Document:

Exhibit 4.4

 

Execution
Copy

 

EXECUTIVE
STOCK AGREEMENT

 

THIS EXECUTIVE STOCK
AGREEMENT (this “Agreement”) is made as of June 18, 2002, by and
among MWI Veterinary Supply Co. (the “Company”), MWI Holdings, Inc. (the
“Holding Company”), and James Cleary (“Executive”). Certain
definitions are set forth in Section 9 of this Agreement.

 

The Company, the Holding
Company and Executive desire to enter into an agreement setting forth (i) the
terms pursuant to which the Holding Company shall sell to Executive certain
shares of the Holding Company’s (a) Common Stock, par value $0.01 per share
(the “Common”), and (b) Series A Preferred Stock, par value $1.00 per
share (the “Preferred,” and the Common and Preferred to be purchased
hereunder, the “Securities”), (ii) the terms pursuant to which the
Holding Company is granting to Executive options to acquire certain shares of
Common, (iii) the obligation of Executive to refrain from competing with
the Company and its Affiliates under certain circumstances as provided herein,
and (iv) certain other rights and obligations of the parties.

 

The parties hereto agree
as follows:

 

1.                                       Purchase
and Sale of Securities.

 

(a)                                  Sale.  Upon execution of this Agreement and
contemporaneously with the consummation of the sale of the Company on the date
hereof, Executive will purchase, and the Holding Company will sell, (i) 27,885
shares of Common at a purchase price of $1.00 per share, and (ii) 140.893
shares of Preferred at a purchase price of $1,000.00 per share, for an
aggregate consideration of $168,778.00 (the “Purchase Price”).  Upon execution of this Agreement and
contemporaneously with the consummation of the sale of the Company on the date
hereof, Executive will deliver to the Holding Company a Promissory Note in
principal amount of the Purchase Price in the form provided to Executive by the
Company, and the Holding Company will deliver to Executive the certificates and
instruments evidencing the Securities. 
Executive shall also execute and deliver to the Company a related Pledge
Agreement in the form provided to Executive by the Company.

 

(b)                                 83(b).  Executive has delivered to the Holding
Company a completed and signed election under Section 83(b) of the
Internal Revenue Code and the regulations thereunder, a copy of which has been
attached as Exhibit A
hereto.  Executive further agrees to
complete and sign subsequent elections under such Section 83(b) upon
exercise of Options hereunder.

 

(c)                                  Vesting
of Common.  5,577 of the shares of Common purchased pursuant
to clause (a) above shall vest and become “Vested Purchase Shares” on
each of the first five annual anniversaries of the date hereof (each, a “Vesting
Date”), provided Executive is employed with the Company on such Vesting
Date (provided that in connection to 

 

 

Executive’s voluntary termination of Executive’s
employment, if Executive in good faith gives the Company written notice that
Executive is retiring, for purposes of this clause (c) (and only for such
purposes) Executive shall be deemed to be employed by the Company on each Vesting
Date subsequent to Executive’s retirement until such time, if any, as Executive
accepts full-time employment with any Person other than the Company); provided
that all shares of Common purchased pursuant to clause (a) above which have not
previously vested pursuant to this clause (c) shall vest and becomes Vested
Purchase Shares upon the consummation of a Sale of the Company, a Qualifying
Recapitalization or an Initial Public Offering. 
Shares of Common purchased pursuant to Section 1(a) which have not
vested and become Vested Purchase Shares shall be referred to as “Unvested
Purchase Shares.”

 

(d)                                 Representations.  In connection with the purchase and sale of
the Securities hereunder, Executive represents and warrants to the Holding
Company that:

 

(i)                                     Executive
has full capacity, power and authority to execute and deliver this Agreement,
to perform Executive’s obligations under this Agreement and to consummate the
transactions contemplated hereby.

 

(ii)                                  The
Securities to be acquired by Executive pursuant to this Agreement will be
acquired for Executive’s own account and not with a view to, or intention of,
distribution thereof in violation of the Securities Act, or any applicable
state securities laws, and such Securities will not be disposed of in contravention
of the Securities Act or any applicable state securities laws.

 

(iii)                               Executive
is able to bear the economic risk of the investment in the Securities for an
indefinite period of time because the Securities are subject to the transfer
restrictions contained herein and have not been registered under the Securities
Act.

 

(iv)                              Executive
has had an opportunity to ask questions and receive answers concerning the
terms and conditions of the offering of the Securities and has had full access
to such other information concerning the Holding Company as Executive has
requested.  Executive has reviewed, or
has had an opportunity to review copies of the following documents, (A) the
Stockholders Agreement, and (B) the certificate of incorporation and by-laws of
the Holding Company.

 

(v)                                 This
Agreement has been duly executed and delivered by Executive and constitutes the
legal, valid and binding obligation of Executive, enforceable in accordance
with its terms, and the execution, delivery, and performance of this Agreement
by Executive does not and will not conflict with, violate, or cause a breach of
any agreement, contract, or instrument to which Executive is a party or any
judgment, order, or decree to which Executive is subject.  No consent, approval, order of authorization
of, or registration, declaration or filing with, any government agency or
public or regulatory unit, agency, body or authority is required to be obtained
or made by Executive in connection with Executive’s execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.

 

2

 

(e)                                  Acknowledgment.  Executive acknowledges and agrees that,
except for information necessary for Executive to determine whether the Company
has achieved the performance targets set forth herein, none of the Holding
Company, the Company or any of their Subsidiaries shall have any duty or
obligation to disclose to Executive, and Executive shall have no right to be
advised of, any material information regarding the Holding Company, the Company
or any of their Subsidiaries at any time prior to, upon, or in connection with
the repurchase of the Securities.  The
Holding Company, the Company and their Subsidiaries shall provide Executive
with such information regarding such entities as Executive may reasonably
request in order for Executive to determine whether or not to exercise the Put
Option.  Notwithstanding anything herein
to the contrary, references herein to the employment of Executive by the
Company shall be deemed to refer to employment of Executive by the Company or
any of its Subsidiaries.

 

2.                                       Options.

 

(a)                                  Options
Grant.  Pursuant to the Holding
Company’s 2002 Stock Option Plan (the “Plan”), the Holding Company hereby
grants to Executive five (5) separate nonqualified stock options (each an “Option”
and individually referred to as the “First Option,” the “Second
Option,” the “Third Option,” the “Fourth Option,” and the “Fifth
Option”), to purchase 2,197.80 (the “Base Amount”) shares of Common
(the “Option Shares”) (which number may be adjusted as provided in the
Plan), at a price per share of $1.00 (the “Exercise Price”).  The stock options so granted shall not be
intended to be “incentive stock options” within the meaning of Section 422
of the Internal Revenue Code.  

 

(b)                                 Executive
Bound by Plan.  Attached hereto as
Exhibit A is a copy of the Plan which is incorporated herein by reference and
made a part hereof.  Executive hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all the
terms and provisions thereof.  The Plan
should be carefully examined before any decision is made to exercise an Option.

 

(c)                                  Exercisability.  Subject to the other provisions hereof, an
Option shall be exercisable, in whole or in part, to the extent it has become
Fully Vested (as set forth below), by written notice to the Holding Company at
any time, and from time to time, during the period of time after the date
hereof and prior to the tenth anniversary of the date hereof or such earlier
date upon which such Option expires as specified herein or in the Plan.  An Option may not be exercised for a fraction
of a share of Common.  Options are
subject to cancellation as provided in the Plan.

 

(d)                                 Vesting
of Option.  Each Option shall vest
and become exercisable with respect to the Option Shares subject to such Option
as follows:

 

(i)                                     Each
Option shall have a date (such Option’s “Future Date”) upon which,
subject to the satisfaction of certain conditions set forth below, such Option
shall become, in whole or in part, “Level 1 Vested.”  The Future Date for the First Option is September 30,
2002.  The Future Date for the Second
Option is September 30, 2003.  The
Future Date for the Third Option is September 30, 2004.  The Future Date for the Fourth Option is September 30,
2005.  

 

3

 

The Future Date for the
Fifth Option is September 30, 2006. 
Each Option shall become fully Level 1 Vested, if (x) the EBITDA for the
fiscal year ending on such Option’s Future Date (each fiscal year ending on a
Future Date, a “Target Year”) equals at least the dollar amount set
forth opposite such Future Date in the table below (each, a “Target EBITDA”),
(y) the Return on Net Assets for the Target Year ending on such Future Date
equals at least the percentage set forth opposite such Future Date in the table
below (each, a “Target Return on Net Assets”), and (z) Executive is
employed with the Company on such Future Date (any Target Year which has been
completed and with respect to which all of the foregoing 3 conditions have been
satisfied, a “Target Achieved Year” and any Target Year which has been
completed with respect to which any of the foregoing 3 conditions have not been
satisfied, a “Target Failed Year”):

 

	
  Future Dates

  	
   

  	
  Target EBITDA

  	
   

  	
  Target Return on Net

  Assets

  	
   

  
	
  September 30, 2002

  	
   

  	
  $

  	
  9,100,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30, 2003

  	
   

  	
  $

  	
  11,700,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30, 2004

  	
   

  	
  $

  	
  14,800,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30, 2005

  	
   

  	
  $

  	
  18,600,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30, 2006

  	
   

  	
  $

  	
  20,600,000

  	
   

  	
  20.0

  	
  %

  

 

; provided that for the
purposes of the definition of Target Enterprise Value below, “Target EBITDA”
for the Company’s fiscal years ending after September 30, 2006 means,
$24,720,000 for the Company’s fiscal year ending on September 30, 2007,
$29,664,000 for the Company’s fiscal year ending on September 30, 2008,
$35,596,800 for the Company’s fiscal year ending on September 30, 2009,
$42,716,160 for the Company’s fiscal year ending on September 30, 2010,
and $51,259,392 for the Company’s fiscal year ending on September 30,
2011.

 

In the event that (x) the
Company consummates any acquisition of the capital stock or assets of another
Person in any given year, or (y) the Company commits to a one-time unusual
capital expenditure, (A) each Target EBITDA shall be adjusted by the Company in
good faith to account for the pro-forma EBITDA impact of such acquisition or
capital expenditure, as the case may be, and (B) each Target Return on Net
Assets shall be adjusted by the Company in good faith to account for the
pro-forma impact of such acquisition including with respect to the goodwill
acquired.  If the Holding Company shall
consummate a stock split, reverse stock split, stock dividend or similar
transaction, the Base Amount and the Exercise Price shall be proportionally
adjusted.

 

(ii)                                  For
the purposes of this Section 2(d), (x) the “Failed Amount” at any
given time shall equal the product of the Base Amount, multiplied by the number
of Target Failed Years which have occurred as of such time, and (y) the “Previously
Level 1 Vested Amount” at any given time shall equal the Extra Level 1
Vested Amount (as defined below) plus, for the purposes of clause (iv) below
and not for the purposes of clause (v) below, the Exit Level 1 Vested Amount
(as defined below).

 

4

 

(iii)                               With
respect to any Target Achieved Year:

 

(A)                              the
aggregate EBITDA for the Target Years prior to and including such Target
Achieved Year shall be referred to as such Target Achieved Year’s “Cumulative
Actual EBITDA”;

 

(B)                                the
aggregate Target EBITDA for the Target Years prior to and including such Target
Achieved Year shall be referred to as such Target Achieved Year’s “Cumulative
Target EBITDA”;

 

(C)                                the
quotient (expressed as a percentage) determined by dividing such Target
Achieved Year’s Cumulative Actual EBITDA by such Target Achieved Year’s
Cumulative Target EBITDA shall be referred to as such Target Achieved Year’s “Cumulative
Percentage;” and

 

(D)                               The
product (expressed as a percentage) of (x) such Target Achieved Year’s
Cumulative Percentage minus 90.0%, multiplied by (y) 10, shall be referred to
as such Target Achieved Year’s “Vesting Percentage;” provided that the
Vesting Percentage for any such Target Achieved Year shall not exceed 100%.

 

(iv)                              If
any Target Achieved Year occurs following a Target Failed Year and such Target
Achieved Year’s Cumulative Percentage is greater than 90.0%, then each Option
corresponding to a Target Failed Year (i.e. having a Future Date which is the
last day of a Target Failed Year) which occurred prior to such Target Achieved
Year shall become Level 1 Vested with respect to a number of shares of Common
equal to the quotient determined by dividing (A) the difference between (x)
such Target Achieved Year’s Vesting Percentage of the Failed Amount as of such
time, minus (y) the Previously Level 1 Vested Amount as of such time, by (B)
the number of Target Failed Years which occurred prior to such Target Achieved
Year.

 

At any given time the
number of shares in the aggregate which have vested pursuant to this clause
(iv) shall equal the “Extra Level 1 Vested Amount.”

 

(v)                                 Upon
the first consummation of a Sale of the Company or an Initial Public Offering
after September 30, 2002 and prior to or on September 30, 2006, if
(i) the EBITDA for the period beginning on the first day of the Company’s
fiscal year (the “Relevant Fiscal Year”) in which the date of such
consummation (the “Test Date”) occurs, and ending on the Test Date,
equals at least 90% of the pro rata amount of the Target EBITDA for the
Relevant Fiscal Year as of the Test Date (based upon a 360 day year and the
number of days elapsed in the Relevant Fiscal Year through the Test Date), (ii)
the Cumulative Exit Percentage as of the Test Date is greater than 90%, and
(iii) Executive is employed with the Company on the Test Date, then each Option
corresponding to a Target Failed Year which occurred prior to such Test Date
shall become Level 1 Vested with respect to a number of shares of Common (the “Exit
Level I Vested Amount”) equal to the quotient determined by dividing (A)
the difference between (x) the Exit Vesting Percentage of the Failed Amount as
of the Test Date, minus (y) the Previously Level I Vested Amount as of the Test
Date, by (B) the number of Target Failed Years which occurred prior to such
Test Date.

 

5

 

“Cumulative
Exit Percentage” means the quotient (expressed as a percentage) determined
by dividing (i) the Company’s aggregate EBITDA for the period beginning October 1,
2001 and ending on the Test Date, by (ii) the sum of (x) the aggregate Target
EBITDA for each Target Year which has been completed as of the Test Date, and
(y) a pro rata amount of the Target EBITDA for the Relevant Fiscal Year as of
the Test Date (based upon a 360-day year and the number of days elapsed in the
Relevant Fiscal Year through the Test Date).

 

“Exit Vesting
Percentage” means the product (expressed as a percentage) of (i) the
Cumulative Exit Percentage as of the Test Date minus 90.0%, multiplied by (ii)
10.

 

(vi)                              Notwithstanding
anything to the contrary set forth herein, upon the consummation of a Sale of
the Company, Initial Public Offering or Qualifying Recapitalization, if the
Total Enterprise Value based upon such Sale of the Company, Initial Public
Offering or Qualifying Recapitalization, as applicable, equals an amount
greater than or equal to the Target Enterprise Value as of the date of
consummation of such event each Option shall become fully Level I Vested.

