**Exhibit10.3**

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MWI VETERINARYSUPPLY, INC.

2008 EMPLOYEE STOCK PURCHASE PLAN

 

1.                                       Purpose of the Plan

 

                                                This Plan is intended to promote theinterests of MWI Veterinary Supply, Inc. by providing eligible employeeswith the opportunity to acquire a proprietary interest in the Company throughparticipation in a payroll-deduction based employee stock purchase plandesigned to qualify under Section 423 of the Code.

 

2.                                       Definitions

 

Capitalizedterms herein shall have the following meanings:

 

2.1.                              “Board” shall mean the Company’s Board ofDirectors.

 

2.2.                              “Changein Control” means:

 

(a)                                  theacquisition in one or more transactions by any “Person” (as such term is usedfor purposes of Section 13(d) or Section 14(d) of theExchange Act) but excluding, for this purpose, the Company, Company Affiliatesor any employee benefit plan of the Company or a Company Affiliate, of “BeneficialOwnership” (within the meaning of Rule 13d-3 under the Exchange Act) oftwenty percent (20%) or more of the combined voting power of the Company’s thenoutstanding voting securities (the “Voting Securities”);

 

(b)                                 theindividuals who, as of the effective date of the Plan, constitute the Board(the “Incumbent Board”) cease for any reason to constitute at least a majorityof the Board; provided, however, that if the election, or nomination forelection by the Company’s stockholders, of any new director was approved by avote of at least a majority of the Incumbent Board, such new director shall beconsidered as a member of the Incumbent Board, and provided further that anyreductions in the size of the Board that are instituted voluntarily by theIncumbent Board shall not constitute a Change in Control, and after any suchreduction the “Incumbent Board” shall mean the Board as so reduced;

 

(c)                                  amerger or consolidation involving the Company if the stockholders of theCompany, immediately before such merger or consolidation, do not own, directlyor indirectly, immediately following such merger or consolidation, more thanseventy percent (70%)****of thecombined voting power of the outstanding Voting Securities of the corporationresulting from such merger or consolidation;

 

(d)                                 acomplete liquidation or dissolution of the Company or a sale or otherdisposition of all or substantially all of the assets of the Company; or

 

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(e)                                  acceptanceby stockholders of the Company of shares in a share exchange if thestockholders of the Company immediately before such share exchange, do not own,directly or indirectly, immediately following such share exchange, more thanseventy percent (70%) of the combined voting power of the outstanding VotingSecurities of the corporation resulting from such share exchange.

 

2.3.                              “Code” shall mean the Internal Revenue Codeof 1986, as amended.

 

2.4.                              “Committee” shall mean the CompensationCommittee of the Board.

 

2.5.                              “Common Stock” shall mean the Company’scommon stock, par value $0.01 per share.

 

2.6.                              “Company” shall mean MWI Veterinary Supply, Inc.,a Delaware corporation, and any corporate successor to all or substantially allof the assets or voting stock of the Company which shall by appropriate actionadopt the Plan.

 

2.7.                              “CompanyAffiliate” shall mean any parent or subsidiary corporation of the Company (asdetermined in accordance with Code Section 424), whether now existing orsubsequently established.

 

2.8.                              “Compensation” shall mean the total earningspaid to a Participant by one or more Participating Companies during suchindividual’s period of participation in the Plan, plus any pre-taxcontributions made by the Participant to any Code Section 401(k) salarydeferral plan or any Code Section 125 cafeteria benefit program now orhereafter established by the Company or any Company Affiliate; provided thatCompensation shall not include the following items of compensation:

 

(a)                                  any extraordinary income compensation of anon-recurring nature;

 

(b)                                 any award made or amount paid pursuant to anemployer’s equity-based compensation arrangement including, but not limited to,performance shares, stock options (including any exercise thereof), restrictedstock, stock appreciation rights (including any exercise thereof), and dividendequivalents;

 

(c)                                  severance pay or special retirement pay;

 

(d)                                 imputed compensation, such as employer-paidgroup insurance premiums; and

 

(e)                                  reimbursements or other allowances forautomobile, relocation, tax-equalization, travel or educational expenses.

 

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2.9.                              “Effective Date” shall mean the date thestockholders of the Company approve the Plan. Any Company Affiliate which becomes a Participating Company after suchEffective Date shall designate a subsequent Effective Date with respect to itsemployee-Participants.

