10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2008 Commission file number 000-51468
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                       to

MWI VETERINARY SUPPLY, INC.
(Exact name of Registrant as specified in its Charter)

Delaware (State or other jurisdiction)	02-0620757 (I.R.S. Employer Identification Number)
651 S. Stratford Drive, Suite 100
Meridian, ID (Address of principal executive offices)	83642 (Zip Code)
(800) 824-3703 (Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE SECURITIES EXCHANGE ACT OF 1934:

Title of each class	Name of Each Exchange on Which Registered
Common Stock, $0.01 par value	The Nasdaq Stock Market, LLC

SECURITIES REGISTERED PURSUANT TO SECTION 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934: NONE

           Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes o No ý

           Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes o No ý

           Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Act") during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes ý No o

           Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (17 CFR section 405) is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer ý Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

           Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

           As of March 31, 2008 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $274,303,619. Shares of common stock held by each executive officer and director and by each person who owns 10% or more of our outstanding common stock have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

           The number of shares of the Registrant's common stock, $0.01 par value, outstanding as of November 14, 2008 was approximately 12,112,535.

Documents Incorporated by Reference

           Listed hereunder are the documents, any portions of which are incorporated by reference and the Parts of this Form 10-K into which such portions are incorporated:

1.

The Registrant's definitive proxy statement for use in connection with the Annual Meeting of Stockholders to be held on or about February 11, 2009 to be filed within 120 days after the Registrant's fiscal year ended September 30, 2008, portions of which are incorporated by reference into Part III of this Form 10-K.

MWI VETERINARY SUPPLY, INC.

FORM 10-K

TABLE OF CONTENTS

Item		Page
PART I
	Cautionary Statement		1
1.	Business		2
1A.	Risk Factors		18
1B.	Unresolved Staff Comments		28
2.	Properties		28
3.	Legal Proceedings		28
4.	Submission of Matters to a Vote of Security Holders		28
PART II
5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		29
6.	Selected Financial Data		32
7.	Management's Discussion and Analysis of Financial Condition and Results of Operations		34
7A.	Quantitative and Qualitative Disclosures About Market Risk		49
8.	Financial Statements and Supplementary Data		50
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		73
9A.	Controls and Procedures		73
9B.	Other Information		76
PART III
10.	Directors, Executive Officers and Corporate Governance of the Registrant		76
11.	Executive Compensation		76
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		76
13.	Certain Relationships, Related Transactions and Director Independence		77
14.	Principal Accountant Fees and Services		77
PART IV
15.	Exhibits and Financial Statement Schedules		78
SIGNATURES			79

PART I

Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private Securities Litigation Reform Act of 1995

        This annual report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words "may," "could," "would," "should," "believe," "expect," "anticipate," "plan," "estimate," "target," "project," "intend" and similar expressions. These statements include, among others, statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement our strategy, our objectives, the amount and timing of capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity.

        Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product offerings geographically or through new applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:

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vendor rebates based upon attaining certain growth goals;

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changes in or availability of vendor contracts or rebate programs;

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changes in the way vendors introduce products to market;

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exclusivity requirements with certain vendors that may prohibit us from distributing competing products manufactured by other vendors;

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the impact of general economic trends on our business;

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the recall of a significant product by one of our vendors;

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extended shortage or backlog of a significant product by one of our vendors;

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seasonality;

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the timing and effectiveness of marketing programs offered by our vendors;

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the timing of the introduction of new products and services by our vendors;

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unforeseen litigation;

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a disruption caused by adverse weather or other natural conditions;

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inability to ship products to the customer as a result of technological or shipping disruptions; and

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competition.

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        Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission ("SEC"), we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.

        Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of MWI Veterinary Supply, Inc.

Item 1.    Business.

General

        Our business commenced operations as part of a veterinary practice in 1976 and was incorporated as MWI Drug Supply, Inc., an Idaho corporation, in 1980. MWI Drug Supply, Inc. was acquired by Agri Beef Co. in 1981. MWI Veterinary Supply Co. was incorporated as an independent subsidiary of Agri Beef Co. in September 1994. Effective June 18, 2002, MWI Holdings, Inc. was formed by Bruckmann, Rosser, Sherrill & Co. II, L.P. ("BRS") for the sole purpose of acquiring all of the outstanding stock of MWI Veterinary Supply Co. from Agri Beef Co. ("Agri Beef"). As a result of this transaction, MWI Veterinary Supply Co. ("MWI Co.") became a wholly-owned subsidiary of MWI Holdings, Inc. On April 21, 2005, we changed our name from MWI Holdings, Inc. to MWI Veterinary Supply, Inc. References in this report to "we," "us," "our," and "MWI" refer to MWI Veterinary Supply, Inc. unless otherwise indicated. Unless otherwise indicated, all statistical information provided about our business in this report is as of September 30, 2008.

        We are a leading distributor of animal health products to veterinarians across the United States. In fiscal year 2008, we distributed more than 30,000 products, of which over 15,000 are stocked in our distribution centers, sourced from approximately 500 vendors to more than 19,000 veterinary practices nationwide from thirteen strategically located distribution centers. Products we sell include pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies, specialty products, veterinary pet food and nutritional products. We market these products to veterinarians in both the companion animal and production animal markets. As of September 30, 2008, we had a sales force of 321 people covering the United States. We also offer our customers a variety of value-added services, including e-commerce platform, pharmacy fulfillment, inventory management system, equipment procurement consultation, special order fulfillment, educational seminars and pet cremation, which we believe closely integrates us with our customers' day-to-day operations and provides them with meaningful incentives to continue ordering from us.

        Historically, approximately two-thirds of our total revenues have been generated from sales to the companion animal market and one-third from sales to the production animal market. For the fiscal years ended September 30, 2008, 2007 and 2006, our total revenues were $831.4 million, $710.1 million

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and $606.2 million, respectively. Our operating income for the fiscal years ended September 30, 2008, 2007 and 2006, was $32.4 million, $26.7 million and $23.7 million, respectively.

Industry Overview

        According to the Animal Health Institute ("AHI"), an industry group representing manufacturers of animal health products, animal health product sales in the United States for calendar year 2007 grew to $6.8 billion, which represents a 7% compounded annual growth rate since calendar year 2002. The market for animal health products in the United States is split between products sold for companion and production animals. Companion animals include dogs, cats, other pets and horses, while production animals include cattle and other food-producing animals. AHI estimates that companion animal products accounted for 53% of the total market for animal health products in the United States in calendar year 2006.

        We believe the companion animal health products market's growth has slowed recently as a result of a decrease in consumer spending. Historically, the growth in the companion animal health market has been due to the increasing number of households with companion animals, an aging pet population, increased expenditures on animal health and preventative care, advancements in animal health products and extensive marketing programs sponsored by companion animal nutrition and pharmaceutical companies. Product sales in the production animal health products market have been heavily impacted by increasing volatility in commodity prices, changes in weather patterns that allow cattle to graze for longer periods and the changes in the general economy. The impact of unprecedented commodity price volatility in commodities such as corn, grain and feeder cattle has made it increasingly more difficult to predict the timing of demand for production animal health products. Historically, sales in this market have been largely driven by spending on animal health products to improve productivity, weight gain and disease prevention, as well as a growing focus on food safety. We believe that these growth factors have been mitigated by the downward influence of generic drugs on pricing.

        Veterinarians are one of the primary purchasers of animal health products, particularly in the companion animal market. As of December 31, 2007, according to the American Veterinary Medical Association, or AVMA, there were more than 58,000 veterinarians in private practice nationwide. We believe that distributors play a vital role for veterinary practices by providing access to a broad selection of products through a single channel and helping them efficiently manage their inventory levels. Distributors also offer product vendors substantial value by providing cost-effective access to a highly fragmented and geographically diverse customer base.

Competitive Strengths

        We believe that our strengths include:

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Leading Distributor to Veterinarians.  Based upon our total revenues for our fiscal year ended September 30, 2008, we are a leading animal health products distributor to veterinarians in the United States. While most of our products are available from several sources and our customers typically have relationships with several distributors, we have achieved this position primarily through internal growth and currently serve more than 19,000 veterinary practices nationwide. We believe that our broad product offering, competitive pricing, superior customer service, rapid

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product fulfillment and value-added services provide meaningful incentives for our customers to continue ordering from us.

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Leading Sales and Marketing Franchise.  Our 321 sales representatives educate customers on new veterinary products, assist in product selection and purchasing, and offer inventory management solutions. As of September 30, 2008, we had 186 field sales personnel and 135 telesales representatives covering the United States. We also publish detailed product catalogs and monthly magazines, which are often utilized by our customers as reference tools. While salespeople and printed materials are vital to our marketing strategy, we also provide on-line ordering, valuable business information and value-added services through our Internet site, www.mwivet.com. For our fiscal year ended September 30, 2008, approximately 27% of our product sales were generated through orders placed over the Internet.

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Strong, Established Relationships with Veterinarians and Vendors.  Our ability to serve as a single source for most of our customers' animal health product needs has enabled us to develop strong and long-term customer relationships. Approximately 52% of our product sales for the fiscal year ended September 30, 2008 were from customer accounts that were opened prior to fiscal year 2003 and approximately 79% of our product sales for the fiscal year ended September 30, 2008 were from customer accounts that were opened prior to fiscal year 2006. Independent veterinary practices have historically accounted for more than 85% of our product sales. In addition, for more than twelve years we have maintained distribution arrangements with Banfield, The Pet Hospital ("Banfield"), the nation's largest private veterinary practice, and with our non-controlled affiliate, Feeders' Advantage, L.L.C. ("Feeders' Advantage"), a related party and a buying group composed of several of the largest cattle feeders in the United States. Since we currently do not manufacture the vast majority of the products we sell, we are dependent on our vendors for the supply of our products. While our vendors often have relationships with multiple distributors, we have long-term relationships with many of our key vendors including Fort Dodge, IDEXX Laboratories, Intervet Schering-Plough, Merial, Pfizer and Vedco.

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Recurring Revenue Product Base.  Over 95% of our product sales for our fiscal years ended September 30, 2008, 2007 and 2006 were from consumable medicines and supplies commonly required by veterinarians in their practice. Historically, this aspect of our business has resulted in a recurring stream of revenues.

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Sophisticated Technology and Information Systems.  Over the past several years, we have continued to invest in our technology and information systems, which we believe has created a competitive advantage when delivering quality service to our customers. In 2007, we launched a new e-commerce platform that offers more enhanced online ordering capabilities for veterinarians. This platform provides many new features for our customers while at the same time significantly enhancing security and our capability to provide additional functionality in the future.

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Experienced Management Team.  We have a strong and experienced senior management team with substantial animal health industry expertise. The members of our senior management team have been with us for an average of over fourteen years, and each member has demonstrated a commitment and capability to deliver growth in revenues and profitability.

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Business Strategy

        Our mission is to strengthen our position as a leading national animal health products distributor while continuing to efficiently deliver substantial value and innovation to our customers, increase revenues and improve profitability. Our strategy to achieve our mission is outlined below.

         Increase Sales to Existing Customers.    We believe that veterinary practices typically purchase animal health products from multiple distributors. For our fiscal year ended September 30, 2008, our average annual product sales per veterinary practice served was approximately $35,000. We intend to increase our share of these purchases by utilizing our proprietary customer database to focus our marketing efforts, expanding our sales force, selectively adding products to our portfolio and increasing and expanding the value-added services we provide to our customers. By increasing the dollar value of purchases made by each customer as well as their average order size, we intend to increase our profitability. Competition for hiring sales representatives who have existing customer relationships is intense and we focus on retaining our valued staff who have demonstrated the skills needed to successfully market our products and services. If we fail to hire or retain a sufficient number of qualified sales professionals, it could adversely impact our business.

         Expand Business Assistance Services for Veterinarians.    We intend to enhance our customer relationships by expanding our business assistance services for veterinarians. These value-added services include among others our e-commerce platform, pharmacy fulfillment, inventory management system, equipment procurement consultation, special order fulfillment, educational seminars and pet cremation. In addition, we have upgraded our Internet site, www.mwivet.com, in order to significantly enhance the e-commerce functionality available to our customers.

         Increase the Total Number of Customers.    We believe we provide products and services to more than 50% of all domestic veterinary practices. We intend to raise this percentage by increasing the number and productivity of our sales representatives, selectively acquiring competitors and expanding distribution centers. We believe the greatest opportunities to add new customers are in the Northeastern, Midwestern and Southeastern regions of the United States, areas where we do not hold the leading market position. We believe it is important to increase the total number of customers served in order to attain the growth goals that are a feature of many of our vendors' rebate programs. Changes to any vendor rebate program or our failure to achieve these growth goals may have a material effect on our gross profit and operating results in any given quarter or year.

         Continuously Seek to Improve Operations.    We continuously evaluate opportunities to increase sales, lower costs and realize operating efficiencies. Current initiatives include investments in our databases and distribution center management systems. We also plan to pursue alternative product sourcing strategies and have implemented a private label program on selected products to reduce our procurement costs and increase our profitability, while maintaining strong relationships with key vendors.

         Make Selective Acquisitions.    The U.S. market for animal health products distribution is highly fragmented, with numerous national, regional and local distributors. Many of these companies are small, privately-held businesses, some of which may represent attractive acquisition candidates. In fiscal year 2006, we acquired substantially all of the assets of Northland Veterinary Supply, Ltd. ("Northland"). In fiscal year 2007, we acquired substantially all of the assets of Securos, Inc. and International Veterinary Distribution Network, Inc. (collectively "Securos"). In fiscal year 2008, we

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acquired substantially all of the assets of Tri V Services, Inc. ("Tri V"). Also in fiscal year 2008, we acquired substantially all of the assets of AAHA Services Corporation, operating as AAHA MARKETLink ("AAHA MARKETLink").

Products

        In fiscal year 2008, we distributed more than 30,000 products with over 15,000 stocked in our thirteen distribution centers, including pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies, veterinary pet food and nutritional products. For our fiscal year ended September 30, 2008, our product revenues were comprised of approximately 42% pharmaceutical products, 18% vaccine products, 7% parasiticide products, 8% diagnostic products, 3% capital equipment products and 22% of other supplies. In addition, we sell over 500 products under agency agreements with our vendors. Under an agency agreement, we typically solicit orders and provide customer service for a commission, while the vendor stocks and ships the products. We also have available on special order approximately 7,000 products that we do not normally stock in our warehouses. We continually seek to update and improve the range of products we offer to address our customer requirements. Over 95% of our product sales for our fiscal years ended September 30, 2008, 2007 and 2006 were from the sale of consumable medicines and supplies commonly required by veterinarians in their practice. Historically, this aspect of our business has resulted in a recurring stream of revenues.

Pharmaceuticals, Vaccines and Parasiticides

        We offer our customers a variety of pharmaceuticals, vaccines and parasiticides. Our pharmaceutical products typically include anesthetics, analgesics, antibiotics, ophthalmics and hormones. Our vaccine products are primarily comprised of small animal, equine and production animal biologicals. Our parasiticides are used for control of fleas, ticks, flies, mosquitoes and internal parasites.

Diagnostics, Capital Equipment and Supplies

        We offer a wide range of diagnostics, capital equipment and supplies to veterinarians. Diagnostic sales typically include consumable in-clinic tests for detecting heartworm, lyme, feline leukemia and parvovirus, as well as consumable products for measuring blood chemistry, electrolyte balance and cell counts. Our capital equipment sales include anesthesia machines, surgical monitors, diagnostic equipment, dental machines, cages, lights and x-ray machines. We employ a team of capital equipment specialists to analyze the latest technologies and recommend equipment that meets our customers' specific needs. Our sales of supplies include syringes, instruments, bandages, IV products, surgical consumables, grooming materials and other small equipment items used by veterinary practices.

Veterinary Pet Food and Nutritional Products

        We offer our customers a broad selection of veterinary pet foods and nutritional products. We consider veterinary pet food to consist of two categories: foods for specialty diets and premium pet foods. Specialty diets are recommended by veterinarians to address specific medical and nutritional needs. Premium pet foods are recommended by veterinarians to promote optimal nutrition in healthy animals. Pet foods are typically sold under agency agreements. Nutritional products include dietary supplements, vitamins, dental chews and specialty treats which either help address specific medical conditions or are compatible with recommended nutritional guidelines.

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Value-Added Services

        We offer our customers a variety of value-added services, which we believe closely integrate us with our customers' day-to-day operations and provide them with meaningful incentives to continue ordering from us. These services include the following:

Service	Description
E-commerce platform	On-line ordering system that provides information to veterinary practices on products, vendor programs and purchasing history
Pharmacy fulfillment	Shipment of prescription production and companion animal health products to end-users on behalf of veterinarians from our five licensed pharmacies located in Edwardsville, Kansas; Clear Lake, Wisconsin; Grand Prairie, Texas; Harrisburg, Pennsylvania and Nampa, Idaho and a licensed veterinary food-animal drug retailer in Visalia, California
Inventory management system	Flexible system that facilitates counting, maintaining and ordering inventory in veterinary practices
Equipment procurement consultation	Consultation and demonstrations provided by our dedicated capital equipment specialists
Special order fulfillment	Procurement and shipment of approximately 7,000 unique products that we do not normally stock in our warehouses
Educational seminars	Seminars for our customers covering business and medical topics, frequently sponsored in conjunction with our vendors
Pet cremation	Business units presently operating with facilities in Idaho and Wisconsin that serve veterinary practices and their clients by providing cremation services

Customers

        We currently serve more than 19,000 veterinary practices located throughout the United States. These veterinary practices are typically small, privately-held businesses that we believe place at least one order per week to avoid storing and managing large volumes of supplies. We believe that these veterinary practices usually purchase animal health products from multiple distributors. We seek to be the principal provider of animal health products to our customer base.

        We maintain a diverse and stable customer base. Independent veterinary practices have historically accounted for more than 85% of our product sales. Also, for more than twelve years, we have maintained distribution arrangements with Banfield, the nation's largest private veterinary practice with over 700 veterinary hospitals, and our non-controlled affiliate, Feeders' Advantage, a buying group composed of several of the largest cattle feeders in the United States. Banfield accounted for approximately 10% of our product sales for each of our fiscal years ended September 30, 2008, 2007 and 2006. Feeders' Advantage accounted for approximately 5% of our product sales for both of our fiscal years ended September 30, 2008 and 2007, and 6% for our fiscal year ended September 30, 2006. The loss of Banfield or Feeders' Advantage or deterioration in our relations with either of them could significantly affect our financial condition and results of operations. Our ten largest customers,

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excluding Banfield and Feeders' Advantage, accounted for approximately 4% of our product sales for our fiscal year ended September 30, 2008 and 5% of our product sales for our fiscal years ended September 30, 2007 and 2006, with no single customer representing more than 1% of our product sales for those years. We typically do not enter into long-term contracts with our independent veterinary customers.

        We are a party to two written agreements with Banfield, an Agreement for Product Purchases and an Agreement for Logistics Services. These contracts are effective from December 1, 2006 through November 30, 2009, and can be terminated by either party with or without cause upon 150 days prior written notice. These contracts provide that we will be the supplier of logistics to Banfield, and these agreements govern the pricing, shipping and other terms and conditions under which we sell our products and provide logistics to Banfield. Under the Agreement for Product Purchases, we provide a limited warranty with respect to all goods sold by us and paid for by Banfield that good title to the products is conveyed, that the products are delivered free of any security interest, that the products will conform to the description, grade and condition of the products invoiced and that all products will be free of any defects arising while the products are either in our possession or control or in the control of any carrier transporting the goods from us to Banfield. We are also required to maintain insurance in an amount equal to at least the replacement cost of all property that is purchased by Banfield from third parties and is held by us on their behalf.

Sales and Marketing

        Our sales and marketing strategies are designed to establish and maintain strong customer relationships through personal visits by field sales representatives, frequent telesales contact and direct marketing, emphasizing our broad product lines, competitive pricing, efficient ordering capabilities, high levels of customer support and service and other value-added services. The key elements of our sales and marketing strategy are:

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Field Sales Representatives:  Our sales force is a key component of our value-added approach. Due to the fragmented nature of the animal health products market, we believe that a large sales force is vital to effectively support existing customers and target potential customers. As of September 30, 2008, we had 186 field sales personnel throughout the United States. Our field sales representatives educate customers on new veterinary products, assist in product selection and purchasing and offer inventory management solutions. Once a field sales representative has established a relationship with a customer, the field sales representative encourages the customer to use our telesales representatives and online ordering capabilities for day-to-day customer needs. Field sales representatives work under the supervision of regional sales managers within an assigned sales territory to ensure effective communication and timely sales calls with customers. Our field sales representatives complement our telesales and direct marketing efforts and enable us to better market, service and support the sale of our products and services. Our field sales representatives are employees of our Company and are compensated with a combination of salaries and commissions.

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Telesales:  We support our field sales representatives and direct marketing efforts with telesales representatives in nine call centers covering the United States. As of September 30, 2008, we had 135 telesales representatives. Telesales representatives work as partners with our field sales representatives, providing a dual coverage approach for individual customers. Telesales representatives process orders and generate new sales through frequent and direct contact with

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customers. Telesales representatives are responsible for assisting customers with ordering, purchasing decisions and general questions. Telesales representatives utilize our customized order entry system to process customer orders, access pricing, availability and promotional information about products, and research customer preferences and order history. Our nine call centers are connected by our telecommunications system which enables them to operate as one virtual call center.

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Direct Marketing:  We market to existing and potential customers by distributing product catalogs and monthly magazines. We publish our comprehensive animal health products catalog every other year. This catalog contains nearly 12,000 SKUs, includes detailed descriptions and specifications of our products and is often used as a reference tool by our customers and sales force. We also promote our products and services in our monthly magazine, the Messenger, which our field sales representatives use as a tool to educate customers on product and vendor programs. Additional marketing tools that we utilize include specialty catalogs, customer loyalty programs, specific product and vendor programs, flyers, faxes, order stuffers and other promotional materials. For the fiscal year ended September 30, 2008, we distributed over 825,000 pieces of direct marketing materials to existing and potential customers. We also participate in national and regional trade shows to extend our customer reach and enhance customer interaction.

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E-Business Platform:  We provide on-line ordering, valuable business information and value-added services to veterinarians via our primary Internet site, www.mwivet.com, and customized Internet sites that we maintain for two of our largest customers, Banfield and Feeders' Advantage. Customers can use our Internet sites to order products, learn more about products and vendor programs, print forms needed for their veterinary practice, review their historical purchases and manage their inventory. For our fiscal years ended September 30, 2008, 2007 and 2006, approximately 27%, 24% and 23%, respectively, of our product sales were generated through orders placed over the Internet.

Product Sourcing

        In fiscal year 2008, we distributed more than 30,000 products, of which over 15,000 are stocked in our distribution centers, sourced from approximately 500 vendors, including most major vendors of animal health products that sell through distributors. We believe that we are a leading distributor for many of these vendors.

        We currently do not manufacture the vast majority of our products and are dependent on vendors for our supply of products. We believe that effective purchasing is a key factor in maintaining our position as a leading provider of animal health care products. We regularly assess our purchasing needs and our vendors' product offerings and prices to obtain products at favorable prices. While we purchase products from many vendors and there is generally more than one vendor for most animal health product categories, our concentration of aggregate purchases with key vendors is significant. Our ten largest vendors accounted for approximately 72%, 70% and 70% of our revenues for the fiscal years ended September 30, 2008, 2007 and 2006, respectively. Our top three vendors, Fort Dodge, Pfizer and Vedco, supplied products that accounted for approximately 43%, 43% and 44% of our revenues for the fiscal years ended September 30, 2008, 2007 and 2006, respectively. Pfizer supplied products that accounted for approximately 23%, 21% and 19% of our revenues for our fiscal years ended September 30, 2008, 2007 and 2006, respectively. Pfizer supplied production animal products under a

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livestock products agreement that accounted for approximately 17%, 17% and 15% of our revenues for our fiscal years ended September 30, 2008, 2007 and 2006, respectively.

        There are two major types of transactions that can affect the flow of our products from our vendors, through us, to our customers. The method of selling products to veterinarians is dictated by our vendors. Traditional "buy/sell" transactions, which account for the vast majority of our business, involve the direct purchase of products by us from vendors, which we manage and store in our warehouses. A customer then places an order with us, and the order is then picked, packed, shipped and invoiced by us to our customer, followed by payment from our customer to us.

        We also sell certain product lines to our customers under agency agreements with some of our vendors. Under this model, when we receive orders for products from the customer, we transmit the order to the vendor who then picks, packs and ships the products. In some cases our vendor invoices and collects payment from our customer, while in other cases we invoice and collect payment from our customer. We receive a commission payment for soliciting the order and for providing other customer service activities. Our operating expenses associated with agency sales transactions are lower than in traditional "buy/sell" transactions.

        We have written agreements with approximately 40 of our vendors, including Fort Dodge and Pfizer. Our distribution agreement with Fort Dodge provides that we shall act as a distributor of Fort Dodge products in the United States on a non-exclusive basis. Fort Dodge may reduce the size of our territory upon 30 days written notice. We are required to actively promote and solicit sales of Fort Dodge products and to include their products in our regular sales promotions. In return, we are entitled to participate in Fort Dodge's current distributor incentive program. Fort Dodge is required to indemnify us against any claims alleging that the Fort Dodge products are defective, except in certain limited situations. We are required to maintain sufficient inventory of each Fort Dodge product to meet our anticipated demand and to store the products in accordance with their respective label instructions. Our distribution agreement with Fort Dodge had an original term that expired on December 31, 2004 but the agreement automatically renews for additional periods of one year. The agreement may be terminated by either party with or without cause upon 90 days prior written notice.

        Our livestock products agreement with Pfizer provides that we shall supply selected customers in the cattle and swine fields with Pfizer products. In return, we are entitled to certain service incentives and rebates. We are required to maintain sufficient inventory to meet our anticipated demand on a monthly basis and to store the Pfizer products in accordance with their respective label instructions. Pfizer also reserves the right to sell directly to our customers or any other party. The livestock products agreement has a one year term that expires on December 31, 2008 and can be terminated by either party with or without cause upon 30 days written notice.

        Our equine products marketing agreement with Pfizer provides that we shall distribute certain products to customers in the equine field. In return, we are entitled to receive certain service incentives and rebates. We are required to maintain sufficient staffing levels of sales representatives and store and handle inventory under appropriate conditions that will maintain the quality and integrity of the products. The agreement expires on December 31, 2008 and can be terminated by either party with or without cause upon 30 days prior written notice.

        Our Rimadyl/Clavamox distribution agreement with Pfizer provides that we shall distribute the Rimadyl and Clavamox products offered by Pfizer. In return, we are entitled to receive certain service incentives and rebates. We are required to maintain sufficient staffing levels of sales representatives and

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store and handle inventory under appropriate conditions that will maintain the quality and integrity of the products. The agreement expires on December 31, 2008 and can be terminated by Pfizer with or without cause upon 30 days written notice, and either party can terminate the agreement immediately upon written notice for material breach of the contract.

        Our companion animal AAHA MARKETLink management agreement with Pfizer provides that we are entitled to purchase designated companion animal products from Pfizer and resell them to selected veterinary hospitals serviced by MWI who are members of the American Animal Hospital Association. In connection with its resale of the Pfizer companion animal products, MWI will be paid a logistics fee and may receive certain incentive payments from Pfizer. This agreement expires on December 31, 2008 and may be terminated by either party, with or without cause, upon 30 days written notice. Pfizer may also terminate the agreement on 15 days written notice to MWI in the event it determines that MWI has failed to comply with certain terms and conditions of the agreement.

        Our independent sales agent agreement with Merial provides that we shall sell, market and provide services related to Merial's companion animal products to the veterinary trade. In return, we are entitled to receive commissions. The agreement expires on December 31, 2009 and may be terminated by either party without cause and without penalty upon 120 days prior written notice. The agreement may also be terminated by either party without cause upon less than 120 days prior written notice; however, financial penalties will apply. The agreement prohibits MWI from representing products that compete with certain of Merial's products, particularly those which are used for the treatment and/or control and/or prevention of fleas, ticks or heartworms.

        Animal health product vendors typically implement sales promotions for products distributed to veterinarians that can affect the timing in which we recognize revenues. In addition, at the time we negotiate vendor agreements for the upcoming year, our vendors typically establish sales growth goals for us to meet in order to receive performance rebates. These growth goals are based on quarterly, trimester, semi-annual or annual targets.

        Product returns from our customers and to our vendors occur in the ordinary course of business. We extend our customers the same return of goods policies as are extended to us by our vendors. We do not believe that our operations will be adversely impacted due to the return of products.

Information Systems

        Over the past several years, we have continued to invest in our technology and information systems, which we believe has created a competitive advantage when delivering quality service to our customers. In 2007, we launched a new e-commerce platform that offers more enhanced online ordering capabilities for veterinarians. This platform provides many new features for our customers while at the same time significantly enhancing security and our capability to provide additional functionality in the future.

Distribution

        As of September 30, 2008, we distributed our products from thirteen strategically located distribution centers throughout the United States. During our fiscal year 2008, we opened our thirteenth distribution center located in Edwardsville, Kansas. We also planned for the move of our distribution center in Dallas, Texas to a larger facility which took place in November 2008. During our fiscal year 2007, we moved our distribution center in Atlanta, Georgia to a larger facility, expanded the

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capacity of our distribution centers in Phoenix, Arizona and Nampa, Idaho and added space to our distribution center in Denver, Colorado to allow for additional warehouse capacity. During our fiscal year 2006, we opened our twelfth distribution center located in Orlando, Florida, expanded operations in Denver, Colorado by moving to a new distribution and call center, and expanded our existing distribution center in Harrisburg, Pennsylvania.

        Once a customer's order is entered into our customized order entry system, it is electronically transmitted to the distribution center that carries the product and is closest to the customer's location. Following receipt of the order, a document is printed in the warehouse which reflects the bin location of the product to facilitate product fulfillment. The order is then packaged and shipped along with an itemized invoice. We maintain inventory levels in our warehouses appropriate to satisfy customer demand for prompt delivery and fulfillment of their product orders. Inventory levels are managed on a daily basis through our information systems. In order to meet the rapid delivery requirements of our customers, we offer next-day delivery service on most of the products we stock in our warehouses. We estimate that as of September 30, 2008, we shipped same day from our warehouses approximately 98% of the dollar value of orders placed by our customers. We currently ship the majority of our orders through United Parcel Service, Inc., or UPS, with the balance of our orders being shipped by our own delivery trucks, regional carriers and other national carriers.