 

“Qualifying
Recapitalization” means a recapitalization of the Holding Company which
shall not include a Sale of the Company, pursuant to which all of the Holding
Company’s Preferred Stock is redeemed by the Holding Company for the original
cost thereof plus all accrued and unpaid dividends thereon.

 

“Total Enterprise
Value” means (i) in the case of a Sale of the Company, the sum of (x) the
equity value of the Holding Company implied by the Sale of the Company (as
reasonably determined in good faith by the Board), plus (y) the amount of debt
for borrowed money of the Holding Company and its Subsidiaries assumed by the
relevant acquirer or repaid in connection to the Sale of the Company, (ii) in
the case of an Initial Public Offering, the sum of (m) the product of the number
of shares of Common outstanding as of the Test Date immediately after the
consummation of the Initial Public Offering, multiplied by the per share price
paid for Common pursuant to the Initial Public Offering, plus (n) the amount of
debt for borrowed money of the Holding Company and its Subsidiaries as of
immediately after the consummation of the Initial Public Offering, and (iii) in
the case of a Qualifying Recapitalization, the sum of (a) the equity value of
the Holding Company implied by the Qualifying Recapitalization (as reasonably
determined in good faith by the Board), plus (y) the amount of debt for
borrowed money of the Holding Company and its Subsidiaries as of immediately
after the consummation of the Qualifying Recapitalization; provided that in all
cases, Total Enterprise Value shall not include any fees and expenses of the
relevant transaction.

 

“Target Enterprise
Value” means, with respect to any Relevant Fiscal Year, an amount equal to
(i) the Target EBITDA for such Relevant Fiscal Year, multiplied by (ii) 8.0.

 

(vii)                           Each
Option shall become “Fully Vested” with respect to (x) 20% (25% with respect to
the Fourth Option and 33.3% with respect to the Fifth Option) of the Option
Shares subject to such Option which have previously become Level I Vested, on
each of the first four annual anniversaries of such Option’s Future Date (each such date, a “Vesting Date”),
and (y) the remaining Option Shares subject to such Option which have
previously become Level I 

 

6

 

Vested but which have not
become Fully Vested, on the fifth annual anniversary of such Option’s Future
Date (each such date, a “Vesting Date”), provided Executive is employed
with the Company on such Vesting Date (provided that in connection to Executive’s
voluntary termination of Executive’s employment, if Executive in good faith
gives the Company written notice that Executive is retiring, for purposes of
this clause (vii) (and only for such purposes) Executive shall be deemed to be
employed by the Company on each Vesting Date subsequent to Executive’s
retirement until such time, if any, as Executive accepts full-time employment
with any Person other than the Company); provided that, upon the
consummation of a Sale of the Company or an Initial Public Offering, each
Option shall become Fully Vested with respect to (i) if the date of such
consummation (the “Test Date”) is prior to or on September 30,
2006, 50% of the Option Shares subject to such Option which have previously
become Level I Vested but which have not previously become Fully Vested, if as
of the Test Date, the EBITDA for the period beginning on the first day of the
Company’s fiscal year in which the Test Date occurs (the “Relevant Fiscal
Year”), and ending on the Test Date equals at least the pro rata amount of
the Target EBITDA for the Relevant Fiscal Year as of the Test Date (based upon
a 360-day year and the number of days elapsed in the Relevant Fiscal Year
through the Test Date), (ii) if the Test Date is after September 30, 2006,
50% of the Option Shares subject to such Option which have previously become
Level I Vested but which have not previously become Fully Vested, if as of the
Test Date, the EBITDA for the period beginning on the first day of the Relevant
Fiscal Year and ending on the Test Date, equals at least the pro rata amount of
the 20% EBITDA Target for the Relevant Fiscal Year as of the Test Date (based
upon a 360-day year and the number of days elapsed in the Relevant Fiscal Year
through the Test Date), and (iii) all of the Option Shares subject to such
Option which have previously become Level I Vested but which have not
previously become Fully Vested, if the Total Enterprise Value based upon such
Sale of the Company or Initial Public Offering, as applicable, equals an amount
greater than or equal to the Target Enterprise Value as of the Test Date; provided
that, upon the consummation of a Qualifying Recapitalization, each Option shall
become Fully Vested with respect to all of the Option Shares subject to such
Option which have previously become Level I Vested but which have not
previously become Fully Vested, if the Total Enterprise Value based upon such
Qualifying Recapitalization, equals an amount greater than or equal to the
Target Enterprise Value as of the date of consummation of such Qualifying
Recapitalization.

 

“20% EBITDA Target”
means, $24,720,000 for the Company’s fiscal year ending on September 30,
2007, $29,664,000 for the Company’s fiscal year ending on September 30,
2008, $35,596,800 for the Company’s fiscal year ending on September 30,
2009, $42,716,160 for the Company’s fiscal year ending on September 30,
2010, and $51,259,392 for the Company’s fiscal year ending on September 30,
2011; provided that such amounts shall be subject to adjustment on the same
basis as Target EBITDA as set forth in Section 2(a)(iii) of the Executive
Stock Agreement

 

(viii)                        Notwithstanding
anything herein to the contrary, on 7 year anniversary of the date herof, if
Executive is employed with the Company on such date, each Option shall become “Fully
Vested” with respect to all Option Shares subject to such Option which have not
previously become Fully Vested regardless of whether or not such Option had
previously become Level 1 Vested with respect to such Option Shares.

 

7

 

(e)                                  Early
Expiration Upon Termination of Employment. 
If Executive’s employment with the Company is terminated for any reason
other than termination by the Company for Cause or a voluntary termination by
Executive which is not within 90 days after a Good Reason Event, or if
Executive shall retire in the ordinary course, (i) the unexercised portion of
an Option that has vested prior to or on the date of such termination or
retirement (such portion, the “Vested Portion,” and such date of termination or
retirement, the “Termination Date”) may be exercised by Executive within 120
days of the Termination Date and such portion shall be immediately subject to
the Repurchase Option pursuant to the terms and conditions set forth in the
Executive Stock Agreement, and (ii) the portion of an Option which has not
vested prior to or on the Termination Date and any portion of the Vested
Portion which Executive does not elect to exercise within 120 days of the
Termination Date shall expire and shall no longer be exercisable (provided that
portions of an Option which have not vested prior to or on the Termination Date
shall not expire, if such portions remain eligible for vesting because of
Executive’s retirement as described in clause (vii) above).  If Executive’s employment with the Company is
terminated by the Company for Cause or in the event of a voluntary termination
by Executive which is not within 90 days after a Good Reason Event, the portion
of an Option that is unexercised (vested or unvested) shall expire and shall no
longer be exercisable (provided that portions of an Option which have not
vested prior to or on the Termination Date shall not expire, if such portions
remain eligible for vesting because of Executive’s retirement as described in
clause (vii) above).

 

(f)                                    Procedure
for Exercise.  Executive may exercise
all or a portion of an Option (to the extent it has become Fully Vested and
subject to the other provisions herein and in the Plan) by delivering written
notice of exercise to the Holding Company, together with (i) written
acknowledgment that Executive has read and has been afforded an opportunity to
ask questions of management of the Holding Company regarding all financial and
other information provided to Executive regarding the Holding Company, (ii)
payment in full (A) by delivery of a cashier’s or certified check in the amount
(the “Aggregate Exercise Amount “) equal to the sum of (x) the Exercise Price
multiplied by the number of shares of Common with respect to which Executive is
exercising such Option, and (y) the amount, if any, of any additional federal
and state income taxes required to be withheld by reason of the exercise of the
Option, or (B) by delivery of a written notice to the Company that Executive is
exercising such Option by authorizing the Company to withhold from issuance a
number of shares of Common issuable upon such exercise, which when multiplied
by the Fair Market Value of a share of Common as of the date of exercise, is
equal to the Aggregate Exercise Amount (and such withheld shares shall no
longer be issuable under such Option), and (iii) the written execution of a
joinder to the Stockholders Agreement to the extent that Executive is not
already party thereto.  As a condition to
the exercise of any part of an Option, Executive will permit the Holding
Company to, and at the request of Executive the Holding Company shall, deliver
to them all financial and other information regarding the Holding Company and
its Subsidiaries which it believes necessary to enable Executive to make an
informed investment decision.

 

8

 

(g)                                 Securities
Laws Restrictions.  Executive
represents that when Executive exercises the Option Executive will be
purchasing Option Shares for Executive’s own account and not on behalf of
others.  Executive understands and
acknowledges that federal and state securities laws govern and restrict
Executive’s right to offer, sell or otherwise dispose of any Option Shares
unless Executive’s offer, sale or other disposition thereof is registered under
the Securities Act and state securities laws or, in the opinion of the Holding
Company’ counsel, such offer, sale or other disposition is exempt from
registration thereunder.  Executive
agrees that it will not offer, sell or otherwise dispose of any Option Shares
in any manner which would: 
(i) require the Holding Company to file any registration statement
(or similar filing under state law) with the Securities and Exchange Commission
or to amend or supplement any such filing or (ii) violate or cause the
Holding Company to violate the Securities Act, the rules and regulations
promulgated thereunder or any other state or federal law.  Executive further understands that the
certificates for any Option Shares Executive purchases will bear the legend set
forth in Section 4 hereof or such other legends as the Holding Company
deems necessary or desirable in connection with the Securities Act or other
rules, regulations or laws.

 

(h)                                 Non-Transferability
of the Option.  The Options are
personal to Executive and are not transferable by Executive.  Only Executive or Permitted Transferees or
their respective estates or heirs are entitled to exercise Options.

 

(i)                                     Effect
of Transfers in Violation of Agreement. 
The Holding Company will not be required (i) to transfer on its books
any Option Shares which have been sold or transferred in violation of any of
the provisions set forth in this Agreement, or (ii) to treat as owner of such
shares, to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares have been transferred in violation of this
Agreement.

 

(j)                                     Delivery
of Shares.  The date on which
Executive has delivered to the Holding Company the items required under clause
(f) above is referred to herein as Executive’s “Exercise Date.”  Certificates for Option Shares purchased upon
exercise of an Option shall be delivered by the Holding Company to Executive
within five business days after Executive’s Exercise Date.

 

(k)                                  Date
of Issuance.  The Option Shares
issuable upon the exercise of an Option shall be deemed to have been issued to
Executive on Executive’s Exercise Date, and Executive shall be deemed for all
purposes to have become the record holder of such Option Shares on Executive’s
Exercise Date.

 

(l)                                     Fully
Paid.  The issuance of certificates
for Option Shares upon exercise of an Option shall be made without charge to
Executive for any issuance tax in respect thereof or other cost incurred by the
Holding Company in connection with such exercise.  Each Option Share issuable upon exercise of
an Option shall, upon payment of the exercise price therefor, be fully paid and
nonassessable and free from all liens and charges with respect to the issuance
thereof.

 

9

 

(m)                               Book
Transfer.  The Holding Company shall
not close its books against the transfer of any Option Shares issued or
issuable upon the exercise of an Option in any manner which interferes with the
timely exercise of an Option.

 

(n)                                 Filings.  The Holding Company shall assist and
cooperate with Executive to make any required governmental filings or obtain
any governmental approvals prior to or in connection with any exercise of an
Option.

 

(o)                                 Reservation.  The Holding Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
solely for the purpose of issuance upon the exercise of the Options, such
number of shares of Common as are issuable upon the exercise of the Options.  The Holding Company shall take all such
actions as may be necessary to assure that all such Option Shares may be so
issued without violation of any applicable law or governmental regulation or
any requirements of any domestic securities exchange upon which shares of
Common may be listed (except for official notice of issuance which shall be
immediately delivered by the Holding Company upon each such issuance).

 

3.                                       Repurchase
Option.

 

(a)                                  Repurchase
Option.  In the event that Executive
is no longer employed by the Company for any reason, the Executive Securities,
whether held by Executive, or one or more Permitted Transferees, will be
subject to repurchase by the Holding Company pursuant to the terms and
conditions set forth in this Section 3 (the “Repurchase Option”);
provided that notwithstanding anything herein to the contrary, the Option
Securities relating to each Option shall not be subject to the Repurchase
Option after the earlier to occur of (i) the fifth annual anniversary of the
applicable Future Date of an Option (or the fourth annual anniversary with
respect to the Fourth Option or the third annual anniversary with respect to
the Fifth Option), and (ii) the consummation of a Sale of the Company, Initial
Public Offering or Qualifying Recapitalization, if the Total Enterprise Value
based upon such Sale of the Company, Initial Public Offering or Qualifying
Recapitalization, as applicable, equals an amount greater than or equal to the
Target Enterprise Value as of the date of consummation of such event.

 

(b)                                 Termination
for Reasons Other than for Cause and Certain Voluntary Terminations.  If Executive’s employment with the Company is
terminated for any reason other than (x) by the Company for Cause, or (y) a
voluntary termination by Executive which is not within 90 days after a Good
Reason Event, then from time to time during the period which begins on the 6
month anniversary of the date upon which Executive’s employment with the
Company is terminated and ends on the one year anniversary of the date upon which
Executive’s employment with the Company is terminated (the “Exercise Period”),
the Holding Company may elect to purchase all or some of the Executive
Securities, at a price per share equal to (i) the Fair Market Value thereof
with respect to Vested Purchase Shares and Option Shares, (ii) the lower
of the Original Cost thereof and the Book Value thereof, with respect to
Unvested Purchase Shares, and (iii) with respect to Preferred Securities,
the original cost thereof plus all accrued and unpaid dividends 

 

10

 

thereon.  In the
case of Vested Purchase Shares, Fair Market Value shall be determined as of the
later of (x) six months and one day after the date of vesting or (y) six months
and one day after the date of termination of employment.  In the case of Option Shares, Fair Market
Value shall be determined as of the date of repurchase, which date shall be no
earlier than six months and one day after the date of exercise.

 

(c)                                  Termination
for Cause and Certain Voluntary Terminations.  If Executive is no longer employed by the
Company as a result of (i) Executive’s termination for Cause, or (ii) a
voluntary termination by Executive which is not within 90 days after a Good
Reason Event, then from time to time during the Exercise Period, the Holding
Company may elect to purchase all or some of the Executive Securities, at a
price per share equal to (i) the lower of the Book Value thereof and the
Original Cost thereof with respect to Common Securities and Option Securities,
and (ii) with respect to Preferred Securities, the original cost thereof.

 

(d)                                 Repurchase
Procedures.  The Holding Company may
elect to exercise the right to purchase all or any portion of the Executive
Securities by delivering written notice (the “Repurchase Notice”), to
the holder or holders of such Executive Securities.  The Repurchase Notice will set forth the
number and type of shares of Executive Securities to be acquired from such
holder(s), the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. If any shares of Executive
Securities are held by Permitted Transferees of Executive, the Holding Company
shall purchase the shares elected to be purchased from such holder(s) of shares
of Executive Securities pro rata according to the number and type of shares of
Executive Securities held by such holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).