 

2.10.                        “Eligible Employee” shall mean any employeeon active payroll status who is employed by a Participating Company on suchterms that he or she is regularly expected to render more than twenty (20)hours of service per week for more than five (5) months per calendar yearfor earnings considered wages under Section 3401(a) of the Code, withthe exception of Five-Percent Owners, as defined in Section 2.13 below.

 

2.11.                        “Exchange Act” means the Securities ExchangeAct of 1934, as amended.

 

2.12.                        “Fair Market Value” per share of Common Stockas of a particular date means (i) if the shares of Common Stock are thenlisted on a national securities exchange, including the Nasdaq Global SelectMarket (“NASDAQ”), the price per share of Common Stock of the last trade on theexchange for such date, or if no trade was made on such date on the exchange,on the last preceding day on which a trade occurred; (ii) if shares ofCommon Stock are not then listed on a national securities exchange but are thenquoted on another stock quotation system, the price for the shares of CommonStock as quoted on such quotation system for the last trade on such date, or ifno trade was made on such date on such quotation system, on the last precedingday on which a trade was made; or (iii) if (i) and (ii) do notapply, such value as the Committee in its discretion may in good faithdetermine.

 

2.13.                        “Five-Percent Owner” shall mean anyindividual who would, immediately after the grant of purchase rights, asdescribed in Section 8.1, own (within the meaning of Code Section 424(d))or hold outstanding options or other rights to purchase stock possessing fivepercent (5%) or more of the total combined voting power or value of theoutstanding Voting Securities of the Company or any Company Affiliate.

 

2.14.                        “Participant” shall mean any EligibleEmployee of a Participating Company who is actively participating in the Plan.

 

2.15.                        “Participating Company” shall mean theCompany and such Company Affiliates as may be authorized from time to time bythe Board to extend the benefits of the Plan to their Eligible Employees. TheParticipating Companies in the Plan are listed in the attached Schedules, whichmay be amended from time to time.

 

2.16.                        “Plan” shall mean the Company’s 2008 EmployeeStock Purchase Plan, as set forth in this document, as such may be amended orsupplemented from time to time.

 

2.17.                        “Purchase Date” shall mean the last TradingDay of each purchase period, i.e., the last Trading Day of February, May, August orNovember of each year in which the Plan is maintained by the Company.

 

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2.18.                        “Trading Day” shall mean any day on whichshares of the Company’s Common Stock are actively traded.

 

3.                                       Administration of the Plan

 

ThePlan shall be administered by the Committee. The Committee shall, at such times as the Common Stock is registeredpursuant to Section 12 of the Exchange Act, consist of at least twoindividuals each of whom shall be a “non-employee director” as defined in Rule 16b-3as promulgated by the Securities and Exchange Commission (“Rule 16b-3”)under the Exchange Act and shall, at such times as the Company is subject to Section 162(m) ofthe Code (to the extent relief from the limitation of Section 162(m) ofthe Code is sought with respect to purchase rights offered hereunder), qualifyas “outside directors” for purposes of Section 162(m) of the Code andrelated Treasury regulations.  The actsof a majority of the members present at any meeting of the Committee at which aquorum is present, or acts approved in writing by a majority of the entireCommittee, shall be the acts of the Committee for purposes of the Plan.  If and to the extent applicable, no member ofthe Committee may act as to matters under the Plan specifically relating tosuch member.  The Committee shall havefull authority to interpret and construe any provision of the Plan and to adoptsuch rules and regulations for administering the Plan as it may deemnecessary in order to comply with the requirements of Code Section 423.  Decisions of the Committee shall be final andbinding on all parties having an interest in the Plan.

 

4.                                       Stock Subject to the Plan

 

4.1.                              Number of Shares.  Thestock purchasable under the Plan shall be shares of authorized but unissued orreacquired Common Stock, including shares of Common Stock purchased on the openmarket. The maximum number of shares of Common Stock that may be issued overthe term of the Plan shall not exceed 500,000 shares.  Shares subject to purchase rights whichexpire or are cancelled will again become available for issuance under thePlan.

 

4.2.                              Adjustments.  Should any change be made tothe Common Stock by reason of any stock split, stock dividend, recapitalization,combination of shares, exchange of shares or other change affecting theoutstanding Common Stock as a class without the Company’s receipt ofconsideration, appropriate adjustments shall be made to (i) the maximumnumber and class of securities issuable under the Plan, (ii) the maximumnumber and class of securities purchasable per Participant on any one PurchaseDate and (iii) the number and class of securities and the price per sharein effect under outstanding purchase rights in order to prevent the dilution orenlargement of benefits thereunder.