Acquisitions

        In May 2006, we acquired substantially all of the assets of Northland. Northland was located in Clear Lake, Wisconsin and was a distributor of animal health products to approximately 500 veterinary practices and producers across the Midwestern United States.

        In June 2007, we acquired substantially all of the assets of Securos. Based in Charlton, Massachusetts, Securos was a provider of veterinary orthopedic products in the United States and select countries abroad and sourced private label products in the categories of veterinary surgical consumables and equipment and handheld instruments.

        In October 2007, we acquired substantially all of the assets of Tri V. Based near Detroit, Michigan, Tri V was a distributor with an 11-year history of providing animal health products to approximately 850 veterinary practices, with a particular focus on emergency clinics and ophthalmology specialists.

        In July 2008, we acquired substantially all of the assets of AAHA MARKETLink. Based near Denver, Colorado, AAHA MARKETLink was a distributor of animal health products to members of the American Animal Hospital Association.

Competition

        The distribution and manufacture of animal health products is highly competitive. We compete with numerous vendors and distributors based on customer relationships, service and delivery, product selection, price and e-commerce capabilities. Most of our products are available from several sources, including other distributors and vendors, and our customers tend to have relationships with several distributors. In addition, our competitors could obtain exclusive rights to distribute certain products, eliminating our ability to distribute those products. Consolidation in the veterinary distribution business could result in existing competitors increasing their market share, which could give them greater pricing

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power, decrease our revenues and profitability, and increase the competition for customers. Our primary competitors, excluding vendors, include the following:

•

Animal Health International, Inc. (formerly Walco International, Inc.);

•

Butler Animal Health Supply;

•

Henry Schein, Inc.;

•

Lextron Animal Health, Inc.;

•

Professional Veterinary Products, Ltd.;

•

Webster Veterinary Supply, a division of Patterson Companies, Inc.; and

•

other national, regional, local and specialty distributors.

        The role of the animal health product distributor has changed dramatically during the last decade. Successful distributors are increasingly providing value-added services in addition to the products they traditionally provided. We believe that to remain competitive we must continue to add value to the distribution channel, while removing unnecessary costs associated with product movement.

        Distribution of animal health products is characterized by either "ethical" or "over-the counter," commonly referred to as OTC, channels of product movement. Ethical distribution is defined as those sales of goods to licensed veterinarians for use in their professional practice. Many of these products are prescription and must be sold or prescribed by a licensed professional. OTC distribution is the movement of goods to the animal owner and the end-user. Many of these products also are purchased by licensed veterinarians for professional use or for resale to their client. There are numerous ethical and OTC distribution companies operating throughout the United States and competition in the veterinary distribution industry is intense.

Seasonality in Operating Results

        Our quarterly sales and operating results have varied significantly in the past, and will likely continue to do so in the future. Historically, our total revenues have typically been higher during the spring and fall months due to increased sales of production animal products. Product use cycles for production animal products are directly related to medical procedures performed by veterinarians on production animals during the spring and fall months. These buying patterns can also be affected by vendors' and distributors' marketing programs launched during the summer months, particularly in June, which can cause veterinarians to purchase production animal health products earlier than those products are needed. This kind of early purchasing may reduce our sales in the months these purchases would have otherwise been made. See "Risk Factors—Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall." Additionally, while we accrue rebates as they are earned, our rebates have historically been highest during the quarter ended December 31, since some of our vendors' rebate programs were designed to include targets to be achieved near the end of the calendar year.

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Trademarks

        We have registered with the United States Patent and Trademark Office the marks "MWI," "MWI Design," "MWIVET.com," "VETONE," "PROXYRx" and "ANIMAL Rx PHARMACY". We believe that the MWI mark is well recognized in the animal health products industry and by veterinarians and is therefore a valuable asset of ours.

Employees

        As of September 30, 2008, we had 881 employees across the United States. We have not experienced a shortage of qualified personnel in the past, and believe that we will be able to attract such employees in the future. None of our employees are a party to a collective bargaining agreement, and we consider our relations with our employees to be good.

Website

        Our website address is www.mwivet.com and can be used to access free of charge, through the investor relations category, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such material with or furnish it to the SEC. The information on our website is not incorporated as a part of this annual report. The public can also obtain copies of these reports by visiting the SEC's Public Reference Room at 100 F Street NE, Washington DC 20549, or by calling the SEC at 1-800-SEC-0330, or by accessing the SEC's website at www.sec.gov.

Governmental Regulation

        Our vendors of pharmaceuticals, vaccines, parasiticides and certain controlled substances are typically regulated by federal agencies, such as the Food and Drug Administration ("FDA"), the United States Department of Agriculture ("USDA"), the Environmental Protection Agency ("EPA"), and the Drug Enforcement Agency ("DEA"), as well as most similar state agencies. Therefore, we are subject, either directly or indirectly, to regulation by the same agencies. Most states and the DEA require us to be registered or otherwise keep a current permit or license to handle controlled substances. Manufacturers of vaccines are required by the USDA to comply with various storage and shipping criteria and requirements for vaccines. To the extent we distribute such products, we must comply with the same requirements, including, without limitation, the storage and shipping requirements for vaccines.

        Most state boards of pharmacy require us to be licensed in their respective states for the sale of pharmaceutical products and medical devices within their jurisdictions. As a distributor of prescription pharmaceutical products, we are subject to the Prescription Drug Marketing Act ("PDMA"). The PDMA provides governance and authority to the states to provide minimum standards, terms and conditions for the licensing by state licensing authorities of persons who "engage" in wholesale distribution (as defined by each state regulatory agency) in interstate commerce of prescription drugs. With this authority, states require site-specific registrations for the parties that engage in the selling and/or physical distribution of pharmaceutical products into their state in the form of out-of-state registrations. Effective December 1, 2006, the federal drug pedigree requirements of the FDA under the PDMA went into effect. Although a court injunction was granted regarding some provisions, the FDA mandated that all distributors that are not the manufacturer's authorized distributor must provide

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a record of all previous transactions. This transaction history is also referred to as a pedigree. The federal pedigree regulations require tracking human labeled prescription products through the entire distribution chain and are applicable to distributors that do not have a written agreement with the manufacturer granting the wholesale distributor status as an "Authorized Distributor of Record." Selling and/or distributing products without the appropriate registrations may subject us to fines, penalties, misdemeanor or felony convictions, and/or seizure of the products involved. We have a Manager of Regulatory Compliance and have engaged outside consultants as needed to assist us in meeting and complying with the various state and federal licensure requirements to which we are subject.

        Our pet cremation business is subject to state and local zoning laws, and we are required to maintain permits for the construction and operation of an animal incineration device. We are also required to have an air pollution permit in connection with the operation of our pet cremation business.

        Some states (as well as certain cities and counties) require us to collect sales taxes/use taxes on certain types of animal products. We are also subject to laws governing our relationship with employees, including minimum wage requirements, overtime, working conditions and citizenship requirements. In addition, we are subject to additional regulations regarding our hiring practices because several federal, state and local governmental agencies are our customers.

Environmental Considerations

        We do not currently manufacture or alter in any way the composition of the vast majority of the products that we distribute. All products are distributed in compliance with the relevant rules and regulations as approved by various state and federal agencies.

Executive Officers

        The following table sets forth the names, ages and titles, as well as a brief account of the business experience, of each person who was an executive officer of the Company as of September 30, 2008:

Name		Age		Title
	James F. Cleary, Jr.		45	Board Director, President and Chief Executive Officer
	Mary Patricia B. Thompson		45	Senior Vice President of Finance and Administration, Chief Financial Officer
	James W. Culpepper		54	Vice President of Inventory Management
	Jeffrey J. Danielson		48	Vice President of Sales
	John J. Francis		55	Vice President and General Manager of the Specialty Resources Group
	James S. Hay		65	Vice President and Chief Information Officer
	Bryan P. Mooney		40	Vice President of Operations
	John R. Ryan		39	Vice President of Marketing

James F. Cleary, Jr. has served as President since March 2000 and Chief Executive Officer since June 2002. Mr. Cleary has also been a member of the board of directors since June 2002. He joined MWI in January 1998 as Director of National Accounts and was promoted to Vice President of Demand Generation in 1999. Mr. Cleary was Vice President of Agri Beef Co., MWI's former parent, from 1996 to 1998. From 1990 to 1996, Mr. Cleary was employed in management positions with

15

Morrison Knudsen Corporation and its affiliate MK Rail Corporation. Mr. Cleary graduated from Dartmouth College in 1985 with a Bachelor of Arts in Economics and received his Masters of Business Administration from Harvard Business School in 1990. Mr. Cleary is also a member of the board of directors of Seroyal Holdings, L.P., and a manager of Feeders' Advantage, L.L.C. Mr. Cleary is the brother-in-law of Mr. Robert Rebholtz, a member of our board directors.

Mary Patricia B. Thompson has served as Senior Vice President of Finance and Administration, Chief Financial Officer since August 2006, with oversight of finance, regulatory compliance, inventory management, information technology, and human resources. Prior to August 2006, Ms. Thompson had been the Vice President, Secretary and Chief Financial Officer since June 2002. Ms. Thompson joined Agri Beef Co. in 1989 as the Feedlot and Commodity Division Controller. In September 1991, Ms. Thompson was promoted to Controller of MWI Veterinary Supply Co., then a wholly-owned subsidiary of Agri Beef Co. Prior to joining Agri Beef Co., Ms. Thompson worked for Arthur Andersen LLP from 1985 to 1989, where she provided auditing and accounting services. Ms. Thompson graduated from the University of Idaho in 1985, summa cum laude, with a Bachelor of Science in Accounting. Ms. Thompson is a licensed Certified Public Accountant. Ms. Thompson is also a member of the board of directors of the American Veterinary Distributors Association and the Idaho Youth Ranch Foundation.

James W. Culpepper has served as Vice President of Inventory Management since 1998. Mr. Culpepper joined MWI in 1997 as General Merchandise Manager. Prior to joining MWI, Mr. Culpepper worked for Payless Drug Stores for 20 years. During that period, Mr. Culpepper held various positions, including pharmacist, merchandiser and buyer of pharmaceutical supplies, and Inventory Control Manager. Mr. Culpepper graduated from Oregon State University's School of Pharmacy in 1977.

Jeffrey J. Danielson has served as Vice President of Sales since 2001. Mr. Danielson joined MWI in 1985 as an Outside Sales Representative, serving the state of Washington. From 1989 to 1991, Mr. Danielson served as Assistant Sales Manager and from 1991 to 2001 served as National Sales Manager. Mr. Danielson graduated from Colorado State University in 1983 with a Bachelor of Science in Agricultural Business.

John J. Francis has served as Vice President and General Manager of the Specialty Resources Group since September 2006. Prior to joining MWI, Mr. Francis worked for Webster Veterinary Supply as the Vice President of Sales from April 2004 to September 2006. Mr. Francis was the Key Account Manager of Excel, a division of Cargill, Inc., from June 2002 to April 2004 and was the Vice President of Sales for Future Beef based in Parker, Colorado, from May 2000 to May 2002. From 1990 until 2000, Mr. Francis served as General Manager and then President of MWI Veterinary Supply Co. Mr. Francis graduated from Michigan State University in 1975 with a Bachelor of Science in Animal Husbandry and holds a Master of Science in Animal Science obtained in 1977 from the University of Illinois.

James S. Hay has served as Vice President and Chief Information Officer since September 2002. Mr. Hay joined Agri Beef Co. in 1996 as Vice President of Information Systems. Prior to joining Agri Beef Co., Mr. Hay served as Director of Management Information Systems at Natural Wonders Inc. from 1991 to 1995; Director of Management Information Systems at the Oakland Tribune from 1989 to 1991; Vice President and Chief Information Officer of Liquor Barn, Inc. from 1987 to 1989; Director of Information Services at Genstar Corporation from 1974 to 1987; management consultant at Price

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Waterhouse from 1968 to 1974; and as a systems engineer at IBM Corporation from 1965 to 1968. Mr. Hay graduated from the University of Manitoba in 1965 with a Bachelor of Science in Mathematics and Physics.

Bryan P. Mooney has served as Vice President of Operations since May 2005. Mr. Mooney joined MWI in January 1994 as the Operations Manager of our Denver, Colorado distribution operation and served in that capacity until May 1998. From May 1998 until February 2005, Mr. Mooney served as Manager of Transportation and Logistics and from January 2005 until May 2005 as the Western Regional Operations Manager. Mr. Mooney graduated from the University of Wyoming in 1991 with a Bachelor of Science in Agricultural Business.

John R. Ryan has served as Vice President of Marketing since 2000. Mr. Ryan joined MWI in June 1995 as an Outside Sales Representative and served in such capacity until June 2000. Prior to joining MWI, Mr. Ryan worked for the Virbac Corporation (a companion animal pharmaceutical company) as a Territory Manager from 1993 to 1995. Mr. Ryan graduated from the University of California, Davis in 1993 with a Bachelor of Science in Animal Physiology.

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Item 1A.    Risk Factors.

In addition to the factors discussed elsewhere in this Form 10-K, the following are important factors which could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of the Company.

Our operating results may fluctuate due to factors outside of management's control.

        Our future revenues and results of operations may significantly fluctuate due to a combination of factors, many of which are outside of management's control. The most notable of these factors include:

•

vendor rebates based upon attaining certain growth goals;

•

changes in or availability of vendor contracts or rebate programs;

•

changes in the way vendors introduce products to market;

•

exclusivity requirements with certain vendors that may prohibit us from distributing competing products manufactured by other vendors;

•

the impact of general economic trends on our business;

•

the recall of a significant product by one of our vendors;

•

extended shortage or backorder of a significant product by one of our vendors;

•

seasonality;

•

the timing and effectiveness of marketing programs offered by our vendors;

•

the timing of the introduction of new products and services by our vendors;

•

unforeseen litigation;

•

a disruption caused by adverse weather or other natural conditions;

•

inability to ship products to the customer as a result of technological or shipping disruptions; and

•

competition.

        These factors could adversely impact our results of operations and financial condition. We may be unable to reduce operating expenses quickly enough to offset any unexpected shortfall in revenues or gross profit. If we have a shortfall in revenues or gross profit without a corresponding reduction to expenses, operating results may suffer. Our operating results for any particular fiscal year or quarter may not be indicative of future operating results. You should not rely on year-to-year or quarter-to-quarter comparisons of results of operations as an indication of our future performance.

An adverse change in vendor rebates could negatively affect our business.

        The terms on which we purchase or sell products from many vendors of animal health products entitle us to receive a rebate based on the attainment of certain growth goals. Vendors may adversely change the terms of some or all of these rebate programs at any time without notice. Because the amount of rebates we earn is directly related to the attainment of pre-determined sales growth goals, and because the nature of the rebate programs and the amount of rebates available are determined by the vendors, there can be no assurance as to the amount of rebates that we will earn in any given year. Changes to any rebate program initiated by our vendors may have a material effect on our gross profit and our operating results in any given quarter or year. Vendors may reduce or eliminate rebates

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offered under their programs, interpret the terms of their rebate programs in a way that is adverse to us or increase the growth goals or other conditions we must meet to earn rebates to levels that we cannot achieve. Additionally, factors outside of our control, such as customer preferences or vendor supply issues, can have a material impact on our ability to achieve the growth goals established by our vendors, which may reduce the amount of rebates we receive. The occurrence of any of these events could have an adverse impact on our results of operations.

Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall.

        Our quarterly revenues and operating results have varied significantly in the past, and may continue to do so in the future. While we accrue rebates from vendors as they are earned, our rebates have historically been highest during the quarter ended December 31, since most of our vendors' rebate programs were designed to include targets to be achieved during the calendar year. Historically, our revenues have been seasonal, with peak sales in the spring and fall months. The seasonal nature of our business is directly tied to the buying patterns of veterinarians for production animal health products used for certain medical procedures performed on production animals during the spring and fall months. These buying patterns can also be affected by vendors' and distributors' marketing programs launched during the summer months, particularly in June, which can cause veterinarians to purchase production animal health products earlier than those products are used. This kind of early purchasing may reduce our sales in the months these purchases would have otherwise been made. Additionally, the production animal market can be affected by volatility in commodity prices such as corn, grain and feeder cattle, changes in weather patterns that allow cattle to graze for longer periods or a change in the general economy,which can shift the timing of when animals are treated and to what extent they are treated. This shift in treatment may have a significant impact on the timing of purchases. While companion animal products tend to have a different product use cycle than production animal health products, and approximately two-thirds of our revenues have been generated from sales to the companion animal market, we cannot assure you that our revenues and operating results will not continue to fluctuate on a quarter-to-quarter basis. We believe period-to-period comparisons of our results of operations are not necessarily meaningful as our future revenue and results of operations may vary substantially. It is also possible that in future quarters our results of operations will be below the expectations of securities analysts and investors. In either case, the price of our common stock could decline, possibly materially.

Our market is highly competitive. Failure to compete successfully could have a material adverse effect on our business, financial condition and results of operations.

        The market for veterinary distribution services is highly competitive, continually evolving and subject to technological change. We compete with numerous vendors and distributors based on customer relationships, service and delivery, product selection, price and e-business capabilities. Our primary competitors, excluding vendors, include the following:

•

Animal Health International, Inc. (formerly Walco International, Inc.);

•

Butler Animal Health Supply;

•

Henry Schein, Inc.;

•

Lextron Animal Health, Inc.;

•

Professional Veterinary Products, Ltd.;

•

Webster Veterinary Supply, a division of Patterson Companies, Inc.; and

•

other national, regional, local and specialty distributors.

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        Some of our competitors may have more customers, stronger brand recognition or greater financial and other resources than we do. Most of our products are available from several sources, including other distributors and vendors, and our customers typically have relationships with several distributors and vendors. Many of our competitors have comparable product lines, technical expertise or distribution strategies that directly compete with us. Our competitors could obtain exclusive rights to distribute certain products, eliminating our ability to distribute those products. The entry of new or additional distributors in the industry could also have a material adverse effect on our ability to compete. Additionally, some of our vendors may decide to compete with us by selling their products directly to our customers. If we do not compete successfully against these organizations, it could have a material and adverse effect on our business, financial condition and results of operations.

Consolidation in the veterinary distribution business and veterinary practices may decrease our revenues and profitability.

        Consolidation in the veterinary distribution business could result in existing competitors increasing their market share, which could give them greater pricing power, decrease our revenues and profitability, and increase the competition for customers. Consolidation of the many small, privately-held veterinary practices would result in an increasing number of larger veterinary practices, which could have increased purchasing leverage and the ability to negotiate lower product costs. This could reduce our operating margins and negatively impact our revenues and profitability. Any of these developments could result in increased marketing expenses and have a material adverse effect on our business, financial condition and results of operations.

Our business, financial condition and results of operations depend upon maintaining our relationships with vendors.

        During the year ended September 30, 2008, we distributed more than 30,000 products, of which over 15,000 were stocked in our distribution centers, sourced from approximately 500 vendors to over 19,000 veterinary practices. We currently do not manufacture the vast majority of our products and are dependent on these vendors for our supply of products. Our ten largest vendors supplied products that accounted for approximately 72%, 70% and 70% of our revenues for the fiscal years ended September 30, 2008, 2007 and 2006, respectively. Our top three vendors, Fort Dodge, Pfizer and Vedco, supplied products that accounted for approximately 43%, 43% and 44% of our revenues for our fiscal years ended September 30, 2008, 2007 and 2006, respectively. Pfizer supplied products that accounted for approximately 23%, 21% and 19% of our revenues for our fiscal years ended September 30, 2008, 2007 and 2006, respectively. Pfizer supplied production animal products under a livestock agreement that accounted for approximately 17%, 17% and 15% of our revenues for our fiscal years ended September 30, 2008, 2007 and 2006, respectively.

        Our ability to sustain our gross profits has been, and will continue to be, dependent in part upon our ability to obtain favorable terms and access to new and existing products from our vendors. These terms may be subject to changes from time to time by vendors, such as changing from a "buy/sell" to an agency relationship, or from an agency to a "buy/sell" relationship. In a "buy/sell" transaction, we purchase or take inventory of products from our vendors. Under an agency relationship, when we receive orders for products from a customer, we transmit the order to the vendor who then picks, packs and ships the products. Any changes from "buy/sell" to agency or from agency to "buy/sell" could adversely affect our revenues and operating income. The loss of one or more of our large vendors, a

20

material reduction in their supply of products to us or material changes in the terms we obtain from them could have a material adverse effect on our business, financial condition and results of operations.

        Vendors may also choose to change the method in which products are taken to market. For example, a vendor may change our relationship from a complete distribution provider, including logistics and sales support, to only a logistics provider or only a sales support provider. Only doing one of these services would reduce our margin on any sale. A change in the method in which products are taken to market caused by any vendor could have a material adverse effect on our business.

        Some of our current and future vendors may decide to compete with us in the future by pursuing or increasing their efforts in direct marketing and sales of their products. These vendors could sell their products at lower prices and maintain a higher gross margin on their product sales than we can. In this event, veterinarians or animal owners may elect to purchase animal health products directly from these vendors. Increased competition from any vendor of animal health products could significantly reduce our market share and adversely impact our financial results.

Exclusivity requirements and failures to continue relationships with vendors may cause us to lose access to certain products and erode our market share.

        We may not be able to establish or maintain relationships with key vendors in the animal health industry if we have established relationships with competitors of these key vendors. We have written agreements with approximately 40 of our vendors, including Fort Dodge and Pfizer. Some of our agreements with vendors are for one-year periods. Upon expiration, we may not be able to renew our existing agreements on favorable terms, or at all.

        In addition, during the course of our negotiation of these agreements certain vendors may require us to distribute their products on an exclusive basis, which would cause us to forego distributing competing products that may also be profitable, including generic products that may gain increased market share. In this situation we are often forced to project future sales of competing products so that we can elect to distribute the product that we believe will be more profitable. Our projections may not be correct, and we may be contractually prohibited from distributing products that gain market share, including generic products, at the expense of the products that we distribute. Competitors of ours could also obtain exclusive rights to market particular products, which we would be unable to market. If we lose the right to distribute products under such agreements, or are required to exclusively distribute certain products at the expense of others that may be more profitable, we may lose access to certain products and lose a competitive advantage. Potential competitors could sell products from vendors that we fail to continue with and erode our market share.

We rely substantially on third-party vendors, and the loss of products or delays in product availability from one or more third-party vendors could substantially harm our business.

        We must contract for the supply of current and future products of appropriate quantity, quality and cost. These products must be available on a timely basis and be in compliance with any regulatory requirements. Failure to do so could substantially harm our business.

        We often purchase products from our vendors under agreements that typically have a term of one year and can be terminated on a periodic basis. There can be no assurance, however, that our vendors

21

will be able to meet their obligations under these agreements or that we will be able to compel them to do so. Risks of relying on vendors include:

•

If an existing agreement expires or a certain product line is discontinued or recalled, then we would not be able to continue to offer our customers the same breadth of products and our sales and operating results would likely suffer unless we are able to find an alternate supply of a similar product.

•

If market demand for our products increases suddenly, our current vendors might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements or find new sources of supply, and may result in substantial delays in meeting market demand. If we consistently generate more demand for a product than a given vendor is capable of handling, it could lead to large backorders and potentially lost sales to competitive products that are more readily available.

•

We may not be able to control or adequately monitor the quality of products we receive from our vendors. Poor quality products could damage our reputation with our customers.

•

Some of our third party vendors are subject to ongoing periodic unannounced inspection by regulatory authorities, including the FDA, the USDA, the EPA, the DEA and other federal and state agencies for compliance with strictly enforced regulations. We do not have control over our vendors' compliance with these regulations and standards. Violations could potentially lead to interruptions in supply that could lead to lost sales to competitive products that are more readily available.

•

If a vendor is unable to obtain the necessary credit to manage their business, they may not be able to deliver their products to us.

        Potential problems with vendors such as those discussed above could substantially decrease sales of our products, lead to higher costs and damage our reputation with our customers.

We rely upon third parties to ship products to our customers and interruptions in their operations could harm our business, financial condition and results of operations.

        We use UPS as our primary delivery service for our air and ground shipments of products to our customers. If there were any significant service interruptions, there can be no assurance that we could engage alternative service providers to deliver these products in either a timely or cost-efficient manner, particularly in rural areas where many of our customers are located. Any labor disputes, slowdowns, transportation disruptions or other adverse conditions in the transportation industry experienced by UPS could impair or disrupt our ability to deliver our products to our customers on a timely basis, and could have a material adverse effect upon our customer relationships, business, financial condition and results of operations. In addition, rising fuel costs may result in continued increases in shipping costs charged by UPS, or other delivery service providers, and could have an adverse effect on our financial condition and results of operations.

The loss of one or more significant customers could adversely affect our profitability.

        Our two largest customers, Banfield and Feeders' Advantage (a related party), accounted for approximately 10% and 5%, respectively, of our product sales for our fiscal years ended September 30, 2008 and 2007, and 10% and 6%, respectively, for our fiscal year ended September 30, 2006. Our ten

22

largest customers, excluding Banfield and Feeders' Advantage, accounted for approximately 4% of our product sales for our fiscal year ended September 30, 2008 and 5% of our product sales for our fiscal years ended September 30, 2007 and 2006. Our business and results of operations could be adversely affected if the business of these customers was lost. We cannot guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at current levels. Banfield, Feeders' Advantage and other customers may seek to purchase some of the products that we currently sell directly from the vendors or from one or more of our competitors. Furthermore, our customers are not required to purchase any minimum amount of products from us. The loss of Banfield or Feeders' Advantage or deterioration in our relations with either of them could significantly affect our financial condition and results of operations. Additionally, deterioration in the financial condition of one or more of our customers could have a material adverse effect on our results of operations.

Difficulties with the integration of acquisitions or the improvement of the performance of acquired companies may impose substantial costs and delays and cause other unanticipated problems for us.

        Acquisitions involve a number of risks relating to our ability to integrate an acquired business into our existing operations. The process of integrating or improving the performance of the operations of an acquired business, particularly its personnel, could cause interruptions to our business. Some of the risks we face include:

•

the need to spend substantial operational, financial and management resources in integrating new businesses, technologies and products, and difficulties management may encounter in integrating or improving the performance of the operations, personnel or systems of the acquired business;

•

retention of key personnel, customers and vendors of the acquired business;

•

the occurrence of a material adverse effect on our existing business relationships with customers or vendors, or both, resulting from future acquisitions or business combinations could lead to a termination of or otherwise affect our relationships with such customers or vendors;

•

impairments of goodwill and other intangible assets; and

•

contingent and latent risks associated with the past operations of, and other unanticipated costs and problems arising in, an acquired business.

        If we are unable to successfully integrate the operations of an acquired business into our operations, we could be required to undertake unanticipated changes. These changes could have a material adverse effect on our business.

        In addition, it may be difficult to manage rapid growth from our acquired companies in the future, and the future success of our acquisitions depends on our ability to implement and/or maintain:

•

sales and marketing programs;

•

customer service levels;

•

current and new product and service lines and vendor relationships;

•

technological support which equals or exceeds our competitors;

23

•

recruitment and training of new personnel; and

•

operational and financial control systems.

        If we are not able to manage our rapid growth from our acquisitions, there is a risk our customer service quality could deteriorate which may in turn lead to decreased sales or profitability. Also, due to acquisitions the cost of our operations could increase faster than growth in our revenues, negatively impacting our profitability.

Increases in over-the-counter sales of animal health products could adversely affect our business.

        We rely, and will continue to rely, on animal owners who purchase their animal health products directly from veterinarians, which we refer to as the ethical channel. There can be no assurance that animal owners will continue to use the ethical channel with the same frequency as they have in the past, and will not increasingly purchase animal health products from sources other than veterinarians, such as the Internet and other over-the-counter channels. Increased competition from any distributor of animal health products making use of an over-the-counter channel could significantly reduce our market share and adversely impact our financial results.

If we fail to comply with or become subject to more onerous government regulations, our business could be adversely affected.

        The veterinary distribution industry is subject to changing political and regulatory influences. Both state and federal government agencies regulate the distribution of certain animal health products and we are subject to regulation, either directly or indirectly, by the FDA, the USDA, the EPA, the DEA and comparable state agencies. As a distributor of prescription pharmaceutical products, we are also subject to the PDMA, which provides for minimum standards, terms and conditions to be maintained for licensing as a distributor. The regulatory stance these agencies take could change. Our vendors are subject to regulation by the FDA, the USDA, the EPA, the DEA, and the PDMA, as well as other federal and state agencies, and material changes to the applicable regulations could affect our vendors' ability to manufacture certain products, which could adversely impact our product supply. In addition, some of our customers may rely, in part, on farm and agricultural subsidy programs. Changes in the regulatory positions that impact the availability of funding for such programs could have an adverse impact on our customers' financial positions, which could lead to decreased sales.

        We strive to maintain compliance with these and all other applicable laws and regulations. We retain a Manager of Regulatory Compliance and have engaged outside consultants as needed to assist us in meeting and complying with the various state licensure requirements to which we are subject. If we are unable to maintain or achieve compliance with these laws and regulations, however, we could be subject to substantial fines or other restrictions on our ability to provide competitive distribution services, which could have an adverse impact on our financial condition.

        We cannot assure you that existing laws and regulations will not be revised or that new, more restrictive laws will not be adopted or become applicable to us or the products that we distribute or dispense. Effective December 1, 2006, the federal drug pedigree requirements of the FDA under the PDMA went into effect. Although a court injunction was granted regarding some provisions, the FDA mandated that all distributors that are not the manufacturers authorized distributor must provide a record of all previous transactions. This transaction history is also referred to as a pedigree. The federal pedigree regulations require tracking human labeled prescription products through the entire

24

distribution chain and are enforceable for distributors that do not have a written agreement with the manufacturer granting the wholesale distributor status as an "Authorized Distributor of Record." We cannot assure you that the vendors of products that may become subject to more stringent laws will not try to recover any or all increased costs of compliance from us by increasing the prices at which we purchase products from them, or, that we will be able to recover any such increased prices from our customers. We also cannot assure you that our business and financial condition will not be materially and adversely affected by future changes in applicable laws and regulations.

Loss of key management or sales representatives could harm our business.

        Our future success depends to a significant extent on the skills, experience and efforts of management, including our President and Chief Executive Officer, Mr. James F. Cleary, Jr. While we have not experienced problems in the past attracting and maintaining members of our management team, the loss of any or all of these individuals could adversely impact our business. We do not carry key-man life insurance on any member of management. In addition we do not have employment agreements with key members of our senior management team. We must continue to develop and retain a core group of individuals if we are to realize our goal of continued expansion and growth. We cannot assure you that we will be able to do so in the future.

