Transaction Overview

In general, Blackstone Farm Financial Corp. purchases two types of farming Companies. These are (A) operating farm corporations, (B) non-resident owned farm corporations. The following deals primarily with the first type of Company since this is the most prevalent and forms Blackstone's core business. Only brief information has been provided regarding the second scenario.

Blackstone will purchase the shares of your qualifying farm corporation which ensures that you can make use of your most powerful tax saving tool – your $750,000 capital gains tax free benefit. For larger farm Companies ($5.0m in assets or greater) where shareholders have used all or a portion of their capital gains exemptions or, if there are not enough capital gains exemptions to warrant a share sale, Blackstone can provide a proprietary share purchase transaction. This purchase transaction will provide significantly higher after tax proceeds than an asset sale or conventional share sale.

A. Selected Canadian-Controlled Operating Farm Corporations

Blackstone's primary business is purchasing operating farming corporations whose shareholders are Canadian residents. Below is a list of criteria which will tend to make a farming corporation attractive for a purchase by Blackstone. If the profile of a farming Company fits this criteria, then Blackstone is able to offer attractive pricing for the shares of the farming corporation. The actual price offered for the shares will be based on the value of the Company’s assets and operations, the Company's financial and tax profile, and other relevant matters.

1. Purchase of Shares - Blackstone will purchase shares in Canadian farming corporations. With some exceptions, Blackstone does not seek to purchase partnership interests, proprietorships or farming assets directly.

2. Minimum/Maximum Asset Value - Blackstone will purchase Companies with a minimum asset value of $1.5m. There is no maximum amount of asset value, Blackstone can purchase companies in excess of $100m.

3. Large Unrealized Capital/Revenue Gains - Blackstone's preferred share purchase is to buy Companies that have large unrealized capital gains or revenue gains. That is, they typically have one or more of the following characteristics: (i) adjusted cost bases on the Company's assets which are substantially lower than the market values for such assets; (ii) the Company's significant capital assets have been materially depreciated for tax purposes; and/or (iii) the Company's inventories have been significantly written-down in accordance with allowable cash-basis accounting. Typical Companies to be purchased do not have access to significant loss carry-forwards or other tax credits. If the Company has one or more of these characteristics, the sale of assets (and the distribution of proceeds to shareholders) will attract significant federal and provincial tax, and the shareholders of such Company will not be able to make use of their enhanced capital gains exemptions to reduce this tax resulting in a very poor “after tax” sale proceeds situation for the Vendors.

4. Shareholder Profile - Typically, a farming Company to be purchased will have numerous shareholders whose shareholdings are relatively equally distributed. The Company's shareholders should have either (i) a high adjusted cost base in the shares which they own or (ii) access to all or a portion of their enhanced capital gains tax on the first $750,000 of capital gains realized upon the sale of their shares.

5. High Debt - Sometimes, a Company to be purchased will have a relatively high ratio of debt to equity. In this circumstance, it is often far more attractive for Vendors to dispose of their shares, rather than causing a corporate disposition of assets. Please note however, that corporate debt is not a requirement, particularly when the Company meets the shareholder profile criteria discussed above.

6. Farming / Non-farming Assets - Blackstone will purchase Companies with a broad range of agricultural assets eg. Dairy farm with a large cash crop land base and machinery inventory. We can also purchase companies with a mix of agricultural and non-agricultural assets eg. A broiler farm with significant cash investments in the company. Our goal is to provide a “one stop” sale solution.

7. Structuring Issues - Blackstone is familiar with all types of farm sale structures and can work with Vendors and their advisors to help put a farm company into the best position to maximize a sale. Blackstone has a team of accountants and can provide guidance in many areas of tax sale and structuring.

B. Selected Non-Resident Owned Farming Corporations

Where a farming corporation is owned by non-resident shareholders, there may be opportunities for Blackstone to design an attractive sale structure for the non-resident shareholders. Blackstone has a wealth of experience in structuring and executing mutually beneficial transactions involving non-resident owned Companies.

If you have any further questions or comments with respect to the above, please contact Blackstone for more details.