 

(e)                                  Closing.  The closing of the transactions contemplated
by this Section 3 will take place on the date designated by the Holding
Company in the Repurchase Notice, which date will not be more than 90 days
after the delivery of such notice.  The
Holding Company will pay for the Executive Securities to be purchased pursuant
to the Repurchase Option by delivery of (i) a cashier’s or certified check
payable to the holder of such Executive Securities, (ii) a note or notes
payable in six equal semi-annual installments beginning on the six-month
anniversary of the closing of such purchase and bearing interest (payable
quarterly) at a rate per annum equal to the “prime rate” as announced by the
Company’s senior lender at the time, or (iii) both (i) and (ii) in the
aggregate amount of the purchase price for such shares.  Notwithstanding the foregoing, any note
issued by the Holding Company as set forth above shall provide that such note
is immediately due and payable upon the consummation of an Initial Public
Offering or a Sale of the Company.  The
Holding Company will receive customary representations and warranties from the
applicable holder(s) regarding the sale of the Executive Securities, including
but not limited to the representation that the applicable holder(s) have good
and marketable title to the Executive Securities to be transferred free and
clear of all liens, claims and other encumbrances.

 

11

 

(f)                                    12
Month True Up.  Notwithstanding
anything herein to the contrary, in the event (i) Executive’s employment with
the Company is terminated by the Company without Cause or pursuant to a
voluntary termination by Executive within 90 days after a Good Reason Event and
(ii) the Company consummates a Sale of the Company, a Qualifying Recapitalization
or an Initial Public Offering within 12 months of the date on which Executive’s
employment is terminated, then (x) to the extent the Common held by Executive
has previously been repurchased hereunder, Executive shall be entitled to be
paid by the Company, within 30 days after the consummation of such Sale of the
Company, Qualifying Recapitalization or Initial Public Offering, as the case
may be, an amount equal to the difference between (A) the product of (i) the
Fair Market Value of a share of Common (as determined by such Sale of the
Company, Qualifying Recapitalization or Initial Public Offering), multiplied by
(ii) the sum of the number of shares of Common which were repurchased from
Executive hereunder, plus the number of additional shares of Common (the “Additional
Option Shares”), if any, which would have been purchasable by Executive
under all Options granted to Executive hereunder as a result of the vesting,
pursuant to such Sale of the Company, Qualifying Recapitalization or Initial
Public Offering (and specifically not including any effects of “time vesting”
following the termination of employment), of such Options had Executive’s
employment with the Company continued through the consummation of such Sale of
the Company, Qualifying Recapitalization or Initial Public Offering, and (B)
the sum of the amount paid by the Company to repurchase the shares of Common
repurchased from Executive hereunder, plus the aggregate exercise price which
would have been payable with respect to the Additional Option Shares, and (y)
to the extent the Common held by Executive has not previously been repurchased
hereunder, Executive shall be entitled to be issued a number of shares of
Common equal to the Additional Options Shares, subject to the payment by
Executive of the aggregate exercise price which would have been payable with
respect to the Additional Option Shares; provided that the amount payable by
the Company pursuant to clause (x) above shall be payable in the manner
described in the second sentence of Section 3(e) or pursuant to the
issuance to Executive of shares of freely and publicly traded common equity (in
the Company or a successor entity) having a Fair Market Value equal to the
amount payable thereunder.

 

(g)                                 Restrictions
on Repurchase.  Notwithstanding
anything to the contrary contained in this Agreement, all repurchases of
Executive Securities by the Holding Company shall be subject to applicable
restrictions contained in the Delaware General Corporation Law.  If any such restrictions prohibit the repurchase
of Executive Securities hereunder which the Holding Company is otherwise
entitled or required to make, (i) the Holding Company may make such repurchases
as soon as it is permitted to do so under such restrictions, or (ii) the
Holding Company may allow Bruckmann, Rosser, Sherrill & Co. II, L.P. and
Agri Beef Co. to purchase such Executive Securities on a pro rata basis based
upon their relative ownership of the Common at such time.

 

4.                                       Put
Option.

 

(a)                                  Put
Option.  In the event that Executive
is no longer employed by the Company by reason of Executive’s death,
Disability, or retirement in the ordinary course, 

 

12

 

Executive, Executive’s Permitted Transferees, and
their respective estates or heirs as applicable (the “Executive Parties”),
shall be entitled to require the Holding Company to repurchase the Executive
Securities, whether held by Executive or one or more Permitted Transferees
pursuant to the terms and conditions set forth in this Section 4 (the “Put
Option”).  At any one time during the
period that begins 184 days after the Termination Date and ends 270 days after
the Termination Date, the Executive Parties may require the Holding Company to
purchase all or some of the Executive Securities, at a price equal to (i) the
Fair Market Value thereof with respect to Vested Purchase Shares and Option
Shares, (ii) the lower of the Original Cost thereof and the Book Value
thereof, with respect to Unvested Purchase Shares, and (iii) with respect
to Preferred Securities, the original cost thereof plus all accrued and unpaid
dividends thereon.  In the case of Vested
Purchase Shares, Fair Market Value shall be determined as of the later of (x)
six months and one day after the date of vesting or (y) six months and one day
after the date of termination of employment. 
In the case of Option Shares, Fair Market Value shall be determined as
of the date of repurchase.

 

(b)                                 Put
Procedures.  The Executive Parties
may elect to exercise the right to have the Holding Company purchase all or any
portion of the Executive Securities by delivering written notice (the “Put
Notice”), to the Holding Company. 
The Put Notice will set forth the number and type of shares of Executive
Securities to be sold by such holder(s), the aggregate consideration to be paid
for such shares and the time (which shall not be less than 30 days nor more
than 90 days after the date the Put Notice is delivered) for the closing of the
transaction. If any shares of Executive Securities are held by Permitted
Transferees of Executive, the Holding Company shall purchase the shares
required to be purchased from such holder(s) of shares of Executive Securities
pro rata according to the number and type of shares of Executive Securities
held by such holder(s) at the time of delivery of such Put Notice (determined
as nearly as practicable to the nearest share).

 

(c)                                  Closing.  The closing of the transactions contemplated
by this Section 4 will take place at the Company’s executive office on the
date designated by the Executive Parties in the Put Notice.  The Holding Company will pay for the
Executive Securities to be purchased pursuant to the Put Option by delivery of
(i) a cashier’s or certified check payable to the holder(s) of such Executive
Securities, (ii) a note or notes payable in six equal semi-annual installments
beginning on the six-month anniversary of the closing of such purchase and
bearing interest (payable quarterly) at a rate per annum equal to the “prime
rate” as announced by the Company’s largest senior lender at the time, or (iii)
both (i) and (ii) in the aggregate amount of the purchase price for such
shares.  Notwithstanding the foregoing,
any note issued by the Holding Company as set forth above shall provide that
such note is immediately due and payable upon the consummation of an Initial
Public Offering or a Sale of the Company. 
The Holding Company will receive customary representations and
warranties from applicable holder(s) regarding the sale of the Executive
Securities, including but not limited to the representation that applicable
holder(s) have good and marketable title to the Executive Securities to be
transferred free and clear of all liens, claims and other encumbrances.

 

13

 

(d)                                 Restrictions
on Repurchase.  Notwithstanding
anything to the contrary contained in this Agreement, all repurchases of
Executive Securities pursuant to this Section 4 shall be subject to
(i) applicable restrictions contained in the Delaware General Corporation
Law, and (ii) the prior approval of the Company’s senior lenders at the
time (if such approval is required at such time pursuant to the Company’s
senior financing documents), and (iii) the Company having sufficient financial
stability and liquidity to consummate such repurchase without materially and
adversely affecting the Company, as determined in the good faith reasonable
discretion of the Board.  If any such
restrictions prohibit the repurchase of Executive Securities hereunder which
the Holding Company is otherwise required to make, the Holding Company shall
make such repurchases as soon as it is permitted to do so under such
restrictions.

 

5.                                       Restrictions
on Transfer.

 

(a)                                  The
certificates representing the Executive Securities shall bear the following legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON                     ,             ,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER.  THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN (I) AN EXECUTIVE
STOCK AGREEMENT AMONG MWI VETERINARY SUPPLY CO., MWI HOLDINGS, INC. (THE “HOLDING
COMPANY”) AND [Executive] DATED AS OF JUNE 18, 2002, AND (II) A
STOCKHOLDERS AGREEMENT AMONG THE HOLDING COMPANY AND ITS STOCKHOLDERS DATED AS
OF JUNE 18, 2002, IN EACH CASE AS AMENDED AND MODIFIED FROM TIME TO
TIME.  A COPY OF EACH SUCH AGREEMENT MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE HOLDING COMPANY’S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE.”

 

(b)                                 No
holder of Executive Securities may sell, transfer or dispose of any Executive
Securities (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Holding Company an opinion of
counsel (reasonably acceptable in form and substance to the Holding Company)
that neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such transfer.

 

(c)                                  Notwithstanding
anything herein to the contrary, Executive agrees that Executive and his
Permitted Transferees shall not transfer any shares of Common during any “lock-up
period” imposed on executives of the Company and certain other affiliates by
the underwriters underwriting the Initial Public Offering.

 

14

 

MISCELLANEOUS
PROVISIONS

 

6.                                       Confidential
Information.  Executive acknowledges
that the information, observations and data obtained by Executive while
employed by the Company (including those obtained while employed by the Company
prior to the date of this Agreement) concerning the business or affairs of the
Company or any of its Affiliates (“Confidential Information”) are the
property of the Company or such Affiliate. 
Therefore, Executive agrees that Executive shall not disclose to any unauthorized
person or use for Executive’s own purposes any Confidential Information without
the prior written consent of the Board, unless and to the extent that (i) such
information was otherwise available to Executive from a source other than the
Company, (ii) the aforementioned matters become generally known to and
available for use by the public other than as a result of Executive’s acts or
omissions, or (iii) disclosure of such information is required by law.  Executive shall deliver to the Company at the
termination of the Employment Period, or at any other time the Company may
request, all memoranda, notes, plans, records, reports, computer tapes,
printouts and software and other documents and data (and copies thereof)
relating to the Confidential Information, Work Product (as defined below) or
the business of the Company or any Affiliate which Executive may then possess
or have under Executive’s control.

 

7.                                       Inventions
and Patents.  Executive acknowledges
that all inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports and all similar or related information (whether or
not patentable) which relate to the Company’s or any of its Affiliates’ actual
or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed by the Company and its Affiliates (“Work Product”) belong
to the Company or such Affiliate. 
Executive shall promptly disclose such Work Product to the Board and
perform all actions reasonably requested by the Board (whether during or after
the Employment Period) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments).

 

8.                                       Non-Compete,
Non-Solicitation.

 

(a)                                  In
further consideration of the compensation to be paid to Executive hereunder,
Executive acknowledges that in the course of Executive’s employment with the
Company prior to the date of this Agreement Executive has become familiar, and
during Executive’s employment with the Company after the date of this Agreement
Executive will become familiar, with the Company’s trade secrets and with other
Confidential Information concerning the Company and its Affiliates and that
Executive’s services have been and shall be of special, unique and
extraordinary value to the Company and its Affiliates.  Therefore, Executive agrees that, during the
period commencing on the date hereof and ending on the second anniversary of
the termination of the Employment Period (the “Noncompete Period”),
Executive shall not directly or indirectly own any interest in, lease, manage,
control, engage in, participate in, consult with, advise, render services for,
or otherwise assist in any manner (in each applicable case, alone or in
association with any Person), any Person in any business that the Company
conducts or has specific plans to conduct as of the date the Employment Period
is terminated.  Nothing herein shall
prohibit Executive from being a passive owner of not more than 5% of the 

 

15

 

outstanding stock of any
class of a corporation which is publicly traded, so long as Executive has no
active participation in the business of such corporation.

 

(b)                                 During
the Noncompete Period, Executive shall not directly, or indirectly through
another entity, (i) induce or attempt to induce any employee of the Company or
any Affiliate to leave the employ of the Company or such Affiliate, or in any
way interfere with the relationship between the Company or any Affiliate and
any employee thereof, (ii) hire any person who was an employee of the Company
or any Affiliate at any time during the Employment Period or (iii) induce or
attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any Affiliate to cease doing business
with the Company or such Affiliate, or in any way interfere with the
relationship between any such customer, supplier, licensee, licensor, franchisee
or business relation and the Company or any Affiliate (including, without
limitation, making any negative statements or communications about the Company
or its Affiliates).

 

9.                                       Enforcement.  If, at the time of enforcement of Sections 6,
7 or 8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.  Because Executive’s services are unique and
because Executive has access to Confidential Information and Work Product, the
parties hereto agree that money damages would not be an adequate remedy for any
breach of this Agreement.  Therefore, in
the event a breach or threatened breach of this Agreement, the Company or its
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security).  In addition, in the event of
an alleged breach or violation by Executive of Section 8, the Noncompete
Period shall be tolled until such breach or violation has been duly cured.  Executive agrees that the restrictions
contained in Section 8 are reasonable.

 

10.                                 Definitions.  All references to a fiscal year refer to the
Company’s fiscal year.

 

“Affiliate” means,
with respect to any Person, any other Person controlling, controlled by, or
under common control with such Person. 
For purposes of this Agreement, the term “control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”
as used with respect to any Person) means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person whether through ownership of voting securities, by
contract or otherwise.

 

“Board” means the
board of directors of the Company.

 

“Book Value” for
each outstanding share of Common means an amount equal to the quotient obtained
by dividing (i) the consolidated book value of the assets of the Company and
its Subsidiaries, plus the exercise, exchange or conversion price of all Common
Stock Equivalents that are at such time convertible, exchangeable or
exercisable, other than Common Stock Equivalents for which the exercise,
exchange or conversion price shall be equal to or 

 

16

 

greater than the Book
Value of the shares of Common to which they relate (determined without giving
effect to the exercise, exchange or conversion of such Common Stock
Equivalents), less the consolidated liabilities of the Company and its
Subsidiaries, and less the liquidation preference of any outstanding shares of
preferred stock (including the Preferred) of the Company, by (ii) the number of
shares of Common Stock Deemed Outstanding as of such date.

 

“Cause” means (i)
the continued failure by Executive to perform duties as reasonably directed by
the Board which such failure continues for ten days after written notice of
such failure provided to Executive, (ii) willful misconduct by Executive in the
performance of Executive’s duties, (iii) gross negligence by Executive in the
performance of Executive’s duties which materially harms the Company, (iv)
Executive’s commission of a felony or other offense involving dishonestly
toward the Company or its Subsidiaries or moral turpitude, or (v) any breach by
Executive of Executive’s obligations set forth in Sections 6, 7 or 8.