        Also, due to the specialized nature of our products and services, generally only highly qualified and trained sales representatives have the necessary skills to market our products and provide our services. These individuals develop relationships with our customers that could be damaged if these employees are not retained. We face intense competition for the hiring of these professionals, and many professionals in the field that may otherwise be attractive candidates for us to hire may be bound by non-competition agreements with our competitors. Any failure on our part to hire, train and retain a sufficient number of qualified professionals would damage our business. We do not generally enter into agreements that contain non-competition provisions with our employees, other than with members of our senior management team, former owners of acquired companies and certain other employees.

Failure of, or security problems with, our information systems could damage our business.

        Our information systems are dependent on third party software, global communications providers, telephone systems and other aspects of technology and Internet infrastructure that are susceptible to failure. Though we have implemented security measures and some redundant systems, our customer satisfaction and our business could be harmed if we or our vendors experience any system delays, failures, loss of data, power outages, computer viruses, break-ins, unauthorized access by competitors or similar disruptions. We currently process all customer transactions and data at our facilities in Meridian, Idaho. Although we have safeguards for emergencies, including, without limitation, sophisticated back-up systems, the occurrence of a major catastrophic event or other system failure at any of our distribution facilities could interrupt data processing or result in the loss of stored data. This may result in the loss of customers or a reduction in demand for our services. Only some of our systems are fully redundant and although we do carry business interruption insurance, it may not be sufficient to compensate us for losses that may occur as a result of system failures. If a disruption occurs, our profitability and results of operations may suffer.

25

The outbreak of an infectious disease within either the production animal or companion animal population could have a significant adverse effect on our business and our results of operations.

        An outbreak of disease affecting animals, such as foot-and-mouth disease, avian influenza or bovine spongiform encephalopathy, commonly referred to as "mad cow disease," could result in the widespread destruction of affected animals and consequently result in a reduction in demand for animal health products. In addition, outbreaks of these or other diseases or concerns of such diseases could create adverse publicity that may have a material adverse effect on consumer demand for meat, dairy and poultry products, and, as a result, on our customers' demand for the products we distribute. The outbreak of a disease among the companion animal population which could cause a reduction in the demand for companion animals could also adversely affect our business. Although we have not been adversely impacted by the outbreak of a disease in the past, there can be no assurance that a future outbreak of an infectious disease will not have an adverse effect on our business.

We may be subject to product liability and other claims in the ordinary course of business.

        Our business involves a risk of product liability and other claims in the ordinary course of business, for example arising from shipping mislabeled or outdated product or disputes among competing vendors. We maintain general liability insurance with policy limits of $1.0 million per incident and $2.0 million in the aggregate, and in many cases we have indemnification rights against such claims from the manufacturers of the products we distribute. We do not maintain a separate product liability insurance policy because we do not currently manufacture the vast majority of the products that we sell. Our ability to recover under insurance or indemnification arrangements is subject to the financial viability of the insurers and manufacturers. We cannot assure you that our insurance coverage or the manufacturers' indemnity will be available or sufficient in any future cases brought against us.

An economic downturn could materially adversely affect our business.

        Our business may be materially adversely affected by negative trends in the general economy that could reduce consumer discretionary spending on animal health products. Levels of consumer spending have recently deteriorated significantly in the United States and may remain depressed for the foreseeable future. Some of the factors that could influence the levels of consumer spending include continuing increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, unemployment levels, healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. In addition, rising prices for commodities such as corn or grain, changes in weather patterns causing cattle to graze for longer periods and changes in the general economy may adversely impact the amount spent by animal owners in the production animal market. Our business ultimately depends on the ability and willingness of animal owners to pay for our products. This dependence could make us more vulnerable to any reduction in consumer confidence or disposable income than companies in other industries that are less reliant on consumer spending, such as the human health care industry, in which a large portion of payments are made by insurance programs. Additionally, any cost-cutting measures taken to offset the effects of an economic downturn could materially impact our ability to generate future revenue growth.

We may not be able to raise needed capital in the future on favorable terms or at all.

        We expect that our existing sources of cash, together with any funds generated from operations, will be sufficient to meet our anticipated capital needs for at least the next twelve months. However,

26

we may require additional capital to finance our growth strategies or other activities in the future. Our capital requirements will depend on many factors, including the costs associated with our growth and expansion. Additional financing may not be available when needed and, if such financing is available, it may not be available on terms favorable to us. Our failure to raise capital when needed could have an adverse effect on our business, financial condition and results of operations.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

        Any borrowings on the revolving credit facility will be at variable rates of interest and expose us to interest rate risk based on market rates. If interest rates increase, our debt service obligations on any future variable rate indebtedness that we may incur on our revolving credit facility would increase even if the amount borrowed remained the same, and our net income and cash available for servicing our indebtedness would decrease. Our variable rate debt as of September 30, 2008 was $0.2 million (comprised of $0 credit facility and $0.2 million promissory note). Our interest expense for fiscal year 2008 was approximately $0.3 million and was approximately $0.5 million for fiscal year 2007. A 1% increase in the average interest rate would not have a material impact on our operations assuming our current level of debt. However, if we had to borrow additional funds to operate our business, the change in interest rates could affect our operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

Our lenders may have suffered losses related to the weakening economy and may not be able to fund our borrowings.

        Our lenders, including the lenders participating in our revolving credit facility, may have suffered losses related to their lending and other financial relationships, especially because of the general weakening of the national economy and increased financial instability of many borrowers. As a result, lenders may become insolvent or tighten their lending standards, which could make it more difficult for us to borrow under our revolving credit facility or to obtain other financing on favorable terms or at all. Our financial condition and results of operations would be adversely affected if we were unable to draw funds under our revolving credit facility because of a lender default or to obtain other cost-effective financing.

27

Item 1B.    Unresolved Staff Comments.

        None.

Item 2.    Properties.

        The table below provides a summary of the Company's principal facilities which are all leased as of September 30, 2008:

Location	Total Square Feet(1)		Principal Function
Meridian, Idaho		34,000	Headquarters and call center
Sturbridge, Massachusetts		15,000	Securos office and call center
Atlanta, Georgia		41,000	Distribution center and call center
Clear Lake, Wisconsin		25,000	Distribution center, call center and pharmacy
Denver, Colorado		75,000	Distribution center and call center
Fife, Washington		30,000	Distribution center
Glendale, Arizona		20,000	Distribution center
Grand Prarie, Texas(2)		70,000	Distribution center, call center and pharmacy
Harrisburg, Pennsylvania		40,000	Distribution center and pharmacy
Holland, Michigan		25,000	Distribution center and call center
Nampa, Idaho		36,000	Distribution center and pharmacy
Orlando, Florida		30,000	Distribution center
San Antonio, Texas		19,000	Distribution center and call center
Visalia, California		52,000	Distribution center and veterinary food-animal drug retailer
Edwardsville, Kansas(3)		80,000	Distribution center and pharmacy
Rochester Hills, Michigan		3,000	Call center

(1)

Rounded to the nearest thousand square feet.

(2)

We moved into a 70,000 square foot facility in November 2008.

(3)

We will occupy 80,000 square feet through February 2009 and 105,000 square feet thereafter.

Item 3.    Legal Proceedings.

        From time to time, in the normal course of business, we may become a party to legal proceedings that may have an adverse effect on our financial position, results of operations and cash flows. Management presently believes that the ultimate outcome of these proceedings will not have a material adverse effect on our financial position, cash flows or overall trends in results of operations. However, litigation is subject to inherent uncertainties, and unfavorable outcomes could occur. An unfavorable outcome could include the payment of monetary damages or, in cases for which injunctive relief is sought, an injunction prohibiting us from selling one or more products or taking certain other actions. Were an unfavorable outcome to occur, our business or results of operations could be materially harmed.

Item 4.    Submission of Matters to a Vote of Security Holders.

        None.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

        Our common stock has been quoted on the Nasdaq under the symbol "MWIV" since August 3, 2005. Prior to that date there was no public market for our common stock. The following table sets forth, for the two most recent fiscal years, the high and low sales prices of our common stock, reported by the Nasdaq Global Select Market.

		Common Stock Price
		High		Low
Fiscal Year Ended September 30, 2007
	First Quarter	$	37.44	$	30.05
	Second Quarter	$	34.50	$	30.00
	Third Quarter	$	40.50	$	32.36
	Fourth Quarter	$	42.98	$	33.63
Fiscal Year Ended September 30, 2008
	First Quarter	$	44.60	$	36.05
	Second Quarter	$	43.85	$	32.40
	Third Quarter	$	39.27	$	32.16
	Fourth Quarter	$	45.11	$	32.15

        At the close of business on November 14, 2008, we had approximately 12,112,535 shares of common stock issued and outstanding. As of that date, there were approximately 186 registered holders of record. This does not reflect beneficial stockholders who hold their stock in nominee or "street" name through brokerage firms.

        We have not paid or declared any dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. We intend to retain future earnings to finance the ongoing operations and growth of our business. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on conditions at that time, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

29

        The table below provides information concerning our repurchase of shares of our common stock during the quarter ended September 30, 2008.

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2008 to July 31, 2008		—			—		—		—
August 1, 2008 to August 31, 2008		50	(1)	$	37.37		—		—
September 30, 2008 to September 30, 2008		77	(1)	$	39.27		—		—
Total		127		$	38.52		—		—

(1)

These shares were withheld upon the vesting of employee restricted stock grants in connection with payment of required withholding taxes.

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        The graph below compares the cumulative total stockholder return on $100 invested at the market close on August 2, 2005, the date the Company's initial public offering was priced for initial sale, through and including September 30, 2008, the last trading day before the end of our most recently completed fiscal year, with the cumulative total return of the same time period on the same amount invested in the Russell 2000 Index, the Standard and Poor's SmallCap 600 Index and a Peer Group Index, consisting of 10 companies that compete or operate in a comparable industry as the Company. The chart below the graph sets forth the actual numbers depicted on the graph.

	8/2/2005		9/30/2005		9/30/2006		9/30/2007		9/30/2008
MWI Veterinary Supply, Inc.	$	100.00	$	117.35	$	197.24	$	222.06	$	227.94
S&P SmallCap 600 Index		100.00		97.86		103.89		118.32		100.79
Russell 2000 Index		100.00		96.99		105.39		116.98		98.70
Peer Group(1)		100.00		101.34		115.03		123.50		108.13

(1)

Peer Group consists of Amerisourcebergen Corp. (ABC), Animal Health International Inc. (AHII), Cardinal Health Inc. (CAH), Henry Schein Inc. (HSIC), IDEXX Laboratories Inc. (IDXX), Owens & Minor Inc. (OMI), McKesson Corp. (MCK), Patterson Companies Inc. (PDCO), PetMed Express Inc. (PETS), PSS World Medical Inc. (PSSI) and VCA Antech Inc. (WOOF).

31

Item 6.    Selected Financial Data.

        The selected consolidated financial and operating data below represent portions of our financial statements and are not complete. You should read this information together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes to these statements included in this annual report. Historical results are not necessarily indicative of future performance.

			Year Ended September 30,
			2008			2007			2006			2005			2004
			(In thousands, except per share amounts)
Revenues:
	Product sales		$	778,953		$	664,351		$	564,289		$	463,272		$	367,863
	Product sales to related party			39,452			36,122			34,123			28,473			22,163
	Commissions			12,959			9,632			7,782			4,910			4,256
		Total revenues		831,364			710,105			606,194			496,655			394,282
Cost of product sales				711,812			607,756			518,068			426,709			338,684
	Gross profit			119,552			102,349			88,126			69,946			55,598
Selling, general and administrative expenses(1)				84,123			73,215			62,470			52,647			41,872
Depreciation and amortization				3,078			2,424			1,964			1,528			1,146
	Operating income			32,351			26,710			23,692			15,771			12,580
Other income (expense):
	Interest expense(2)			(265	)		(545	)		(1,959	)		(6,515	)		(6,098	)
	Earnings of equity method investees			179			169			161			131			104
	Other			642			756			338			268			218
		Total other income (expense)		556			380			(1,460	)		(6,116	)		(5,776	)
Income before taxes				32,907			27,090			22,232			9,655			6,804
Income tax expense				(12,990	)		(10,215	)		(8,396	)		(5,098	)		(4,280	)
Net income			$	19,917		$	16,875		$	13,836		$	4,557		$	2,524
Earnings per common share:
	Basic		$	1.65		$	1.43		$	1.28		$	0.76		$	0.50
	Diluted		$	1.62		$	1.40		$	1.25		$	0.68		$	0.43
Shares used in computing earnings per common share:
	Basic			12,053			11,764			10,773			5,970			5,038
	Diluted			12,301			12,044			11,072			6,697			5,878

	As of September 30,
	2008		2007		2006		2005		2004
	(In thousands)
Cash	$	3,419	$	8,599	$	37	$	31	$	28
Total assets		314,805		267,194		230,559		188,244		146,565
Total debt		194		292		10,948		25,177		50,149
Redeemable preferred stock		—		—		—		—		35,733
Total stockholders' equity		181,003		160,011		129,626		86,694		4,632

32

		Year Ended September 30,
		2008			2007			2006			2005			2004
Other Data (unaudited):(3)
	Product sales from Internet as a percentage of sales		27	%		24	%		23	%		21	%		18	%
	Field sales representatives (at end of period)		186			163			155			134			111
	Telesales representatives (at end of period)		135			117			106			93			79
	Distribution centers		13			13			12			10			9
	Fill rate(4)		98	%		98	%		98	%		98	%		98	%

(1)

Includes management fees expense of $2,456 and $386 for our fiscal years ended September 30, 2005 and 2004, respectively, as a result of payments to BRS and Agri Beef Co. The management and consulting services agreement was terminated in August 2005 for a termination fee of $2,000 that is included in the management fee expense of $2,456 for fiscal year ended September 30, 2005.

(2)

Includes accretion of our Series A preferred stock dividends beginning on July 1, 2003, which is nondeductible for income tax purposes. Accretion expense included as a component of interest expense was $4,055 and $4,239 for fiscal years ended September 30, 2005 and 2004, respectively. We used a portion of the proceeds from our initial public offering in August 2005 to redeem all the Series A preferred stock.

(3)

The non-financial information included in this table is derived from reports from various departments, including human resources, operations, inventory management and sales.

(4)

Defined as, for any period, the dollar value of orders shipped the same day they were placed from any warehouse expressed as a percentage of the total dollar value of the orders placed by customers in the period.

33

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

All dollar amounts are presented in thousands, except for per share amounts.

Overview

        We are a leading distributor of animal health products to veterinarians across the United States. We market our products to veterinarians in both the companion and production animal markets. Our growth has primarily been from internal growth initiatives and, to a lesser extent, selective acquisitions. We operate within a single reporting segment and are primarily located within the United States.

        Historically, approximately two-thirds of our total revenues have been generated from sales to the companion animal market and one-third from sales to the production animal market. The overall economy and consumer spending have impacted both markets, with volatile commodity prices in grain, corn and feeder cattle, and changes in weather patterns also affecting demand in the production animal market. Both markets have been integral to our financial results and we intend to continue supporting both markets. With the recent acquisition of AAHA MARKETLink, we demonstrated our commitment to the companion animal market and our intent to continue our growth in that market.

        We believe that the companion animal market has slowed recently as a result of a decrease in consumer spending. Historically, this growth has been due to the increasing number of households with companion animals, increased expenditures on animal health and preventative care, an aging pet population, advancements in pharmaceuticals and diagnostic testing and extensive marketing programs sponsored by companion animal nutrition and pharmaceutical companies. While the average order size for companion animal health products is often smaller than production animal health products, companion animal health products typically have higher margins. We intend to continue to penetrate this market through internal growth initiatives and selective acquisitions.

        Product sales in the production animal market have been negatively impacted by increasing volatility in commodity prices such as corn, grain and feeder cattle, changes in weather patterns that allow cattle to graze for longer periods and changes in the general economy. We believe that this is not a permanent condition in the market and that demand will return as prices normalize. We intend to continue to support production animal veterinarians with a broad range of products and value-added services. Historically, sales in this market have been largely driven by spending on animal health products to improve productivity, weight gain and disease prevention, as well as a growing focus on food safety.

        We sell products that we source from our vendors to our customers through either a "buy/sell" transaction or an agency relationship with our vendors. In a "buy/sell" transaction, we purchase or take inventory of products from our vendors. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We record sales from "buy/sell" transactions, which account for the vast majority of our business, as revenues in conformity with generally accepted accounting principles in the United States. In an agency relationship, we generally do not purchase and take inventory of products from our vendors. When we receive an order from our customer, we transmit the order to our vendor, who picks, packs and ships the order to our customer. In some cases, our vendor invoices and collects payment from our customer, while in other cases we invoice and collect payment from our customer on behalf of our vendor. We receive a commission payment for soliciting the order from our customer and for providing other customer service activities. The aggregate revenues we receive in agency transactions constitute the "commissions" line item on our consolidated statements of

34

income and are recorded in conformity with accounting principles generally accepted in the United States. Our vendors determine the method we use to sell our products. Historically, vendors have occasionally switched between the "buy/sell" and agency models for particular products in response to market conditions related to that particular product. A switch between models can impact our revenues and our operating income. We cannot know in advance when a vendor will switch between the "buy/sell" and agency models or what impact, if any, such a change may have. A switch can occur even with vendors with whom we have written agreements, because most of our agreements with vendors have relatively short terms and are terminable with or without cause on short notice, normally 30 to 90 days. The impact of any individual change from a "buy/sell" to an agency model depends on the costs and expenses associated with a particular product, and can have either a positive or a negative effect on our profitability.

        We typically renegotiate vendor contracts annually. These vendor contracts may include terms defining rebates, commissions, exclusivity requirements and the manner in which we go to market. For example, vendors could require us to distribute their products on an exclusive basis, which could cause us to forego distributing competing products which may also be profitable. Conversely, competitors could obtain exclusive rights to market particular products, which we would be unable to market. If we lose the right to distribute products under such exclusive agreements, we may lose access to certain products and lose a competitive advantage. Exclusivity agreements could allow potential competitors to sell products that we cannot offer and erode our market share. In addition, vendors have the ability to expand the distributors that they use which could have a material adverse effect on our business.

        Many of our vendors' rebate programs are based on a calendar year. Historically, the three months ended December 31 has been our most significant quarter for recognition of rebates. During calendar year 2006, certain of our vendors modified their rebate programs with us. These rebate program modifications changed the revenue growth targets from annual-weighted calendar year targets to either quarterly or trimester growth targets. These modifications resulted in rebates previously expected to be earned and recognized in our first fiscal quarter 2007 ending December 31, 2006 to be recognized in our fiscal year 2006. Vendor rebates based on sales are classified in our accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are a reduction of inventory until the product is sold. When the inventory is sold, purchase rebates are recognized as a reduction to cost of product sales.

        We are currently in annual negotiations with Pfizer on our livestock products agreement for calendar year 2009. The distribution agreement proposed by Pfizer does not meet our expectations, and we are continuing negotiations. An unfavorable outcome in these negotiations could have a material adverse impact to our business, financial condition, and results of operations.

         Total Revenues.    Our total revenues increased from $394,282 for our fiscal year ended September 30, 2004 to $831,364 for our fiscal year ended September 30, 2008. Our revenue growth has been driven by our ability to offer a broad product selection at competitive prices with high levels of customer service and support and an expansion in the number of veterinary practices to which we distribute products. We have continually added new vendor relationships to expand our product offering and field sales representatives to increase our customer reach, principally in the Southeast, Northeast and Midwest regions of the United States.

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         Operating Expenses.    Our selling, general and administrative expenses increased from $41,872 for our fiscal year ended September 30, 2004 to $84,123 for our fiscal year ended September 30, 2008. Selling, general and administrative expenses consist mainly of compensation and benefits, warehouse operating supplies, occupancy and location expenses and other general corporate expenses. Our selling, general and administrative expenses as a percentage of total revenues were 10.6% for our fiscal year ended September 30, 2004, compared to 10.1% for the same period in 2008.

         Acquisitions.    In fiscal year 2006, we acquired substantially all of the assets of Northland. Based in Clear Lake, Wisconsin, Northland was a distributor of animal health products to veterinary practices and producers across the Midwestern portion of the United States.

        In June 2007, we acquired substantially all of the assets of Securos, including an ownership interest in Securos Europe. Based in Charlton, Massachusetts, Securos was a provider of veterinary orthopedic products in the United States and select countries abroad and sourced private label products in the categories of veterinary surgical consumables and equipment and handheld instruments.

        In October 2007, we acquired substantially all of the assets of Tri V. Based near Detroit, Michigan, Tri V was a distributor with an 11-year history of providing animal health products to approximately 850 veterinary practices, with a particular focus on emergency clinics and ophthalmology specialists.

        In July 2008, we acquired substantially all of the assets of AAHA MARKETLink. Based near Denver, Colorado, AAHA MARKETLink was a distributor of animal health products to members of American Animal Health Association.

        Fair values of the assets acquired and liabilities assumed as a result of these acquisitions are discussed in Note 3 "Business Acquisitions" to the consolidated financial statements.

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Results of Operations

        The following tables summarize our historical results of operations for our fiscal years ended September 30, 2008, 2007 and 2006.

Summary Consolidated Results of Operations Table

			Year Ended September 30,
			2008			%			2007			%			2006			%
			(In thousands, except per share data)
Revenues:
	Product sales		$	778,953			93.7	%	$	664,351			93.5	%	$	564,289			93.1	%
	Product sales to related party			39,452			4.7	%		36,122			5.1	%		34,123			5.6	%
	Commissions			12,959			1.6	%		9,632			1.4	%		7,782			1.3	%
		Total revenues		831,364			100.0	%		710,105			100.0	%		606,194			100.0	%
Cost of product sales				711,812			85.6	%		607,756			85.6	%		518,068			85.5	%
Gross profit				119,552			14.4	%		102,349			14.4	%		88,126			14.5	%
Selling, general and administrative expenses				84,123			10.1	%		73,215			10.3	%		62,470			10.3	%
Depreciation and amortization				3,078			0.4	%		2,424			0.3	%		1,964			0.3	%
Operating income				32,351			3.9	%		26,710			3.8	%		23,692			3.9	%
Other income (expense):
	Interest expense			(265	)		0.0	%		(545	)		(0.1	)%		(1,959	)		(0.3	)%
	Earnings of equity method investees			179			0.0	%		169			0.0	%		161			0.0	%
	Other			642			0.1	%		756			0.1	%		338			0.1	%
		Total other income (expense)		556			0.1	%		380			0.0	%		(1,460	)		(0.2	)%
Income before taxes				32,907			4.0	%		27,090			3.8	%		22,232			3.7	%
Income tax expense				(12,990	)		(1.6	)%		(10,215	)		(1.4	)%		(8,396	)		(1.4	)%
Net income			$	19,917			2.4	%	$	16,875			2.4	%	$	13,836			2.3	%
Earnings per common share:
	Basic		$	1.65					$	1.43					$	1.28
	Diluted		$	1.62					$	1.40					$	1.25
Shares used in computing earnings per common share:
	Basic			12,053						11,764						10,773
	Diluted			12,301						12,044						11,072

Fiscal 2008 Compared to Fiscal 2007

         Total Revenues.    Total revenues increased $121,259, or 17.1%, to $831,364 for the fiscal year ended September 30, 2008 from $710,105 for the fiscal year ended September 30, 2007. This increase was attributable to an increase in product sales volumes of a wide variety of products to both existing and new customers. Revenues attributable to new customers represented approximately 57% of the growth in total revenues during the fiscal year ended September 30, 2008. Revenues attributable to existing customers represented approximately 43% of the growth in total revenues during the fiscal year ended September 30, 2008. For the purpose of calculating growth rates of new and existing customer revenue,

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we have defined a new customer as a customer that did not purchase product from us in the corresponding fiscal quarter of the prior year, with the remaining customer base being considered an existing customer. Revenues from new customers for each fiscal quarter are summed to arrive at the estimated year-to-date revenue for new customers. Included in the new customer growth were approximately $2.8 million of revenues attributable to new customers acquired as a result of the acquisition of AAHA MARKETLink on July 1, 2008. Additionally, we had $5.4 million of incremental revenues as a result of the acquisition of AAHA MARKETLink from customers who had previously been purchasing from both MWI and AAHA MARKETLink.

        Commission revenues increased $3,327, or 34.5%, to $12,959 for the fiscal year ended September 30, 2008 from $9,632 for the fiscal year ended September 30, 2007. The increase of commission revenues was due to the increase in gross agency billings of $50,694, or 26.1%, to $245,045 for the fiscal year ended September 30, 2008 from $194,351 for the fiscal year ended September 30, 2007. The growth in commissions was due to an increase in sales volume to customers as well as additional incentives which were achieved during the fiscal year.

         Gross Profit.    Gross profit increased $17,203, or 16.8%, to $119,552 for the fiscal year ended September 30, 2008 from $102,349 for the fiscal year ended September 30, 2007. The change in gross profit is a result of increased total revenues as discussed above. Vendor rebates increased by approximately $989 for the fiscal year ended September 30, 2008 as compared to the fiscal year ended September 30, 2007. Gross profit as a percentage of total revenues was 14.4% for both of the fiscal years ended September 30, 2008 and 2007.

         Selling, General and Administrative Expenses ("SG&A").    SG&A increased $10,908, or 14.9%, to $84,123 for the fiscal year ended September 30, 2008 from $73,215 for the fiscal year ended September 30, 2007. This increase was primarily due to increased compensation and benefits costs and occupancy and location costs. Compensation and benefit costs increased due to the addition of 81 employees during the fiscal year, which includes 23 new field sales representatives and 18 new telesales representatives. Compensation costs also increased as a result of increased sales commissions that are directly correlated with the sales growth. Occupancy and location costs increased as a result of the addition of our distribution center in Edwardsville, Kansas. This distribution center commenced operations in October 2007. We also experienced higher credit card fees as a result of increased revenues and usage. SG&A as a percentage of revenue was 10.1% for the fiscal year ended September 30, 2008 and 10.3% for the fiscal year ended September 30, 2007.

         Depreciation and Amortization.    Depreciation and amortization expense increased $654, or 27.0%, to $3,078 for the fiscal year ended September 30, 2008 from $2,424 for the fiscal year ended September 30, 2007. The addition of the Kansas distribution center as well as the implementation of new technologies contributed to the increase in depreciation expense. In addition, amortization expense increased as a result of intangible assets acquired in the purchases of Securos, Tri V and AAHA MARKETLink.

         Other Income/Expenses.    Other income increased $176, or 46.3%, to $556 for the fiscal year ended September 30, 2008 from $380 for the fiscal year ended September 30, 2007. The increase in other income was primarily due to a reduction in interest expense of $280 in the fiscal year ended September 30, 2008 as compared to the same period in the prior year. This was a result of the issuance of additional shares of common stock in April 2007, the proceeds of which were partially used to pay down borrowings on our revolving credit facility. This resulted in less outstanding during fiscal year

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2008 against the revolving credit facility as compared to fiscal year 2007. Additionally, for most of fiscal year 2008, interest rates were lower which also resulted in lower interest expense.

         Income Tax Expense.    Our effective tax rate was 39.5% for the fiscal year ended September 30, 2008 and 37.7% for the fiscal year ended September 30, 2007. The increase in the effective tax rate for the year ended September 30, 2008 as compared to the year ended September 30, 2007 was primarily attributable to the change in our estimates related to state taxes as a result of our adoption of FIN 48.

Fiscal 2007 Compared to Fiscal 2006

         Total Revenues.    Total revenues increased $103,911, or 17.1%, to $710,105 for the fiscal year ended September 30, 2007 from $606,194 for the fiscal year ended September 30, 2006. This increase was attributable to an increase in product sales volumes of a wide variety of products to both existing and new customers. Revenues attributable to new customers represented approximately 66% of the growth in total revenues during the fiscal year ended September 30, 2007. Revenues attributable to existing customers represented approximately 34% of the growth in total revenues during the fiscal year ended September 30, 2007. For the purpose of calculating growth rates of new and existing customer revenue, we have defined a new customer as a customer that did not purchase product from us in the corresponding fiscal quarter of the prior year, with the remaining customer base being considered an existing customer. Revenues from new customers for each fiscal quarter are summed to arrive at the estimated year-to-date revenue for new customers. Contributing to the growth in revenues to both new and existing customers for the fiscal year ended September 30, 2007 as compared to the prior fiscal year was the addition of new product lines, including the leading antibiotic for dogs and cats. Also, the fiscal year 2007 included all four quarters of revenues resulting from the acquisition of substantially all of the assets of Northland while fiscal year 2006 included approximately two quarters of such revenues.

        Commission revenues increased $1,850, or 23.8%, to $9,632 for the fiscal year ended September 30, 2007 from $7,782 for the fiscal year ended September 30, 2006. The increase of commission revenues was due to the increase in gross agency billings of $42,975, or 28.4%, to $194,351 for the fiscal year ended September 30, 2007 from $151,376 for the fiscal year ended September 30, 2006.

         Gross Profit.    Gross profit increased $14,223, or 16.1%, to $102,349 for the fiscal year ended September 30, 2007 from $88,126 for the fiscal year ended September 30, 2006. The change in gross profit is a result of increased total revenues as discussed above, offset by decreased vendor rebates. Vendor rebates decreased by approximately $664 for the fiscal year ended September 30, 2007 as compared to the fiscal year ended September 30, 2006. This decrease was largely offset by an increase in our product margins for fiscal year 2007 compared to fiscal year 2006. Vendor rebates have historically been highest during our first fiscal quarter ended December 31, since certain significant vendor rebate programs were designed to include annual targets to be achieved based on the calendar year. Vendor modifications to rebate programs from annual-weighted calendar year growth targets to either quarterly or trimester growth targets resulted in a shift of rebate dollars that historically would have been earned in our first quarter of fiscal year 2007 ending December 31, 2006 to be earned in the fiscal year 2006. The growth in vendor rebates during the 2006 fiscal year included approximately $2.5 million ($1.5 million after-tax) due to this shift in the timing of rebates.

        Gross profit as a percentage of total revenues was 14.4% for the fiscal year ended September 30, 2007, compared to 14.5% for the fiscal year ended September 30, 2006. The decrease in our gross

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profit as a percentage of total revenues was primarily due to a decrease in vendor rebates as discussed above.

