trading on the Toronto Stock Exchange (the "TSX") under the symbol "MDG". Based on the closing price of $0.51 of the Shares on the TSX on August 20, 2012, the current market capitalization of the Corporation is approximately $125,893,938.

5. The Corporation has entered into a Representation Right and Preemptive Right Agreement with Philip Morris Participations B.V. ("PMP") (the "Preemptive Right Agreement") dated October 21, 2008, which was approved by the Corporation's shareholders at a special meeting held on November 10, 15, 2008. PMP holds 39.95% of the Shares. Under the Preemptive Right Agreement, upon each distribution of Shares to be made by the Corporation, it must offer to PMP or to its affiliates the opportunity to subscribe to the number of Shares necessary for PMP to preserve its percentage of interest held in the Corporation (the "Preemption Right").

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

7. The Corporation intends to file with the securities regulator in each of the provinces of British Columbia, Alberta, Ontario and Québec a base shelf prospectus pertaining to various securities of the Corporation, including the Shares (such base shelf prospectus and any amendment that could be made thereto, the "Base Shelf Prospectus" and, upon the disclosure being supplemented by one or more prospectus supplements, collectively, the "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 a Corporation 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 Delaware limited liability Corporation with 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 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 Corporation and the Subscriber entered into a standby equity distribution agreement on May 13, 2010 (the "Distribution Agreement") pursuant to which the Subscriber agreed to subscribe for, and the Corporation 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. The Distribution Agreement provides the Corporation with the ability to raise capital as needed from time to time. The Subscriber regularly engages in such transactions. The Subscriber may, in certain circumstances, finance its commitment to subscribe for Shares on a drawdown through short-sales or resales out of existing holdings of the Corporation's securities.

14. Under the Distribution Agreement, the Corporation has the sole ability to determine the timing and the amount of each drawdown in a drawdown notice, subject to certain conditions, including the Aggregate Commitment Amount and a maximum investment amount per drawdown equal to the lesser of (i) $500,000 or (ii) the remaining portion of the Aggregate Commitment Amount.

15. The subscription price per Share, which will be used to calculate the number of Shares to be issued to the Subscriber for each drawdown, will be (i) 95% of the relevant daily volume-weighted average price per Share on the TSX (a "Trading Day") for the applicable day (the "Average Daily Price") during a period of ten Trading Days following a drawdown notice sent by the Corporation (the "Drawdown Pricing Period") if such Average Daily Price is equal to or greater than $0.20; (ii) 92.5% of the relevant Average Daily Price of the Shares for each Trading Day during the Draw Down Pricing Period if such Average Daily Price is equal to or greater than $0.15 but less than $0.20; and (iii) 90% of the relevant Average Daily Price of the Shares for each Trading Day during the Draw Down Pricing Period if such Average Daily Price is equal to or greater than $0.10 but less than $0.15. The Corporation may fix in such drawdown notice a minimum purchase price below which it will not issue any Shares for any given Trading Day provided however that the minimum price may not be lower than $0.10. Notwithstanding the foregoing, the purchase price per Share may not be lower than the Average Daily Price per Share on the TSX over a period of five consecutive Trading Days immediately preceding the applicable drawdown notice, less the permitted discount under the private placement rules contained in the TSX Corporation Manual (the "Floor Price").

16. 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.

17. The Distribution Agreement provides that, at the time of each drawdown notice and at each Settlement Date, the Corporation will make a representation to the Subscriber that the Prospectus contains full, true and plain disclosure of all material facts relating to the Corporation and the Shares being distributed. The Corporation 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.

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

19. 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.

20. The Subscriber and its affiliates, associates and 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 complies with applicable rules of the TSX and applicable securities regulations;

b) the Subscriber and its affiliates, associates or insiders will not during the period between a drawdown notice and the corresponding Settlement Date, 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 Shares or any securities convertible into or exchangeable for Shares, in an amount exceeding the number of Shares to be subscribed by the Subscriber under the applicable drawdown; and

c) notwithstanding the foregoing, the Subscriber and its 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 Shares or any securities convertible into or exchangeable for Shares, between the time of delivery of a drawdown notice and the filing of the news release announcing the drawdown.