 

“Common Securities”
means (i) the shares of Common purchased hereunder which are issued and
outstanding from time to time, (ii) any other shares of Common otherwise issued
to, acquired by or held by Executive (not including Option Shares or other
Option Securities), and (iii) shares of the Holding Company issued with respect
to the securities specified in clauses (i) or (ii) above by way of a share
split, share dividend or other recapitalization; provided that Common
Securities shall continue to be Common Securities in the hands of any holder
other than Executive (except for the Holding Company and except for transferees
in a Public Sale), and except as otherwise provided herein, each such other
holder of Common Securities shall succeed to all rights and obligations
attributable to Executive as a holder of Common Securities hereunder.

 

“Common Stock Deemed
Outstanding” means the number of shares of Common outstanding as of a
particular date, determined on a fully diluted basis giving effect to all
outstanding securities convertible into or exchangeable or exercisable for
Common (collectively, “Common Stock Equivalents”), that are at such time
convertible, exchangeable or exercisable, other than Common Stock Equivalents
for which the exercise price or conversion price shall have been equal to or
greater than the Book Value of the shares of Common with respect to which they
relate (determined without giving effect to the exercise, exchange or
conversion of such Common Stock Equivalents).

 

“Consolidated EBITDA”
means, for any period, the net income of the Company and its Subsidiaries for
such period taken as a single accounting period determined in conformity with
GAAP, (A) plus (to the extent deducted in the calculation of net income and
without duplication), (i) interest expense, (ii) income tax expense, (iii)
depreciation expense, (iv) amortization expense, (v) all other non-cash
charges, (vi) losses on sales of assets (excluding sales in the ordinary course
of business) and other extraordinary or nonrecurring losses and (vii)
management fees paid, (B) minus (to the extent included in the
calculation of net income and without duplication), (x) all non-cash gains, (y)
gains on sales of assets (excluding sales in the ordinary course of business)
and other extraordinary or nonrecurring gains, and (z) interest income,
all as determined on a consolidated basis in accordance with GAAP; provided
that the calculation of Consolidated EBITDA shall ignore any and all effects
under purchase accounting of the Sale of the Company consummated on the date
hereof.

 

17

 

“Disability” means
Executive’s inability, due to illness, accident, injury, physical or mental
incapacity or other disability, to carry out effectively Executive’s duties and
obligations to the Company or to participate effectively and actively in the
management of the Company for a period of at least 90 consecutive days or for
shorter periods aggregating 20 days (whether or not consecutive) during each
three month period for not less than six months, as determined by an
independent physician.

 

“EBIT” means, for
any period, the net income of the Company and its Subsidiaries for such period
taken as a single accounting period determined in conformity with GAAP,
(A) plus (to the extent deducted in the calculation of net income and
without duplication), (i) interest expense, (ii) income tax expense,
(iii) all other non-cash charges other than depreciation expense and
amortization expense, and (iv) losses on sales of assets (excluding sales
in the ordinary course of business) and other extraordinary or
nonrecurring losses, (B) minus (to the extent included in the
calculation of net income and without duplication), (x) all non-cash
gains, (y) gains on sales of assets (excluding sales in the ordinary
course of business) and other extraordinary or nonrecurring gains, and
(z) interest income, all as determined on a consolidated basis in
accordance with GAAP.

 

“EBITDA” means the
Consolidated EBITDA of the Company and its Subsidiaries for a particular fiscal
year, derived from the Company’s audited consolidated financial statements for
such fiscal year certified by the Company’s chief financial officer.

 

“Executive Securities”
means the Common Securities, the Option Securities and the Preferred
Securities.

 

“Fair Market Value”
for each outstanding share of Common, means the market value as determined in
good faith mutually by the Board and Executive; provided that if the
parties cannot agree within 30 days, the Fair Market Value will be decided by a
mutually acceptable independent investment bank, whose determination will be
final and binding (whose fees and expense shall be paid one-half by the
Company, up to a maximum of $25,000, and the rest by Executive); provided the
parties are unable to agree on a mutually acceptable independent investment
bank, the Holding Company and Executive shall each designate an investment bank
and such investment banks shall choose the independent investment bank which
shall determine Fair Market Value hereunder.

 

“GAAP” means
generally accepted accounting principles as in effect in the United States,
consistently applied.

 

“Good Reason Event”
means (i) the relocation of the Company’s executive offices more than 75 miles
from its location on the date hereof, or (ii) a material reduction by the
Company of Executive’s employment responsibilities or compensation.

 

“Initial Public
Offering” means the initial underwritten public offering registered under
the Securities Act of shares of Common.

 

“Option Securities”
means (i) the Option Shares which are issued and outstanding from time to time,
and (ii) shares of the Holding Company issued with respect to the securities 

 

18

 

specified in clause (i)
above by way of a share split, share dividend or other recapitalization;
provided that Option Securities shall continue to be Option Securities in the
hands of any holder other than Executive (except for the Holding Company and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Option Securities shall succeed to all rights
and obligations attributable to Executive as a holder of Option Securities
hereunder.

 

“Original Cost”
means for each share of Common acquired by Executive, the amount per share paid
by Executive to the Company as the purchase price or exercise price for such
share of Common, as adjusted for any merger, consolidation, reclassification,
stock split, reverse stock split, stock dividend or other similar transaction.

 

“Permitted Transferee”
has the meaning set forth in the Stockholders Agreement.

 

“Person” means any
natural person, corporation, partnership, limited liability company, trust,
unincorporated organization or other entity.

 

“Preferred Securities”
means (i) the shares of Preferred purchased hereunder which are issued and
outstanding from time to time, (ii) any other shares of Preferred otherwise
issued to, acquired by or held by Executive, and (iii) shares of the Holding
Company issued with respect to the securities specified in clauses (i) or (ii)
above by way of a share split, share dividend or other recapitalization;
provided that Preferred Securities shall continue to be Preferred Securities in
the hands of any holder other than Executive (except for the Holding Company
and except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Preferred Securities shall succeed to all
rights and obligations attributable to Executive as a holder of Preferred
Securities hereunder.

 

“Public Sale”
means any sale pursuant to a registered public offering under the Securities
Act or any sale to the public pursuant to Rule 144 promulgated under the
Securities Act effected through a broker, dealer or market maker.

 

“Return on Net Assets”
means, for any fiscal year, the quotient obtained by dividing (i) EBIT for
such fiscal year, by (ii) the difference between (a) the sum of (w) Accounts
Receivable plus (x) Inventory, plus (y) Prepaid Current Assets plus (z) Net
Plant, Property and Equipment, and (b) the sum of (x) Accounts Payable, plus
(y) Accrued Expenses.  The terms “Accounts
Receivable,” “Inventory,” “Prepaid Current Assets,” “Net
Plant, Property and Equipment,” “Accounts Payable” and “Accrued
Expenses” shall refer to the Company’s consolidated Accounts Receivable,
Inventory, Prepaid Current Assets, Net Plant, Property and Equipment, Accounts
Payable and Accrued Expenses as of the end of such fiscal year, as determined
in accordance with GAAP from the Company’s audited consolidated financial
statements for such fiscal year certified by the Company’s chief financial
officer.

 

“Sale of the Company”
has the meaning set forth in the Stockholders Agreement.

 

“Securities Act”
means the Securities Act of 1933, as amended from time to time.

 

19

 

“Stockholders
Agreement” means that Stockholders Agreement dated as of June 18,
2002, by and among the Holding Company and certain other parties thereto.

 

“Subsidiary” means
any corporation, partnership, association or other business entity of which (i)
if a corporation, a majority of the total voting power of shares entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company or (ii) if a partnership, association or
other business entity, a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly,
by the Company.  For purposes hereof, the
Company shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if the Company, directly or indirectly, is
allocated a majority of partnership, association, or other business entity
gains or losses, or is or controls the managing director or general partner (or
Person having like authority) of such partnership, association or other
business entity.

 

11.                                 Notices.  Any notice provided for in this Agreement
must be in writing and must be either personally delivered, mailed by first
class mail (postage prepaid and return receipt requested) or sent by reputable
overnight courier service (charges prepaid) to the addresses indicated below:

 

If to Executive:

 

 

 

 

 

If to the Company or the
Holding Company:

 

c/o MWI Veterinary Supply Co.

2201 N. 20th Street

Nampa, ID 83687

Attn:                    President

Fax:

 

with copies (which shall
not constitute notice to the Company or the Holding Company) to:

 

Bruckmann,
Rosser Sherrill & Co., Inc.

156
East 56th Street, 29th Floor

New
York, NY 10022

Attn:                    Bruce Bruckmann

Brett Pertuz

Fax:  (212)
521-3799

 

20

 

Kirkland
& Ellis

153
East 53rd Street

New
York, New York 10022

Attn:                    Eunu Chun, Esq.

Fax:  (212)
446-4900

 

or such other address or
to the attention of such other person as the recipient party shall have
specified by prior written notice to the sending party.  Any notice under this Agreement shall be
deemed to have been given when so delivered or sent or, if mailed, five days
after deposit in the U.S. mail.

 

12.                                 General
Provisions.

 

(a)                                  Termination
of Repurchase/Put Option.  The right
of the Holding Company to exercise the Repurchase Option and the right of the
Executive Parties to exercise the Put Option, in each case with respect to
Common Securities and Preferred Securities but expressly excluding Option
Securities, shall each expire on the earlier to occur of the (i) fifth annual
anniversary of the date hereof, (ii) date of consummation of an Initial Public
Offering, or (iii) date of consummation of a Sale of the Company.

 

(b)                                 Severance.  If Executive’s employment with the Company is
terminated other than by the Company for Cause or pursuant to a voluntary
termination by Executive which is not within 90 days of a Good Reason Event,
then the Company shall continue to pay Executive at a rate equal to Executive’s
base salary at the time of such termination for a period of 12 months after
such termination, provided that such payments shall be made pursuant to the
Company’s normal payroll practices and shall be subject to any required
withholding.  Notwithstanding the
foregoing, the Company shall not be obligated to make such severance payments
if the Company gives Executive written notice, within 15 days after the date of
the termination of employment, that the Company has elected to waive the
provisions of Section 8(a) hereof and thus not pay the severance described
above.

 

(c)                                  Transfers
in Violation of Agreement.  Any
transfer or attempted transfer of any Executive Securities in violation of any
provision of this Agreement shall be void, and the Holding Company shall not
record such transfer on its books or treat any purported transferee of such
Executive Securities as the owner of such shares for any purpose.

 

(d)                                 Severability.  Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.

 

21

 

(e)                                  Complete
Agreement.  This Agreement, those
documents expressly referred to herein and other documents of even date
herewith embody the complete agreement and understanding among the parties and
supersede and preempt any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.

 

(f)                                    Counterparts.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

 

(g)                                 Successors
and Assigns.  Except as otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by Executive, the Company, the Holding Company and their respective
successors and assigns (including subsequent holders of Executive Securities);
provided that the rights and obligations of Executive under this Agreement
shall not be assignable except in connection with a permitted transfer of
Executive Securities hereunder.

 

(h)                                 Choice
of Law.  The corporate law of the
State of Delaware shall govern all questions concerning the relative rights of
the Company, the Holding Company and Executive. 
All issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of New York, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.

 

(i)                                     Remedies.  Each of the parties to this Agreement shall
be entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorney’s fees) caused by any breach
of any provision of this Agreement and to exercise all other rights existing in
its favor.  The parties hereto agree and
acknowledge that money damages would not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in its sole
discretion apply to any court of law or equity of competent jurisdiction
(without posting any bond or deposit) for specific performance and/or other
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.

 

(j)                                     Amendment
and Waiver.  The provisions of this
Agreement may be amended and waived only with the prior written consent of the
Holding Company, the Company and Executive.

 

*     *     *    
*     *

 

22

 

IN
WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.

 

	
   

  	
  MWI HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Mary Pat
  Thompson

  	
   

  
	
   

  	
   

  
	
   

  	
  Its: 

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ James Cleary

  	
   

  
	
   

  	
  James Cleary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MWI VETERINARY
  SUPPLY CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mary Pat
  Thompson

  	
   

  
	
   

  	
   

  
	
   

  	
  Its: 

  	
   

  	
   

  
					

 

 

EXHIBIT
A

 

                              ,
2002

 

ELECTION TO INCLUDE
PROPERTY IN GROSS INCOME PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE
CODE

 

The undersigned purchased
Common Stock (the “Stock”), of MWI Holdings, Inc., a Delaware
corporation (the “Corporation”), on the date hereof.  Under certain circumstances, the Corporation
has the right to repurchase some or all of the Stock, at the lesser of its cost
or book value at a time in the future, from the undersigned (or from the holder
of the Stock, if different from the undersigned) should the undersigned cease to
be employed by the Corporation (the “Employer”).  Hence, the Stock is subject to a substantial
risk of forfeiture.  The undersigned
desires to make an election to have the Stock taxed under the provision of Code
§83(b) at the time the undersigned purchased the Stock.

 

Therefore, pursuant to
Code §83(b) and Treasury Regulation §1.83-2 promulgated thereunder, the
undersigned hereby makes an election, with respect to the Stock (described
below), to report as taxable income for calendar year 2002 the excess (if any)
of the Stock’s fair market value on the date hereof over the purchase price
thereof.

 

The following information
is supplied in accordance with Treasury Regulation §1.83-2(e):

 

1.                                       The
name, address and social security number of the undersigned:

 

	
  Name:

  	
   

  
	
  Address

  	
   

  
	
   

  	
   

  
	
  SS #:

  	
   

  

 

2.                                       A
description of the property with respect to which the election is being made:                    
shares of the Corporation’s Common Stock.

 

3.                                       The
date on which the property was transferred: the date hereof.  The taxable year for which such election is
made: calendar 2002.

 

4.                                       The
restrictions to which the property is subject: 
If the undersigned ceases to be employed by the Corporation (except in
certain circumstances) all or a portion of the Stock will be subject to repurchase
by the Corporation at the lesser of the cost paid by the undersigned and the
book value at a time in the future.

 

5.                                       The
aggregate fair market value on the date hereof of the property with respect to
which the election is being made, determined without regard to any lapse
restrictions: $                   .

 

A-1

 

6.                                       The
aggregate amount paid for such property: $                   
..

 

A copy of this election
has been furnished to the Secretary of the Corporation pursuant to Treasury
Regulations §1.83-2(e)(7).

 

 

	
   

  	
   

  	
   

  
	
   

  	
  [Name]

  

 

A-2Exhibit 4.5

 

Execution Copy

 

EXECUTIVE STOCK
AGREEMENT

 

THIS EXECUTIVE STOCK AGREEMENT (this “Agreement”)
is made as of June 18, 2002, by and among MWI Veterinary Supply Co. (the “Company”),
MWI Holdings, Inc. (the “Holding Company”), and Jeff Danielson (“Executive”).
Certain definitions are set forth in Section 9 of this Agreement.