         Selling, General and Administrative Expenses.    SG&A increased $10,745, or 17.2%, to $73,215 for the fiscal year ended September 30, 2007 from $62,470 for the fiscal year ended September 30, 2006. This increase was primarily due to increased compensation and benefits costs and occupancy and location costs. Compensation costs increased due to the addition of 81 employees, which includes 17 employees from the Securos acquisition and the full year of costs related to the employees acquired from Northland. Compensation costs also increased as a result of increased sales commissions that are directly correlated with the sales growth. The increase in benefits costs was a result of increased headcount as well as higher health insurance costs. These costs increased as a result of higher participant claims than experienced in the past. Occupancy and location costs increased as a result of changes in our distribution centers. We moved our Atlanta, Georgia distribution center to a larger facility to accommodate capacity needs. We also added capacity to our distribution centers in Denver, Colorado, Phoenix, Arizona, and Nampa, Idaho. Additionally, we prepared for the opening of our distribution center in Edwardsville, Kansas. Certain expenses were incurred in the fourth quarter of fiscal year 2007 in anticipation of the opening of this distribution center that increased our SG&A expenses. The facility did not commence operations until October 2007. SG&A as a percentage of revenue was 10.3% for each of the fiscal years ended September 30, 2007 and 2006.

         Depreciation and Amortization.    Depreciation and amortization expense increased $460, or 23.4%, to $2,424 for the fiscal year ended September 30, 2007 from $1,964 for the fiscal year ended September 30, 2006. The expansion and improvements of our distribution centers as well as the implementation of new technologies contributed to the increase in depreciation expense. In addition, amortization expense increased as a result of intangible assets acquired in the purchases of Northland and Securos.

         Other Expenses.    Other expenses decreased $1,840, or 126.0%, to $380 in income for the fiscal year ended September 30, 2007 from $1,460 in expense for the fiscal year ended September 30, 2006. The decrease in other expenses was primarily due to a reduction in interest expense of $1,414 in the fiscal year ended September 30, 2007 as compared to the same period in the prior year. This was a result of the issuance of additional shares of common stock in July 2006 and April 2007, the proceeds of both of which were partially used to pay down borrowings on our revolving credit facility. The issuance of common stock in April 2007 and cash provided by operations also led to a positive cash balance for the majority of the remainder of the year which contributed to interest income of approximately $424.

         Income Tax Expense.    Our effective tax rate was 37.7% for the fiscal year ended September 30, 2007 and 37.8% for the fiscal year ended September 30, 2006.

Seasonality in Operating Results

        Our quarterly sales and operating results have varied significantly in the past, and will likely continue to do so in the future. Historically, our total revenues have typically been higher during the spring and fall months due to increased sales of production animal products. Product use cycles for production animal products are directly related to medical procedures performed by veterinarians on production animals during the spring and fall months. These buying patterns can also be affected by vendors' and distributors' marketing programs launched during the summer months, particularly in

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June, which can cause veterinarians to purchase production animal health products earlier than those products are needed. This kind of early purchasing may reduce our sales in the months these purchases would have otherwise been made. See "Risk Factors—Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall." Additionally, while we accrue rebates as they are earned, our rebates have historically been highest during the quarter ended December 31, since some of our vendors' rebate programs were designed to include targets to be achieved near the end of the calendar year.

        Our companion animal products tend to have a different product use cycle that minimally overlaps with that of production animal products. In the companion animal market, sales of flea, tick and mosquito products are highest during the spring and summer months. The differing product use cycles of companion animal products partially offsets the seasonality we typically experience due to our sales of production animal products.

        For the reasons and factors discussed above our quarterly operating results may fluctuate significantly. Accordingly, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any year and our sales for any particular future period may decrease. In the future, operating results may fall below the expectations of securities analysts and investors. If this occurs, the price of our stock would likely decrease.

			For the three-months ended (unaudited)
			Dec. 31, 2006			Mar. 31, 2007			Jun. 30, 2007			Sept. 30, 2007			Dec. 31, 2007			Mar. 31, 2008			Jun. 30, 2008			Sept. 30, 2008
			(In thousands, except per share amounts)(1)
Revenues:
	Product sales		$	149,787		$	163,311		$	173,548		$	177,705		$	189,303		$	182,461		$	196,325		$	210,864
	Product sales to related party			9,559			8,867			7,750			9,946			11,117			8,922			8,689			10,724
	Commissions			1,699			2,875			2,555			2,503			2,941			3,577			3,263			3,178
		Total revenues		161,045			175,053			183,853			190,154			203,361			194,960			208,277			224,766
Cost of product sales				135,296			150,631			158,391			163,438			173,576			166,692			177,970			193,574
Gross profit				25,749			24,422			25,462			26,716			29,785			28,268			30,307			31,192
Selling, general and administrative expenses				17,694			17,806			18,302			19,413			21,303			20,410			20,802			21,608
Depreciation and amortization				569			602			603			650			747			746			757			828
Operating income				7,486			6,014			6,557			6,653			7,735			7,112			8,748			8,756
Other income (expense):
	Interest expense			(269	)		(160	)		(76	)		(40	)		(51	)		(114	)		(53	)		(47	)
	Earnings of equity method investees			45			42			35			47			51			41			37			50
	Other			90			101			243			322			235			117			115			175
		Total other income (expense)		(134	)		(17	)		202			329			235			44			99			178
Income before taxes				7,352			5,997			6,759			6,982			7,970			7,156			8,847			8,934
Income tax expense				(2,748	)		(2,309	)		(2,499	)		(2,659	)		(3,270	)		(2,778	)		(3,429	)		(3,513	)
Net income			$	4,604		$	3,688		$	4,260		$	4,323		$	4,700		$	4,378		$	5,418		$	5,421
Earnings per common share:
	Basic		$	0.40		$	0.32		$	0.36		$	0.36		$	0.39		$	0.36		$	0.45		$	0.45
	Diluted		$	0.39		$	0.31		$	0.35		$	0.35		$	0.38		$	0.36		$	0.44		$	0.44

(1)

The sums of the quarterly line items may not agree to the year-to-date amounts as a result of rounding.

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Liquidity and Capital Resources

        Our principal sources of liquidity are cash flows generated from operations and borrowings on our revolving credit facility under our credit agreement. We use capital primarily to fund day-to-day operations and to maintain sufficient inventory levels in order to promptly fulfill customer orders and to expand our operations and sales growth. We believe our capital resources, including our ability to borrow funds from our revolving credit facility, will be sufficient to meet our anticipated cash needs for at least the next twelve months. Bank of America, N.A. and Wells Fargo, N.A. are the lenders for the revolving credit facility. The revolving credit facility allows for borrowings in the aggregate of $70,000, with the right to request an increase in the commitment to $100,000. The facility has a maturity date of December 1, 2011 and a variable interest rate equal to the Daily LIBOR Floating Rate or the LIBOR 1-month fixed rate plus a margin ranging from 0.7% to 1.25% or the Prime Rate (at our option). The lenders also receive an unused line fee and letter of credit fee equal to 0.125% of the unused amount of the facility. Our outstanding balance on the facility at September 30, 2008 was $0.

        Our lenders may have suffered losses related to their lending and other financial relationships, especially because of the general weakening of the national economy and increased financial instability of many borrowers. As a result, the lenders may become insolvent or tighten their lending standards, which could make it more difficult for us to borrow under our revolving credit facility or to obtain other financing on favorable terms or at all. Our financial condition and results of operations would be adversely affected if we were unable to draw funds under our revolving credit facility because of a lender default or to obtain other cost-effective financing.

        In the fourth quarter of fiscal year 2006, we issued 908,846 shares (including the shares issued upon the partial exercise of the underwriters' over-allotment option) of our common stock at a price of $32.25 per share. We used the net proceeds of $27,341 received from this offering to pay down borrowings on our revolving credit facility.

        In the third quarter of fiscal year 2007, we issued 348,974 shares of our common stock at a price to the public of $35.00 per share. We used the net proceeds of $11,252 received from this offering to pay down our borrowings on our revolving credit facility and for general corporate purposes.

         Operating Activities.    For fiscal year ended September 30, 2008, cash provided by operating activities was $10,622, and was primarily attributable to net income of $19,917 and an increase in accounts payable and accrued expenses of $23,163. This amount was partially offset by an increase in receivables of $11,180 and inventories of $23,543. The increase in net income is a result of the factors discussed above in "Results of Operations". The increase in accounts receivable is primarily related to the increase in sales. We provide financing terms to our customers that we believe are customary for our industry. There are occasions when we offer extended terms based on market conditions and customer demand. Our inventory levels increase as our sales increase as we keep much of the inventory in stock. Additionally, we opened a new distribution center in Edwardsville, Kansas and we increased our inventory levels at that facility during the year. We also increased our inventory to accommodate the growth in sales to AAHA MARKETLink customers. Our accounts payable is primarily used to offset the increases in inventory.

        For fiscal year ended September 30, 2007, cash provided by operating activities was $15,379, and was primarily attributable to net income of $16,875 and an increase in accounts payable and accrued expenses of $17,311. This amount was partially offset by an increase in receivables of $11,797 and inventories of $8,795. The increase in net income is a result of the factors discussed above in "Results

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of Operations". The increase in accounts receivable is primarily related to the increase in sales and the continued offering of extended payment terms to production animal veterinarians in response to market conditions. The increased levels of inventory and accounts payable are related to purchases to correspond to increased sales, purchases to achieve target volumes and service levels and the opening of a new distribution center located in Edwardsville, Kansas.

        For fiscal year ended September 30, 2006, cash used in operating activities was $7,751, and was primarily attributable to an increase in receivables of $21,022 and inventories of $15,114. This amount was partially offset by net income of $13,836 and an increase in accounts payable of $12,839. The increase in net income is a result of the factors discussed above in "Results of Operations". The increase in accounts receivable is primarily related to the increase in sales and the continued offering of extended payment terms to production animal veterinarians in response to market conditions. The increased levels of inventory and accounts payable are related to purchases to correspond to increased sales; purchases to achieve target volumes and service levels; and purchases related to the new distribution center acquired in the Northland acquisition and the opening of a new distribution center located in Orlando, Florida.

         Investing Activities.    For fiscal year ended September 30, 2008, net cash used in investing activities was $16,198. Significant transactions impacting cash used in investing activities include the acquisition of substantially all of the assets of AAHA MARKETLink for $8,676, net of cash received of $1,320, the acquisition of substantially all of the assets of Tri V for $4,606 and capital expenditures of $3,246 primarily related to the relocation of our distribution center in Dallas, Texas and expansion and improvements made to our existing distribution centers. Additionally, we continue to improve our information technology infrastructure and had multiple projects related to improving our technology.

        For fiscal year ended September 30, 2007, net cash used in investing activities was $8,749. Significant transactions impacting cash used in investing activities include the acquisition of substantially all of the assets of Securos for $4,661 and capital expenditures of $3,872 primarily related to the new distribution center in Edwardsville, Kansas and expansion and improvements made to our existing distribution centers. Additionally, we added new technology to our distribution centers to improve receiving inventory. We also used cash to improve our e-commerce site at www.mwivet.com.

        For fiscal year ended September 30, 2006, net cash used in investing activities was $6,065. Significant transactions impacting cash used in investing activities include the acquisition of substantially all of the assets of Northland for $3,551 and capital expenditures of $3,663 primarily related to the relocation of our existing distribution center to a new larger distribution center in Denver, Colorado, the opening of a new distribution center in Orlando, Florida and the expansion of the Northland facility. Additionally, we completed the sale of a distribution center previously operated in Denver, Colorado for $1,455.

         Financing Activities.    For fiscal year ended September 30, 2008, net cash provided by financing activities was $396, and was primarily attributable to the proceeds of $218 from stock option exercises. We also had a tax benefit from the stock option exercises of $216.

        For fiscal year ended September 30, 2007, net cash provided by financing activities was $1,932, and was primarily attributable to net proceeds of $11,252 from the issuance of 348,974 shares of common stock completed in the third quarter ended June 30, 2007. The proceeds were primarily used to reduce outstanding debt under our revolving credit facility.

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        For fiscal year ended September 30, 2006, net cash provided by financing activities was $13,822, and was primarily attributable to net proceeds of $27,341 from the issuance of 908,846 shares of common stock completed in the fourth quarter ended September 30, 2006. The proceeds were primarily used to reduce outstanding debt under our revolving credit facility.

         Capital Resources.    On December 13, 2006, MWI Co., (our wholly-owned subsidiary) as borrower, entered into an unsecured credit agreement with us and Memorial Pet Care, as guarantors, and Bank of America, N.A. and Wells Fargo Bank, N.A., (collectively, the "lenders") for the provision of a revolving credit facility (the "facility"). The facility allows for borrowings in the aggregate of $70,000, with the right to request an increase in the commitment of the lenders to $100,000. The facility has a maturity date of December 1, 2011 and a variable interest rate equal to the Daily LIBOR Floating Rate or the LIBOR 1-month fixed rate plus a margin ranging from 0.7% to 1.25% or the Prime Rate (at our option). The lenders also receive an unused line fee and letter of credit fee equal to 0.125% of the unused amount of the facility. Our outstanding balance on the facility at September 30, 2008 was $0.

        From time to time we issue letters of credit to act as guarantee of payment to specified third parties. We had four letters of credit totaling $400 at September 30, 2008 and eleven letters of credit totaling $940 at September 30, 2007. There were no outstanding borrowings on these letters of credit at September 30, 2008 or 2007.

        In January 2005, we issued a promissory note in the aggregate principal amount of $487 in partial consideration for the purchase of substantially all the assets of Vetpo. The note bears interest at the Prime Rate, payable quarterly. The principal of the note is payable in five equal annual installments, which began on January 1, 2006. At September 30, 2008, we owed $194 on this note payable.

Off Balance Sheet Arrangements

        At September 30, 2008, we had no significant investments that were accounted for under the equity method in accordance with accounting principles generally accepted in the United States except for Feeders Advantage. Feeders Advantage has no liabilities associated with them that were guaranteed by or that would be considered material to us. Accordingly, we do not have any off balance sheet arrangements with unconsolidated entities.

44

Contractual Obligations

Contractual Obligations

        Our contractual obligations at September 30, 2008 mature as follows (in thousands):

	Payments Due by Period
	Total		1 Year or less		2-3 Years		4-5 Years		More than 5 Years
Line-of-credit(1)	$	—	$	—	$	—	$	—	$	—
Operating lease commitments(2)		15,518		2,958		5,204		3,736		3,620
Long-term debt obligations (including current portion)		194		97		97		—		—
Interest on long-term debt and line-of-credit(3)		284		94		175		15		—
Other long-term obligations(4)		1,295		916		377		2		—
Total contractual obligations	$	17,291	$	4,065	$	5,853	$	3,753	$	3,620

(1)

The line-of-credit balance at September 30, 2008 was $0.

(2)

In November 2008, we commenced a new lease agreement for a 70,000 square foot distribution center located in Grand Prairie, Texas with an average annual lease expense of $235 and expiring in 2019.

(3)

Future interest payments are calculated based on the assumption that all debt is outstanding until maturity. For debt instruments with variable interest rates and unused commitment fees, interest has been calculated for all future periods using the rates in effect at September 30, 2008.

(4)

Other long-term obligations include contracts related to information technology services, telecommunications and financial services. This also includes $508, which is an estimate of certain tax positions that are expected to be settled within the next fiscal year.

Guarantees

        We provide guarantees, indemnifications and assurances to others in the ordinary course of our business. We have evaluated our agreements that contain guarantees and indemnification clauses in accordance with the guidance of Financial Accounting Standards Board ("FASB") Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.

        We enter into a wide range of indemnification arrangements in the ordinary course of business. These include tort indemnities, tax indemnities, indemnities against third party claims arising out of arrangements to provide services to us, indemnities in merger and acquisition agreements and indemnities in agreements related to the sale of our securities. Also, our governance documents and the governance documents of all of our subsidiaries provide for the indemnification of individuals made party to any suit or proceeding by reason of the fact that the individual was acting as an officer, director or agent of the relevant company or as a fiduciary of a company-sponsored welfare benefit plan. We also provide guarantees and indemnifications for the benefit of our wholly-owned subsidiaries for the satisfaction of performance obligations, including certain lease obligations. It is difficult to quantify the maximum potential liability under these indemnification arrangements. We are not aware of any material liabilities arising from these indemnification arrangements.

45

Inflation

        Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. During the past three years, the most significant effects of inflation have been on employee wages, costs of products and fuel-intensive costs including freight, packing supplies and travel. We manage the effects of inflation by controlling increases in compensation expense, renegotiating freight carrier contracts and utilizing a central source for warehouse shipping supplies.

Critical Accounting Policies

        Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to sales returns, allowance for doubtful accounts, customer incentives, vendor rebates, inventories, goodwill and intangible assets, income taxes, impairment of long-lived assets, depreciation and amortization, employee benefits, unearned income and contingencies. We base our estimates on historical experience and on various other assumptions and factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We, based on our ongoing review, will make adjustments to our judgments and estimates where facts and circumstances dictate. Historically, actual results have not significantly deviated from those determined using the estimates described above.

        We believe the following critical accounting policies are important to understand our financial condition and results of operations and require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Revenue Recognition

        We sell products that we source from vendors to our customers through either a "buy/sell" transaction or an agency relationship with our vendors. In a "buy/sell" transaction, we purchase and take inventory of products from the vendor. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We recognize revenue from "buy/sell" transactions as product sales when the product is delivered to the customer. We accept product returns from our customers. We estimate sales returns based on historical experience, and returns are recognized as a reduction of product sales. Product returns have not been significant to our financial statements. In an agency relationship, we generally do not purchase and take inventory of products from our vendors. We receive an order from a customer, then transmit the order to the vendor, who picks, packs and ships the order to the customer. In some cases, the vendor invoices and collects payment from the customer, while in other cases we invoice and collect payment from the customer on behalf of the vendor. We receive a commission payment for soliciting the order from the customer and for providing other customer service activities. Commissions are recognized when the services upon which the commissions are based are complete.

Vendor Rebates

        Vendor rebates are recorded based on the terms of the contracts with each vendor and in accordance with the provisions of Emerging Issues Task Force ("EITF") Issue No. 02-16, Accounting by

46

a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. We receive quarterly, trimester, semi-annual and annual performance-based rebates from third-party vendors based upon attainment of certain sales and/or purchase goals. Sales rebates are classified in our accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are a reduction of inventory until the product is sold. When the inventory is sold, purchase rebates are recognized as a reduction to cost of product sales.

        Historically, actual results have not significantly deviated from those determined using the estimates described above. We expect that our estimates in the future will continue to be reasonable as our rebates are based on specific vendor program goals and are principally recorded upon achievement of sales or purchase performance measures. Vendors may change rebate programs from year to year.

Customer Incentives

        Customer incentives are accrued based on the terms of the contracts with each customer and in accordance with the provisions of EITF Issue No. 01-9, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products). These incentive programs provide that the customer receives an incentive based on their product purchases or attainment of performance goals. Incentives are estimated based on the specific terms in each agreement, historical experience and product growth rates. The incentives are recognized as a reduction of product sales.

Goodwill and Intangible Assets

        We assess the potential impairment of goodwill and non-amortizing intangible assets annually and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that we consider important and may trigger an interim impairment review include:

•

significant underperformance relative to expected historical or projected future operating results;

•

significant changes in the manner of our use of acquired assets or the strategy of our overall business; and

•

significant negative industry or economic trends.

        If we determine through the impairment review process that goodwill or non-amortizing intangible assets are impaired, an impairment charge is recognized in our consolidated statement of income.

        Goodwill and non-amortizing intangible assets were evaluated for impairment in our fourth quarter of 2008 and we determined that the recorded amount was not impaired. The fair value calculations used for these tests require us to make assumptions about items that are inherently uncertain. Assumptions related to future market demand, market prices and product costs could vary from actual results, and the impact of such variations could be material. Factors that could affect the assumptions include changes in economic conditions, changes in government regulations, success in marketing products and competitive conditions in our industry. The factors that most significantly affect the fair value calculation are market multiples and estimates of future cash flows. Fair value was determined using the discounted cash flow method.

47

Stock Based Awards

        Effective October 1, 2005, we adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised), Share-Based Payment ("SFAS 123-R") for our share-based compensation plans using the modified prospective method.

Recently Issued and New Accounting Pronouncements

        On October 1, 2007, we adopted the provisions of FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. The adoption of FIN 48 as of October 1, 2007, resulted in a cumulative effect adjustment of $257 which reduced our retained earnings. See Note 10 "Income Taxes" in the Notes to the Financial Statements.

        In September 2006, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value according to generally accepted accounting principles and expands disclosure requirements regarding fair value measurements. This statement emphasizes that fair value should be determined based on assumptions market participants would use to price the asset or liability. SFAS 157 is effective for financial assets for our fiscal year beginning October 1, 2008. FASB Staff Position 157-2 ("FSP 157-2") delayed the implementation of SFAS 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 is effective for nonfinancial assets and liabilities for our fiscal year beginning October 1, 2009. The adoption of this statement is not expected to have a material impact on our consolidated financial statements.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits entities to choose to measure certain financial assets and liabilities at fair value. The provisions of SFAS 159 are effective for our fiscal year beginning October 1, 2008. The adoption of this statement is not expected to have a material impact on our consolidated financial statements.

        In December 2007, the FASB issued SFAS No. 141 (Revised), Business Combinations ("SFAS 141-R"). SFAS 141-R retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred, among other items. The statement will apply prospectively to any business combinations occurring in our fiscal year beginning October 1, 2009.

        In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51 ("SFAS 160"). This statement amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Noncontrolling interests shall be reclassified to equity, consolidated net income shall be adjusted to include net income attributable to noncontrolling interests and consolidated comprehensive income

48

shall be adjusted to include comprehensive income attributable to the noncontrolling interests. SFAS 160 is effective for our fiscal year beginning October 1, 2009. We are currently evaluating the expected impact, if any, that SFAS 160 will have on our consolidated financial statements.

        In April 2008, the FASB issued FASB Staff Position FAS 142-3 ("FSP 142-3"), which amends the list of factors an entity should consider in determining the useful life of recognized intangible assets under FASB Statement 142. FSP 142-3 is effective for our fiscal year beginning October 1, 2009. We are currently evaluating the expected impact, if any, that FSP 142-3 will have on our consolidated financial statements.

Credit Agreement

        On December 13, 2006, MWI Co., (our wholly-owned subsidiary) as borrower, entered into an unsecured credit agreement with us and Memorial Pet Care, as guarantors, and Bank of America, N.A. and Wells Fargo Bank, N.A., (collectively, the "lenders") for the provision of a revolving credit facility (the "facility"). The facility allows for borrowings in the aggregate of $70,000, with the right to request an increase in the commitment of the lenders to $100,000. The facility has a maturity date of December 1, 2011 and a variable interest rate equal to the Daily LIBOR Floating Rate, the LIBOR 1-month fixed rate plus a margin ranging from 0.7% to 1.25% or the Prime Rate (at our option). The lenders also receive an unused line fee and letter of credit fee equal to 0.125% of the unused amount of the facility. Our outstanding balance on the facility at September 30, 2008 was $0.

        From time to time we issue letters of credit to act as guarantee of payment to specified third parties. We had four letters of credit totaling $400 at September 30, 2008 and eleven letters of credit totaling $940 at September 30, 2007. There were no outstanding borrowings on these letters of credit at September 30, 2008 or 2007.

Promissory Note

        In January 2005, we issued a promissory note in the aggregate principal amount of $487 in partial consideration for the purchase of substantially all the assets of Vetpo. The note bears interest at the Prime Rate, payable quarterly. The principal of the note is payable in five equal annual installments, beginning on January 1, 2006. At September 30, 2008, we owed $194 on this note payable.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

        We are exposed to market risks primarily from changes in interest rates in the United States. We do not engage in financial transactions for trading or speculative purposes.

        The interest payable on the revolving credit facility is based on variable interest rates and is affected by changes in market interest rates. The outstanding balance on the facility as of September 30, 2008 was $0. Therefore, there was no exposure to market risks as of this date. If there had been a balance on the facility of $70,000, which is the maximum available amount on the facility, a change of 10% from the interest rate as of September 30, 2008, which was 5.0% (Prime Rate), would have changed interest by $350. Since September 30, 2008, the Daily LIBOR Floating Rate has decreased and this would be the preferred rate based on current conditions. As of November 14, 2008, the Daily LIBOR Floating Rate was .4125%. Our rate as of this date was 1.1125%, including the 0.7% margin per our credit facility. Assuming that the maximum available amount on the facility was outstanding at this rate, a change of 10% from this interest rate would have changed interest by $78.

49

Item 8.    Financial Statements and Supplementary Data.

MWI Veterinary Supply, Inc.
Index to Consolidated Financial Statements

	Page Number
Report of Independent Registered Public Accounting Firm		51
Consolidated Statements of Income for the years ended September 30, 2008, 2007 and 2006		52
Consolidated Balance Sheets as of September 30, 2008 and 2007		53
Consolidated Statements of Stockholders' Equity for the years ended September 30, 2008, 2007 and 2006		54
Consolidated Statements of Cash Flows for the years ended September 30, 2008, 2007 and 2006		55
Notes to Consolidated Financial Statements		56

50

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
MWI Veterinary Supply, Inc.
Meridian, Idaho

        We have audited the accompanying consolidated balance sheets of MWI Veterinary Supply, Inc. and subsidiaries (the "Company") as of September 30, 2008 and 2007, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2008. Our audits also included the consolidated financial statement schedule listed in the Index at Item 15. These consolidated financial statements and consolidated financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2008 and 2007, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

        As discussed in Note 2, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109, effective October 1, 2007.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of September 30, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 21, 2008, expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP
Boise, Idaho
November 21, 2008

51

MWI VETERINARY SUPPLY, INC.

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended September 30, 2008, 2007 and 2006

Dollars and shares in thousands, except per share amounts

			2008			2007			2006
Revenues:
	Product sales		$	778,953		$	664,351		$	564,289
	Product sales to related party			39,452			36,122			34,123
	Commissions			12,959			9,632			7,782
		Total revenues		831,364			710,105			606,194
Cost of product sales				711,812			607,756			518,068
Gross profit				119,552			102,349			88,126
Selling, general and administrative expenses				84,123			73,215			62,470
Depreciation and amortization				3,078			2,424			1,964
Operating income				32,351			26,710			23,692
Other income (expense):
	Interest expense			(265	)		(545	)		(1,959	)
	Earnings of equity method investees			179			169			161
	Other			642			756			338
		Total other income (expense), net		556			380			(1,460	)
Income before taxes				32,907			27,090			22,232
Income tax expense				(12,990	)		(10,215	)		(8,396	)
Net income			$	19,917		$	16,875		$	13,836
Earnings per common share:
	Basic		$	1.65		$	1.43		$	1.28
	Diluted		$	1.62		$	1.40		$	1.25
Weighted average common shares outstanding:
	Basic			12,053			11,764			10,773
	Diluted			12,301			12,044			11,072

See notes to consolidated financial statements

52

MWI VETERINARY SUPPLY, INC.

CONSOLIDATED BALANCE SHEETS

As of September 30, 2008 and 2007

Dollars and shares in thousands, except per share amounts

			2008		2007
Assets
Current Assets:
	Cash and cash equivalents		$	3,419	$	8,599
	Receivables, net			128,564		111,676
	Inventories			118,403		94,623
	Prepaid expenses and other current assets			3,168		2,362
	Deferred income taxes			809		518
		Total current assets		254,363		217,778
Property and equipment, net				9,687		9,206
Goodwill				37,727		32,964
Intangibles, net				10,945		5,014
Other assets, net				2,083		2,232
Total assets			$	314,805	$	267,194
Liabilities And Stockholders' Equity
Current Liabilities:
	Line-of-credit		$	—	$	—
	Accounts payable			123,003		98,724
	Accrued expenses			9,854		7,693
	Current maturities of long-term debt			97		97
		Total current liabilities		132,954		106,514
Deferred income taxes				751		474
Long-term debt				97		195
Commitments and contingencies
Stockholders' Equity
	Common stock $0.01 par value, 40,000 authorized; 12,098 and 12,024 shares issued and outstanding, respectively			121		120
	Additional paid in capital			122,319		120,988
	Retained earnings			58,563		38,903
		Total stockholders' equity		181,003		160,011
Total liabilities and stockholders' equity			$	314,805	$	267,194

See notes to consolidated financial statements

53

MWI VETERINARY SUPPLY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the Years Ended September 30, 2008, 2007 and 2006

Dollars and shares in thousands

	Shares of Common Stock		Common Stock		Additional Paid In Capital		Retained Earnings			Total
Balance at October 1, 2005		10,576	$	106	$	78,396	$	8,192		$	86,694
Net income		—		—		—		13,836			13,836
Issuance of common stock, net of issuance costs of $1,969		909		9		27,332		—			27,341
Issuance of restricted stock for purchase of Northland		29		—		995		—			995
Exercises of common stock options		31		—		597		—			597
Tax benefit of common stock exercises		—		—		148		—			148
Other		4		—		15		—			15
Balance at September 30, 2006		11,549		115		107,483		22,028			129,626
Net income		—		—		—		16,875			16,875
Issuance of common stock, net of issuance costs of $383		349		4		11,248		—			11,252
Issuance of restricted stock for purchase of Securos		13		—		486		—			486
Exercises of common stock options		98		1		337		—			338
Tax benefit of common stock exercises		—		—		1,122		—			1,122
Issuance of stock awards		15		—		312		—			312
Balance at September 30, 2007		12,024		120		120,988		38,903			160,011
Net income		—		—		—		19,917			19,917
FIN 48 adoption adjustment		—		—		—		(257	)		(257	)
Issuance of common stock		2		—		59		—			59
Issuance of restricted stock for purchase of Tri V		13		—		505		—			505
Exercises of common stock options		19		—		218		—			218
Tax benefit of common stock exercises		—		—		216		—			216
Issuance of stock awards		40		1		333		—			334
Balance at September 30, 2008		12,098	$	121	$	122,319	$	58,563		$	181,003

See notes to consolidated financial statements

54

MWI VETERINARY SUPPLY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended September 30, 2008, 2007 and 2006

Dollars in thousands

					2008			2007			2006
Cash Flows From Operating Activities:
	Net income				$	19,917		$	16,875		$	13,836
	Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
		Depreciation and amortization				3,089			2,435			1,973
		Amortization of debt issuance costs				43			63			140
		Stock-based compensation				334			312			—
		Deferred income taxes				(14	)		(47	)		(165	)
		Earnings of equity method investees				(179	)		(169	)		(161	)
		Tax benefit of common stock options				(216	)		(1,122	)		(148	)
		Loss/(gain) on disposal of property and equipment				2			18			(51	)
		Other				—			(9	)		5
		Changes in operating assets and liabilities (net of effects of business acquisitions):
			Receivables			(11,180	)		(11,797	)		(21,022	)
			Inventories			(23,543	)		(8,795	)		(15,114	)
			Prepaid expenses and other current assets			(794	)		304			(639	)
			Accounts payable			22,203			15,654			12,839
			Accrued expenses			960			1,657			756
				Net cash provided by/(used in) operating activities		10,622			15,379			(7,751	)
Cash Flows From Investing Activities:
			Business acquisitions, net of cash received of $1,320			(13,224	)		(4,661	)		(3,551	)
			Purchases of property and equipment			(3,246	)		(3,872	)		(3,663	)
			Sale of property and equipment			—			—			1,455
			Other			272			(216	)		(306	)
				Net cash used in investing activities		(16,198	)		(8,749	)		(6,065	)
Cash Flows From Financing Activities:
			Issuance of common stock, net of issuance costs			59			11,252			27,341
			Proceeds from stock options			218			338			597
			Tax benefit of common stock options			216			1,122			148
			Payment on debt			(97	)		(97	)		(133	)
			Net payments on line-of-credit			—			(10,559	)		(14,131	)
			Debt issuance costs			—			(124	)		—
				Net cash provided by financing activities		396			1,932			13,822
Net (Decrease)/Increase in Cash and Cash Equivalents						(5,180	)		8,562			6
Cash and Cash Equivalents at Beginning of Period						8,599			37			31
Cash and Cash Equivalents at End of Period					$	3,419		$	8,599		$	37

See notes to consolidated financial statements

55

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except share and per share data

1. Business Description and Basis of Presentation

        MWI Veterinary Supply, Inc. is a leading distributor of animal health products to veterinarians across the United States. We market our products to veterinarians in both the companion and production animal markets. We operate thirteen distribution centers located in the Western United States, Texas, Kansas, Michigan, Georgia, Pennsylvania, Wisconsin, and Florida. We also provide supplies to Feeders' Advantage, L.L.C. ("Feeders'Advantage"), a 50% owned entity that sells to various feedlot companies.