 

5.                                       Purchase Periods

 

5.1.                              Purchase Period. Shares of Common Stock shall be offered for purchase under the Planthrough a series of successive purchase periods until the termination of thePlan pursuant to Section 10.2.

 

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5.2.                              Duration of Purchase Period.  Eachpurchase period shall have a duration of three (3) months.  Purchase periods shall run from June 1stto August 31st, September 1st to November 30th,December 1st to February 28th (or February 29th, as the case may be) and March 1st to May 31st;provided that the first purchase period shall begin on the first day of thesecond purchase period commencing after the Effective Date.

 

6.                                       Eligibility

 

6.1.                              Eligible Employees.  Eachindividual who is an Eligible Employee shall be eligible to participate in thePlan on the start date of any purchase period under the Plan.

 

6.2.                              Participation.  Toparticipate in the Plan for a particular purchase period, the Eligible Employeemust complete the enrollment procedure prescribed by the Committee (or itsdesignate), at the time specified by such procedures.  Such enrollment will include authorizingpayroll deductions as described in Section 7 below.  An Eligible Employee’s election toparticipate in the Plan for a particular purchase period shall apply tosubsequent purchase periods, unless revoked by the Eligible Employee, asprovided in Section 7 and Section 8.

 

7.                                       Payroll Deductions

 

7.1.                              Election and Revocation.  Thepayroll deduction authorized by the Participant for purposes of acquiringshares of Common Stock under the Plan may be any multiple of one percent (1%)of the Compensation paid to the Participant during each purchase period, up toa maximum of ten percent (10%).  Thededuction rate so authorized shall continue in effect for the entire purchaseperiod.  The rate of payroll deductionmay not be increased or decreased during the purchase period.  However, the Participant may, at any timeduring a purchase period prior to the Purchase Date, revoke his or her payrolldeduction election by using the procedures prescribed by the Committee.  The revocation shall become effective as soonas possible following the completion of such procedure.  The revocation of a payroll deductionelection results in the termination of the Participant’s outstanding purchaserights, as provided in Section 8.6(a) below.

 

7.2.                              Beginning Date. Payroll deductions shall begin on the first pay period following thestart date of the purchase period and shall (unless sooner terminated by theParticipant) continue through the pay period ending with or immediately priorto the last day of the purchase period. The amounts so collected shall be credited to the Participant’s bookaccount under the Plan, but no interest shall be paid on the balanceoutstanding from time to time in such account. The amounts collected from the Participant shall not be held in anysegregated account or trust fund and may be commingled with the general assetsof the Company and used for general corporate purposes.

 

7.3.                              Ending Date.  Payroll deductions shallautomatically cease upon the termination of the Participant’s purchase rightsin accordance with the provisions of the Plan.

 

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7.4.                              No Further Obligation. Subject to the limitations set forth in Section 8.4 and Section 9below, the Participant’s acquisition of Common Stock under the Plan on anyPurchase Date shall neither limit nor require the Participant’s acquisition ofCommon Stock on any subsequent Purchase Date.

 

8.                                       Purchase Rights

 

8.1.                              Grant of Purchase Rights.  AParticipant shall be granted a separate purchase right on the start date ofeach purchase period in which he or she elects to participate. Such purchaseright shall provide the Participant with the right to purchase shares of CommonStock on the Purchase Date upon the terms set forth below. Under nocircumstances shall a purchase right be granted under the Plan to any EligibleEmployee if such individual would immediately after the grant be a Five-PercentOwner, as defined in Section 2.13.

 

8.2.                              Exercise of the Purchase Rights. Purchase rights shall be automatically exercised on the Purchase Date,and shares of Common Stock shall accordingly be purchased on behalf of eachParticipant (other than any Participant whose payroll deductions havepreviously been refunded in accordance with Section 8.6. below) on suchdate. The purchase shall be accomplished by applying the Participant’s payrolldeductions for the purchase period ending on such Purchase Date to the purchaseof shares of Common Stock (subject to the limitation on the maximum number ofshares purchasable per Participant on any one Purchase Date) at the purchaseprice in effect for that purchase period.

 

8.3.                              PurchasePrice.  Unless otherwise provided bythe Committee, the purchase price per share at which Common Stock will bepurchased on the Participant’s behalf on each Purchase Date shall be a priceequal to ninety-five percent (95%) of the Fair Market Value of the Common Stockon the Purchase Date; provided that such purchase price shall in noevent be less than the minimum option price permitted pursuant to InternalRevenue Service regulation Section 1.423(g), or any successor provision.