 

The Company, the Holding Company and Executive desire
to enter into an agreement setting forth (i) the terms pursuant to which the
Holding Company shall sell to Executive certain shares of the Holding Company’s
(a) Common Stock, par value $0.01 per share (the “Common”), and (b)
Series A Preferred Stock, par value $1.00 per share (the “Preferred,”
and the Common and Preferred to be purchased hereunder, the “Securities”),
(ii) the terms pursuant to which the Holding Company is granting to Executive
options to acquire certain shares of Common, (iii) the obligation of
Executive to refrain from competing with the Company and its Affiliates under
certain circumstances as provided herein, and (iv) certain other rights and
obligations of the parties.

 

The parties hereto agree as follows:

 

1.                                       Purchase
and Sale of Securities.

 

(a)                                  Sale.  Upon execution of this Agreement and
contemporaneously with the consummation of the sale of the Company on the date
hereof, Executive will purchase, and the Holding Company will sell, (i) 5,783
shares of Common at a purchase price of $1.00 per share, and (ii) 29.217 shares
of Preferred at a purchase price of $1,000.00 per share, for an aggregate
consideration of $35,000.00 (the “Purchase Price”).  Upon execution of this Agreement and
contemporaneously with the consummation of the sale of the Company on the date
hereof, Executive will deliver to the Holding Company a Promissory Note in
principal amount of the Purchase Price in the form provided to Executive by the
Company, and the Holding Company will deliver to Executive the certificates and
instruments evidencing the Securities. 
Executive shall also execute and deliver to the Company a related Pledge
Agreement in the form provided to Executive by the Company.

 

(b)                                 83(b).  Executive has delivered to the Holding
Company a completed and signed election under Section 83(b) of the Internal
Revenue Code and the regulations thereunder, a copy of which has been attached
as Exhibit A hereto.  Executive further agrees to complete and sign
subsequent elections under such Section 83(b) upon exercise of Options
hereunder.

 

(c)                                  Vesting
of Common.  1156.6 of the shares of
Common purchased pursuant to clause (a) above shall vest and become “Vested
Purchase Shares” on each of the first five annual anniversaries of the date
hereof (each, a “Vesting Date”), provided Executive is employed with the
Company on such Vesting Date (provided that in connection to 

 

 

Executive’s voluntary termination of Executive’s
employment, if Executive in good faith gives the Company written notice that
Executive is retiring, for purposes of this clause (c) (and only for such
purposes) Executive shall be deemed to be employed by the Company on each Vesting
Date subsequent to Executive’s retirement until such time, if any, as Executive
accepts full-time employment with any Person other than the Company); provided
that all shares of Common purchased pursuant to clause (a) above which have not
previously vested pursuant to this clause (c) shall vest and becomes Vested
Purchase Shares upon the consummation of a Sale of the Company, a Qualifying
Recapitalization or an Initial Public Offering. 
Shares of Common purchased pursuant to Section 1(a) which have not
vested and become Vested Purchase Shares shall be referred to as “Unvested
Purchase Shares.”

 

(d)                                 Representations.  In connection with the purchase and sale of
the Securities hereunder, Executive represents and warrants to the Holding
Company that:

 

(i)                                     Executive
has full capacity, power and authority to execute and deliver this Agreement,
to perform Executive’s obligations under this Agreement and to consummate the
transactions contemplated hereby.

 

(ii)                                  The
Securities to be acquired by Executive pursuant to this Agreement will be
acquired for Executive’s own account and not with a view to, or intention of,
distribution thereof in violation of the Securities Act, or any applicable
state securities laws, and such Securities will not be disposed of in contravention
of the Securities Act or any applicable state securities laws.

 

(iii)                               Executive
is able to bear the economic risk of the investment in the Securities for an
indefinite period of time because the Securities are subject to the transfer
restrictions contained herein and have not been registered under the Securities
Act.

 

(iv)                              Executive
has had an opportunity to ask questions and receive answers concerning the
terms and conditions of the offering of the Securities and has had full access
to such other information concerning the Holding Company as Executive has
requested.  Executive has reviewed, or
has had an opportunity to review copies of the following documents, (A) the
Stockholders Agreement, and (B) the certificate of incorporation and by-laws of
the Holding Company.

 

(v)                                 This
Agreement has been duly executed and delivered by Executive and constitutes the
legal, valid and binding obligation of Executive, enforceable in accordance
with its terms, and the execution, delivery, and performance of this Agreement
by Executive does not and will not conflict with, violate, or cause a breach of
any agreement, contract, or instrument to which Executive is a party or any
judgment, order, or decree to which Executive is subject.  No consent, approval, order of authorization
of, or registration, declaration or filing with, any government agency or
public or regulatory unit, agency, body or authority is required to be obtained
or made by Executive in connection with Executive’s execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.

 

2

 

(e)                                  Acknowledgment.  Executive acknowledges and agrees that,
except for information necessary for Executive to determine whether the Company
has achieved the performance targets set forth herein, none of the Holding
Company, the Company or any of their Subsidiaries shall have any duty or
obligation to disclose to Executive, and Executive shall have no right to be
advised of, any material information regarding the Holding Company, the Company
or any of their Subsidiaries at any time prior to, upon, or in connection with
the repurchase of the Securities.  The
Holding Company, the Company and their Subsidiaries shall provide Executive
with such information regarding such entities as Executive may reasonably
request in order for Executive to determine whether or not to exercise the Put
Option.  Notwithstanding anything herein
to the contrary, references herein to the employment of Executive by the
Company shall be deemed to refer to employment of Executive by the Company or
any of its Subsidiaries.

 

2.                                       Options.

 

(a)                                  Options
Grant.  Pursuant to the Holding
Company’s 2002 Stock Option Plan (the “Plan”), the Holding Company hereby grants
to Executive five (5) separate nonqualified stock options (each an “Option”
and individually referred to as the “First Option,” the “Second
Option,” the “Third Option,” the “Fourth Option,” and the “Fifth
Option”), to purchase 2,197.80 (the “Base Amount”) shares of Common
(the “Option Shares”) (which number may be adjusted as provided in the
Plan), at a price per share of $1.00 (the “Exercise Price”).  The stock options so granted shall not be
intended to be “incentive stock options” within the meaning of Section 422 of
the Internal Revenue Code.  

 

(b)                                 Executive
Bound by Plan.  Attached hereto as
Exhibit A is a copy of the Plan which is incorporated herein by reference and
made a part hereof.  Executive hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all the
terms and provisions thereof.  The Plan
should be carefully examined before any decision is made to exercise an Option.

 

(c)                                  Exercisability.  Subject to the other provisions hereof, an
Option shall be exercisable, in whole or in part, to the extent it has become
Fully Vested (as set forth below), by written notice to the Holding Company at
any time, and from time to time, during the period of time after the date
hereof and prior to the tenth anniversary of the date hereof or such earlier
date upon which such Option expires as specified herein or in the Plan.  An Option may not be exercised for a fraction
of a share of Common.  Options are
subject to cancellation as provided in the Plan.

 

(d)                                 Vesting
of Option.  Each Option shall vest
and become exercisable with respect to the Option Shares subject to such Option
as follows:

 

(i)                                     Each
Option shall have a date (such Option’s “Future Date”) upon which,
subject to the satisfaction of certain conditions set forth below, such Option
shall become, in whole or in part, “Level 1 Vested.”  The Future Date for the First Option is
September 30, 2002.  The Future Date for
the Second Option is September 30, 2003. 
The Future Date for the Third Option is September 30, 2004.  The Future Date for the Fourth Option is
September 30, 2005.  

 

3

 

The Future Date for the Fifth Option is September 30, 2006.  Each Option shall become fully Level 1
Vested, if (x) the EBITDA for the fiscal year ending on such Option’s Future
Date (each fiscal year ending on a Future Date, a “Target Year”) equals
at least the dollar amount set forth opposite such Future Date in the table
below (each, a “Target EBITDA”), (y) the Return on Net Assets for the
Target Year ending on such Future Date equals at least the percentage set forth
opposite such Future Date in the table below (each, a “Target Return on Net
Assets”), and (z) Executive is employed with the Company on such Future
Date (any Target Year which has been completed and with respect to which all of
the foregoing 3 conditions have been satisfied, a “Target Achieved Year”
and any Target Year which has been completed with respect to which any of the
foregoing 3 conditions have not been satisfied, a “Target Failed Year”):

 

	
  Future Dates

  	
   

  	
  Target EBITDA

  	
   

  	
  Target Return on Net

  Assets

  	
   

  
	
  September 30,
  2002

  	
   

  	
  $

  	
  9,100,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30,
  2003

  	
   

  	
  $

  	
  11,700,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30,
  2004

  	
   

  	
  $

  	
  14,800,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30,
  2005

  	
   

  	
  $

  	
  18,600,000

  	
   

  	
  20.0

  	
  %

  
	
  September 30,
  2006

  	
   

  	
  $

  	
  20,600,000

  	
   

  	
  20.0

  	
  %

  

 

; provided that for the purposes of the definition of
Target Enterprise Value below, “Target EBITDA” for the Company’s fiscal
years ending after September 30, 2006 means, $24,720,000 for the Company’s
fiscal year ending on September 30, 2007, $29,664,000 for the Company’s fiscal
year ending on September 30, 2008, $35,596,800 for the Company’s fiscal year
ending on September 30, 2009, $42,716,160 for the Company’s fiscal year ending
on September 30, 2010, and $51,259,392 for the Company’s fiscal year ending on
September 30, 2011.

 

In the event that (x) the Company consummates any
acquisition of the capital stock or assets of another Person in any given year,
or (y) the Company commits to a one-time unusual capital expenditure, (A) each
Target EBITDA shall be adjusted by the Company in good faith to account for the
pro-forma EBITDA impact of such acquisition or capital expenditure, as the case
may be, and (B) each Target Return on Net Assets shall be adjusted by the
Company in good faith to account for the pro-forma impact of such acquisition
including with respect to the goodwill acquired.  If the Holding Company shall consummate a
stock split, reverse stock split, stock dividend or similar transaction, the
Base Amount and the Exercise Price shall be proportionally adjusted.

 

(ii)                                  For
the purposes of this Section 2(d), (x) the “Failed Amount” at any given
time shall equal the product of the Base Amount, multiplied by the number of
Target Failed Years which have occurred as of such time, and (y) the “Previously
Level 1 Vested Amount” at any given time shall equal the Extra Level 1
Vested Amount (as defined below) plus, for the purposes of clause (iv) below
and not for the purposes of clause (v) below, the Exit Level 1 Vested Amount
(as defined below).

 

4

 

(iii)                               With
respect to any Target Achieved Year:

 

(A)                              the
aggregate EBITDA for the Target Years prior to and including such Target
Achieved Year shall be referred to as such Target Achieved Year’s “Cumulative
Actual EBITDA”;

 

(B)                                the
aggregate Target EBITDA for the Target Years prior to and including such Target
Achieved Year shall be referred to as such Target Achieved Year’s “Cumulative
Target EBITDA”;

 

(C)                                the
quotient (expressed as a percentage) determined by dividing such Target
Achieved Year’s Cumulative Actual EBITDA by such Target Achieved Year’s
Cumulative Target EBITDA shall be referred to as such Target Achieved Year’s “Cumulative
Percentage;” and

 

(D)                               The
product (expressed as a percentage) of (x) such Target Achieved Year’s
Cumulative Percentage minus 90.0%, multiplied by (y) 10, shall be referred to
as such Target Achieved Year’s “Vesting Percentage;” provided that the
Vesting Percentage for any such Target Achieved Year shall not exceed 100%.

 

(iv)                              If
any Target Achieved Year occurs following a Target Failed Year and such Target
Achieved Year’s Cumulative Percentage is greater than 90.0%, then each Option
corresponding to a Target Failed Year (i.e. having a Future Date which is the
last day of a Target Failed Year) which occurred prior to such Target Achieved
Year shall become Level 1 Vested with respect to a number of shares of Common
equal to the quotient determined by dividing (A) the difference between (x)
such Target Achieved Year’s Vesting Percentage of the Failed Amount as of such
time, minus (y) the Previously Level 1 Vested Amount as of such time, by (B)
the number of Target Failed Years which occurred prior to such Target Achieved
Year.

 

At any given time the number of shares in the
aggregate which have vested pursuant to this clause (iv) shall equal the “Extra
Level 1 Vested Amount.”

 

(v)                                 Upon
the first consummation of a Sale of the Company or an Initial Public Offering
after September 30, 2002 and prior to or on September 30, 2006, if (i) the
EBITDA for the period beginning on the first day of the Company’s fiscal year
(the “Relevant Fiscal Year”) in which the date of such consummation (the
“Test Date”) occurs, and ending on the Test Date, equals at least 90% of
the pro rata amount of the Target EBITDA for the Relevant Fiscal Year as of the
Test Date (based upon a 360 day year and the number of days elapsed in the
Relevant Fiscal Year through the Test Date), (ii) the Cumulative Exit
Percentage as of the Test Date is greater than 90%, and (iii) Executive is
employed with the Company on the Test Date, then each Option corresponding to a
Target Failed Year which occurred prior to such Test Date shall become Level 1
Vested with respect to a number of shares of Common (the “Exit Level I
Vested Amount”) equal to the quotient determined by dividing (A) the
difference between (x) the Exit Vesting Percentage of the Failed Amount as of
the Test Date, minus (y) the Previously Level I Vested Amount as of the Test
Date, by (B) the number of Target Failed Years which occurred prior to such
Test Date.

 

5

 

“Cumulative Exit
Percentage” means the quotient (expressed as a percentage) determined by
dividing (i) the Company’s aggregate EBITDA for the period beginning October 1,
2001 and ending on the Test Date, by (ii) the sum of (x) the aggregate Target
EBITDA for each Target Year which has been completed as of the Test Date, and
(y) a pro rata amount of the Target EBITDA for the Relevant Fiscal Year as of the
Test Date (based upon a 360-day year and the number of days elapsed in the
Relevant Fiscal Year through the Test Date).

 

“Exit Vesting
Percentage” means the product (expressed as a percentage) of (i) the
Cumulative Exit Percentage as of the Test Date minus 90.0%, multiplied by (ii)
10.

 

(vi)                              Notwithstanding
anything to the contrary set forth herein, upon the consummation of a Sale of
the Company, Initial Public Offering or Qualifying Recapitalization, if the
Total Enterprise Value based upon such Sale of the Company, Initial Public
Offering or Qualifying Recapitalization, as applicable, equals an amount
greater than or equal to the Target Enterprise Value as of the date of
consummation of such event each Option shall become fully Level I Vested.

 

“Qualifying Recapitalization” means a
recapitalization of the Holding Company which shall not include a Sale of the
Company, pursuant to which all of the Holding Company’s Preferred Stock is
redeemed by the Holding Company for the original cost thereof plus all accrued
and unpaid dividends thereon.