        MWI Veterinary Supply, Inc. (formerly named MWI Holdings, Inc.) was formed on June 18, 2002 for the sole purpose of acquiring all of the outstanding stock of MWI Veterinary Supply Co. ("MWI Co.") from its then owner, Agri Beef Co. ("Agri Beef").

2. Summary of Significant Accounting Policies

         Principles of Consolidation—The accompanying consolidated financial statements consist of MWI Veterinary Supply, Inc. and its wholly-owned subsidiaries, collectively referred to herein as "MWI." All intercompany transactions have been eliminated. We use the equity method of accounting for our investments in entities in which we have significant influence; generally this represents an ownership interest between 20% and 50%. Our share of income or loss from these investments is reported as increases or decreases in the respective investment with a corresponding amount reported as other income.

         Basis of Accounting and Use of Estimates—The accompanying consolidated financial statements have been prepared on the accrual basis of accounting using accounting principles generally accepted in the United States. In preparing financial information, we use certain estimates and assumptions that may affect the reported amounts and disclosures. Some of these estimates require difficult, subjective and complex judgments about matters that are inherently uncertain. As a result, actual results could differ from these estimates. Estimates are used when accounting for sales returns, allowance for doubtful accounts, customer incentives, vendor rebates, inventories, goodwill and intangible assets, income taxes, impairment of long-lived assets, depreciation and amortization, employee benefits, unearned income and contingencies. The estimates of fair value of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date and reported amounts of revenue and expenses for the periods are based on assumptions that we believe to be reasonable.

         Segment Information—We are a distributor of animal health products to veterinarians. These operations are within a single reporting segment and are primarily located within the United States.

         Revenue Recognition—We sell products we source from vendors to our customers through either a "buy/sell" transaction or an agency relationship with our vendors. In a "buy/sell" transaction, we purchase or take inventory of products from the vendor. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We recognize revenue from "buy/sell" transactions as product sales when the product is delivered to the customer. We accept product returns

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

2. Summary of Significant Accounting Policies (Continued)

from our customers. We estimate returns based on historical experience and recognize these estimated returns as a reduction of product sales. Product returns have not been significant to our financial statements. We record revenues net of sales tax. In an agency relationship, we generally do not purchase and take inventory of products from vendors. We receive an order from a customer, then transmit the order to the vendor, who picks, packs and ships the order to the customer. In some cases, the vendor invoices and collects payment from the customer, while in other cases we invoice and collect payment from the customer on behalf of the vendor. We receive a commission payment for soliciting the order from the customer and for providing other customer service activities. Commissions are recognized when the services upon which the commissions are based are complete. Gross billings from agency contracts were $245,045, $194,351 and $151,376 for the years ended September 30, 2008, 2007 and 2006, respectively, and generated commission revenue of $12,959, $9,632 and $7,782 for the years ended September 30, 2008, 2007 and 2006, respectively.

         Cost of Product Sales and Vendor Rebates—Cost of product sales consist of our inventory product cost, including shipping costs to and from our distribution centers. Vendor rebates are recorded based on the terms of the contracts or programs with each vendor. We receive quarterly, trimester, semi-annual and annual performance-based rebates from third-party vendors based upon attainment of certain sales and/or purchase goals. Sales rebates are classified in the accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are classified as a reduction of inventory until the product is sold. When the inventory is sold and purchase measures are achieved, purchase rebates are recognized as a reduction to cost of product sales.

        Historically, actual results have not significantly deviated from those determined using the estimates described above. We expect that our estimates in the future will continue to be reasonable as our rebates are based on specific vendor program goals and are principally recorded upon achievement of sales or purchase performance measures. Vendors may change rebate programs from year to year.

         Customer Incentives—Customer incentives are accrued based on the terms of the contracts with each customer. These incentive programs provide that the customer receive an incentive based on their product purchases or attainment of performance goals. Incentives are estimated based on the specific terms in each agreement, historical experience and product growth rates. Incentives are recognized as a reduction to product sales.

         Cash and Cash Equivalents—Cash equivalents consist primarily of highly liquid investments with a maturity of three months or less from the date of purchase. Our banking arrangements allow us to fund outstanding checks when presented to the financial institution for payment. At September 30, 2008 and 2007, we had net cash book overdrafts of $0 classified in accounts payable.

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

2. Summary of Significant Accounting Policies (Continued)

         Inventories—Inventories, consisting of pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies and nutritional products, are stated at the lower of cost (on a moving-average basis) or market.

         Property and Equipment—Property and equipment are stated at cost and depreciation is computed using the straight-line method over the estimated useful lives of the related assets as follows:

Machinery, furniture and equipment	3 to 7 years
Computer hardware and software	3 to 7 years
Leasehold improvements	Shorter of useful life or lease term

        The cost and accumulated depreciation of items sold or retired are removed from the property accounts and any resulting gain or loss is reflected in net income. Repairs and maintenance are expensed as incurred and renewals and improvements are capitalized.

        We periodically review long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No impairments were identified during the fiscal years ended September 30, 2008 and 2007.

         Goodwill and Intangible Assets—We recognize the excess purchase price over the fair value of net assets acquired and liabilities assumed in a business combination as goodwill on the consolidated balance sheet. Goodwill and non-amortizing intangible assets, consisting of trade names and patents, are tested for impairment at least annually. We perform an annual impairment test as of September 30 each year and we have concluded that there was no impairment at September 30, 2008 or 2007. These impairment tests will continue to be performed at least annually and more frequently if circumstances indicate a possible impairment. Amortizing intangible assets primarily include customer relationships and covenants not to compete and are amortized over their useful lives or contractual term which range from 1-20 years.

         Other Assets—Included in other assets are investments that consist of our equity method investment in one entity and two entities accounted for under the cost method of accounting. Other assets also consist of debt issuance costs that are being amortized over the life of the related debt.

         Earnings Per Common Share—Basic earnings per common share is calculated based on the weighted-average number of outstanding common shares during the applicable period. Diluted earnings per common share is based on the weighted-average number of outstanding common shares plus the weighted-average number of potential outstanding common shares. Potential common shares that would increase earnings per share amounts or decrease loss per share amounts are antidilutive and are, therefore, excluded from the earnings per common share computations. Earnings per common share is computed separately for each period presented.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

2. Summary of Significant Accounting Policies (Continued)

         Income Taxes—Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized to provide for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are measured using enacted tax rates in effect during the years in which the temporary differences are expected to reverse.

         Concentrations of Risk—Our financial instruments that are exposed to concentrations of credit risk consist primarily of our receivables. Our customers are geographically dispersed throughout the United States. We routinely assess the financial strength of our customers and review their credit history before extending credit. In addition, we establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

        Product sales to one customer were approximately 10% of our total product sales in 2008, 2007 and 2006. Product sales to another customer, a related party (See Note 13), were approximately 5% of our total product sales in the fiscal years 2008 and 2007, and 6% of our total product sales in the fiscal year 2006.

         Advertising—Advertising costs are expensed when incurred and are included as part of selling, general and administrative expenses. Advertising costs were $563, $392 and $257 in fiscal years 2008, 2007 and 2006, respectively.

         Stock-Based Compensation—Effective October 1, 2005, we adopted the provisions of SFAS No. 123 (Revised), Share Based Payment ("SFAS 123-R") for our share-based compensation plans using the modified prospective method.

        Under the modified prospective method, compensation expense includes the expense for all share-based awards granted prior to, but not yet vested as of October 1, 2005 excluding those options initially valued using the minimum value method. At October 1, 2005, all of our options to purchase common stock were either vested and exercisable or were initially valued using the minimum value method. Therefore, we have recognized no compensation expense for stock-based option awards in the fiscal years ended September 30, 2008, 2007 and 2006.

        We granted no common stock options under either plan during our fiscal years ended September 30, 2008, 2007 and 2006.

         Recently Issued and New Accounting Pronouncements—On October 1, 2007, we adopted the provisions of Financial Accounting Standards Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"). See Note 10 "Income Taxes".

        In September 2006, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value according to generally accepted accounting principles and expands disclosure requirements regarding fair value measurements. This statement emphasizes that fair value should be

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

2. Summary of Significant Accounting Policies (Continued)

determined based on assumptions market participants would use to price the asset or liability. SFAS 157 is effective for financial assets for our fiscal year beginning October 1, 2008. FASB Staff Position 157-2 ("FSP 157-2") delayed the implementation of SFAS 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 is effective for nonfinancial assets and liabilities for our fiscal year beginning October 1, 2009. The adoption of this statement is not expected to have a material impact on our consolidated financial statements.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities ("SFAS 159"). SFAS 159 permits entities to choose to measure certain financial assets and liabilities at fair value. The provisions of SFAS 159 are effective for our fiscal year beginning October 1, 2008. The adoption of this statement is not expected to have a material impact on our consolidated financial statements.

        In December 2007, the FASB issued SFAS No. 141 (Revised), Business Combinations ("SFAS 141-R"). SFAS 141-R retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred, among other items. The statement will apply prospectively to any business combinations occurring in our fiscal year beginning October 1, 2009.

        In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51 ("SFAS 160"). This statement amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Noncontrolling interests shall be reclassified to equity, consolidated net income shall be adjusted to include net income attributable to noncontrolling interests and consolidated comprehensive income shall be adjusted to include comprehensive income attributable to the noncontrolling interests. SFAS 160 is effective for our fiscal year beginning October 1, 2009. The adoption of this statement is not expected to have a material impact on our consolidated financial statements.

        In April 2008, the FASB issued FASB Staff Position FAS 142-3 ("FSP 142-3"), which amends the list of factors an entity should consider in determining the useful life of recognized intangible assets under FASB Statement 142. FSP 142-3 is effective for our fiscal year beginning October 1, 2009. We are currently evaluating the expected impact, if any, that FSP 142-3 will have on our consolidated financial statements.

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

3. Business Acquisitions

        In June 2007, we acquired substantially all of the assets of Securos Inc. and International Veterinary Distribution Network, Inc. (collectively "Securos") for approximately $5,147 consisting of $4,661 in cash (including direct acquisition costs of approximately $177) and 13,058 shares of restricted common stock valued at the time of issuance at approximately $486. The purchase price was reduced by $50 as a result of a post closing working capital adjustment. Based in Charlton, Massachusetts, Securos was a provider of veterinary orthopedic products in the United States and select countries abroad and sourced private label products in the categories of veterinary surgical consumables and equipment and handheld instruments.

        In October 2007, we acquired substantially all of the assets of Tri V Services, Inc. ("Tri V") for approximately $5,111, consisting of $4,606 in cash (including direct acquisition costs of approximately $106) and 12,692 shares of restricted common stock valued at the time of the issuance at approximately $505. The purchase price was reduced by $8 as a result of a post closing working capital adjustment. Based near Detroit, Michigan, Tri V was a distributor with an 11-year history of providing animal health products to approximately 850 veterinary practices, with a particular focus on emergency clinics and ophthalmology specialists.

        In July 2008, we acquired substantially all of the assets of AAHA Services Corporation, operating as AAHA MARKETLink ("AAHA MARKETLink") for approximately $8,676, net of cash acquired of $1,320 (including direct acquisition costs of approximately $212). Based near Denver, Colorado, AAHA MARKETLink was a distributor of animal health products to members of the American Animal Hospital Association.

        The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of each acquisition, as adjusted during the allocation period as defined in SFAS No. 141, Business Combinations. These purchase price allocations are based on a combination of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

3. Business Acquisitions (Continued)

valuations and internal analyses. The impact of our acquisitions was not material to our consolidated financial statements.

	2008		2007
Receivables	$	5,705	$	352
Inventories		237		746
Property and equipment		5		286
Intangibles		6,569		2,947
Goodwill		4,763		1,403
Other assets		12		39
Total assets acquired		17,291		5,773
Accounts payable		3,562		611
Other liabilities		—		15
Total liabilities assumed		3,562		626
Net assets acquired	$	13,729	$	5,147

        The amount recorded in goodwill for all acquisitions is expected to be deductible for tax purposes over 15 years.

4. Receivables

        Receivables consist of the following at September 30:

	2008			2007
Trade	$	118,227		$	100,422
Vendor rebates and programs		11,200			11,725
Interest		1			61
Related party		14			342
		129,442			112,550
Allowance for doubtful accounts		(878	)		(874	)
	$	128,564		$	111,676

        Approximately 10% of our trade receivables resulted from transactions with a single customer as of September 30, 2008 and 2007.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

5. Property and Equipment

        Property and equipment consists of the following at September 30:

	2008			2007
Land	$	20		$	20
Leasehold improvements		3,094			2,257
Machinery, furniture and equipment		11,587			10,744
Computer hardware and software		3,428			3,825
Construction in progress		1,626			1,586
		19,755			18,432
Accumulated depreciation and amortization		(10,068	)		(9,226	)
	$	9,687		$	9,206

        We recorded depreciation expense of $2,441, $2,110 and $1,744 for the years ended September 30, 2008, 2007 and 2006, respectively.

6. Intangibles

        Intangible assets consists of the following at September 30:

		Useful Lives	2008			2007
Amortizing:
	Customer relationships	9-20 years	$	9,076		$	3,186
	Covenants not to compete	1-5 years		686			356
	Other	3-5 years		257			168
				10,019			3,710
Accumulated amortization				(1,346	)		(698	)
				8,673			3,012
Non-Amortizing:
	Trade names and patents			2,272			2,002
			$	10,945		$	5,014

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

6. Intangibles (Continued)

        We recorded amortization expense of $648, $325 and $229 for the years ended September 30, 2008, 2007 and 2006, respectively. Estimated amortization expense related to intangible assets as of September 30, 2008 is as follows:

	Amount
2009	$	829
2010		803
2011		786
2012		760
2013		675
Thereafter		4,820
	$	8,673

7. Line-of-Credit and Long-Term Debt

        Line-of-Credit—On December 13, 2006, MWI Co., (our wholly-owned subsidiary) as borrower, entered into an unsecured credit agreement with us and Memorial Pet Care, as guarantors, and Bank of America, N.A. and Wells Fargo Bank, N.A., (collectively, the "lenders") for the provision of a revolving credit facility (the "facility"). The facility allows for borrowings in the aggregate of $70,000, with the right to request an increase in the commitment of the lenders to $100,000. The facility has a maturity date of December 1, 2011 and a variable interest rate equal to the Daily LIBOR Floating Rate or the LIBOR 1-month fixed rate plus a margin ranging from 0.7% to 1.25% or the Prime Rate (at our option). The lenders also receive an unused line fee and letter of credit fee equal to 0.125% of the unused amount of the facility. Our outstanding balance on the facility at September 30, 2008 was $0.

        The line-of-credit contains certain financial covenants as well as other restrictive covenants. As of September 30, 2008, we were in compliance with all covenants. The facility allows for the issuance of up to $10,000 in letters of credit. The letters of credit typically act as a guarantee of payment to certain third-parties in accordance with specified terms and conditions. We had four letters of credit totaling $400 at September 30, 2008 and eleven letters of credit totaling $940 at September 30, 2007. There were no outstanding borrowings on these letters of credit at either September 30, 2008 or 2007.

        Long-Term Debt—In January 2005, we issued a promissory note in the aggregate principal amount of $487 in partial consideration for the purchase of substantially all the assets of Vetpo. The note bears interest at the Prime Rate (5.0% at September 30, 2008), payable quarterly. The principal of the note is payable in five equal annual installments, the first of which was due on January 1, 2006. The balance on this promissory note was $194 and $292 at September 30, 2008 and 2007, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

8. Common Stock and Stock-Based Awards

2002 Stock Plan

        We have a 2002 Stock Plan (the "2002 Plan") to provide our directors, executives and other key employees with additional incentives by allowing them to acquire an ownership interest in us and, as a result, encouraging them to contribute to our success. At September 30, 2008 and 2007, we had 417,798 and 426,094 shares, respectively, of our common stock reserved for issuance under the 2002 Plan. The options granted under the 2002 Plan are nonqualified stock options that have an exercise price per share equal to fair market value of the common stock at the time of grant. The term of each option is determined by our board of directors or by a designated committee of the board. The term of any option may not exceed ten years from the date of grant. In 2008, no options were granted, 8,296 options were exercised and no options were forfeited under the 2002 Plan. In 2007, no options were granted, 81,594 options were exercised and no options were forfeited.

2005 Stock Plan

        In July 2005, we adopted the 2005 Stock-Based Award and Incentive Compensation Plan (the "2005 Plan"). Under the 2005 Plan as amended, we may offer restricted shares of our common stock and grant options to purchase shares of our common stock to selected employees and non-employee directors. The purpose of the 2005 Plan is to promote our long-term financial success by attracting, retaining and rewarding eligible participants. At September 30, 2008 and 2007 we had 1,089,706 and 1,131,128 shares, respectively, of our common stock available for issuance under the 2005 Plan.

        The 2005 Plan permits us to grant stock options (both incentive stock options and non-qualified stock options), restricted stock and deferred stock. The compensation committee will determine the number and type of stock-based awards to each participant, the exercise price of each award, the duration of the award (not to exceed ten years), vesting provisions and all other terms and conditions of such award in individual award agreements. The 2005 Plan provides that upon termination of employment with us, unless determined otherwise by the compensation committee at the time options are granted, the exercise period for vested awards will generally be limited, provided that vested awards will be canceled immediately upon a termination for cause or voluntary termination. The 2005 Plan provides for the cancellation of all unvested awards upon termination of employment with us, unless determined otherwise by the compensation committee at the time awards are granted.

        During the fourth quarter of 2005, we granted 135,103 nonqualified stock options with a weighted average exercise price of $18.43 and a term of ten years.

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

8. Common Stock and Stock-Based Awards (Continued)

        A summary of activity under the 2002 and 2005 Plans are as follows:

	2008					2007					2006
	Number of Shares			Weighted average exercise price		Number of Shares			Weighted average exercise price		Number of Shares			Weighted average exercise price
Outstanding at beginning of year		441,502		$	3.27		540,895		$	3.32		580,335		$	4.37
Granted		—			—		—			—		—			—
Exercised		(19,618	)		11.11		(98,533	)		3.42		(31,600	)		18.88
Cancelled or expired		(986	)		17.00		(860	)		17.00		(7,840	)		18.64
Outstanding at end of year		420,898		$	2.87		441,502		$	3.27		540,895		$	3.32
Exercisable at end of year		364,490		$	3.28		328,686		$	4.33		371,671		$	4.75
Expected to vest		56,408		$	0.18		112,816		$	0.18		169,224		$	0.18

        The intrinsic value of the shares outstanding and exercisable as of September 30, 2008 was $13,124.

	Outstanding options						Exercisable options
Range of exercise prices	Number of Shares		Weighted average remaining contractual life (in years)		Weighted average exercise price		Number of Shares		Weighted average exercise price
$  0.18 - $16.99		357,358		3.7	$	0.18		300,950	$	0.18
$17.00 - $19.99		52,080		6.8	$	17.00		52,080	$	17.00
$20.00 - $23.06		11,460		7.0	$	22.44		11,460	$	22.44

        During the fiscal years ended September 30, 2008 and 2007, we made stock grants of 40,100 and 15,000 shares, respectively.

2008 Employee Stock Purchase Plan

        In February 2008, we approved the 2008 Employee Stock Purchase Plan (the "ESPP"). The plan allows substantially all employees to purchase shares of our common stock at 95% of the fair market value on the date of purchase. The purchase date is the last trading date of the purchase period, which begins in March, June, September and December. Employees accumulate amounts through payroll deductions during the purchase period of between 1% and 10% but no more than $20,000 annually. An employee is allowed to purchase a maximum of 200 shares per purchase period. In August 2008, we issued 1,571 shares of our common stock under the ESPP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

9. Computation Of Earnings Per Common Share (In thousands, except per share data)

	2008				2007				2006
	Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income	$	19,917	$	19,917	$	16,875	$	16,875	$	13,836	$	13,836
Weighted average common shares outstanding		12,053		12,053		11,764		11,764		10,773		10,773
Effect of diluted securities Stock options and restricted stock				248				280				299
Weighted average shares outstanding				12,301				12,044				11,072
Earnings per share	$	1.65	$	1.62	$	1.43	$	1.40	$	1.28	$	1.25
Anti-dilutive shares excluded from calculation				—				—				—

10. Income Taxes

        The components of the U.S. Federal and state income tax expense consist of the following:

		2008		2007			2006
Current payable:
	U.S. Federal	$	10,752	$	9,367		$	7,726
	State		1,964		895			835
			12,716		10,262			8,561
Deferred:
	U.S. Federal		236		(42	)		(139	)
	State		38		(5	)		(26	)
			274		(47	)		(165	)
		$	12,990	$	10,215		$	8,396

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

10. Income Taxes (Continued)

        Our deferred tax assets and liabilities consist of the following at September 30:

		2008			2007
Deferred tax assets:
	Investments	$	144		$	144
	Allowance for doubtful accounts		339			329
	Inventories		341			278
	Revenue recognition		185			83
	Lease expense		183			153
	Federal benefit of state taxes		56			—
	Other		93			81
Total deferred tax assets			1,341			1,068
Deferred tax liabilities:
	Property and equipment		(895	)		(618	)
	Prepaid expenses		(269	)		(359	)
	Other		(119	)		(47	)
Total deferred tax liabilities			(1,283	)		(1,024	)
Net deferred tax assets		$	58		$	44

        We believe realization of these deferred assets is more likely than not. Accordingly, no valuation allowance has been recorded.

        Income tax expense differed from income taxes at the U.S. federal statutory tax rate for all periods presented as follows:

	2008			2007			2006
Taxes computed at statutory rate		35.0	%		35.0	%		35.0	%
State income taxes (net of federal income tax benefit)		3.8			2.0			2.0
Other		0.7			0.7			0.8
		39.5	%		37.7	%		37.8	%

        The increase in the effective tax rate for the year ended September 30, 2008 as compared to the year ended September 30, 2007 was primarily attributable to the change in our estimates related to state taxes as a result of our adoption of FIN 48.

        In 2006, the FASB issued FIN 48, which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that management evaluate its tax positions for all open tax years to determine if the position is more likely than not to be sustained upon examination by taxing authorities having full

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

10. Income Taxes (Continued)

knowledge of all relevant information. We adopted the provisions of FIN 48 as of October 1, 2007, the beginning of our 2008 fiscal year. As a result of the adoption of FIN 48, we reported a cumulative effect adjustment of $257 which reduced our retained earnings.

        On October 1, 2007, we had $449 of unrecognized tax benefits, of which $292 would impact our effective rate, if recognized. Our policy for classifying interest and penalties associated with unrecognized tax benefits is to include such items in income tax expense. As of the date of adoption, gross interest and penalties associated with unrecognized tax benefits were $122 and $38, respectively.

        A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Unrecognized tax benefits—October 1, 2007	$	449
Gross increases related to prior period tax positions		—
Gross decreases related to prior period tax positions		(8	)
Gross increases related to current period tax positions		185
Settlements		(103	)
Unrecognized tax benefits—September 30, 2008	$	523

        For the year ended September 30, 2008 our income tax expense included $40 of tax-related interest and penalties. Of the $523 unrecognized tax benefits ending balance, $220 would impact our effective rate, if recognized.

        We file income tax returns in the U.S. federal jurisdiction and other various state and local jurisdictions. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our liability for uncertain tax benefits reflects the most probable outcome. We adjust the liability, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position would usually require the use of cash. The resolution of a matter would be recognized as an adjustment to our income tax expense and our effective tax rate in the period of resolution. We have begun the process to enter into voluntary disclosure agreements with certain state jurisdictions and it is reasonably possible that these will be settled within the next twelve months, which would decrease the liability for uncertain tax benefits by approximately $338 as a result of the payment of additional tax expected to be due. The gross increases in the current period relates to a Form 3115 Application for Change in Accounting Method filed with the Internal Revenue Service. We filed an advance consent request for a non-automatic account method change for tax purposes for which we had not received approval prior to our reporting period end. The method change will make revenue recognition for tax purposes the same as revenue recognized for book purposes. We expect resolution within the next twelve months which would decrease the liability for uncertain tax benefits by approximately $185. With few exceptions, we are no

69

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

10. Income Taxes (Continued)

longer subject to income tax examination for years before 2003 in the U.S. and significant state and local jurisdictions.

11. Statements of Cash Flows—Supplemental and Noncash Disclosures

	2008		2007		2006
Supplemental Disclosures
Cash paid for interest	$	189	$	531	$	1,785
Cash paid for income taxes		12,865		8,842		9,138
Noncash Activities
Issuance of restricted common stock for asset acquisition		505		486		995
Equipment acquisitions financed with accounts payable		580		254		132

12. Commitments and Contingencies

        We have operating leases for office and distribution center space and equipment for varying periods. Certain leases have renewal options and require contingent payments for increases, including executory costs, property taxes, insurance and certain other costs in excess of a base year amount. Total rent expense for the years ended September 30, 2008, 2007 and 2006 were $3,629, $3,048 and $2,377, respectively.

        The aggregate future noncancelable minimum rental payments on operating leases at September 30, 2008 are as follows:

2009	$	2,958
2010		2,829
2011		2,375
2012		2,129
2013		1,607
Thereafter		3,620
	$	15,518

13. Related Party Transactions

        MWI Co., our subsidiary, holds a 50% membership interest in Feeders' Advantage that is accounted for as an investment using the equity method. Sales of products to Feeders' Advantage, which are at our cost, were $39,443, $36,116 and $34,121 in 2008, 2007 and 2006, respectively. MWI Co. charged Feeders' Advantage for certain operating and administrative services of $562, $550

70

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

13. Related Party Transactions (Continued)

and $591 in 2008, 2007 and 2006, respectively. Our President and Chief Executive Officer and a member of our Board of Directors are each members of the board of managers of Feeders' Advantage.

14. Employee Benefit Plans

        We have a multi-employer defined contribution profit sharing plan with a 401(k) arrangement. To become eligible for the profit sharing portion of the plan, an employee must complete two years of service and attain the age of twenty-one. Participation is automatic beginning the following January or July. To become eligible for the 401(k) portion of the plan, the employee must complete three-months of service and attain the age of twenty-one.

        Both portions of the plan allow for employer contributions. We are required to match 50% of the employee's contribution to the 401(k) portion of the plan up to 6% of the employee's salary. Our matching contributions for the 401(k) portion of the plan were $911, $794 and $633 in 2008, 2007 and 2006, respectively. Employee's contributions are fully vested immediately while employer contributions vest over a five-year period.

        Contributions to the profit sharing portion of the Plans are discretionary, ranging from 0% to 3%, and are approved by our Board of Directors. Total contributions for 2008, 2007 and 2006 were $956, $817 and $677, respectively. Employer contributions are fully vested immediately.

15. Financial Instruments

Financial Instruments—The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, Disclosures About Fair Value of Financial Instruments. The estimated fair value amounts have been determined by us, using available market information and appropriate valuation methodologies. The carrying amounts of cash and cash equivalents, receivables, investments, accounts payable, long-term debt and the line-of-credit are a reasonable estimate of their fair value based on their short-term nature.

71

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

16. Quarterly Financial Data (Unaudited)

	Three-Months Ended
	Dec. 31,		Mar. 31,		June 30,		Sept. 30,		Year
	(Dollars and shares in thousands, except per share data)(1)
2008
Total revenues	$	203,361	$	194,960	$	208,277	$	224,766	$	831,364
Gross profit		29,785		28,268		30,307		31,192		119,552
Operating income		7,735		7,112		8,748		8,756		32,351
Net income		4,700		4,378		5,418		5,421		19,917
Earnings per common share—basic	$	0.39	$	0.36	$	0.45	$	0.45	$	1.65
Earnings per common share—diluted	$	0.38	$	0.36	$	0.44	$	0.44	$	1.62
Weighted average common shares outstanding used in the basic earnings per share calculation		12,046		12,050		12,051		12,063		12,053
Weighted average common shares outstanding used in the diluted earnings per share calculation		12,296		12,298		12,298		12,311		12,301
2007
Total revenues	$	161,045	$	175,053	$	183,853	$	190,154	$	710,105
Gross profit		25,749		24,422		25,462		26,716		102,349
Operating income		7,486		6,014		6,557		6,653		26,710
Net income		4,604		3,688		4,260		4,323		16,875
Earnings per common share—basic	$	0.40	$	0.32	$	0.36	$	0.36	$	1.43
Earnings per common share—diluted	$	0.39	$	0.31	$	0.35	$	0.35	$	1.40
Weighted average common shares outstanding used in the basic earnings per share calculation		11,559		11,566		11,904		12,020		11,764
Weighted average common shares outstanding used in the diluted earnings per share calculation		11,860		11,863		12,168		12,276		12,044

(1)

The sums of the quarterly net income and earnings per share amounts do not agree to the year-to-date earnings per common share amount as a result of rounding.