 

8.4.                              Number of Shares That May Be Purchased.  Thenumber of shares of Common Stock that will be purchased by a Participant oneach Purchase Date shall be that number of shares (including fractional shares)of Common Stock obtained by dividing the amount collected from the Participantthrough payroll deductions during the purchase period ending with that PurchaseDate by the purchase price in effect for that Purchase Date, determined inaccordance with Section 8.3. However, the maximum number of shares of Common Stock purchasable perParticipant on any one Purchase Date shall not exceed 200 shares, subject toperiodic adjustments as provided in Section 4.2. and subject to thelimitation in Section 9.

 

8.5.                              Excess Payroll Deductions.  Anypayroll deductions not applied to the purchase of Common Stock by reason of thelimitation on the maximum number of shares purchasable by the Participant onthe Purchase Date shall be refunded to the Participant or held for the purchaseof shares of Common Stock for the Participant on the next Purchase Date at thesole discretion of the Plan’s administrator.

 

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8.6.                              Termination of Payroll Deductions During aPurchase Period.  The following provisions shall govern thetermination of payroll deduction elections during a purchase period:

 

(a)                                  Participant Election to Terminate PayrollDeductions.  A Participant may, at any time before thelast two weeks of a purchase period, terminate his or her payroll deductions byrevoking his or her payroll deduction election using the procedures establishedby the Committee, and no further payroll deductions shall be collected from theParticipant hereunder during the purchase period in which such revocation ismade. Any payroll deductions collected during the purchase period in which arevocation of payroll deduction election occurs shall be refunded in cash.

 

(b)                                 Effect of Participant Election to TerminatePayroll Deductions.  The termination of a payroll deductionelection shall be irrevocable. In order to resume payroll deductions in anysubsequent purchase period, such individual must re-enroll in the Plan on orbefore the start date of the next purchase period for which the individual iseligible to participate.

 

(c)                                  Termination of Participation Upon Ceasing tobe an Eligible Employee.  Should the Participant cease to remain anEligible Employee for any reason (including death or disability) while his orher purchase rights are outstanding, then such Participant’s right to continuepayroll deduction contributions shall immediately terminate, and all of theParticipant’s payroll deductions accumulated prior to such termination shall berefunded as soon as practicable following such termination of employment.

 

(d)                                 Effect of Leave of Absence Upon Participation. Should the Participant cease to remain in active service by reason of anapproved leave of absence, then such Participant’s right to continue payrolldeduction contributions shall terminate on the date which is 91 days after theday the Participant last rendered active service, and all of the Participant’spayroll deductions accumulated prior to such date shall be refunded to theParticipant as soon as practicable following such date.

 

8.7.                              Change in Control. Unless otherwise determined by the Committee, outstanding purchaserights shall automatically be exercised, immediately prior to the effectivedate of any Change in Control, by applying the payroll deductions of eachParticipant for the purchase period in which such Change in Control occurs tothe purchase of shares of Common Stock at a purchase price per share equal tothe purchase price determined under Section 8.3 for the portion of thepurchase period that expired prior to such Change in Control. However, theapplicable limitation on the number of shares of Common Stock purchasable perParticipant shall continue to apply to any such purchase. The Company shall useits best efforts to provide at least ten (10) days prior written notice ofthe occurrence of any Change in Control, and Participants shall, following thereceipt of such notice, have the right to terminate their outstanding purchaserights prior to the effective date of the Change in Control in accordance with Section 8.6(a) above.

 

8.8.                              Proration of Purchase Rights. Should the total number of shares of CommonStock which are to be purchased pursuant to outstanding purchase rights on anyPurchase Date exceed the number of shares then available for issuance under thePlan, the Committee shall 

 

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make a pro-rata allocationof the available shares on a uniform and nondiscriminatory basis, and thepayroll deductions of each Participant, to the extent in excess of theaggregate purchase price payable for the Common Stock pro-rated to suchindividual, shall be refunded.

 

8.9.                              Assignability. Purchase rights shall be exercisable only by the Participant and shallnot be assignable or transferable by the Participant.

 

8.10.                        No Stockholder Rights. A Participant shall have no stockholderrights with respect to the shares subject to his or her outstanding purchaserights until the shares are purchased on the Participant’s behalf in accordancewith the provisions of the Plan and the Participant has become a holder ofrecord of the purchased shares.