 

“Total Enterprise Value” means (i) in the case
of a Sale of the Company, the sum of (x) the equity value of the Holding
Company implied by the Sale of the Company (as reasonably determined in good
faith by the Board), plus (y) the amount of debt for borrowed money of the
Holding Company and its Subsidiaries assumed by the relevant acquirer or repaid
in connection to the Sale of the Company, (ii) in the case of an Initial Public
Offering, the sum of (m) the product of the number of shares of Common
outstanding as of the Test Date immediately after the consummation of the
Initial Public Offering, multiplied by the per share price paid for Common
pursuant to the Initial Public Offering, plus (n) the amount of debt for borrowed
money of the Holding Company and its Subsidiaries as of immediately after the
consummation of the Initial Public Offering, and (iii) in the case of a
Qualifying Recapitalization, the sum of (a) the equity value of the Holding
Company implied by the Qualifying Recapitalization (as reasonably determined in
good faith by the Board), plus (y) the amount of debt for borrowed money of the
Holding Company and its Subsidiaries as of immediately after the consummation
of the Qualifying Recapitalization; provided that in all cases, Total
Enterprise Value shall not include any fees and expenses of the relevant
transaction.

 

“Target Enterprise Value” means, with respect
to any Relevant Fiscal Year, an amount equal to (i) the Target EBITDA for such
Relevant Fiscal Year, multiplied by (ii) 8.0.

 

(vii)                           Each
Option shall become “Fully Vested” with respect to (x) 20% (25% with respect to
the Fourth Option and 33.3% with respect to the Fifth Option) of the Option
Shares subject to such Option which have previously become Level I Vested, on
each of the first four annual anniversaries of such Option’s Future Date (each such date, a “Vesting Date”),
and (y) the remaining Option Shares subject to such Option which have
previously become Level I 

 

6

 

Vested but which have not become Fully Vested, on the
fifth annual anniversary of such Option’s Future Date (each such date, a “Vesting
Date”), provided Executive is employed with the Company on such Vesting
Date (provided that in connection to Executive’s voluntary termination of
Executive’s employment, if Executive in good faith gives the Company written
notice that Executive is retiring, for purposes of this clause (vii) (and only
for such purposes) Executive shall be deemed to be employed by the Company on
each Vesting Date subsequent to Executive’s retirement until such time, if any,
as Executive accepts full-time employment with any Person other than the
Company); provided that, upon the consummation of a Sale of the Company
or an Initial Public Offering, each Option shall become Fully Vested with
respect to (i) if the date of such consummation (the “Test Date”) is
prior to or on September 30, 2006, 50% of the Option Shares subject to such
Option which have previously become Level I Vested but which have not
previously become Fully Vested, if as of the Test Date, the EBITDA for the
period beginning on the first day of the Company’s fiscal year in which the
Test Date occurs (the “Relevant Fiscal Year”), and ending on the Test
Date equals at least the pro rata amount of the Target EBITDA for the Relevant
Fiscal Year as of the Test Date (based upon a 360-day year and the number of
days elapsed in the Relevant Fiscal Year through the Test Date), (ii) if the
Test Date is after September 30, 2006, 50% of the Option Shares subject to such
Option which have previously become Level I Vested but which have not
previously become Fully Vested, if as of the Test Date, the EBITDA for the
period beginning on the first day of the Relevant Fiscal Year and ending on the
Test Date, equals at least the pro rata amount of the 20% EBITDA Target for the
Relevant Fiscal Year as of the Test Date (based upon a 360-day year and the
number of days elapsed in the Relevant Fiscal Year through the Test Date), and
(iii) all of the Option Shares subject to such Option which have previously
become Level I Vested but which have not previously become Fully Vested, if the
Total Enterprise Value based upon such Sale of the Company or Initial Public
Offering, as applicable, equals an amount greater than or equal to the Target
Enterprise Value as of the Test Date; provided that, upon the
consummation of a Qualifying Recapitalization, each Option shall become Fully
Vested with respect to all of the Option Shares subject to such Option which
have previously become Level I Vested but which have not previously become
Fully Vested, if the Total Enterprise Value based upon such Qualifying
Recapitalization, equals an amount greater than or equal to the Target
Enterprise Value as of the date of consummation of such Qualifying
Recapitalization.

 

“20% EBITDA Target” means, $24,720,000 for the
Company’s fiscal year ending on September 30, 2007, $29,664,000 for the Company’s
fiscal year ending on September 30, 2008, $35,596,800 for the Company’s fiscal
year ending on September 30, 2009, $42,716,160 for the Company’s fiscal year
ending on September 30, 2010, and $51,259,392 for the Company’s fiscal year
ending on September 30, 2011; provided that such amounts shall be subject to
adjustment on the same basis as Target EBITDA as set forth in Section 2(a)(iii)
of the Executive Stock Agreement

 

(viii)                        Notwithstanding
anything herein to the contrary, on 7 year anniversary of the date herof, if
Executive is employed with the Company on such date, each Option shall become “Fully
Vested” with respect to all Option Shares subject to such Option which have not
previously become Fully Vested regardless of whether or not such Option had
previously become Level 1 Vested with respect to such Option Shares.

 

7

 

(e)                                  Early
Expiration Upon Termination of Employment. 
If Executive’s employment with the Company is terminated for any reason
other than termination by the Company for Cause or a voluntary termination by
Executive which is not within 90 days after a Good Reason Event, or if
Executive shall retire in the ordinary course, (i) the unexercised portion of
an Option that has vested prior to or on the date of such termination or
retirement (such portion, the “Vested Portion,” and such date of termination or
retirement, the “Termination Date”) may be exercised by Executive within 120
days of the Termination Date and such portion shall be immediately subject to
the Repurchase Option pursuant to the terms and conditions set forth in the
Executive Stock Agreement, and (ii) the portion of an Option which has not
vested prior to or on the Termination Date and any portion of the Vested
Portion which Executive does not elect to exercise within 120 days of the
Termination Date shall expire and shall no longer be exercisable (provided that
portions of an Option which have not vested prior to or on the Termination Date
shall not expire, if such portions remain eligible for vesting because of
Executive’s retirement as described in clause (vii) above).  If Executive’s employment with the Company is
terminated by the Company for Cause or in the event of a voluntary termination
by Executive which is not within 90 days after a Good Reason Event, the portion
of an Option that is unexercised (vested or unvested) shall expire and shall no
longer be exercisable (provided that portions of an Option which have not
vested prior to or on the Termination Date shall not expire, if such portions
remain eligible for vesting because of Executive’s retirement as described in
clause (vii) above).

 

(f)                                    Procedure
for Exercise.  Executive may exercise
all or a portion of an Option (to the extent it has become Fully Vested and
subject to the other provisions herein and in the Plan) by delivering written
notice of exercise to the Holding Company, together with (i) written
acknowledgment that Executive has read and has been afforded an opportunity to
ask questions of management of the Holding Company regarding all financial and
other information provided to Executive regarding the Holding Company, (ii)
payment in full (A) by delivery of a cashier’s or certified check in the amount
(the “Aggregate Exercise Amount “) equal to the sum of (x) the Exercise Price
multiplied by the number of shares of Common with respect to which Executive is
exercising such Option, and (y) the amount, if any, of any additional federal
and state income taxes required to be withheld by reason of the exercise of the
Option, or (B) by delivery of a written notice to the Company that Executive is
exercising such Option by authorizing the Company to withhold from issuance a
number of shares of Common issuable upon such exercise, which when multiplied
by the Fair Market Value of a share of Common as of the date of exercise, is
equal to the Aggregate Exercise Amount (and such withheld shares shall no
longer be issuable under such Option), and (iii) the written execution of a
joinder to the Stockholders Agreement to the extent that Executive is not
already party thereto.  As a condition to
the exercise of any part of an Option, Executive will permit the Holding
Company to, and at the request of Executive the Holding Company shall, deliver
to them all financial and other information regarding the Holding Company and
its Subsidiaries which it believes necessary to enable Executive to make an
informed investment decision.

 

8

 

(g)                                 Securities
Laws Restrictions.  Executive
represents that when Executive exercises the Option Executive will be
purchasing Option Shares for Executive’s own account and not on behalf of
others.  Executive understands and
acknowledges that federal and state securities laws govern and restrict
Executive’s right to offer, sell or otherwise dispose of any Option Shares
unless Executive’s offer, sale or other disposition thereof is registered under
the Securities Act and state securities laws or, in the opinion of the Holding
Company’ counsel, such offer, sale or other disposition is exempt from
registration thereunder.  Executive agrees
that it will not offer, sell or otherwise dispose of any Option Shares in any
manner which would:  (i) require the
Holding Company to file any registration statement (or similar filing under
state law) with the Securities and Exchange Commission or to amend or
supplement any such filing or (ii) violate or cause the Holding Company to
violate the Securities Act, the rules and regulations promulgated thereunder or
any other state or federal law. 
Executive further understands that the certificates for any Option
Shares Executive purchases will bear the legend set forth in Section 4 hereof
or such other legends as the Holding Company deems necessary or desirable in
connection with the Securities Act or other rules, regulations or laws.

 

(h)                                 Non-Transferability
of the Option.  The Options are
personal to Executive and are not transferable by Executive.  Only Executive or Permitted Transferees or
their respective estates or heirs are entitled to exercise Options.

 

(i)                                     Effect
of Transfers in Violation of Agreement. 
The Holding Company will not be required (i) to transfer on its books
any Option Shares which have been sold or transferred in violation of any of
the provisions set forth in this Agreement, or (ii) to treat as owner of such
shares, to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares have been transferred in violation of this
Agreement.

 

(j)                                     Delivery
of Shares.  The date on which
Executive has delivered to the Holding Company the items required under clause
(f) above is referred to herein as Executive’s “Exercise Date.”  Certificates for Option Shares purchased upon
exercise of an Option shall be delivered by the Holding Company to Executive
within five business days after Executive’s Exercise Date.

 

(k)                                  Date
of Issuance.  The Option Shares
issuable upon the exercise of an Option shall be deemed to have been issued to
Executive on Executive’s Exercise Date, and Executive shall be deemed for all
purposes to have become the record holder of such Option Shares on Executive’s
Exercise Date.

 

(l)                                     Fully
Paid.  The issuance of certificates
for Option Shares upon exercise of an Option shall be made without charge to
Executive for any issuance tax in respect thereof or other cost incurred by the
Holding Company in connection with such exercise.  Each Option Share issuable upon exercise of
an Option shall, upon payment of the exercise price therefor, be fully paid and
nonassessable and free from all liens and charges with respect to the issuance
thereof.

 

9

 

(m)                               Book
Transfer.  The Holding Company shall
not close its books against the transfer of any Option Shares issued or
issuable upon the exercise of an Option in any manner which interferes with the
timely exercise of an Option.

 

(n)                                 Filings.  The Holding Company shall assist and
cooperate with Executive to make any required governmental filings or obtain
any governmental approvals prior to or in connection with any exercise of an
Option.

 

(o)                                 Reservation.  The Holding Company shall at all times
reserve and keep available out of its authorized but unissued shares of Common
solely for the purpose of issuance upon the exercise of the Options, such
number of shares of Common as are issuable upon the exercise of the Options.  The Holding Company shall take all such
actions as may be necessary to assure that all such Option Shares may be so
issued without violation of any applicable law or governmental regulation or
any requirements of any domestic securities exchange upon which shares of
Common may be listed (except for official notice of issuance which shall be
immediately delivered by the Holding Company upon each such issuance).

 

3.                                       Repurchase
Option.

 

(a)                                  Repurchase
Option.  In the event that Executive
is no longer employed by the Company for any reason, the Executive Securities,
whether held by Executive, or one or more Permitted Transferees, will be
subject to repurchase by the Holding Company pursuant to the terms and
conditions set forth in this Section 3 (the “Repurchase Option”);
provided that notwithstanding anything herein to the contrary, the Option
Securities relating to each Option shall not be subject to the Repurchase
Option after the earlier to occur of (i) the fifth annual anniversary of the
applicable Future Date of an Option (or the fourth annual anniversary with
respect to the Fourth Option or the third annual anniversary with respect to
the Fifth Option), and (ii) the consummation of a Sale of the Company, Initial
Public Offering or Qualifying Recapitalization, if the Total Enterprise Value
based upon such Sale of the Company, Initial Public Offering or Qualifying
Recapitalization, as applicable, equals an amount greater than or equal to the
Target Enterprise Value as of the date of consummation of such event.

 

(b)                                 Termination
for Reasons Other than for Cause and Certain Voluntary Terminations.  If Executive’s employment with the Company is
terminated for any reason other than (x) by the Company for Cause, or (y) a
voluntary termination by Executive which is not within 90 days after a Good
Reason Event, then from time to time during the period which begins on the 6
month anniversary of the date upon which Executive’s employment with the
Company is terminated and ends on the one year anniversary of the date upon
which Executive’s employment with the Company is terminated (the “Exercise
Period”), the Holding Company may elect to purchase all or some of the
Executive Securities, at a price per share equal to (i) the Fair Market Value
thereof with respect to Vested Purchase Shares and Option Shares, (ii) the
lower of the Original Cost thereof and the Book Value thereof, with respect to
Unvested Purchase Shares, and (iii) with respect to Preferred Securities,
the original cost thereof plus all accrued and unpaid dividends 

 

10

 

thereon.  In the
case of Vested Purchase Shares, Fair Market Value shall be determined as of the
later of (x) six months and one day after the date of vesting or (y) six months
and one day after the date of termination of employment.  In the case of Option Shares, Fair Market
Value shall be determined as of the date of repurchase, which date shall be no
earlier than six months and one day after the date of exercise.

 

(c)                                  Termination
for Cause and Certain Voluntary Terminations.  If Executive is no longer employed by the
Company as a result of (i) Executive’s termination for Cause, or (ii) a
voluntary termination by Executive which is not within 90 days after a Good
Reason Event, then from time to time during the Exercise Period, the Holding
Company may elect to purchase all or some of the Executive Securities, at a
price per share equal to (i) the lower of the Book Value thereof and the
Original Cost thereof with respect to Common Securities and Option Securities,
and (ii) with respect to Preferred Securities, the original cost thereof.

 

(d)                                 Repurchase
Procedures.  The Holding Company may
elect to exercise the right to purchase all or any portion of the Executive
Securities by delivering written notice (the “Repurchase Notice”), to
the holder or holders of such Executive Securities.  The Repurchase Notice will set forth the
number and type of shares of Executive Securities to be acquired from such
holder(s), the aggregate consideration to be paid for such shares and the time
and place for the closing of the transaction. If any shares of Executive
Securities are held by Permitted Transferees of Executive, the Holding Company
shall purchase the shares elected to be purchased from such holder(s) of shares
of Executive Securities pro rata according to the number and type of shares of
Executive Securities held by such holder(s) at the time of delivery of such
Repurchase Notice (determined as nearly as practicable to the nearest share).