72

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

        None.

Item 9A.    Controls and Procedures.

        Our management, including the Chief Executive Officer and the Chief Financial Officer, have evaluated the effectiveness of the our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of September 30, 2008. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our Company's disclosure controls and procedures, including the accumulation and communication of disclosures to the Company's Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure, are effective to provide reasonable assurance that information required to be disclosed by the us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms.

        Management's annual report on internal control over financial reporting and the attestation report of our independent registered public accounting firm are set forth below on this Annual Report on Form 10-K.

        There were no changes in our internal controls over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

        The management of MWI Veterinary Supply, Inc. and subsidiaries (the "Company") is responsible for establishing and maintaining effective internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f)).

        There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.

        Management assessed the effectiveness of the Company's internal control over financial reporting as of September 30, 2008. This assessment was based on criteria for effective internal control over financial reporting described in "Internal Control—Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of September 30, 2008, we maintained effective internal control over financial reporting.

        The effectiveness of the Company's internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Their report is included herein.

73

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
MWI Veterinary Supply, Inc.
Meridian, Idaho

        We have audited the internal control over financial reporting of MWI Veterinary Supply, Inc. and subsidiaries (the "Company") as of September 30, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained, in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"). A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2008, based on the criteria established in Internal Control—

74

Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and consolidated financial statement schedule as of and for the year ended September 30, 2008, of the Company, and our report dated November 21, 2008 expressed an unqualified opinion on those consolidated financial statements and consolidated financial statement schedule and included an explanatory paragraph regarding the Company's adoption of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109.

/s/ DELOITTE & TOUCHE LLP
Boise, Idaho
November 21, 2008

75

Item 9B.    Other Information.

        None.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance of the Registrant.

        The information regarding directors and nominees for directors of the Company, including identification of the audit committee and audit committee financial expert, is presented under the headings "Corporate Governance—Committees of the Board of Directors," and "Election of Directors—Nominees For Directors" in the Company's definitive proxy statement for use in connection with the 2009 Annual Meeting of Stockholders (the "Proxy Statement") to be filed within 120 days after the end of the Company's fiscal year ended September 30, 2008. The information contained under these headings is incorporated herein by reference. Information regarding the executive officers of the Company is included in this Annual Report on Form 10-K under Item 1 of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.

        The Company has adopted a code of conduct that applies to its Chief Executive Officer and Chief Financial Officer. This code of conduct is available on the Company's Web site at www.mwivet.com. If the Company makes any amendments to this code other than technical, administrative or other non-substantive amendments, or grants any waivers, including implicit waivers, from a provision of this code to the Company's Chief Executive Officer or Chief Financial Officer, the Company will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a report on Form 8-K filed with the SEC.

Item 11.    Executive Compensation.

        Information concerning executive compensation is presented under the headings "Executive Compensation" in the Proxy Statement. Information concerning director compensation is presented under the heading "Corporate Governance—Director Compensation" in the Proxy Statement. The information contained under these headings is incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

        Information with respect to security ownership of certain beneficial owners and management is set forth under the heading "Security Ownership of Certain Beneficial Owners and Directors and Officers" in the Proxy Statement. Information with respect to equity compensation plans is set forth under the heading "Equity Compensation Plan Information" in this Annual Report on Form 10-K under Item 5 of Part II. The information contained under these headings is incorporated herein by reference.

Equity Compensation Plan Information

        The following table provides information as of September 30, 2008 about the common stock that may be issued under all of our existing equity compensation plans, including the 2002 Stock Plan and

76

2005 Stock-Based Incentive Compensation Plans. Both of these plans have been approved by our stockholders.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		420,898	$	2.87		1,086,606
Equity compensation plans not approved by security holders		—		—		—
Total		420,898	$	2.87		1,086,606

Item 13.    Certain Relationships, Related Transactions and Director Independence.

        Information concerning related transactions is presented under the heading "Certain Relationships, Related Transactions and Director Independence" in the Proxy Statement. The information contained under this heading is incorporated herein by reference.

Item 14.    Principal Accountant Fees and Services.

        Information concerning principal accountant fees and services is presented under the heading "Ratification of Appointment of Independent Registered Public Accountant" in the Proxy Statement. The information contained under this heading is incorporated herein by reference.

77

PART IV

Item 15.    Exhibits and Financial Statement Schedules.

(a)

The following documents are filed as part of this report:

1)

Consolidated Financial Statements: See Index to Consolidated Financial Statements at Item 8 on page 50 of this report.

2)

Financial Statement Schedule: Schedule II—Consolidated Valuation and Qualifying Accounts

3)

Exhibits are incorporated herein by reference or are filed with this report as set forth in the Index to Exhibits on pages 80 through 82 hereof.

MWI VETERINARY SUPPLY, INC.
SCHEDULE II—CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)

		Balance at Beginning of Period		Charged (Credited) to Costs and Expenses		Deductions/ Write-offs			Balance at End of Period
Allowance for Doubtful Accounts
	Year ended September 30, 2006	$	1,181	$	214	$	(241	)	$	1,154
	Year ended September 30, 2007		1,154		208		(488	)		874
	Year ended September 30, 2008		874		454		(450	)		878

78

Signatures

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MWI VETERINARY SUPPLY, INC.
	By:	/s/ MARY PATRICIA B. THOMPSON Mary Patricia B. Thompson (Senior Vice President of Finance and Administration, Chief Financial Officer)
Date: November 21, 2008

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of November 21, 2008.

/s/ JAMES F. CLEARY, JR. James F. Cleary, Jr. Director, President and Chief Executive Officer (Principal Executive Officer)	/s/ MARY PATRICIA B. THOMPSON Mary Patricia B. Thompson Senior Vice President of Finance and Administration, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
/s/ KEITH E. ALESSI Keith E. Alessi (Director)	/s/ BRUCE C. BRUCKMANN Bruce C. Bruckmann (Director)
/s/ JOHN F. MCNAMARA John F. McNamara (Director)	/s/ A. CRAIG OLSON A. Craig Olson (Director)
/s/ ROBERT N. REBHOLTZ Robert N. Rebholtz (Director)	/s/ WILLIAM J. ROBISON William J. Robison (Director)

79

Index to Exhibits

Filed with the Annual Report
on Form 10-K for the
Year Ended September 30, 2008

Number		Description
	2.1	Asset Purchase Agreement among MWI Veterinary Supply Co., AAHA Services Corporation and American Animal Hospital Association effective July 1, 2008
	3.1	Form of Amended and Restated Certificate of Incorporation of MWI Veterinary Supply, Inc., incorporated herein by reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q, filed August 1, 2007.
	3.2	Form of Amended and Restated Bylaws of MWI Veterinary Supply, Inc., incorporated herein by reference to Exhibit 3.2 of the Company's Quarterly Report on Form 10-Q, filed August 1, 2007.
	4.1	Form of MWI Veterinary Supply, Inc. common stock certificate, incorporated herein by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).
	4.2	Registration Rights Agreement dated as of June 18, 2002 by and between MWI Holdings, Inc., Bruckmann, Rosser, Sherrill & Co. II, L.P., Agri Beef Co. and the other parties thereto, incorporated herein by reference to Exhibit 4.3 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).
	4.3	Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and James Cleary, incorporated herein by reference to Exhibit 4.4 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	4.4	Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and Jeff Danielson, incorporated herein by reference to Exhibit 4.5 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	4.5	Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and James Hay, incorporated herein by reference to Exhibit 4.6 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	4.6	Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and James Ross, incorporated herein by reference to Exhibit 4.7 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	4.7	Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and Mary Pat Thompson, incorporated herein by reference to Exhibit 4.8 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	4.8	First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and James F. Cleary, Jr., incorporated herein by reference to Exhibit 4.9 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*

80

Number		Description
	4.9	First Amendment to Executive Stock Agreement dated as of May 5, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and Jeffrey J. Danielson, incorporated herein by reference to Exhibit 4.10 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	4.10	First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and James S. Hay, incorporated herein by reference to Exhibit 4.11 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	4.11	First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and James M. Ross, incorporated herein by reference to Exhibit 4.12 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	4.12	First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and Mary Patricia B. Thompson, incorporated herein by reference to Exhibit 4.13 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	10.1	2002 Stock Option Plan, incorporated herein by reference to Exhibit 10.11 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*
	10.2	Lease Agreement dated June 20, 2003 between Rafanelli and Nahas and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10.13 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).
	10.3	Ethical Distribution Agreement dated as of January 1, 2004 by and between Fort Dodge Animal Health and MWI Veterinary Supply Co., as amended, incorporated herein by reference to Exhibit 10.16 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).
	10.4	MWI Veterinary Supply, Inc. 2005 Stock-Based Incentive Compensation Plan, adopted July 27, 2005, as Amended and Restated, effective July 24, 2006, incorporated herein by reference to Exhibit 10.21 of the Company's Current Report on Form 8-K, filed February 8, 2007.*
	10.5	Form of Option Letter, incorporated herein by reference to Exhibit 10.22 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).
	10.6	First Amendment to 2007 - 2008 Merial Independent Sales Agent Agreement effective as of January 1, 2008 by and between Merial Limited and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q, filed May 1, 2008.
	10.7	Agreement for Product Purchases dated as of December 1, 2006 by and between MWI Veterinary Supply Co. and Medical Management International, Inc., dba Banfield, The Pet Hospital®, incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q, filed February 5, 2007.†

81

Number		Description
	10.8	Agreement for Logistics Services dated as of December 1, 2006 by and between MWI Veterinary Supply Co. and Medical Management International, Inc., dba Banfield, The Pet Hospital®, incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q, filed February 5, 2007.†
	10.9	Credit Agreement dated as of December 13, 2006 by and between MWI Veterinary Supply Co., as Borrower, MWI Veterinary Supply, Inc. and Memorial Pet Care, Inc. as Guarantors, Bank of America, N.A. and Wells Fargo Bank, N.A., as Lenders, incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q, filed February 5, 2007.
	10.10	Livestock Products Agreement effective as of December 22, 2007 by and between Pfizer Inc. and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q, filed May 1, 2008.†
	10.11	Pfizer Equine Products Marketing Agreement dated as of January 1, 2007 by and between Pfizer Inc. and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10. 3 of the Company's Quarterly Report on Form 10-Q, filed August 1, 2007.†
	10.12	Rimadyl/Clavamox Distribution Agreement dated as of March 15, 2007 by and between Pfizer Inc. and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q, filed August 1, 2007.†
	10.13	MWI Veterinary Supply, Inc. 2008 Employee Stock Purchase Plan, incorporated herein by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q, filed May 1, 2008.
	10.14	License Agreement dated and effective July 1, 2008 between MWI Veterinary Supply Co. and American Animal Hospital Association.†
	10.15	Sponsorship Letter Agreement dated June 30, 2008 between American Animal Hospital Association and MWI Veterinary Supply Co.
	10.16	Companion Animal AAHA MARKETLink Management Agreement dated and effective as of July 1, 2008 between Pfizer, Inc. and MWI Veterinary Supply Co.†
	21.1	Subsidiaries of MWI Veterinary Supply, Inc.
	23	Consent of Deloitte & Touche LLP
	31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*

Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto.

†

Certain portions of the exhibit have been omitted pursuant to a confidential treatment request submitted to and approved by the SEC.

82

EX-2.1

Exhibit 2.1

ASSET PURCHASE AGREEMENT

BETWEEN

MWI VETERINARY SUPPLY CO.

AS BUYER

AND

AAHA SERVICES CORPORATION, AND

AMERICAN ANIMAL HOSPITAL ASSOCIATION

Effective July 1, 2008

Boise  •  Ketchum  •  Pocatello  •  Reno

www.hteh.com

TABLE OF CONTENTS

				Page
Article 1 PARTIES				1
1.1	Buyer			1
1.2	Servco			1
1.3	AAHA			1
1.4	Successors and Assigns			1
Article 2 PURCHASE AND SALE				1
2.1	Transfer and Assumption			1
2.2	Possession			1
2.3	Purchase Price			2
2.4	Form of Payment			2
	2.4.1	Cash at Closing		2
	2.4.2	Escrow Amount		2
	2.4.3	Working Capital Adjustment to Purchase Price at Closing		2
	2.4.4	Working Capital Adjustment Post Closing		2
2.5	Escrow Agreement			3
2.6	Payment of Taxes			3
2.7	Allocation of Purchase Price			3
2.8	Conveyance of Title			3
Article 3 ASSETS AND LIABILITIES INCLUDED IN AND EXCLUDED FROM SALE				3
3.1	Transfer of Assets			3
	3.1.1		Equipment, Furniture and Fixtures	3
	3.1.2		Personal Property Leases	4
	3.1.3		Contracts	4
	3.1.4		Prepaid Expenses	4
	3.1.5		Cash	4
	3.1.6		Accounts Receivables	4
	3.1.7		Business Records	4
	3.1.8		Intellectual Property	4
	3.1.9		Communication Addresses	4
	3.1.10		Computer Software and Databases	5
	3.1.11		Proprietary Information	5
	3.1.12		Goodwill	5
	3.1.13		Rights Arising from Assumed Obligations	5
	3.1.14		Tangible and Intangible Personal Property	5
3.2	Assumption of Liabilities			5
	3.2.1		Account and Trade Payables	5
	3.2.2		Purchase Orders	5
	3.2.3		Personal Property Leases and Contracts	6
	3.2.4		Prepaid Income	6
	3.2.5		Obligations Arising From Transferred Assets	6

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	3.2.6	Scheduled Liabilities	6
3.3	Excluded Assets		6
	3.3.1	Licenses and Permits	6
	3.3.2	Personal Use Property	6
	3.3.3	Insurance	6
	3.3.4	Tax Refunds	6
3.4	Excluded Liabilities		6
	3.4.1	Notes Payable	7
	3.4.2	Distributions and Dividends.	7
	3.4.3	Trade Payables	7
	3.4.4	Rent Payable	7
	3.4.5	Employment Liabilities	7
	3.4.6	Employee Benefit Plans	7
	3.4.7	Insurance	7
	3.4.8	Workers’ Compensation	7
	3.4.9	Severance	7
	3.4.10	Sales Representatives	7
	3.4.11	Taxes and Tax Compliance	8
	3.4.12	Transaction Taxes	8
	3.4.13	Losses	8
	3.4.14	Litigation and Judgments	8
	3.4.15	Standards Compliance	8
	3.4.16	Business Records Compliance	8
	3.4.17	Controlled Substance Compliance	8
	3.4.18	Pharmaceutical Product Compliance	8
	3.4.19	Pedigree Laws	8
	3.4.20	Errors and Omissions	9
	3.4.21	Unscheduled Liabilities	9
Article 4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SERVCO AND AAHA			9
4.1	Financial Statements		9
4.2	Absence of Undisclosed Liabilities		9
4.3	No Default		9
4.4	Taxes		10
	4.4.1	Timely Filing of Tax Returns	10
	4.4.2	Preparation of Tax Returns and Payment of Taxes	10
	4.4.3	Tax Lien	10
	4.4.4	Withholding Taxes	10
	4.4.5	Audit, Administrative and Court Proceedings	10
	4.4.6	Availability of Tax Returns	10
	4.4.7	Tax Sharing Agreements	11
	4.4.8	Liability for Others	11
4.5	Clear Title to Assets		11
4.6	Condition of Tangible Assets		11
4.7	Vendor List and Orders		11
4.8	Receivables		11
4.9	Insurance		12
4.10	Contracts and Personal Property Leases		12

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4.11	Business Records			12
4.12	Intellectual Property			12
4.13	Computer Software and Databases			12
4.14	Proprietary Information			12
4.15	PVP’s Retention of Assets			12
4.16	Employees			13
4.17	Employment Obligations			13
4.18	No Employee Benefit Plans Unless Disclosed			13
4.19	Controlled Substance Compliance			13
	4.19.1		No Claims, Notices, Investigation of Violations	13
	4.19.2		Controlled Substance Definition	14
	4.19.3		Controlled Substance Laws Definition	14
4.20	Pharmaceutical Products Compliance			14
	4.20.1		No Claims, Notices, Investigation of Violations	14
	4.20.2		Pharmaceutical Products	14
4.21	Certain Disclosures			15
4.22	Operation Of Servco			15
4.23	Confidential Information			16
4.24	Compliance with Law			16
4.25	Trade Payables			16
4.26	Litigation Or Claims			16
4.27	Product Liability			17
4.28	Organization, Good Standing and Qualification of Servco			17
4.29	Authority To Contract of Servco			17
4.30	No Limit On Authority of Servco			17
4.31	Board of Director and Shareholder Approval			17
4.32	Organization, Good Standing and Qualification of AAHA			18
4.33	Authority To Contract of AAHA			18
4.34	No Limit On Authority of AAHA			18
4.35	Brokers or Finders			18
4.36	Material Misstatement or Omissions			18
4.37	Representations and Warranties Are Independent of Due Diligence			18
Article 5 REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER				19
5.1	Organization, Good Standing and Qualification			19
5.2	Authority To Contract			19
5.3	No Limit On Authority			19
5.4	Collection of Receivables			19
5.5	MWI Veterinary Supply Co. Benefit Plans			20
5.6	Brokers or Finders			20
5.7	Material Misstatement or Omissions			20
Article 6 DELIVERABLES AT CLOSING AND COVENANTS				20
6.1	Deliverables Of AAHA and Servco			20
	6.1.1	Consents		20
	6.1.2	Execution and Certification of Resolution of Board of Directors and Shareholders of Servco and Board of Directors of AAHA		20
	6.1.3	Removal of Encumbrances and Liens		20

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	6.1.4	Michael Hughes Employment Agreement		20
	6.1.5	Trademark License Agreement		20
	6.1.6	Sponsorship Agreement		21
	6.1.7	Escrow Agreement		21
	6.1.8	Legal Opinion		21
6.2	Deliverables of Buyer
	6.2.1	Michael Hughes Employment Agreement		21
	6.2.2	Trademark License Agreement		21
	6.2.3	Sponsorship Agreement		21
	6.2.4	Escrow Agreement		21
	6.2.5	Purchase Price		21
6.3	Termination of AAHA Employees			21
Article 7 POST-CLOSING COVENANTS				21
7.1	Office and Service Space			21
7.2	Employees			21
7.3	Access to Assets			21
7.4	PVP			22
Article 8 CLOSING				22
8.1	Time, Date and Place of Closing			22
8.2	Documents Delivered After Closing			22
Article 9 NONCOMPETITION AND CONFIDENTIAL INFORMATION				22
9.1	Purpose Of Noncompetition And Confidential Information Agreements			22
9.2	Noncompetition Agreement, Duration and Area			23
9.3	Nonsolicitation Covenant			23
9.4	Non-Hire Covenant			23
9.5	Nondisparagement Covenant			23
9.6	Confidentiality Agreement and Duration			23
9.7	Inducement of Parties			24
9.8	Acknowledgement by Buyer, Servco and AAHA			24
Article 10 INDEMNIFICATION				24
10.1	Survival of Representations, Warranties and Covenants			24
	10.1.1		Survival for Two Year Period	24
	10.1.2		Survival for Three Year Period	24
	10.1.3		Survival for Unlimited Period	25
10.2	Indemnification			25
10.3	Claims			25
	10.3.1		Definition of Claims	25
	10.3.2		No Admission	26
10.4	Covered Acts			26
	10.4.1		AAHA and Servco Covered Acts	26
	10.4.2		Buyer Covered Acts	27
10.5	Indemnification Cap and Uncapped Claims			28
10.6	Special Sharing for Regulatory Claims			28

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Article 11 REMEDIES			29
11.1	Claim Notice and Cure Period		29
11.2	Purchase Price Offset		29
11.3	Purchase Price Offset: Regulatory and Tax Claims		29
11.4	Special Remedies for Noncompetition and Confidentiality Violations by Servco or AAHA		29
11.5	Special Remedies for Confidentiality Violations by Buyer		30
11.6	Handling Indemnification for Third-Party Claims		30
	11.6.1	Notice	30
	11.6.2	Effect of Notice	30
	11.6.3	Defense	31
	11.6.4	Reservation of Right to Defend	31
	11.6.5	Cooperation	31
11.7	Handling Indemnification for All Other Claims		31
11.8	Payment of Claim		31
11.9	Acts of PVP		32
11.10	Attorney Fees and Costs		32
11.11	Disputes		32
11.12	Rights Cumulative		32
11.13	Nonwaiver of Remedies		32
11.14	Governing Law, Jurisdiction, and Venue		32
Article 12 GENERAL PROVISIONS			33
12.1	Press Releases		33
12.2	Notices		33
12.3	Payment of Expenses		34
12.4	Time of the Essence		34
12.5	Entire Agreement		34
12.6	Disclosures		34
12.7	Severability		34
12.8	Counterparts		35
Article 13 SIGNATURES			35

v

ASSET PURCHASE AGREEMENT

Effective July 1, 2008, MWI Veterinary Supply Co., an Idaho corporation, AAHA Services Corporation, a Colorado corporation, and American Animal Hospital Association, an Illinois non-profit corporation, agree as follows:

Article 1
PARTIES.

1.1Buyer.  MWI Veterinary Supply Co., is an Idaho corporation (“Buyer”), with its general offices located at 651 S. Stratford, Suite 100, Meridian, Idaho, 83642-6203.

1.2Servco.  AAHA Services Corporation, is a Colorado for-profit corporation (“Servco”) with its general offices located at 12575 W. Bayaud Ave., Lakewood, Colorado, 80228.

1.3AAHA.  American Animal Hospital Association, is a Illinois non-profit corporation (“AAHA”) with its general offices located at 12575 W. Bayaud Ave., Lakewood, Colorado, 80228.   AAHA holds 80% of the common stock of Servco.  Professional Veterinary Products, Ltd. (“PVP”), which owns 20% of the common stock of Servco, is not a party to this Agreement

1.4Successors and Assigns.  Subject to any express provisions in this Agreement regarding restrictions on transfers or assignments, this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors, assigns, heirs, and personal representatives.  Buyer has the right, in Buyer’s sole discretion, to assign all or part of Buyer’s rights and obligations set forth in this Agreement, but the Buyer nevertheless will remain responsible for the obligations of the assignee as if no such assignment had occurred.  Servco shall not assign Servco’s rights and obligations set forth in this Agreement without the consent of Buyer, which consent shall not be unreasonably withheld.

Article 2
PURCHASE AND SALE.

2.1Transfer and Assumption.  At the Closing described in Article 8, and subject to the terms and conditions of this Agreement, Servco agrees to sell, transfer and assign to Buyer, and Buyer agrees to purchase, take delivery, take assignment, and assume from Servco: (i) all tangible and intangible assets, claims, and other properties of Servco used in the operation of Servco, including but not limited to those assets specifically identified in Section 3.1 (“Assets”), and excepting only those assets specifically identified in Section 3.3 as excluded by this Agreement, and (ii) only those certain liabilities of Servco specifically identified in Section 3.2 (“Liabilities”), and excepting all other liabilities, including but not limited to those liabilities specifically identified in Section 3.4 as excluded by this Agreement.

2.2Possession.  Servco is delivering actual possession of the Assets to Buyer at Closing, and the Buyer is assuming the Liabilities at the Closing.

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2.3Purchase Price.  At the Closing described in Article 8, the purchase price (“Purchase Price”) to be paid by Buyer to Servco pursuant to this Agreement is $10,000,000 plus or minus a Working Capital adjustment as calculated pursuant to Sections 2.4.3 and 2.4.4.

2.4Form of Payment.  The Purchase Price shall be paid as follows:

2.4.1Cash at Closing.  Buyer shall pay to Servco at Closing the amount of $8,500,000, plus or minus a Working Capital adjustment as calculated pursuant to Section 2.4.3, by means of a wire transfer into an account identified by Servco.

2.4.2Escrow Amount.  An amount equal to $1,500,000 (“Escrow Amount”) to be deposited in an Escrow Account, as further described in Section 2.5.

2.4.3Working Capital Adjustment to Purchase Price at Closing.  The amount of the Purchase Price paid by the Buyer at Closing will increase to the extent that the Estimated Working Capital is greater than the Target Working Capital, and will be decreased to the extent the Estimated Working Capital is less than the Target Working Capital.    The “Target Working Capital”, as determined by Buyer, and Servco and AAHA’s executive management during due diligence, equals $3,324,647.  At Closing, Servco provided a good faith estimate of Servco’s working capital at Closing, equal to $3,064,088 (the “Estimated Working Capital”), which Estimated Working Capital was certified by the Chief Operating Officer of Servco pursuant to a “Certificate of Estimated Working Capital”, which certificate was provided to Buyer two (2) days prior to Closing.  For purposes of this Agreement, “working capital” shall mean current assets minus current liabilities.

2.4.4Working Capital Adjustment Post Closing. After a post-closing review period of sixty (60) days, if the working capital of Servco at Closing (the “Final Working Capital”) as initially determined by the Buyer, exceeds the Estimated Working Capital, then, not later than the 65^th day after the Closing, the Buyer shall transfer additional cash to Servco in an amount equal to the Final Working Capital less the Estimated Working Capital.  If the Final Working Capital as initially determined by Buyer was less than the Estimated Working Capital, then, not later than the 65^th day after the Closing, Servco shall transfer additional cash to the Buyer in an amount equal to the Estimated Working Capital less the Final Working Capital.    Any working capital adjustment, as described in Sections 2.4.3 and 2.4.4, shall not be subject to the attainment of $25,000 in Claims, as described in Section 11.2.  If Servco disagrees with Buyer’s initial determination of Final Working Capital, the parties will promptly meet to discuss such disagreement and, in any event, if they do not agree within two business days after such 60^th day after the Closing, the matter will be resolved in accordance with Section 11.11 of this Agreement; upon the resolution of the dispute, the party who owes payment to the other party will also owe interest on any unpaid amount at the rate of 4% per annum above the Prime Rate, measured from the 65^th day after the Closing until the date that such amount is paid in full.  In the event of such a disagreement, the parties will nevertheless make partial payment on the 65^th day after the Closing as provided above to the extent they agree on the amount of the payment that is due.   “Prime Rate” means the floating prime rate published from time to time by The Wall Street Journal.

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2.5Escrow Agreement.  At Closing, the Buyer shall deposit with Wells Fargo N.A. (the “Escrow Agent”) the Escrow Amount.  The Escrow Amount plus any interest accrued thereon will be available to satisfy any amounts owed by AAHA or Servco to Buyer under this Agreement in accordance with the terms of the Escrow Agreement attached as Schedule 2.5 (the “Escrow Agreement”).

2.6Payment of Taxes.  Servco shall pay all of its state income taxes, sales taxes, use taxes, excise taxes, property taxes, business and occupation taxes, or other taxes imposed with respect to the Assets or the operations of Servco for any period prior to the Closing.  For any period after Closing, Buyer shall pay all of the taxes imposed with respect to the Buyer’s operations of the Assets.

2.7Allocation of Purchase Price.  After the Closing, Buyer will engage John Taylor  of JP Pan Global Consulting to conduct an appraisal, in accordance with generally accepted accounting principles (“GAAP”), of the Assets and Liabilities of Servco (the “Appraisal”).  Upon conclusion of the Appraisal, Buyer will forward the Appraisal and all supporting documents to Servco.  The Purchase Price shall be allocated for federal and state tax purposes by Buyer and Servco in accordance with the Appraisal.  Buyer and Servco shall each complete and file Form 8594 in accordance with Internal Revenue Code Section 1060 and the corresponding rules and regulations reflecting the allocation set forth in the Appraisal.

2.8Conveyance of Title.  Unless expressly stated otherwise and except as set forth on Schedule 4.5, title to the Assets (i) shall be marketable in Buyer, and (ii) shall be conveyed free and clear of all covenants, equitable interests, liens, options, pledges, security interests, rights of first refusal, encumbrances.  EXCEPT AS SET FORTH IN Article 4, THE ASSETS ARE CONVEYED TO THE BUYER IN THEIR PRESENT CONDITION, “AS IS,” SUBJECT TO NO WARRANTIES, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

Article 3
ASSETS AND LIABILITIES
INCLUDED IN AND EXCLUDED FROM SALE.

3.1Transfer of Assets.  Unless otherwise excluded by this Agreement, the Assets purchased by Buyer expressly include all the assets, properties and rights of Servco that relate to the operations and business of Servco, as currently conducted, of every type and condition, real, personal and mixed, tangible and intangible, fixed and unfixed, choate or inchoate, accrued, absolute, contingent or otherwise, wherever located and whether or not reflected on the books and records of Servco, including, but not limited, to the following:

3.1.1Equipment, Furniture and Fixtures.  All tangible personal property owned by Servco and used in connection with operations and business of Servco, including without limitation, equipment, office equipment, computer equipment, computer systems, furniture, furnishings, security equipment, communications equipment, equipment operation manuals, and manufacturer’s warranties and guarantees, if any (“Equipment”), but excluding any personal property used by Servco under Personal Property Leases and excluding any personal property owned or used by AAHA in providing administrative support and services to

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Servco (including the furniture located on the premises of AAHA’s corporate offices, which is owned by AAHA).  The Equipment is identified on Schedule 3.1.1.

3.1.2Personal Property Leases.  All equipment and other personal property leases for tangible personal property identified in and attached to Schedule 3.1.2 (“Personal Property Leases”).

3.1.3Contracts.  The rights and obligations related to contracts, agreements, options and commitments (other than Personal Property Leases) related to Servco (“Contracts”), as set forth on Schedule 3.1.3.

3.1.4Prepaid Expenses.  Deposits on assets with Servco’s vendors, prepaid items, prepaid expenses, and similar amounts paid by Servco to other vendors of services or goods for which Servco has not received services or goods in return.  The Prepaid Expenses are set forth on Schedule 3.1.4.

3.1.5Cash.  All cash and cash equivalents, which are in the approximate amount of $1,320,000 as of the Closing.

3.1.6Accounts Receivables.  The accounts receivable, promissory notes, and other amounts owed to Servco at Closing and arising in the ordinary course of business (“Receivables”), as described on Schedule 3.1.6.

