Background

[para 1]
Galaxy has applied for an exemption from the requirement to file and obtain receipts for a preliminary prospectus and prospectus in section 61 of the Act, for certain intended trades;

Representations

[para 2]
Galaxy represents that:

1. Galaxy was created on August 8, 2001 by the amalgamation of Umbro Canada Inc. (Umbro Canada), Umbro Factory Outlet Inc. (Umbro Factory), NNA Sports Marketing Inc., Millennium Sports Inc. and 625596 B.C. Ltd. (together, the Amalgamating Companies) pursuant to an arrangement (the Arrangement) among the Amalgamating Companies and Galaxy Energy Corp. (Galaxy Energy);

2. the authorized share capital of Galaxy consists of 150,000,000 shares divided into 100,000,000 common shares without par value (the Common Shares) and 50,000,000 preferred shares without par value; as at October 18, 2001, there were 9,642,409 Common Shares and no preferred shares outstanding;

3. prior to the Arrangement, Galaxy Energy, the common shares of which traded on the Canadian Venture Exchange Inc., was a reporting issuer in British Columbia and Alberta;

4. pursuant to the Arrangement, the shares of Galaxy Energy were exchanged for shares of Galaxy, Galaxy Energy became the wholly owned subsidiary of Galaxy and Galaxy became a reporting issuer; the common shares of Galaxy are listed on the CDNX.

5. Galaxy is not in default of any requirements of the Act or the Securities Rules, B.C. Reg. 194/97;

6. special resolutions of the shareholders of each of the Amalgamating Companies and Galaxy Energy were passed approving the Arrangement, and the CDNX approved the Arrangement;

7. in connection with the Arrangement and the meeting at which the shareholders of Galaxy Energy passed a special resolution approving the Arrangement, Galaxy Energy prepared an information circular (the Circular) that was filed with the CDNX and accepted under its policies relating to RTOs, which Circular included audited financial statements of Galaxy Energy for the three years ended December 31, 2000, audited financial statements of Umbro Canada for the three years ended December 31, 2000, audited financial statements of Umbro Factory for the year ended December 31, 2000, unaudited financial statements of Umbro Factory for the two years ended December 31, 1999, and pro forma financial statements of Galaxy Energy for the year ended December 31, 2000 together with a compilation report thereon, confirming that the pro forma statements were compiled so as to give effect to the assumptions set out in the notes to the pro forma statements;
8. in connection with the unaudited financial statements filed with the Circular, Galaxy concurrently filed an auditor’s comfort letter;

9. prior to the Arrangement, Umbro Canada, Umbro Factory and NNA Sports Marketing Inc. (together the Umbro Companies) carried on active businesses, Millennium Sports Inc.’s sole business being to hold shares of Umbro Canada Inc. and 625596 B.C. Ltd. being incorporated solely for the purpose of facilitating the Arrangement; as a result of the Arrangement, the property and undertaking of the Umbro Companies became the property and undertaking of Galaxy, and Galaxy continues to carry on the businesses that were carried on by the Umbro Companies;

10. the method of accounting for the Arrangement is the purchase method, and Umbro Canada is identified as being the acquirer for accounting purposes; Umbro Canada’s audited consolidated financial statements for the year ended December 31, 2000 disclose revenues of $14,196,627;

11. the date of Galaxy’s first year end subsequent to the Arrangement is December 31, 2001. The financial statements of Galaxy for the year ended December 31, 2001 will be the first audited financial statements of Galaxy that will be filed with the British Columbia Securities Commission;

12. the Arrangement constituted a “Reverse Take-Over” (RTO) under CDNX policies;

13. on August 8, 2001 (the Placement Date), immediately following completion of the Arrangement, Galaxy issued by way of private placement (the Private Placement) 200,000 special warrants (Special Warrants) at a price per special warrant of $1.25, with the following characteristics:

(a) each Special Warrant entitles the holder to acquire one unit (a Unit) for no additional consideration;
(b) each Unit consists of one Common Share (a Special Warrant Share) and one half of one non-transferable warrant (each whole warrant being a Warrant);
(c) each Warrant entitles the holder to acquire one Common Share (a Warrant Share) for $1.40 per Warrant Share until August 8, 2002 and at a price per Warrant Share of $1.55 after August 8, 2002 and on or before August 8, 2003;
(d) the Special Warrants are exercisable on the earlier of (i) the 10th business day after Galaxy files an annual information form (“AIF”) with the Commission pursuant to British Columbia Instrument 45-506 (the “B.C. Instrument”) and (ii) August 2, 2002;