 

(e)                                  Closing.  The closing of the transactions contemplated
by this Section 3 will take place on the date designated by the Holding Company
in the Repurchase Notice, which date will not be more than 90 days after the
delivery of such notice.  The Holding
Company will pay for the Executive Securities to be purchased pursuant to the
Repurchase Option by delivery of (i) a cashier’s or certified check payable to
the holder of such Executive Securities, (ii) a note or notes payable in six
equal semi-annual installments beginning on the six-month anniversary of the
closing of such purchase and bearing interest (payable quarterly) at a rate per
annum equal to the “prime rate” as announced by the Company’s senior lender at
the time, or (iii) both (i) and (ii) in the aggregate amount of the purchase
price for such shares.  Notwithstanding
the foregoing, any note issued by the Holding Company as set forth above shall
provide that such note is immediately due and payable upon the consummation of
an Initial Public Offering or a Sale of the Company.  The Holding Company will receive customary
representations and warranties from the applicable holder(s) regarding the sale
of the Executive Securities, including but not limited to the representation
that the applicable holder(s) have good and marketable title to the Executive
Securities to be transferred free and clear of all liens, claims and other
encumbrances.

 

11

 

(f)                                    12
Month True Up.  Notwithstanding
anything herein to the contrary, in the event (i) Executive’s employment with
the Company is terminated by the Company without Cause or pursuant to a
voluntary termination by Executive within 90 days after a Good Reason Event and
(ii) the Company consummates a Sale of the Company, a Qualifying Recapitalization
or an Initial Public Offering within 12 months of the date on which Executive’s
employment is terminated, then (x) to the extent the Common held by Executive
has previously been repurchased hereunder, Executive shall be entitled to be
paid by the Company, within 30 days after the consummation of such Sale of the
Company, Qualifying Recapitalization or Initial Public Offering, as the case
may be, an amount equal to the difference between (A) the product of (i) the
Fair Market Value of a share of Common (as determined by such Sale of the
Company, Qualifying Recapitalization or Initial Public Offering), multiplied by
(ii) the sum of the number of shares of Common which were repurchased from
Executive hereunder, plus the number of additional shares of Common (the “Additional
Option Shares”), if any, which would have been purchasable by Executive
under all Options granted to Executive hereunder as a result of the vesting,
pursuant to such Sale of the Company, Qualifying Recapitalization or Initial
Public Offering (and specifically not including any effects of “time vesting”
following the termination of employment), of such Options had Executive’s
employment with the Company continued through the consummation of such Sale of
the Company, Qualifying Recapitalization or Initial Public Offering, and (B)
the sum of the amount paid by the Company to repurchase the shares of Common
repurchased from Executive hereunder, plus the aggregate exercise price which
would have been payable with respect to the Additional Option Shares, and (y)
to the extent the Common held by Executive has not previously been repurchased
hereunder, Executive shall be entitled to be issued a number of shares of
Common equal to the Additional Options Shares, subject to the payment by Executive
of the aggregate exercise price which would have been payable with respect to
the Additional Option Shares; provided that the amount payable by the Company
pursuant to clause (x) above shall be payable in the manner described in the
second sentence of Section 3(e) or pursuant to the issuance to Executive of
shares of freely and publicly traded common equity (in the Company or a
successor entity) having a Fair Market Value equal to the amount payable
thereunder.

 

(g)                                 Restrictions
on Repurchase.  Notwithstanding
anything to the contrary contained in this Agreement, all repurchases of
Executive Securities by the Holding Company shall be subject to applicable
restrictions contained in the Delaware General Corporation Law.  If any such restrictions prohibit the
repurchase of Executive Securities hereunder which the Holding Company is
otherwise entitled or required to make, (i) the Holding Company may make such
repurchases as soon as it is permitted to do so under such restrictions, or
(ii) the Holding Company may allow Bruckmann, Rosser, Sherrill & Co. II,
L.P. and Agri Beef Co. to purchase such Executive Securities on a pro rata
basis based upon their relative ownership of the Common at such time.

 

4.                                       Put
Option.

 

(a)                                  Put
Option.  In the event that Executive
is no longer employed by the Company by reason of Executive’s death,
Disability, or retirement in the ordinary course, 

 

12

 

Executive, Executive’s Permitted Transferees, and
their respective estates or heirs as applicable (the “Executive Parties”),
shall be entitled to require the Holding Company to repurchase the Executive
Securities, whether held by Executive or one or more Permitted Transferees
pursuant to the terms and conditions set forth in this Section 4 (the “Put
Option”).  At any one time during the
period that begins 184 days after the Termination Date and ends 270 days after
the Termination Date, the Executive Parties may require the Holding Company to
purchase all or some of the Executive Securities, at a price equal to (i) the
Fair Market Value thereof with respect to Vested Purchase Shares and Option
Shares, (ii) the lower of the Original Cost thereof and the Book Value
thereof, with respect to Unvested Purchase Shares, and (iii) with respect
to Preferred Securities, the original cost thereof plus all accrued and unpaid
dividends thereon.  In the case of Vested
Purchase Shares, Fair Market Value shall be determined as of the later of (x)
six months and one day after the date of vesting or (y) six months and one day
after the date of termination of employment. 
In the case of Option Shares, Fair Market Value shall be determined as
of the date of repurchase.

 

(b)                                 Put
Procedures.  The Executive Parties
may elect to exercise the right to have the Holding Company purchase all or any
portion of the Executive Securities by delivering written notice (the “Put
Notice”), to the Holding Company. 
The Put Notice will set forth the number and type of shares of Executive
Securities to be sold by such holder(s), the aggregate consideration to be paid
for such shares and the time (which shall not be less than 30 days nor more
than 90 days after the date the Put Notice is delivered) for the closing of the
transaction. If any shares of Executive Securities are held by Permitted
Transferees of Executive, the Holding Company shall purchase the shares
required to be purchased from such holder(s) of shares of Executive Securities
pro rata according to the number and type of shares of Executive Securities
held by such holder(s) at the time of delivery of such Put Notice (determined
as nearly as practicable to the nearest share).

 

(c)                                  Closing.  The closing of the transactions contemplated
by this Section 4 will take place at the Company’s executive office on the date
designated by the Executive Parties in the Put Notice.  The Holding Company will pay for the
Executive Securities to be purchased pursuant to the Put Option by delivery of
(i) a cashier’s or certified check payable to the holder(s) of such Executive
Securities, (ii) a note or notes payable in six equal semi-annual installments
beginning on the six-month anniversary of the closing of such purchase and
bearing interest (payable quarterly) at a rate per annum equal to the “prime
rate” as announced by the Company’s largest senior lender at the time, or (iii)
both (i) and (ii) in the aggregate amount of the purchase price for such
shares.  Notwithstanding the foregoing,
any note issued by the Holding Company as set forth above shall provide that
such note is immediately due and payable upon the consummation of an Initial
Public Offering or a Sale of the Company. 
The Holding Company will receive customary representations and
warranties from applicable holder(s) regarding the sale of the Executive
Securities, including but not limited to the representation that applicable
holder(s) have good and marketable title to the Executive Securities to be
transferred free and clear of all liens, claims and other encumbrances.

 

13

 

(d)                                 Restrictions
on Repurchase.  Notwithstanding
anything to the contrary contained in this Agreement, all repurchases of
Executive Securities pursuant to this Section 4 shall be subject to
(i) applicable restrictions contained in the Delaware General Corporation Law,
and (ii) the prior approval of the Company’s senior lenders at the time
(if such approval is required at such time pursuant to the Company’s senior
financing documents), and (iii) the Company having sufficient financial
stability and liquidity to consummate such repurchase without materially and
adversely affecting the Company, as determined in the good faith reasonable
discretion of the Board.  If any such
restrictions prohibit the repurchase of Executive Securities hereunder which
the Holding Company is otherwise required to make, the Holding Company shall
make such repurchases as soon as it is permitted to do so under such
restrictions.

 

5.                                       Restrictions
on Transfer.

 

(a)                                  The
certificates representing the Executive Securities shall bear the following legend:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON                      ,            ,
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER.  THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN
REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN (I) AN EXECUTIVE
STOCK AGREEMENT AMONG MWI VETERINARY SUPPLY CO., MWI HOLDINGS, INC. (THE “HOLDING
COMPANY”) AND [Executive] DATED AS OF JUNE 18, 2002, AND (II) A STOCKHOLDERS
AGREEMENT AMONG THE HOLDING COMPANY AND ITS STOCKHOLDERS DATED AS OF JUNE 18,
2002, IN EACH CASE AS AMENDED AND MODIFIED FROM TIME TO TIME.  A COPY OF EACH SUCH AGREEMENT MAY BE OBTAINED
BY THE HOLDER HEREOF AT THE HOLDING COMPANY’S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE.”

 

(b)                                 No
holder of Executive Securities may sell, transfer or dispose of any Executive
Securities (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Holding Company an opinion of
counsel (reasonably acceptable in form and substance to the Holding Company)
that neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such transfer.

 

(c)                                  Notwithstanding
anything herein to the contrary, Executive agrees that Executive and his
Permitted Transferees shall not transfer any shares of Common during any “lock-up
period” imposed on executives of the Company and certain other affiliates by
the underwriters underwriting the Initial Public Offering.

 

14

 

MISCELLANEOUS
PROVISIONS

 

6.                                       Confidential
Information.  Executive acknowledges
that the information, observations and data obtained by Executive while
employed by the Company (including those obtained while employed by the Company
prior to the date of this Agreement) concerning the business or affairs of the
Company or any of its Affiliates (“Confidential Information”) are the
property of the Company or such Affiliate. 
Therefore, Executive agrees that Executive shall not disclose to any
unauthorized person or use for Executive’s own purposes any Confidential
Information without the prior written consent of the Board, unless and to the
extent that (i) such information was otherwise available to Executive from a
source other than the Company, (ii) the aforementioned matters become generally
known to and available for use by the public other than as a result of
Executive’s acts or omissions, or (iii) disclosure of such information is
required by law.  Executive shall deliver
to the Company at the termination of the Employment Period, or at any other
time the Company may request, all memoranda, notes, plans, records, reports,
computer tapes, printouts and software and other documents and data (and copies
thereof) relating to the Confidential Information, Work Product (as defined
below) or the business of the Company or any Affiliate which Executive may then
possess or have under Executive’s control.

 

7.                                       Inventions
and Patents.  Executive acknowledges
that all inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports and all similar or related information (whether or
not patentable) which relate to the Company’s or any of its Affiliates’ actual
or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed by the Company and its Affiliates (“Work Product”) belong
to the Company or such Affiliate. 
Executive shall promptly disclose such Work Product to the Board and
perform all actions reasonably requested by the Board (whether during or after
the Employment Period) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments).

 

8.                                       Non-Compete,
Non-Solicitation.

 

(a)                                  In
further consideration of the compensation to be paid to Executive hereunder,
Executive acknowledges that in the course of Executive’s employment with the
Company prior to the date of this Agreement Executive has become familiar, and
during Executive’s employment with the Company after the date of this Agreement
Executive will become familiar, with the Company’s trade secrets and with other
Confidential Information concerning the Company and its Affiliates and that
Executive’s services have been and shall be of special, unique and
extraordinary value to the Company and its Affiliates.  Therefore, Executive agrees that, during the
period commencing on the date hereof and ending on the first anniversary of the
termination of the Employment Period (the “Noncompete Period”),
Executive shall not directly or indirectly own any interest in, lease, manage,
control, engage in, participate in, consult with, advise, render services for,
or otherwise assist in any manner (in each applicable case, alone or in
association with any Person), any Person in any business that the Company
conducts or has specific plans to conduct as of the date the Employment Period
is terminated.  Nothing herein shall
prohibit Executive from being a passive owner of not more than 5% of the
outstanding 

 

15

 

stock of any class of a corporation which is publicly traded, so long
as Executive has no active participation in the business of such corporation.

 

(b)                                 During
the Noncompete Period, Executive shall not directly, or indirectly through
another entity, (i) induce or attempt to induce any employee of the Company or
any Affiliate to leave the employ of the Company or such Affiliate, or in any
way interfere with the relationship between the Company or any Affiliate and
any employee thereof, (ii) hire any person who was an employee of the Company
or any Affiliate at any time during the Employment Period or (iii) induce or
attempt to induce any customer, supplier, licensee, licensor, franchisee or
other business relation of the Company or any Affiliate to cease doing business
with the Company or such Affiliate, or in any way interfere with the
relationship between any such customer, supplier, licensee, licensor, franchisee
or business relation and the Company or any Affiliate (including, without
limitation, making any negative statements or communications about the Company
or its Affiliates).

 

9.                                       Enforcement.  If, at the time of enforcement of Sections 6,
7 or 8 of this Agreement, a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.  Because Executive’s services are unique and
because Executive has access to Confidential Information and Work Product, the
parties hereto agree that money damages would not be an adequate remedy for any
breach of this Agreement.  Therefore, in
the event a breach or threatened breach of this Agreement, the Company or its
successors or assigns may, in addition to other rights and remedies existing in
their favor, apply to any court of competent jurisdiction for specific
performance and/or injunctive or other relief in order to enforce, or prevent
any violations of, the provisions hereof (without posting a bond or other
security).  In addition, in the event of
an alleged breach or violation by Executive of Section 8, the Noncompete Period
shall be tolled until such breach or violation has been duly cured.  Executive agrees that the restrictions
contained in Section 8 are reasonable.

 

10.                                 Definitions.  All references to a fiscal year refer to the
Company’s fiscal year.

 

“Affiliate” means, with respect to any Person,
any other Person controlling, controlled by, or under common control with such
Person.  For purposes of this Agreement,
the term “control” (including, with correlative meanings, the terms “controlled
by” and “under common control with” as used with respect to any Person) means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through
ownership of voting securities, by contract or otherwise.

 

“Board” means the board of directors of the
Company.

 

“Book Value” for each outstanding share of
Common means an amount equal to the quotient obtained by dividing (i) the
consolidated book value of the assets of the Company and its Subsidiaries, plus
the exercise, exchange or conversion price of all Common Stock Equivalents that
are at such time convertible, exchangeable or exercisable, other than Common
Stock Equivalents for which the exercise, exchange or conversion price shall be
equal to or 

 

16

 

greater than the Book Value of the shares of Common to which they
relate (determined without giving effect to the exercise, exchange or
conversion of such Common Stock Equivalents), less the consolidated liabilities
of the Company and its Subsidiaries, and less the liquidation preference of any
outstanding shares of preferred stock (including the Preferred) of the Company,
by (ii) the number of shares of Common Stock Deemed Outstanding as of such
date.

 

“Cause” means (i) the continued failure by
Executive to perform duties as reasonably directed by the Board which such
failure continues for ten days after written notice of such failure provided to
Executive, (ii) willful misconduct by Executive in the performance of Executive’s
duties, (iii) gross negligence by Executive in the performance of Executive’s
duties which materially harms the Company, (iv) Executive’s commission of a
felony or other offense involving dishonestly toward the Company or its
Subsidiaries or moral turpitude, or (v) any breach by Executive of Executive’s
obligations set forth in Sections 6, 7 or 8.