3.1.7Business Records.  All original paper and other copies of all correspondence, files, operations records, accounting and financial records, customer records, customer lists, vendor lists, price lists, operations manuals, personnel records, employee manuals, and all other records, files, memoranda, bids, contracts, practice protocols, policies and other documents relating to and necessary for the continued operation of the business of Servco including such Servco documents and records in PVP’s possession (other than such documents owned by PVP, subject to Section 7.4 of this Agreement) (“Business Records”), except that Servco may make and retain copies of any or all of the foregoing.

3.1.8Intellectual Property.  All trade marks, service marks, copyrights, any applications therefor, logos, symbols, business manuals or policies created by Servco, and tangible or intangible material created by Servco and that are used by Servco (“Intellectual Property”).  Schedule 3.1.8 lists: (i) all of Servco’s copyrights, trademarks, and any applications therefor, (ii) all of Servco’s logos and graphics that identify Servco, and (iii) all licenses, sublicenses, and other agreements (other than license agreements with AAHA or for prepackaged, commercially available computer software and all software retained by Servco as an Excluded Asset), related to the operations and business of Servco, to which Servco is a party and pursuant to which Servco or any other person is authorized to use any of the Intellectual Property or other trade secrets of Servco.

3.1.9Communication Addresses.  All telephone numbers, facsimile numbers, and other communication addresses relating to Servco necessary for the continued operation of the business of Servco (“Communication Addresses”).  The Communication Addresses are disclosed on Schedule 3.1.9.  The Communication Addresses do not include log-in

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identifications, user identifications, screen names and on-line service identifications that are owned by AAHA or PVP.

3.1.10Computer Software and Databases. All computer software, applications, and databases owned, licensed, leased, internally developed or otherwise used by Servco, necessary for the continued operation of the business of Servco, including such Servco software, applications, and databases in PVP’s possession, but excluding computer software, applications, and databases owned by PVP or AAHA or licensed to PVP or AAHA by an unrelated third party (“Computer Software and Databases”).  The Computer Software and Databases are identified in Schedule 3.1.10

3.1.11Proprietary Information.  All Proprietary Information owned by Servco.  “Proprietary Information” means all information, data and materials (whether contained in documents, electronic media or other forms), including without limitation, information about materials, procedures, expertise, customer lists, customer data, financial data, vendors, marketing plans, and trade secrets necessary for the continued operation of the business of Servco, including such Servco information in PVP’s possession, subject to Section 7.4 of this Agreement.  Proprietary Information is identified in Schedule 3.1.11.

3.1.12Goodwill.  All rights of Servco to the goodwill of Servco, including all rights to the reputation of Servco’s business and Servco’s relations with its customers (“Goodwill”).

3.1.13Rights Arising from Assumed Obligations.  All rights of Servco arising under or relating to the obligations expressly assumed by Buyer at Closing pursuant to Section 3.2.

3.1.14Tangible and Intangible Personal Property.  All other tangible and intangible personal property owned by Servco and used with respect to the operation and business of Servco.

3.2Assumption of Liabilities.  The Liabilities which Buyer assumes, and agrees to timely pay and perform, include only the following:

3.2.1Account and Trade Payables.  All current liabilities related to amounts owed by Servco to third parties, including but not limited to vendors of supplies and inventory to Servco as of Closing (“Trade Payables”).  Trade Payables include only that portion of the liabilities that are current as of the Closing (e.g., Trade Payables does not include any portion of the Trade Payables that is delinquent as of the Closing) or that become current after the Closing, pursuant to the respective vendor terms and conditions of purchase and are not incurring or accruing, for the benefit of the vendor, interest or in-service charges.  The Trade Payables that are assumed are listed in Schedule 3.2.1(a), and copies of all invoices or other documents supporting the list, if any, are attached to Schedule 3.2.1(b) (except to the extent that Trade Payable incurred within 10 days prior to Closing will not be on such Schedule).

3.2.2Purchase Orders.  All liabilities related to purchase orders and commitments of Servco made in the ordinary course of business for goods, services, and

5

supplies to be delivered to Servco or performed by Servco subsequent to Closing.  The purchase orders are set forth in Schedule 3.2.2.

3.2.3Personal Property Leases and Contracts.  All liabilities related to Personal Property Leases and Contracts, including those identified in Schedules 3.1.2 and 3.1.3, respectively.  Servco will pay in full all payments, installment payments, monthly payments and other liabilities related to Personal Property Leases and Contracts that are due through the date of the Closing.

3.2.4Prepaid Income.  Amounts that customers have deposited with Servco, deferred revenue, prepaid income, amounts paid by customers pursuant to any plans or programs in which customers paid an amount to receive services or goods in the future, and similar amounts paid by customers, to Servco, in advance of Servco rendering the services or providing the goods.  The prepaid income is listed on Schedule 3.2.4.

3.2.5Obligations Arising From Transferred Assets.  All obligations of Servco arising under or relating to the Assets transferred to Buyer at Closing pursuant to Section 3.1.

3.2.6Scheduled Liabilities.  Except as set forth in this Section 3.2, and applicable Schedules, Buyer shall not assume any Liabilities of Servco.  If a liability is not identified in this Section 3.2 or applicable Schedules, then the liability shall not be assumed by Buyer, and shall be retained by, and be the sole and exclusive obligation of, Servco, as applicable, following Closing.

3.3Excluded Assets.  The Assets to be transferred to Buyer at Closing do not include the Assets identified in this Section (“Excluded Assets”).  Except as set forth in this Section or otherwise expressly provided in this Agreement, the Buyer shall acquire all other assets and properties of Servco that relate to the operations and business of Servco.

3.3.1Licenses and Permits.  All licenses, permits, and accreditations used in operation and business of Servco.

3.3.2Personal Use Property.  Personal property of Servco, including family photographs, awards, certificates, and similar property (“Personal Use Property”), as set forth on Schedule 3.3.2.

3.3.3Insurance.  Insurance policies held by Servco or in which Servco is a named insured or an additional insured, and all rights to payments under such insurance policies.

3.3.4Tax Refunds.  All Tax refunds, regardless of when paid, that arise with respect to any period prior to the Closing.

3.4Excluded Liabilities.  Except as otherwise specifically provided in Section 10.6, Buyer does not assume and shall not be deemed to have assumed, and Servco shall remain solely responsible following Closing for, any liability not expressly described in Section 3.2

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(“Excluded Liabilities”).  The Excluded Liabilities include, but are not limited to, the following:

3.4.1Notes Payable.  Any liability or obligation of Servco that arises prior to the Effective Date and relates to any long-term debt, interest-bearing debt, line of credit or note payables or other encumbrances, including any accrued interest concerning the same.  The Note Payable(s) are set forth on Schedule 3.4.1.

3.4.2Distributions and Dividends.  Any liability for accrued distributions or dividends, declared by the Board of Directors of Servco and payable to the shareholders of Servco, which have not been paid or otherwise distributed to the shareholders of Servco.

3.4.3Trade Payables.  Any liability for Trade Payables not listed on Schedule 3.2.1(a).

3.4.4Rent Payable..  Any liability for rent payable, with respect to the Leased Property, which rent was due prior to or on the date of the Closing.

3.4.5Employment Liabilities.  Any liability for employment compensation of Servco employees or of AAHA employees who provide services to Servco, including (i) federal, state and local income, withholding, trust fund or other employment related taxes, (ii) wages and salaries, (iii) commissions, (iv) incentives, overtime or bonuses, (v) compensatory time, (vi) pension plan, investment plan, profit sharing plan or other plan contributions, (vii) medical insurance premiums, (viii) medical benefits, (ix) accrued vacation, (x) sick leave, (xi) holiday pay, (xii) penalties, fines or payments related to any cash or non-cash employment benefits or compensation, (xiii) workers compensation, (xiv) unemployment, and (xv)  any other obligations related to cash or non-cash employment benefits or compensation.

3.4.6Employee Benefit Plans.  Any Employee Benefit Plan as defined in Section 4.18 and any liability or obligation of Servco or AAHA, as applicable, for or under any Employee Benefit Plan.

3.4.7Insurance.  Deductibles, co-payments, premiums or other payments relating to property, casualty, liability, workers compensation, and other insurance premiums or payments.

3.4.8Workers’ Compensation.  Any liability or obligation of Servco and AAHA, as applicable, relating to workers’ compensation (including, without limitation, weekly benefits, medical rehabilitation expenses and any other expenses or obligations) regarding injuries or illnesses suffered by employees of Servco resulting from occurrences on or prior to the Closing, whether known or unknown as of the Closing.

3.4.9Severance.  Any liability of obligation of Servco for any severance, termination or similar obligations, resulting from events occurring on or prior to the Closing, or resulting from the transactions contemplated by this Agreement.

3.4.10Sales Representatives.  Any liability or obligation of Servco for compensation due and payable to outside or inside sales representatives.

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3.4.11Taxes and Tax Compliance.  Any liability or obligation of Servco arising prior, on or after the Effective Date relating to (i) federal, state and local taxes, including income, sales or use, property, service or other taxes, and (ii) compliance with federal, state and local tax rules and regulations, including the obligation to prepare, report or file payroll, income, excise, sales, social security, trust fund, unemployment, withholding, property or other notices, forms, reports or documents.

3.4.12Transaction Taxes.  Any liability or obligation of Servco or AAHA, as applicable, relating to income, sales or excise taxes arising from, related to, or caused by the transactions contemplated by this Agreement, which taxes shall be paid by Servco.

3.4.13Losses.  Any losses, claims, remedies, damages, disputes or other liabilities, actual or potential, known or unknown, of Servco that occurred, arose or relates to any action or omission, of Servco prior to Closing.

3.4.14Litigation and Judgments.  Any claims, actions, suits, proceedings, arbitrations, mediation, product claims or litigation against Servco relating to or resulting from, actions or omissions of Servco before or as of Closing, including, without limitation, and any amounts payable or to be paid to resolve any such disputes.

3.4.15Standards Compliance.  Any liability of Servco arising from or related to the failure of Servco to comply with (i) all federal, state, local and other statutes and regulations relating to Servco, (ii) all rules and regulations of any regulatory agency governing Servco’s business, and (iii) the duty to exercise the requisite care, skill and knowledge, under such laws, rules, and regulations.

3.4.16Business Records Compliance.  Any liability of Servco arising from or related to the failure of Servco to properly comply with (i) all federal, state, local and other statutes and regulations, (ii) all rules and regulations of any regulatory agency governing Servco, and (iii) the duty to exercise the requisite care, skill and knowledge in the preparation, retention, storage, duplication, preservation and other obligations relating to Business Records.

3.4.17Controlled Substance Compliance..  Any liability of Servco arising from or related to the failure of Servco to properly comply with (i) all Controlled Substance Laws, (ii) all rules and regulations of the United States Drug Enforcement Agency, and (iii) the duty to exercise the requisite care, skill and knowledge in purchasing, storing, selling, and distributing Controlled Substances.

3.4.18Pharmaceutical Product Compliance..  Any liability of Servco arising from or related to the failure of Servco to properly comply with (i) any federal, state, or local law, statute, ordinance, regulation, permit, license or order, relating to Pharmaceutical Products and (ii) the duty to exercise the requisite care, skill and knowledge in purchasing, storing, selling, and distributing Pharmaceutical Products.

3.4.19Pedigree Laws..  Any liability of Servco arising from or related to the failure of Servco to properly comply with (i) any federal, state, or local law, statute, ordinance, regulation, permit, license or order, relating to Pedigree Laws and (ii) the duty to exercise the

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requisite care, skill and knowledge in purchasing, storing, selling, and distributing products pursuant to Pedigree Laws.  As used in this Agreement, “Pedigree Laws” shall mean the Prescription Drug Marketing Act of 1988, as amended (“PDMA”) and any rules, regulations or laws promulgated pursuant to PDMA, including (without limitation) all equivalent state laws, rules, and regulations.

3.4.20Errors and Omissions.  Any liability or amounts payable arising from or related to any claims of errors and omissions by Servco’s officers and directors.

3.4.21Unscheduled Liabilities.  Servco shall retain after the Closing, and shall remain solely responsible for, all Excluded Liabilities and other liabilities of Servco not expressly scheduled as part of this Agreement and not expressly assumed by Buyer.

Article 4
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF SERVCO AND AAHA

Servco and AAHA jointly and severally represent, warrant and covenant to Buyer as follows:

FINANCIAL REPRESENTATIONS AND WARRANTIES

4.1Financial Statements.  Attached as Schedule 4.1 are (i) Servco’s balance sheets as of the close of the fiscal years ended June 30, 2005, June 30, 2006, and June 30, 2007; (ii) Servco’s Income Statements for the fiscal years ended June 30, 2005, June 30, 2006, and June 30, 2007; and (iii) Servco’s interim balance sheets and related statements of income and earnings for the period from July 1, 2007, to May 31, 2008 (collectively “Servco’s Financial Statements”).  Servco’s Financial Statements (i) were prepared in the ordinary course of business on an accrual basis from the books and records of Servco in accordance with GAAP, and (ii) present fairly, in all material respects, the financial position of Servco as of the dates indicated, except that the interim balance sheets and related statements of income and earnings are subject to normal year-end adjustments (which would not be material in the aggregate except for manufacturer rebates, commissions, and performance incentives) and do not contain footnotes or other presentation items that would appear in a company’s audited financial statements.

4.2Absence of Undisclosed Liabilities.  Except as (i) disclosed on Schedule 4.2 or in Servco’s Financial Statements, and except as incurred by Servco in the ordinary course of operating Servco since the date of Servco’s Financial Statements, there has not been any material adverse change in the business, condition (financial or otherwise), Assets, Liabilities, or operations of Servco, and there are no liabilities, whether absolute, accrued, contingent or otherwise, arising through the operation of Servco which materially affect the Assets, the Liabilities or the operations of Servco.

4.3No Default.  Except as set forth in Schedule 4.3, (i) Servco is not in material default under the terms of any Contract to which Servco is a party, and which material default will result in any loss or damage to Servco, nor has any condition or event occurred which, after

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notice, the passage of time, or otherwise, would constitute a material default by Servco under or a breach of any terms of any such Contract, and (ii) Servco is not aware of any condition that will result in a material default under any terms of any such Contract.

4.4Taxes

4.4.1Timely Filing of Tax Returns.  Except as disclosed on Schedule 4.4.1, Servco has filed all federal, state, local and foreign returns and reports for all income tax, franchise tax, capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, service tax, excise tax, payroll tax, stamp tax, sales tax, use tax, property tax, business tax, unclaimed property tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including any customs duty), deficiency or fee, social security, trust fund, unemployment and any related charge or amount (including any fine, penalty or interest), imposed, assessed or collected by or under the authority of any Governmental Body or other taxes (collectively “Taxes” or “Tax”) required to be filed.  All federal, state, local and foreign Tax returns and reports were and are in all material respects true, complete, and correct and filed on a timely basis.  No claim has ever been made by any authority in any jurisdiction in which Servco does not file federal, state and local Tax returns and reports that Servco is or may be subject to taxation by the respective jurisdiction.

4.4.2Preparation of Tax Returns and Payment of Taxes.  Up to and through Closing, Servco, within the time and in the manner prescribed by law, (i) prepared all Tax returns and (ii) paid all Taxes shown by the returns to be due and payable, except for those Taxes contested in good faith and for which adequate reserves have been provided.

4.4.3Tax Lien.  There are no Tax liens or security interests on any of the assets or liabilities.

4.4.4Withholding Taxes.  Servco has paid all Taxes required to have been paid and has complied in full and in all material respects with the provisions of applicable law relating to the withholding of all federal, state, local and foreign Taxes, including the requirement, within the time and in the manner prescribed by law, to withhold from amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party and pay over to the proper federal, state or local governmental authority all amounts required.

4.4.5Audit, Administrative and Court Proceedings.  No audits or other administrative proceeds or court proceedings are presently pending with regard to any federal, state, local and foreign Tax or their respective Tax returns of Servco.  There is no dispute concerning any Tax liability of Servco, either (i) claimed by any federal, state, local and foreign governmental authority in writing or (ii) as to which any of Servco or AAHA’s directors and officers (and employees responsible for Tax matters) of Servco or AAHA, respectfully, have knowledge based upon personal contact with any agent of a federal, state or local governmental authority.

4.4.6Availability of Tax Returns.  Attached to Schedule 4.4.6 are complete and correct copies of (i) the federal, state, local and foreign income and excise tax returns of Servco for all tax years ending between June 30, 2005 to Closing, as filed with the Internal

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Revenue Service or any state or local Taxing authority (ii) all audit reports received from any Taxing authority relating to any Tax return filed by Servco, and (iii) any agreements entered into by Servco with any Taxing authority.

4.4.7Tax Sharing Agreements.  Servco is not a party to any agreement relating to allocating or sharing of federal, state, local and foreign Taxes.

4.4.8Liability for Others.  Neither Servco nor AAHA (i) have been a member of an affiliate group, as defined in Internal Revenue Code (“Code”) Section 1504, filing a consolidated federal income tax return, or (ii) have liability for any federal, state and local Tax of any person other than AAHA (a) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (b) under any applicable law as a transferee or successor, or (c) by contract. 

ASSETS AND PROPERTY REPRESENTATIONS AND WARRANTIES

4.5Clear Title to Assets.  Except as set forth on Schedule 4.5, Servco has good title to the Assets, free and clear of all mortgages, pledges, security interests, liens and encumbrances, with the exception of taxes not due and payable which constitute a lien.  The Assets constitute all of the tangible or intangible Assets necessary for the conduct of Servco’s business as presently conducted, other than the Excluded Assets and the licenses and permits used in the operations and business of Servco.

4.6Condition of Tangible Assets.  Except as set forth on Schedule 3.1.1, all of the tangible assets identified on Schedule 3.1.1 are in good operating condition and repair, ordinary wear and tear excepted.  The tangible assets are suitable for the purposes used, and have been maintained in accordance with good business and maintenance practices.  Neither Servco nor AAHA knows of any material latent defects in the tangible assets.

4.7Vendor List and Orders.  Schedule 4.7 lists each vendor of supplies to Servco during the 12 months preceding the Closing and Servco’s account number with the vendor. Schedule 3.2.2 describes all orders or contracts for supplies placed with vendors but not received.

4.8Receivables.  The Receivables represent bona fide claims that have arisen in the ordinary course of business, in accordance with Servco’s customary practices.  Except as set forth in Section 4.21, the amounts charged for goods and services have been determined and statements rendered in accordance with applicable laws, regulations and contracts binding upon Servco and the purchaser.  The Receivables will be collectible in the ordinary course of business within 120 days of the creation of each Receivable.  Following Closing, (a) the Buyer will use commercially reasonable efforts to collect the Receivables, and (b) AAHA and Servco will assist Buyer in the collection of the Receivables in the manner and to the extent that Buyer reasonably requests.  If the Receivables are not collected in the ordinary course of business by Buyer, within 120 days after the Closing, Buyer shall immediately have a right to offset any outstanding amount of the Receivables (the “Outstanding Receivables”), which offset amount shall include any interest accrued on the Outstanding Receivables, from the Escrow Amount pursuant to the Escrow Agreement entered by and between the Buyer and AAHA, effective as

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of the Closing, and at the time that the Buyer exercises such offset, the Buyer shall assign to Servco and Servco shall assume from Buyer such Outstanding Receivables.  The Buyer shall exercise such right of offset, if at all, not later than 130 days after the Closing.

4.9Insurance.  Schedule 4.9 lists and briefly describes (i) all policies of fire, extended coverage, and all other kinds of casualty insurance held by Servco and covering the Assets of Servco, and (ii) any claims made against any insurance policy, with respect to the Assets, that are unresolved as of Closing.  The policies are in full force and effect.

4.10Contracts and Personal Property Leases.  Attached as Schedules 3.1.2 and 3.1.3 are complete and accurate copies of all the Contracts and Personal Property Leases, which constitute all of the Contracts and Personal Property Leases of Servco.  All Contracts and Personal Property Leases are in full force and effect and, except for defaults which neither alone nor in the aggregate are material, there are no existing defaults by Servco, or events or conditions which but for the passage of time would constitute defaults by Servco pursuant to such documents.  All payments, installment payments, monthly payments and other liabilities related to Personal Property Leases and Contracts that are due through the Closing have been paid in full.

4.11Business Records.  The books of accounts and records, including Business Records, of Servco are complete and correct in all material respects, and there have been no transactions involving Servco which properly should have been set forth in Business Records and which have not been accurately so set forth in all material respects.  Servco has all Business Records that are necessary to conduct the operations and business of Servco as presently conducted. As of Closing, Servco has exercised reasonable care, skill and knowledge in performing its duties relating to the preparation, retention, storage, duplication, preservation and other obligations relating to Business Records in all material respects.

4.12Intellectual Property.  Servco owns or has the right to exercise all rights necessary in the Intellectual Property to carry out Servco’s business activities in the ordinary course of business, when combined with intellectual property rights licensed from others.  Servco is not in violation of any license, sublicense, or agreement to which Servco is a party or bound pertaining to the Intellectual Property, except where such noncompliance does not have any material adverse effect.  Servco has not received notice of any claims with respect to the Intellectual Property asserted against Servco or threatened by any person against Servco, nor, to Servco’s knowledge, are there any valid grounds for any bona fide claims.

4.13Computer Software and Databases.  Servco has all Computer Software and Databases that are necessary to conduct the operations and business of Servco as presently conducted and all documentation relating to all the Computer Software and Databases.  The Computer Software and Databases perform in accordance with the documentation and are free of known defects in programming and operation.

4.14Proprietary Information. Servco has all Proprietary Information that is necessary to conduct the operations and business of Servco as presently conducted.

4.15PVP’s Retention of Assets.  Any Assets or copies of Assets of Servco which

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are retained by PVP as of Closing shall not limit the ability of Buyer to conduct the operations and business of Servco as presently conducted; provided, however, that neither AAHA nor Servco represent or warrant that PVP will not use such Assets.

EMPLOYMENT REPRESENTATIONS AND WARRANTIES

4.16Employees.  For the five year period prior to Closing, Servco has not had any employees.  A complete and accurate list of the employees employed by AAHA on behalf of Servco on the date of the Closing as to whom the Buyer has informed AAHA that the Buyer intends to hire, which accurately sets forth the employees’ (i) name, (ii) date of birth, (iii) social security number, (iv) the existence and terms of all written and oral employment agreements, if any, (v) position, (vi) date of hire, (vii) date of last compensation increase, (viii) hours of employment and rate of compensation, (ix) amount of accrued benefits (including vacation and sick leave pay, if any), and (x) the hours each employee has worked this calendar year to date (which is a prerequisite for 401(k) plan eligibility) is set forth on Schedule 4.16 (“Employees”).

4.17Employment Obligations.  With respect to the Employees, AAHA is in substantial compliance with all federal, state and other applicable laws respecting employment, employment practices, terms, conditions of employment, employment benefits, and wages and hours.  As of Closing, all salaries, wages, vacation pay, holiday pay, short or long-term disability, pension, severance or similar obligations, reimbursement of expenses, commissions, compensation for paid leave, bonuses of any kind, payroll taxes, payroll tax reporting compliance, workers compensation, and benefits of any kind payable to any Employee have been paid in full, and all obligations to comply with all reporting requirements have been performed in full.

4.18No Employee Benefit Plans Unless Disclosed.  Servco does not maintain and never has maintained any group health insurance, group life insurance, medical, §401(k), profit sharing, defined benefit, pension, cafeteria, SIMPLE, SEP, Servco-sponsored IRA or any other employee benefit plan including without limitation (i) all employee benefit plans established by, maintained by, or receiving contributions from Servco and (ii) any program, arrangement or plan within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) (collectively “Employee Benefit Plans” or “Plans”), except for each health, life or medical plan and each qualified retirement plan set forth in Schedule 4.18.

BUSINESS OPERATION REPRESENTATIONS AND WARRANTIES

4.19Controlled Substance Compliance.  Except as disclosed on Schedule 4.19,

4.19.1No Claims, Notices, Investigation of Violations.  Neither Servco nor AAHA have received from any governmental entity any request for information, notice of claim, demand letter or other notification, notice or information that (i) Servco is liable for or in violation of any Controlled Substance Laws or (ii) Servco’s registration under the Controlled Substance Laws (a) is unauthorized, (b) is inconsistent with the public interest, health or safety, (c) may be revoked, or (d) may be suspended.  To Servco’s or AAHA’s knowledge, there have been no federal, state or local governmental or regulatory investigations, enforcement actions, studies, audits, reviews or other analyses, the purpose of which was to discover, identify or otherwise

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characterize any actual, alleged or potential violations of Controlled Substance Laws or to revoke, suspend, deny or prevent the issuance of the registration of Servco.  Servco has not (i) been charged with, (ii) been served a subpoena or search warrant relating to, (iii) to Servco’s knowledge, been the subject of an administrative inspection or warrant relating to, (iv) settled any allegations relating to, (v) pled no contest to, (vi) conceded liability for, (vii) been convicted of, (viii) been assessed or paid any fines or penalties relating to, or (ix) been subject to cease and desist or similar orders relating to, any violations of the Controlled Substance Laws.

4.19.2Controlled Substance Definition.  The phrase “Controlled Substance” means (i) any drug or other substance identified in 13 U.S.C. § 802(6); and (ii) any drug or other substance for which the manufacturing, distributing, transporting, labeling, packaging, dispensing, using, reporting, storing, disposing, importing, exporting, controlling, wholesaling, brokering or trading is prohibited, regulated or controlled under any Controlled Substance Laws.

4.19.3Controlled Substance Laws Definition.  The phrase “Controlled Substance Laws” means any federal or state law, statute, ordinance, regulation, permit, license or order pertaining to manufacturing, distributing, transporting, labeling, packaging, dispensing, using, reporting, storing, disposing, importing, exporting, controlling, wholesaling, brokering or trading of Controlled Substances, and includes without limitation the statutes set forth in 13 U.S.C. §§ 801 to 971, as amended and supplemented, and the regulations set forth in 21 CFR §§ 1300 to 1316, as amended and supplemented.

4.20Pharmaceutical Products Compliance.  Except as disclosed on Schedule 4.20,

4.20.1No Claims, Notices, Investigation of Violations.  Neither Servco nor AAHA have received from any governmental entity any request for information, notice of claim, demand letter or other notification, notice or information that (i) Servco is liable for or in violation of any federal, state, or local law, statute, ordinance, regulation, permit, license or order relating to Pharmaceutical Products, or (ii) Servco’s registration or license under any federal, state, or local law, statute, ordinance, regulation, permit, license or order, relating to the Pharmaceutical Products, (a) is unauthorized, (b) is inconsistent with the public interest, health or safety, (c) may be revoked, or (d) may be suspended.  To Servco’s knowledge, there have been no federal, state or local governmental or regulatory investigations, enforcement actions, studies, audits, reviews or other analyses, the purpose of which was (i) to discover, identify or otherwise characterize any actual, alleged or potential violations of any federal, state, or local law, statute, ordinance, regulation, permit, license or order, relating to Pharmaceutical Products or (ii) to revoke, suspend, deny or prevent the issuance of the registration of Servco.  Servco has not (i) been charged with, (ii) been served a subpoena or search warrant relating to, (iii) been the subject of an administrative inspection or warrant relating to, (iv) settled any allegations relating to, (v) pled no contest to, (vi) conceded liability for, (vii) been convicted of, (viii) been assessed or paid any fines or penalties relating to, or (ix) been subject to cease and desist or similar orders relating to, any violations of any federal, state, or local law, statute, ordinance, regulation, permit, license or order relating to Pharmaceutical Products.

4.20.2Pharmaceutical Products.  The phrase “Pharmaceutical Products” means (i) articles recognized in the official United States Pharmacopoeia, official Homoeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of

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them; (ii) articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals; (iii) articles (other than food) intended to affect the structure or any function of the body of man or other animals; (iv) articles classified as a “drug” or “device” under the United States Food, Drug, and Cosmetic Act, 21 U.S.C. § 301, etc., and the regulations promulgated pursuant to such Act; (v) articles classified as a “drug”, “device”, or similar such terms under applicable state or local statutes, ordinances, rules and regulations governing pharmacists or pharmacies; (vi) articles that are dispensed or delivered for administration to or use by a patient or other individual entitled to receive the article pursuant to a prescription issued by a physician, dentist, veterinarian, scientific investigator or other person who has a license to issue such a prescription; and (vii) articles commonly called prescription drugs or prescription medicine.

4.21Certain Disclosures.  Servco and AAHA have disclosed to the Buyer specific details concerning certain of Servco’s practices related to Controlled Substance Laws, Pedigree Laws, and Pharmaceutical Products. Servco and AAHA are making no representations or warranties to the Buyer concerning their compliance or possible non-compliance with Controlled Substance Laws, Pedigree Laws, and Pharmaceutical Products, but instead are agreeing to certain limited indemnities as provided for in Article 10.

4.22Operation Of Servco.  Except as disclosed on Schedule 4.22, during the period beginning 180 days prior to Closing and continuing to Closing, Servco, through Servco or AAHA’s directors, officers, shareholders, and employees:

(a)Ordinary Course.  Conducted the business of Servco only in the usual, regular and ordinary course in all material respects.

(b)Maintain Assets.  Maintained the tangible assets in their current condition in all material respects, reasonable wear and tear excepted.

(c)Equipment.  Retained all Equipment and other assets used in the operations of Servco, except for the disposal of obsolete Equipment.

(d)Goodwill.  Preserved and protected in all material respects the goodwill and advantageous relationships of Servco with clients, customers, suppliers, referral sources and all other persons having business dealings with Servco.

(e)Contracts.  Preserved and maintained in force in all material respects all Contracts, lease rights, Personal Property Lease rights and all Licenses of Servco.

(f)Liens.  Have not mortgaged, pledged, created a security interest in or otherwise encumbered any of Servco’s Assets, incurred expenses other than in the ordinary course of business, or incurred any secured or unsecured borrowings.

(g)Expenses.  Have not made or incurred any capital commitment or capital expenditures exceeding Five Thousand Dollars ($5,000.00) without disclosing the capital commitment to Buyer.

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(h)Distributions or Dividends. Have not made, paid, declared or otherwise distributed any distributions or dividends to Servco’s shareholders of record.

(i)Compensation.  Except as accrued or reflected on Servco’s Financial Statements, AAHA has not increased the compensation payable or to become payable by AAHA to any Employee, and have not made any bonus payments or arrangements with any Employee.

(j)Compliance.  Except as set forth in Section 4.21 complied in all material respects with all federal, state, and local laws, rules, and regulations applicable to the operation of Servco.