14. the Private Placement was completed relying on prospectus exemptions under the Act;

15. under the Rules, first trades in securities previously acquired under certain prospectus exemptions under the Act are deemed to be distributions unless, among other things, a 12 month hold period (the Hold Period) has elapsed from the relevant dates referred to in the Rules;

16. under the BC Instrument the Hold Period can be reduced from 12 months to 4 months if the issuer distributing the securities is a qualifying issuer (Qualifying Issuer), has filed a current Annual Information Form (AIF) or an acceptable alternative form of AIF, and complies with the applicable resale rules ;

17. Galaxy was not a Qualifying Issuer on the Placement Date;

18. the CDNX has confirmed the following:

(a) under the CDNX policies relating to RTOs, an issuer undergoing an RTO must prepare a draft information circular or a filing statement disclosing all material facts related to the RTO. The CDNX policy relating to RTOs specifically states that any information circular or filing statement prepared for an RTO must contain prospectus level disclosure and include information required by the CDNX Exchange Information Circular (Form 3A);

(b) the information circular or filing statement must include a certificate page signed by four directors of the issuer, including the CEO and CFO, which certifies that the disclosure constitutes full, true and plain disclosure of all material facts relating to the securities of the issuer, assuming the completion of the RTO. If the RTO involves the acquisition of another issuer (the “Target Issuer”), the information circular or filing statement must also include a certificate page signed by the CEO, CFO and two other directors of the Target Issuer certifying that the disclosure, as it relates to the Target Issuer, constitutes full, true and plain disclosure of all material facts relating to the securities/assets of the Target Issuer;

(c) Form 3A is the same form of information circular for an RTO and for a “Qualifying Transaction” for a capital pool company under CDNX policies, and is intended to incorporate the form requirements of both an information circular and a prospectus;

(d) the CDNX vets RTO information circulars to the same standard as it does when vetting an information circular for a “Qualifying Transaction” for a capital pool company, or a prospectus pursuant to the CDNX’s Operating Agreement with the Commission and as such, the CDNX vets for full, true and plain disclosure and prospectus level disclosure; and

(e) the Circular complied with the CDNX requirements contained in Form 3A;

19. Form 3A contains all of the information required under the form prescribed by the Act pertaining to information circulars;

Order

[para 3]
Because it is not prejudicial to the public interest the Executive Director orders, effective November 29, 2001 that, under Section 76 of the Act, a trade (Trade) in Special Warrant Shares or Warrant Shares (together, the Securities) is exempt from the requirements of Section 61 of the Act, provided that:

1. at the time of the Trade, Galaxy:

(a) is a reporting issuer under the Act; and

(b) has equity securities listed or quoted on a recognized market as defined in the B.C. Instrument;

2. on or before the date of the issuance of Securities under the Special Warrants (the “Issuance Date”), Galaxy has filed with the Commission, in electronic format through SEDAR, the Circular as an alternative form of AIF;

3. Galaxy complies with the provisions of the B.C. Instrument other than the certification contemplated by paragraph 3(a)(ii) and (iii) of the B.C. Instrument;

4. four months have elapsed from the Placement Date;

5. Galaxy endorses the certificates representing the Securities with a legend stating that unless permitted under the Act or Rules, the holder of the Securities will not trade the Securities until four months and one day after the Placement Date;

6. no unusual effort is made to prepare the market of create a demand for the Securities;

7. no extraordinary commission or other consideration is paid in respect of the Trade;

8. the Trade is not from the holdings of a control person;

9. if the seller is an insider of Galaxy, other than a director or senior officer of Galaxy, the seller has filed all records required to be filed under the Act; and

10. if the seller is a director or senior officer of Galaxy, the seller has filed all records required to be filed under the Act and Galaxy has filed all records required to be filed under the Act and Rules.

[para 4]
DATED December 24, 2001

Brenda Leong
Director