21. Disclosure of the activities of the Subscriber and its affiliates, associates or insiders, as well as the restrictions thereon, the whole as described in paragraph 20 above, will be included in the Prospectus. In addition, the Corporation will disclose in the Base Shelf Prospectus, as a risk factor, that the Subscriber may engage in short-sales, resales or other hedging strategies to reduce or eliminate investment risks associated with a drawdown and the possibility that such transactions may result in significant dilution to existing shareholders and could have a significant effect on the price of the Shares.

22. No extraordinary commission or consideration will be paid by the Subscriber or the Manager to a person or Corporation in respect of the disposition of Shares by the Subscriber to purchasers who purchase the same on the TSX through dealer(s) engaged by the Subscriber (the "TSX Purchasers").

23. The Subscriber and the Manager will also agree, in effecting any disposition of Shares, not to engage in any sales, marketing or solicitation activities of the type undertaken by dealers 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 Corporation, (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 Corporation for any loss or liability from the failure of the transaction to be successfully consummated, or (j) participate in a selling group.

24. 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 Corporation.

The Prospectus Supplements

25. The Corporation intends to file with the securities regulator in each of the provinces of British Columbia, Alberta, Ontario and Québec, prospectus supplements within two business days after the Settlement Date for each drawdown under the Distribution Agreement.

26. Each Prospectus Supplement will disclose (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 (the "Amended Statement of Rights"):

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, revision of the price or damages if the prospectus and any amendment are not delivered to the purchaser, provided that the remedies for rescission, revision 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 September 18, 2012.

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, 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.

27. The Prospectus will qualify, among others, the distributions of: (a) the Shares to the Subscriber on the Settlement Date, and (b) the 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").

28. 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.

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

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

News Releases / Continuous Disclosure

31. Following the execution of the Distribution Agreement, the Corporation filed on SEDAR a news release dated May 13, 2010 and a material change report dated May 19, 2010 disclosing the material terms of the Distribution Agreement, including the Aggregate Commitment Amount, and on May 19, 2010 filed a copy of the Distribution Agreement on SEDAR.

32. Promptly upon the issuance of each drawdown notice, regardless of the size of the drawdown, the Corporation will issue and file on SEDAR a news release disclosing the aggregate amount of the drawdown, the maximum number of Shares to be issued, the minimum price per Share, if any, the Floor Price, the intention of PMP to exercise the Preemption Right, if known, as well as the availability on SEDAR of the Base Shelf Prospectus and the Prospectus Supplement, specifying how a copy of those documents can be obtained.

33. Promptly upon any amendment to the minimum price per Share set forth in a drawdown notice, the Corporation will issue and file on SEDAR a news release disclosing the amended minimum price per Share and the maximum number of Shares to be issued in the drawdown.

34. The Corporation will:

a) on, or as soon as practicable after, the last day of each Drawdown Pricing Period, issue and file on SEDAR a news release disclosing for the relevant drawdown:

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

ii) the number of Shares subscribed by PMP under the Preemption Right;

iii) that the Base Shelf Prospectus and each Prospectus Supplement will be available on SEDAR and specifying how a copy of these documents can be obtained; and

iv) the Amended Statement of Rights; and

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

35. The Corporation will also disclose in its financial statements and management's discussion and analysis filed on SEDAR, under Regulation 51-102 respecting Continuous Disclosure Obligations, for each financial period, the number and price of Shares issued to the Subscriber pursuant to the Distribution Agreement.

Deliveries upon Request

36. The Corporation will deliver to the Decision Makers and to the TSX, upon request, a copy of each drawdown notice delivered by the Corporation to the Subscriber under the Distribution Agreement.

37. The Subscriber and the Manager will provide 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 Corporation 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 Corporation complies with the representations in paragraphs 8, 21, 26, 27 and 29 through 36 and

ii) the number of Shares distributed by the Corporation 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/or the Manager, as the case may be, comply with the representations in paragraphs 20 through 24, 29 and 37; and

c) this decision will terminate on May 13, 2013.

"Louis Morisset"
Superintendant, Securities Markets