 

8.11.                        Dividends.  Once shares are purchased on aParticipant’s behalf, to the extent that dividends are paid on such shares,such dividends shall be distributed in cash to the Participant.

 

9.                                       Accrual Limitations

 

9.1.                              Twenty Thousand Dollar Limit.  NoParticipant shall be entitled to accrue rights to acquire Common Stock pursuantto any purchase right outstanding under this Plan if and to the extent suchaccrual, when aggregated with (i) rights to purchase Common Stock accruedunder any other purchase right granted under this Plan and  (ii) similar rights accrued under otheremployee stock purchase plans (within the meaning of Code Section 423) ofthe Company or any Company Affiliate, would otherwise permit such Participantto purchase more than Twenty Thousand Dollars ($20,000) worth of stock of theCompany or any Company Affiliate (determined on the basis of the Fair MarketValue per share on the date or dates such rights are granted) for each calendaryear such rights are at any time outstanding.

 

9.2.                              Application of the Limit.  Forpurposes of applying such accrual limitations, (i) the right to acquireCommon Stock under each outstanding purchase right shall accrue on the PurchaseDate in effect for the purchase period for which such right is granted and, (ii) theright to acquire Common Stock under any outstanding purchase right shall accruein accordance with the rate preserved in the Plan, but in no event may suchrate exceed Twenty Thousand Dollars ($20,000) worth of Common Stock (determinedon the basis of the Fair Market Value per share on the date or dates of grant)for any one calendar year.

 

9.3.                              Refund of Excess.  Ifsolely by reason of such accrual limitations, the purchase rights of aParticipant does not accrue for a particular purchase period, then the payrolldeductions which the Participant made during that purchase period with respectto such purchase rights shall be refunded within thirty (30) days, or at thesole discretion of the Committee, held until the next purchase period for whichsuch Participant is eligible to make a purchase under the Plan.

 

9.4.                              Limit Controls.  Inthe event there is any conflict between the provisions of this Section 9and one or more provisions of the plan or any instrument issued thereunder, theprovisions of this Section 9 shall be controlling.

 

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10.                                 Effective Date and Termination of the Plan

 

10.1.                        Effective Date.  ThePlan was adopted by the Board on December 20, 2007 and became effective onthe Effective Date.

 

10.2.                        Termination of the Plan. Unless sooner terminated by the Board, the Plan shall terminate upon theearliest of (i) the 10-year anniversary of the Effective Date, (ii) thedate on which all shares available for issuance under the Plan shall have beensold pursuant to purchase rights exercised under the Plan or (iii) thedate on which all purchase rights are exercised in connection with a Change inControl. No further purchase rights shall be granted or exercised, and no furtherpayroll deductions shall be collected, under the Plan following itstermination.

 

11.                                 Amendment of the Plan

 

TheBoard may alter, amend, suspend or discontinue the Plan at any time, with suchchange to become effective immediately following the close of any purchaseperiod. However, the Board may not, without the approval of the Company’sstockholders, (i) materially increase the number of shares of Common Stockissuable under the Plan or the maximum number of shares purchasable perParticipant on any one Purchase Date, except for permissible adjustments in theevent of certain changes in the Company’s capitalization, (ii) alter thepurchase price formula so as to reduce the purchase price payable for theshares of Common Stock purchasable under the Plan, or (iii) materiallyincrease the benefits accruing to Participants under the Plan or materiallymodify the requirements for eligibility to participate in the Plan.

 

12.                                 General Provisions

 

12.1.                        Costs and Expenses.  Allcosts directly related to the sale, transfer or delivery of Common Stock toParticipants pursuant to the Plan shall be borne by the Participants.  Allcosts and expenses otherwise incurred in the administration of the Plan shallbe paid by the Company.

 

12.2.                        No Right to Employment.  Nothingin the Plan shall confer upon any Participant the right to continue in theemploy of the Company or any Company Affiliate for any period of specificduration or interfere with or otherwise restrict in any way the rights of theCompany (or any Company Affiliate employing such person) or of the Participant,which rights are hereby expressly reserved by each, to terminate such person’semployment at any time for any reason, with or without cause.

 

12.3.                        Governing Law. Except to the extent federal law applies, the provisions of the Planshall be governed by the laws of the State of Delaware without regard to thatState’s conflict-of-laws rules.

 

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SCHEDULE A

Companies Participating in

Employee Stock Purchase Plan

 

MWI Veterinary Supply, Inc.

MWI Veterinary Supply Co.

 

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