Farm transition documents are finally official; the Moes start to implement 15-year plan
After six years and several fits and starts, Greg and Jim Moes signed documents that officially inks their plan to immediately transfer 28% of the company to the fifth generation. If all goes well, Greg’s sons, Jacob and Scott, and Jim’s son, Matthew, will each own a third of the operation by 2029.
MoDak milks 2,000 cows, raises 2,500 heifers and farms 3,000 acres. The dairy alone is valued at $10 million.
The Moes and their advisers had to come up with a transition plan that provided for Greg and Jim’s retirement but didn’t burden their sons with debt.
The sons will accrue 2% of MoDak shares for each year of employment. However, no shares are transferred during the first five years to ensure each son is committed to the operation. In the sixth year of employment, each son will receive 12% of the shares.
Scott has worked at the dairy since 2007, Jacob since 2009 and Matthew since 2012. When the paperwork was official, Scott was awarded 16% of the shares and Jacob 12%. Matthew will be eligible to receive 12% in 2018.
Three-fourths of these shares are gifted; the remainder is sold as an “on demand” promissory note with 2% interest paid annually. Greg and Jim might never demand the principal, but it’s in place if the money is needed.
If Jacob, Scott or Matthew leave prior to 10 years, their ownership interest will be forfeited and divided among the remaining shareholders. If they leave after 10 years, the shares must be sold back to MoDak.
The plan is to also distribute earnings annually, at the discretion of the members. The goal is to make the dividends enough to at least pay taxes on the pass-through income, while retaining enough working capital to ensure the business is sustainable.