 

“Common Securities” means (i) the shares of
Common purchased hereunder which are issued and outstanding from time to time,
(ii) any other shares of Common otherwise issued to, acquired by or held by
Executive (not including Option Shares or other Option Securities), and (iii)
shares of the Holding Company issued with respect to the securities specified
in clauses (i) or (ii) above by way of a share split, share dividend or other
recapitalization; provided that Common Securities shall continue to be Common
Securities in the hands of any holder other than Executive (except for the
Holding Company and except for transferees in a Public Sale), and except as
otherwise provided herein, each such other holder of Common Securities shall
succeed to all rights and obligations attributable to Executive as a holder of
Common Securities hereunder.

 

“Common Stock Deemed Outstanding” means the
number of shares of Common outstanding as of a particular date, determined on a
fully diluted basis giving effect to all outstanding securities convertible
into or exchangeable or exercisable for Common (collectively, “Common Stock
Equivalents”), that are at such time convertible, exchangeable or
exercisable, other than Common Stock Equivalents for which the exercise price
or conversion price shall have been equal to or greater than the Book Value of
the shares of Common with respect to which they relate (determined without giving
effect to the exercise, exchange or conversion of such Common Stock
Equivalents).

 

“Consolidated EBITDA” means, for any period,
the net income of the Company and its Subsidiaries for such period taken as a
single accounting period determined in conformity with GAAP, (A) plus (to the
extent deducted in the calculation of net income and without duplication), (i)
interest expense, (ii) income tax expense, (iii) depreciation expense, (iv)
amortization expense, (v) all other non-cash charges, (vi) losses on sales of
assets (excluding sales in the ordinary course of business) and other
extraordinary or nonrecurring losses and (vii) management fees paid, (B) minus
(to the extent included in the calculation of net income and without
duplication), (x) all non-cash gains, (y) gains on sales of assets (excluding
sales in the ordinary course of business) and other extraordinary or
nonrecurring gains, and (z) interest income, all as determined on a
consolidated basis in accordance with GAAP; provided that the calculation of
Consolidated EBITDA shall ignore any and all effects under purchase accounting
of the Sale of the Company consummated on the date hereof.

 

17

 

“Disability” means Executive’s inability, due
to illness, accident, injury, physical or mental incapacity or other
disability, to carry out effectively Executive’s duties and obligations to the
Company or to participate effectively and actively in the management of the
Company for a period of at least 90 consecutive days or for shorter periods
aggregating 20 days (whether or not consecutive) during each three month period
for not less than six months, as determined by an independent physician.

 

“EBIT” means, for any period, the net income of
the Company and its Subsidiaries for such period taken as a single accounting
period determined in conformity with GAAP, (A) plus (to the extent
deducted in the calculation of net income and without duplication),
(i) interest expense, (ii) income tax expense, (iii) all other non-cash
charges other than depreciation expense and amortization expense, and
(iv) losses on sales of assets (excluding sales in the ordinary course of
business) and other extraordinary or nonrecurring losses, (B) minus
(to the extent included in the calculation of net income and without
duplication), (x) all non-cash gains, (y) gains on sales of assets
(excluding sales in the ordinary course of business) and other
extraordinary or nonrecurring gains, and (z) interest income, all as determined
on a consolidated basis in accordance with GAAP.

 

“EBITDA” means the Consolidated EBITDA of the
Company and its Subsidiaries for a particular fiscal year, derived from the
Company’s audited consolidated financial statements for such fiscal year
certified by the Company’s chief financial officer.

 

“Executive Securities” means the Common
Securities, the Option Securities and the Preferred Securities.

 

“Fair Market Value” for each outstanding share
of Common, means the market value as determined in good faith mutually by the
Board and Executive; provided that if the parties cannot agree within 30
days, the Fair Market Value will be decided by a mutually acceptable
independent investment bank, whose determination will be final and binding
(whose fees and expense shall be paid one-half by the Company, up to a maximum
of $25,000, and the rest by Executive); provided the parties are unable to
agree on a mutually acceptable independent investment bank, the Holding Company
and Executive shall each designate an investment bank and such investment banks
shall choose the independent investment bank which shall determine Fair Market
Value hereunder.

 

“GAAP” means generally accepted accounting
principles as in effect in the United States, consistently applied.

 

“Good Reason Event” means (i) the relocation of
the Company’s executive offices more than 75 miles from its location on the
date hereof, or (ii) a material reduction by the Company of Executive’s
employment responsibilities or compensation.

 

“Initial Public Offering” means the initial
underwritten public offering registered under the Securities Act of shares of
Common.

 

“Option Securities” means (i) the Option Shares
which are issued and outstanding from time to time, and (ii) shares of the
Holding Company issued with respect to the securities 

 

18

 

specified in clause (i) above by way of a share split, share dividend
or other recapitalization; provided that Option Securities shall continue to be
Option Securities in the hands of any holder other than Executive (except for
the Holding Company and except for transferees in a Public Sale), and except as
otherwise provided herein, each such other holder of Option Securities shall
succeed to all rights and obligations attributable to Executive as a holder of
Option Securities hereunder.

 

“Original Cost” means for each share of Common
acquired by Executive, the amount per share paid by Executive to the Company as
the purchase price or exercise price for such share of Common, as adjusted for any
merger, consolidation, reclassification, stock split, reverse stock split,
stock dividend or other similar transaction.

 

“Permitted Transferee” has the meaning set
forth in the Stockholders Agreement.

 

“Person” means any natural person, corporation,
partnership, limited liability company, trust, unincorporated organization or
other entity.

 

“Preferred Securities” means (i) the shares of
Preferred purchased hereunder which are issued and outstanding from time to
time, (ii) any other shares of Preferred otherwise issued to, acquired by or
held by Executive, and (iii) shares of the Holding Company issued with respect
to the securities specified in clauses (i) or (ii) above by way of a share
split, share dividend or other recapitalization; provided that Preferred
Securities shall continue to be Preferred Securities in the hands of any holder
other than Executive (except for the Holding Company and except for transferees
in a Public Sale), and except as otherwise provided herein, each such other
holder of Preferred Securities shall succeed to all rights and obligations
attributable to Executive as a holder of Preferred Securities hereunder.

 

“Public Sale” means any sale pursuant to a
registered public offering under the Securities Act or any sale to the public pursuant
to Rule 144 promulgated under the Securities Act effected through a
broker, dealer or market maker.

 

“Return on Net Assets” means, for any fiscal
year, the quotient obtained by dividing (i) EBIT for such fiscal year, by
(ii) the difference between (a) the sum of (w) Accounts Receivable plus (x)
Inventory, plus (y) Prepaid Current Assets plus (z) Net Plant, Property and
Equipment, and (b) the sum of (x) Accounts Payable, plus (y) Accrued
Expenses.  The terms “Accounts
Receivable,” “Inventory,” “Prepaid Current Assets,” “Net
Plant, Property and Equipment,” “Accounts Payable” and “Accrued
Expenses” shall refer to the Company’s consolidated Accounts Receivable,
Inventory, Prepaid Current Assets, Net Plant, Property and Equipment, Accounts
Payable and Accrued Expenses as of the end of such fiscal year, as determined
in accordance with GAAP from the Company’s audited consolidated financial
statements for such fiscal year certified by the Company’s chief financial
officer.

 

“Sale of the Company” has the meaning set forth
in the Stockholders Agreement.

 

“Securities Act” means the Securities Act of
1933, as amended from time to time.

 

19

 

“Stockholders Agreement” means that
Stockholders Agreement dated as of June 18, 2002, by and among the Holding
Company and certain other parties thereto.

 

“Subsidiary” means any corporation,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company or (ii) if a partnership, association or
other business entity, a majority of the partnership or other similar ownership
interests thereof is at the time owned or controlled, directly or indirectly,
by the Company.  For purposes hereof, the
Company shall be deemed to have a majority ownership interest in a partnership,
association or other business entity if the Company, directly or indirectly, is
allocated a majority of partnership, association, or other business entity
gains or losses, or is or controls the managing director or general partner (or
Person having like authority) of such partnership, association or other
business entity.

 

11.                                 Notices.  Any notice provided for in this Agreement
must be in writing and must be either personally delivered, mailed by first
class mail (postage prepaid and return receipt requested) or sent by reputable
overnight courier service (charges prepaid) to the addresses indicated below:

 

If to Executive:

 

Jeff Danielson

15166 Horseshoe Drive

Caldwell, ID  83607

 

If to the Company or the Holding Company:

 

c/o MWI Veterinary
Supply Co.

2201 N. 20th
Street

Nampa, ID 83687

Attn:                    President

Fax:

 

with copies (which shall not constitute notice to the
Company or the Holding Company) to:

 

Bruckmann,
Rosser Sherrill & Co., Inc.

156
East 56th Street, 29th Floor

New
York, NY 10022

Attn:                    Bruce Bruckmann

Brett Pertuz

Fax:  (212)
521-3799

 

20

 

Kirkland
& Ellis

153
East 53rd Street

New
York, New York 10022

Attn:                    Eunu Chun, Esq.

Fax:  (212)
446-4900

 

or such other address or to the attention of such
other person as the recipient party shall have specified by prior written
notice to the sending party.  Any notice
under this Agreement shall be deemed to have been given when so delivered or
sent or, if mailed, five days after deposit in the U.S. mail.

 

12.                                 General
Provisions.

 

(a)                                  Termination
of Repurchase/Put Option.  The right
of the Holding Company to exercise the Repurchase Option and the right of the
Executive Parties to exercise the Put Option, in each case with respect to
Common Securities and Preferred Securities but expressly excluding Option
Securities, shall each expire on the earlier to occur of the (i) fifth annual
anniversary of the date hereof, (ii) date of consummation of an Initial Public
Offering, or (iii) date of consummation of a Sale of the Company.

 

(b)                                 Severance.  If Executive’s employment with the Company is
terminated other than by the Company for Cause or pursuant to a voluntary
termination by Executive which is not within 90 days of a Good Reason Event,
then the Company shall continue to pay Executive at a rate equal to Executive’s
base salary at the time of such termination for a period of 12 months after
such termination, provided that such payments shall be made pursuant to the
Company’s normal payroll practices and shall be subject to any required
withholding.  Notwithstanding the
foregoing, the Company shall not be obligated to make such severance payments
if the Company gives Executive written notice, within 15 days after the date of
the termination of employment, that the Company has elected to waive the
provisions of Section 8(a) hereof and thus not pay the severance described
above.

 

(c)                                  Transfers
in Violation of Agreement.  Any
transfer or attempted transfer of any Executive Securities in violation of any
provision of this Agreement shall be void, and the Holding Company shall not
record such transfer on its books or treat any purported transferee of such
Executive Securities as the owner of such shares for any purpose.

 

(d)                                 Severability.  Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

 

21

 

(e)                                  Complete
Agreement.  This Agreement, those
documents expressly referred to herein and other documents of even date
herewith embody the complete agreement and understanding among the parties and
supersede and preempt any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.

 

(f)                                    Counterparts.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

 

(g)                                 Successors
and Assigns.  Except as otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by Executive, the Company, the Holding Company and their respective
successors and assigns (including subsequent holders of Executive Securities);
provided that the rights and obligations of Executive under this Agreement
shall not be assignable except in connection with a permitted transfer of
Executive Securities hereunder.

 

(h)                                 Choice
of Law.  The corporate law of the
State of Delaware shall govern all questions concerning the relative rights of
the Company, the Holding Company and Executive. 
All issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of New York, without giving effect to any choice of law or conflict of
law rules or provisions (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.

 

(i)                                     Remedies.  Each of the parties to this Agreement shall
be entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorney’s fees) caused by any breach
of any provision of this Agreement and to exercise all other rights existing in
its favor.  The parties hereto agree and
acknowledge that money damages would not be an adequate remedy for any breach
of the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.

 

(j)                                     Amendment
and Waiver.  The provisions of this
Agreement may be amended and waived only with the prior written consent of the
Holding Company, the Company and Executive.

 

*     *     *    
*     *

 

22

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement on the date first written
above.

 

	
   

  	
  MWI HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Mary Pat
  Thompson

  	
   

  
	
   

  	
   

  
	
   

  	
  Its: 

  	
  CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jeff
  Danielson

  	
   

  
	
   

  	
  Jeff Danielson

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MWI VETERINARY
  SUPPLY CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Mary Pat
  Thompson

  	
   

  
	
   

  	
   

  
	
   

  	
  Its: 

  	
  CFO

  	
   

  
					

 

 

EXHIBIT A

 

                         ,
2002

 

ELECTION TO INCLUDE PROPERTY IN GROSS INCOME PURSUANT
TO SECTION 83(b) OF THE INTERNAL REVENUE CODE

 

The undersigned purchased Common Stock (the “Stock”),
of MWI Holdings, Inc., a Delaware corporation (the “Corporation”), on
the date hereof.  Under certain
circumstances, the Corporation has the right to repurchase some or all of the
Stock, at the lesser of its cost or book value at a time in the future, from
the undersigned (or from the holder of the Stock, if different from the
undersigned) should the undersigned cease to be employed by the Corporation
(the “Employer”).  Hence, the
Stock is subject to a substantial risk of forfeiture.  The undersigned desires to make an election
to have the Stock taxed under the provision of Code §83(b) at the time the
undersigned purchased the Stock.

 

Therefore, pursuant to Code §83(b) and Treasury
Regulation §1.83-2 promulgated thereunder, the undersigned hereby makes an
election, with respect to the Stock (described below), to report as taxable
income for calendar year 2002 the excess (if any) of the Stock’s fair market
value on the date hereof over the purchase price thereof.

 

The following information is supplied in accordance
with Treasury Regulation §1.83-2(e):

 

1.                                       The
name, address and social security number of the undersigned:

 

	
  Name:

  	
   

  
	
  Address

  	
   

  
	
   

  	
   

  
	
  SS #:

  	
   

  

 

2.                                       A
description of the property with respect to which the election is being made:                    
shares of the Corporation’s Common Stock.

 

3.                                       The
date on which the property was transferred: the date hereof.  The taxable year for which such election is
made: calendar 2002.

 

4.                                       The
restrictions to which the property is subject: 
If the undersigned ceases to be employed by the Corporation (except in
certain circumstances) all or a portion of the Stock will be subject to
repurchase by the Corporation at the lesser of the cost paid by the undersigned
and the book value at a time in the future.

 

5.                                       The
aggregate fair market value on the date hereof of the property with respect to
which the election is being made, determined without regard to any lapse
restrictions: $                   .

 

A-1

 

6.                                       The
aggregate amount paid for such property: $                   .

 

A copy of this election has been furnished to the
Secretary of the Corporation pursuant to Treasury Regulations §1.83-2(e)(7).

 

 

	
   

  	
   

  	
   

  
	
   

  	
  [Name]

  

 

A-2

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