4.23Confidential Information.  Except with respect to Servco’s disclosures regarding Business Records and Proprietary Information with respect to Servco’s business practices, including disclosures to PVP in connection with this transaction and otherwise, Servco and AAHA have kept confidential any and all Business Records, and Proprietary Information of Servco in all material respects and in accordance with their respective business practices.  Servco and AAHA agree that Business Records and Proprietary Information have value, contain proprietary information of Servco, contain trade secrets of Servco, and are being transferred to Buyer for value under this Agreement.

CLAIMS AND LIABILITY REPRESENTATIONS AND WARRANTIES

4.24Compliance with Law.  Except as identified on Schedule 4.24, neither Servco nor AAHA have received any notices of violation of any law, regulation, condition of permit or license, order, ordinance, or any requirement noted in or issued by any federal, state, local or foreign authority having jurisdiction over or affecting the Assets or Liabilities of Servco which has not been corrected, resolved or withdrawn.   Except as set forth in Section 4.21, AAHA and Servco have complied with, and the operations and business of Servco are and have been conducted in accordance with (i) all federal, state, local, foreign and other statutes and regulations, and (ii) the duty to exercise the requisite care, skill and knowledge in performing Servco’s duties, including but not limited to the preparation, retention, storage, duplication, preservation and other obligations relating to Business Records.

4.25Trade Payables. The Trade Payables are set forth on Schedule 3.2.1(a) and are current pursuant to the respective vendor terms and conditions of purchase and are not incurring or accruing, for the benefit of the vendor, interest or in-service charges. 

4.26Litigation Or Claims.  Except as identified on Schedule 4.26, there are no claims, actions, suits, arbitrations, governmental investigations, inquiries, or proceedings pending or, to the knowledge of Servco or AAHA, threatened against or involving Servco, or the Assets and Liabilities of Servco, including any claims based upon any theory of errors and omissions or professional malpractice, before any court, governmental or administrative body or agency, or private arbitration tribunal.  Except as set forth in Section 4.21 and except as identified on Schedule 4.26, there are no facts upon which material claims may be made against Servco, or the Assets or Liabilities of Servco, nor are there any outstanding orders, writs,

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injunctions, or decrees of any court, arbitrator or governmental agency which adversely affect or could adversely affect Servco, or the Assets or Liabilities of Servco.

4.27Product Liability.  Except as identified on Schedule 4.27, neither Servco nor AAHA has knowledge of, and after diligent investigation is unaware of, any liability (or any basis for any present or future claim or demand against Servco, giving rise to any liability) arising out of any injury to individuals or property as a result of any Inventory, supplies, goods or other products sold by Servco.

STATUS REPRESENTATIONS AND WARRANTIES OF SERVCO

4.28Organization, Good Standing and Qualification of Servco.  Servco is a Colorado for-profit corporation duly organized, validly existing and in good standing under the laws of the state of Colorado.  Servco has full corporate power and authority to carry on its business as and where now conducted and to own or lease and operate its properties at and where now owned, leased or operated.  Servco is duly qualified to do business and is in good standing in the State of Colorado.

4.29Authority To Contract of Servco.  Servco has the full right, power and authority to execute, deliver and perform the terms of this Agreement and all documents and agreements necessary to give effect to the obligations of Servco under the provisions of this Agreement.  The execution, delivery, and consummation of this Agreement by Servco were duly approved by the Board of Directors and shareholders of Servco according to applicable law and the Articles of Incorporation and Bylaws of Servco.  Upon the execution and delivery of this Agreement by Servco, (i) no further action will be necessary to make this Agreement valid and binding upon Servco according to its terms, and (ii) Servco shall deliver to Buyer copies of resolutions duly authorized by the directors and shareholders of Servco authorizing the execution and performance of this Agreement and designating those officers of Servco with authority to execute documents in connection with this transaction.

4.30No Limit On Authority of Servco.    The execution, delivery, and consummation of this Agreement by Servco will not, with the passage of time, the giving of notice, or otherwise, (i) cause Servco to be in violation or breach of any law, regulation, judgment, administrative order, contract, agreement, or other restriction to or by which Servco is subject or bound, or (ii) result in the acceleration or termination of any loan or security agreement to which Servco is a party.  No approval or consent of any person, firm, or other entity is required to be obtained by Servco for the execution, delivery, and consummation of this Agreement by Servco.

4.31Board of Director and Shareholder Approval.  Servco has obtained all necessary board of director and shareholder approvals and consents, required under Colorado law, to enter this Agreement and transfer the Assets and Liabilities of the Company to the Buyer.  Attached as Schedule 4.31 is a true and correct copies of the Servco board of director and shareholder actions, approving this Agreement and transaction set forth herein.

STATUS REPRESENTATIONS AND WARRANTIES OF AAHA

The representations and warranties in Sections 4.32, 4.33, and 4.34 are made solely by

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AAHA.

4.32Organization, Good Standing and Qualification of AAHA.  AAHA is a Illinois nonprofit corporation duly organized, validly existing and in good standing under the laws of the state of Illinois.

4.33Authority To Contract of AAHA.  AAHA has the full right, power and authority to execute, deliver and perform the terms of this Agreement and all documents and agreements necessary to give effect to the obligations of AAHA under the provisions of this Agreement.  The execution, delivery, and consummation of this Agreement by AAHA were duly approved by the Board of Directors of AAHA according to applicable law and the Articles of Incorporation and Bylaws of AAHA.  Upon the execution and delivery of this Agreement by AAHA, (i) no further action will be necessary to make this Agreement valid and binding upon AAHA according to its terms, and (ii) AAHA shall deliver to Buyer copies of resolutions duly authorized by the directors of AAHA authorizing the execution and performance of this Agreement and designating those officers of AAHA with authority to execute documents in connection with this transaction.

4.34No Limit On Authority of AAHA.    The execution, delivery, and consummation of this Agreement by AAHA will not, with the passage of time, the giving of notice, or otherwise, (i) cause AAHA to be in violation or breach of any law, regulation, judgment, administrative order, contract, agreement, or other restriction to or by which AAHA is subject or bound, or (ii) result in the acceleration or termination of any loan or security agreement to which AAHA is a party.  No approval or consent of any person, firm, or other entity is required to be obtained by AAHA for the execution, delivery, and consummation of this Agreement by AAHA.

4.35Brokers or Finders.  Neither Servco nor AAHA have employed any broker or finder or incurred any liability for any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated by this Agreement, except that AAHA entered into a consulting agreement with Brakke Consultants and AAHA will pay all amounts due under such agreement.

DISCLOSURE REPRESENTATION AND WARRANTY

4.36Material Misstatement or Omissions.  The representations and warranties made by Servco and AAHA, together or separately, in this Agreement and in any Schedule, taken as a whole, do not contain any untrue statement of a material fact, or omit to state a material fact, necessary to make the statements, in light of the circumstances in which such statements were made, not misleading.  Servco and AAHA know and expect that Buyer will rely upon their representations, warranties and covenants.

4.37Representations and Warranties Are Independent of Due Diligence.  Buyer is not and will not be required to undertake any independent due diligence investigation to determine the truth, accuracy and completeness of the representations, warranties and covenants made by AAHA and Servco in this Agreement.  AAHA and Servco’s representations, warranties and covenants made to Buyer in this Agreement are independent of any due diligence investigation done by Buyer.  Buyer’s due diligence investigation, if any, (i) does not terminate, reduce, mitigate or otherwise diminish AAHA and Servco’s responsibility to fully and

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fairly make all representations, warranties and covenants and disclose all required information, (ii) does not impute or attribute to Buyer by implication or otherwise information that did or should have been discovered in Buyer’s due diligence investigation, (iii) shall not be deemed to ascribe any knowledge to Buyer different from, or in addition to, the representations and warranties made by AAHA or Servco to Buyer in this Agreement, and (iv) except to the extent that Buyer had actual knowledge, and neither AAHA nor Servco had knowledge, of the breach of a representation or warranty as of the Closing, shall not be deemed to reduce, effect, or eliminate Buyer’s complete reliance upon the representations and warranties set forth in this Agreement.

Article 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.

Buyer represents, warrants and covenants to Servco and AAHA as follows:

5.1Organization, Good Standing and Qualification.  Buyer is an Idaho corporation duly organized, validly existing and in good standing under the laws of the state of Idaho.  Buyer has full corporate power and authority to carry on its business as and where now conducted and to own or lease and operate its properties at and where now owned, leased or operated.

5.2Authority To Contract.  Buyer has the full right, power and authority to execute, deliver and perform the terms of this Agreement and all documents and agreements necessary to give effect to the obligations of the Buyer under the provisions of this Agreement.  The execution, delivery, and consummation of this Agreement by the Buyer were duly approved by the Board of Directors of Buyer according to applicable law and the Articles of Incorporation and Bylaws of Buyer.  The execution and performance of this transaction was approved by the Board of Directors of Buyer on June 20, 2008.  Upon the execution and delivery of this Agreement by Buyer, no further action will be necessary to make this Agreement valid and binding upon Buyer according to its terms.

5.3No Limit On Authority.  The execution, delivery, and consummation of this Agreement by Buyer will not, with the passage of time, the giving of notice, or otherwise, (i) cause Buyer to be in violation or breach of any law, regulation, judgment, administrative order, contract, agreement, or other restriction to or by which Buyer is subject or bound, or (ii) result in the acceleration or termination of any loan or security agreement to which Buyer is a party.  There are no restrictions in the Articles of Incorporation, amendments to the Articles, Bylaws, minutes, or share certificates of Buyer, shareholder agreements, indenture, credit agreements, or other agreement limiting the right or power of Buyer to buy the Assets and Liabilities.  No approval or consent of any person, firm, or other entity is required to be obtained by Buyer for the execution, delivery, and consummation of this Agreement by Buyer.

5.4Collection of Receivables.  Post-Closing, Buyer (i) shall use Buyer’s reasonable business efforts, consistent with its own business practices, to collect the Receivables of the Company within 120 days post-Closing, (ii) without Servco’s consent, shall not compromise or waive any rights with respect to such Receivables (other than a release of further payment obligations on any Receivable upon full payment of such Receivable), and (iii) 

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with respect to any customer of the Buyer or affiliate of such customer that is also the payor under any Receivable, shall be consistent with its own business practices, and not seek to favor the collection of any post-closing receivable of the Buyer from such customer or affiliate, that is to the detriment of the collection of the Receivable from such Servco customer or its affiliate.

5.5MWI Veterinary Supply Co. Benefit Plans.  In accordance with all rules and regulations regarding enrolment, as soon as practicable after Closing, Buyer shall enroll all of the Employees, hired by Buyer, in Buyer’s applicable health and medical benefit plans, which benefit plans are comparable to AAHA’s current health and medical benefit plans.

5.6Brokers or Finders.  Buyer has not employed any broker or finder or incurred any liability for any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated by this Agreement.

5.7Material Misstatement or Omissions.  No representation or warranty made by Buyer in this Agreement or in any document or agreement furnished in connection with this Agreement contains or will contain any untrue statement of material facts, or omits or will omit to state a material fact necessary to make the statements therein not misleading. Buyer knows and expects that AAHA and Servco will rely upon its representations, warranties and covenants.

Article 6
DELIVERABLES AT CLOSING AND COVENANTS

6.1Deliverables Of AAHA and Servco.  AAHA and Servco are delivering to Buyer the following at Closing:

6.1.1Consents.  The written consents and releases attached in Schedule 6.1.1.

6.1.2Execution and Certification of Resolution of Board of Directors and Shareholders of Servco and Board of Directors of AAHA.  A duly adopted and certified copy of a Resolution of the Board of Directors of and shareholders of Servco, and the Board of Directors of AAHA, respectively, approving the transactions contemplated by this Agreement and authorizing the execution and delivery by Servco and AAHA of this Agreement and all other documents contemplated by this Agreement.

6.1.3Removal of Encumbrances and Liens.  A written termination statement or agreement to discharge as of Closing all Encumbrances and liens identified in Schedule 4.5.

6.1.4Michael Hughes Employment Agreement.  An executed employment agreement for Michael Hughes in the form attached as Schedule 6.1.4.

6.1.5Trademark License Agreement.  An executed  copy of the “Trademark License Agreement”, the form of which is attached as Schedule 6.1.5.

6.1.6Sponsorship Agreement.  An executed  copy of the “Sponsorship Agreement”, the form of which is attached as Schedule 6.1.6.

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6.1.7Escrow Agreement. An executed copy of the “Escrow Agreement”, the form of which is attached as Schedule 2.5.

6.1.8Legal Opinion.  An opinion from counsel for Servco and AAHA in the form attached as Schedule 6.1.8.

6.2Deliverables of Buyer.  Buyer shall deliver to AAHA the following at Closing:

6.2.1Michael Hughes Employment Agreement.  An executed employment agreement for Michael Hughes in the form attached as Schedule 6.1.4.

6.2.2Trademark License Agreement.  An executed  copy of the “Trademark License Agreement”, the form of which is attached as Schedule 6.1.5.

6.2.3Sponsorship Agreement. An executed  copy of the “Sponsorship Agreement”, the form of which is attached as Schedule 6.1.6.

6.2.4Escrow Agreement. An executed  copy of the “Escrow Agreement”, the form of which is attached as Schedule 2.5.

6.2.5Purchase Price.  Buyer shall deliver the cash portion of the Purchase Price as set forth in Section 2.4.1.

6.3Termination of AAHA Employees.  Effective as of the Closing and in full compliance with applicable laws and regulations, AAHA shall terminate the employment of each Employee that the Buyer identifies as an individual that Buyer has agreed to hire as an employee of the Buyer.

Article 7
POST-CLOSING COVENANTS

7.1Office and Service Space.  For a reasonable time frame post-Closing, but no longer then four (4) months, AAHA shall provide Buyer free rent with respect to office and service space for those Employees to be hired by the Buyer.  The Buyer shall use its reasonable best efforts to vacate AAHA’s offices within four (4) months post-Closing.

7.2Employees.  For a reasonable time frame post-Closing, but no longer then four (4) months, Buyer shall provide AAHA and Servco access to the Employees, for purposes of winding up the day-to-day operations of Servco, assisting with communications with AAHA members regarding the change in logistics and ownership, filing final sales tax reports, and similar activities.

7.3Access to Assets.  In the event the Buyer determines that certain Assets of Servco, necessary for the Buyer to conduct the operations and business of Servco as conducted prior to Closing, remain in the possession of PVP, AAHA and Servco shall immediately take all commercially reasonable efforts to cause PVP to transfer such Assets to the Buyer within a reasonable period of time; provided, however, that neither AAHA nor Servco

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represent or warrant that PVP will not use such Assets.

7.4PVP.

(a)Within sixty (60) days of Closing, Servco and AAHA shall use commercially reasonable efforts to obtain written assurance from PVP that PVP, except as required by law, and except as otherwise provided for in the Logistics Agreement, has transferred, conveyed or otherwise turned over all Assets to Servco that PVP has in its possession, or in the alternative has destroyed all copies of Servco’s Assets it has in its possession; provided, however, that neither AAHA nor Servco represent or warrant that PVP will not use such Assets.  Notwithstanding the forgoing, PVP shall be permitted to retain certain copies of Servco’s Business Records, as may be required by law; however, PVP shall solely be permitted to use such Business Records for the purposes of complying with applicable federal, state, or local laws, rules, or regulations.

(b)For sixty (60) days after the Closing, AAHA shall use its personal relationships with PVP as well as PVP’s officers, directors and agents to assist the Buyer in securing the business of Servco, recapturing any lost business, minimizing any interference with current Servco customers and assisting the Buyers in achieving its sales goals with respect to the Servco business.   AAHA shall use commercially reasonable efforts in meeting this post closing covenant.

Article 8
CLOSING.

8.1Time, Date and Place of Closing.  The parties are executing the documents necessary to consummate this transaction and are closing this transaction on the same day.  The execution of the documents and closing shall be at the corporate offices of AAHA in Lakewood, Colorado on July 1, 2008 (the “Closing”).  The Closing shall be effective as of 12:00 A.M. MDT. on July 1, 2008 (the “Effective Date”).  At the Closing, Buyer shall pay the Purchase Price as provided in this Agreement, and the parties shall make the deliveries and take the actions specified in Article 6.

8.2Documents Delivered After Closing.  At any time after Closing, each party to this Agreement shall each execute, acknowledge, and deliver any further assignments, conveyances and other assurances, documents and instruments of transfer reasonably requested by any other party to this Agreement, and shall take any other action consistent with the terms of this Agreement that may reasonably be requested by any other party to this Agreement for the purpose of effecting the transactions contemplated by this Agreement.

Article 9
NONCOMPETITION AND CONFIDENTIAL INFORMATION.

9.1Purpose Of Noncompetition And Confidential Information Agreements.  Servco and AAHA acknowledge that Buyer is purchasing the Assets and is assuming the Liabilities of Servco with the expectation of continuing the general business of Servco and continuing the services to Servco’s existing and expected future customers and clients.  Servco

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and AAHA agree that Buyer is entitled to a period of time to benefit from the purchase, and that Servco and AAHA should be restricted from competing with Buyer or benefiting from the Proprietary Information and Goodwill purchased by Buyer.

9.2Noncompetition Agreement, Duration and Area.  For a period of five (5) years following Closing, in the United States, Servco and AAHA agree not to Compete with Buyer.  Compete” means to directly or indirectly solicit, sell or render any services or products in a Competitive Business, (other than as a passive shareholder of a publicly traded company) including, but not limited to, as a proprietor, member, partner, investor, shareholder, director, officer, employee, consultant, or independent contractor.    “Competitive Business” means to engage in (i) the distribution of animal health pharmaceuticals, biologicals, and surgical, laboratory, and x-ray supplies ordinarily used in the business of providing veterinary care and (ii) the provision of inventory management services.

9.3Nonsolicitation Covenant.  Servco and AAHA will not, directly or indirectly, for a period of five (5) years following Closing, solicit any customer, client, employee, independent contractor, supplier, or manufacturer’s representative of the Buyer, for the purpose of (i) establishing a relationship for any business or services in a Competitive Business, (ii) causing any client, customer, employee, independent contractor, supplier, or manufacturer’s representative to terminate any relationship with Buyer, or  (iii) interfering with the relationship between the Buyer and any of Buyer’s customers, clients, employees, independent contractors, suppliers, or manufacturer’s representatives.

9.4Non-Hire Covenant..  Servco and AAHA will not, directly or indirectly, for a period of five (5) years following Closing, hire, employ or attempt to hire or employ a Protected Person as an employee, independent contractor, or otherwise of Servco or AAHA or any Related Entity of Servco or AAHA.  A “Protected Person” is any person who is or was an employee or Independent Contractor of the Buyer at the time of the actual or attempted hiring or employment.  An “Independent Contractor” is any person that is in the same line of business as the Buyer, but, for purposes of illustration, does not include accountants or attorneys.  The phrase “Related Entity” means any entity for which Servco or AAHA is a proprietor, member, partner, investor, shareholder, director, officer or employee.

9.5Nondisparagement Covenant.  Except as otherwise required by law, Servco and AAHA will not directly or indirectly, for any reason, intentionally make statements materially injurious to the business reputation or good will of the Buyer or any of its directors, officers or employees.  Nothing in this provision shall prevent Servco or AAHA from giving truthful information to the extent required by subpoena or other legal process.

9.6Confidentiality Agreement and Duration.  For a period of three (3) years post-Closing, Buyer, Servco and AAHA agree to keep confidential and not disclose to any person any Proprietary Information or Confidential Information of the other parties.  The term “Confidential Information” shall mean all confidential, proprietary, or other knowledge, data or information of the Buyer, Servco, or AAHA.  Confidential Information includes all information that the Buyer, Servco, or AAHA has made a concerted effort to keep confidential and includes, but is not limited to, any such information relating to trade secrets, financial information and results, organizational structure, personnel data, marketing strategies, philosophy and objectives,

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project plans, strategy and vision statements, business initiatives, system design, methodologies, processes, competitive advantages and disadvantages, audit reports and materials related to same, systems, operations, technology, existing or potential customer lists, vendor lists, price lists, product development, software development, business plans, advertising or sales programs, and any other information concerning Buyer, Servco, or AAHA, and their respective businesses and operations.  Proprietary Information and Confidential Information does not include information which (i) becomes public knowledge, not as a result of any improper inaction or action of Buyer, AAHA or Servco; (ii)  is disclosed to Buyer, AAHA or Servco by a third party on a nonconfidential basis without violating any law or any other agreement between the third party and Buyer; and (iii) is required to be disclosed by Buyer, AAHA or Servco by any law, statute, rule, regulation, or order of any governmental body or court of competent jurisdiction.  Notwithstanding the forgoing, Buyer, Servco, or AAHA shall be permitted to disclose such Proprietary Information and Confidential Information (i) solely as reasonably necessary, to their directors, shareholders, representatives or agents, including (without limitations) their accountants and attorneys and (ii) as required by applicable law, rule, or regulation.

9.7Inducement of Parties.  Buyer, Servco and AAHA understand and agree that strict observance of the agreements set forth in Article 9 was a substantial inducement to the execution and performance of this Agreement by Buyer, Servco and AAHA.

9.8Acknowledgement by Buyer, Servco and AAHA.  Buyer, Servco and AAHA (i) carefully considered the nature and extent of the restrictions upon each party and the rights and remedies conferred upon the parties under this Article 9, (ii) agree that the restrictions, rights and remedies are reasonable in time, application, amount, and effect, and (iii) agree that the restrictions are supported by sufficient consideration and are not disproportionate to the respective benefits conferred upon Buyer, Servco and AAHA by this Agreement.

Article 10
INDEMNIFICATION

10.1Survival of Representations, Warranties and Covenants

10.1.1Survival for Two Year Period.  Except with respect to Sections 4.4, 4.17, 4.18, 4.19, 4.20, 4.29, 4.30, 4.31, 4.33, 4.34, 5.2, and 5.3, all representations, warranties, and covenants by Buyer, AAHA, and Servco set forth in this Agreement, including without limitation, any representations, warranties, or covenants set forth in any Schedule or other writing delivered pursuant to this Agreement, shall survive the Closing for a period of two years,  and shall be deemed to be material and to have been relied upon by Buyer, AAHA, and Servco.

10.1.2Survival for Three Year Period.  The representations, warranties, and covenants by AAHA, and Servco set forth in Sections 4.4, 4.17, 4.18, 4.19, and 4.20 of this Agreement, including without limitation, any representations, warranties, or covenants set forth in any Schedule or other writing delivered pursuant to Sections 4.4, 4.17, 4.18, 4.19, and 4.20 of this Agreement, shall survive the Closing for a period of three years, and shall be deemed to be material and to have been relied upon by Buyer.

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10.1.3Survival for Unlimited Period.  The representations, warranties, and covenants by Buyer, AAHA, and Servco set forth in Sections 4.29, 4.30, 4.31, 4.33, 4.34, 5.2, 5.3 and Article 9 of this Agreement, including without limitation, any representations, warranties, or covenants set forth in any Schedule or other writing delivered pursuant to Sections 4.29, 4.30, 4.31, 4.33, 4.34, 5.2, 5.3 and Article 9 of this Agreement, shall survive the Closing, and shall be deemed to be material and to have been relied upon by Buyer, AAHA and Servco.

10.2Indemnification.  Notwithstanding any investigation or due diligence made by or on behalf of any party hereto or any information which any party may now or hereafter receive, (except as provided in Section 4.37(iv)), (i) Servco and AAHA, jointly and severally, agree to defend, indemnify, hold harmless and reimburse Buyer and its past, present and future employees, officers, directors, stockholders, agents, Affiliates, representatives, successors and assigns, and any combination of them (“Buyer Protected Parties”) from all Claims made against or suffered by Buyer Protected Parties to the extent that any such Claim is a Covered Act (as defined in Section 10.4.1); and (ii) Buyer agrees to defend, indemnify, hold harmless and reimburse Servco and AAHA and their respective past, present and future employees, officers, directors, stockholders, agents, Affiliates, representatives, successors and assigns, and any combination of them (“Seller Protected Parties”) from all Claims made against or suffered by a Seller Protected Party to the extent that any such Claim is a Covered Act (as defined in Section 10.4.2).  An “Affiliate” is any person or entity controlled by, in control of, or under the common control of any person or entity.

10.3Claims

10.3.1Definition of Claims.  The word “Claims” shall be broadly construed to mean all threatened, pending or completed (i) claims, demands, losses, injuries, damages, liabilities, judgments, fines, penalties, suits, causes of action, or awards; (ii) settlements, compromises, or plea bargains (subject to the procedures set forth in Article 11); (iii) diminution of value; (iv) reasonable attorney fees, reasonable expert fees, costs, or expenses incurred in connection with Claims; (v) interest (such as pre- and post-judgment interest) incurred by a Buyer Protected Party in connection with a third-party claim; (vi) damages or losses arising from, connected with, or related to revocation or loss of license, revocation or loss of permits, revocation or loss of registrations, or revocation or loss of accreditation; and (vii) compensatory damages, consequential damages, incidental damages, punitive damages, treble damages, exemplary damages, liquidated damages, lost profits, or other amounts, all of which are payable by or suffered by a Buyer Protected Party and which arise from, are related to, or are connected with the Covered Acts.  Claims may arise from, relate to, or be connected with (i) losses or injuries suffered by the Buyer Protected Parties or Seller Protected Parties without the involvement of third-parties and without being caused by third-parties; (ii) actions or omissions of third-parties; (iii) an amount payable to a third party, including a party’s own officers, employees, attorneys or representatives; (iv) civil, criminal, regulatory, investigative, administrative and other actions or omissions of federal, state and other governmental authorities; (iv) judicial, bankruptcy, administrative and other governmental proceedings and processes; and (v) trials, appeals, conferences, arbitrations, and mediations.  Claims may be (i) actual or alleged; (ii) direct or indirect; (iii) acts or omissions to act; (iv) known or unknown; (v) present or contingent; (vi) matured or unmatured; (vii) suspected or unsuspected; or (viii) any combination of these.  Claims include without limitation amounts which a party owes or pays to

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(i) third parties; (ii) federal, state and other governmental agencies; and (iii) a party’s own officers, employees, attorneys, representatives and others.

10.3.2No Admission.  The definition of Claims set forth in Section 10.3.1 does not constitute an admission by any party that such Claims exist, but only means that if such Claims exist, then this Article 10 relating to Indemnification applies.  Without limiting the foregoing, AAHA and Servco have not agreed to be responsible for compensatory damages, consequential damages, incidental damages, punitive damages, treble damages, exemplary damages, liquidated damages, or lost profits of Buyer in connection with any Covered Act, except as expressly provided in this Agreement; Buyer reserves its rights to seek recourse against AAHA and Servco for the foregoing types of damages under applicable law, subject to the limitations set forth in Section 10.5.  Similarly, AAHA and Servco have not agreed to be responsible for interest incurred by Buyer in connection with any Covered Act, except as expressly provided in this Agreement; Buyer reserves its rights to seek recourse against AAHA and Servco for interest under applicable law, subject to the limitations set forth in Section 10.5.

10.4Covered Acts.

10.4.1AAHA and Servco  Covered Acts.  With respect to the indemnification obligations of AAHA and Servco, a “Covered Act” is any Claim to the extent it arises from, relates to, is connected with, or is caused by any of the following:

(a)Servco’s and AAHA’s Obligations Under This Agreement.  The performance or lack of performance of Servco’s and AAHA’s obligations under this Agreement.

(b)Controlled Substances and Pharmaceutical Products.  All Claims made against or suffered by any Buyer Protected Party to the extent they arise from, relate to, or are connected with any action or omission, or failure or alleged failure, of Servco, AAHA, or any Person acting on behalf of Servco or AAHA, to comply with any federal, state, local or foreign law, statute, ordinance, regulation, permit, license or order arising from, relating to, connected with the regulation, manufacturing, distributing, transporting, labeling, packaging, dispensing, using, reporting, storing, disposing, importing, exporting, controlling, wholesaling, brokering or trading of Controlled Substances or Pharmaceutical Products, including without limitation (i) failure to comply with Controlled Substance Laws; (ii) failure to comply with all federal and state law, statute, ordinance, regulation, permit, license or order pertaining to manufacturing, distributing, transporting, labeling, packaging, dispensing, using, reporting, storing, disposing, importing, exporting, brokering or trading of Pharmaceutical  Products; (iii) failure to properly display name, address, registration numbers and other information of both shipper and recipient on distribution documents; (iv) failure to maintain all required records, registrations, licenses, accreditation, and permits in all federal and state jurisdictions; (v) failure to comply with federal and state Pedigree Laws; and (vi) failure to provide, authenticate, or pass the pedigree in compliance with Pedigree Laws.

(c)Records.  All Claims made against or suffered by any Buyer Protected Party to the extent they arise from, relate to, or are connected with any action or omission, or failure or alleged failure, of Servco, AAHA or any Person acting on behalf of Servco or AAHA arising from, relating to, or connected with preparing, creating, maintaining and preserving

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accurate records in compliance with any federal, state, local or foreign law, statute, ordinance, regulation, permit, license or order of (i) Controlled Substances and Pharmaceutical Products, and (ii) transactions relating to Controlled Substances, Pharmaceutical Products, and Pedigree Laws.

(d)Theft or Diversion.  All Claims made against or suffered by any Buyer Protected Party to the extent they arise from, relate to, or are connected with any action or omission, or failure or alleged failure, of Servco, AAHA or any Person acting on behalf of Servco or AAHA to comply with any federal, state, local or foreign law, statute, ordinance, regulation, permit, license or order arising from, relating to, or connected with the theft or diversion of Controlled Substances or Pharmaceutical Products into other than legitimate medical, scientific and industrial channels.

(e)Taxes.  All Claims made against or suffered by any Buyer Protected Party to the extent they arise from, relate to, or are connected with any action or omission, or failure or alleged failure, of Servco, AAHA or any Person acting on behalf of Servco or AAHA regarding any Taxes imposed on or payable by Servco.

(f)Servco Internal Corporate Affairs.  Any Claims made against any Buyer Protected Party to the extent they arise from, relate to, or are connected with any dispute between and among Servco, Professional Veterinary Products, Ltd. (“PVP”), AAHA, or any combination of them, relating to the internal affairs of Servco, including without limitation rights or obligations of  Servco, or its directors, officers, or shareholders, such as dissenters rights, dividend rights, voting rights, shareholder rights, director obligations, fiduciary duties of directors and officers, approval of this transaction, oppression of minority shareholders, and conflicting interest transactions.

(g)Logistics Agreement.  All Claims made against or suffered by any Buyer Protected Party to the extent they arise from, relate to, or are connected with any action or omission, or failure or alleged failure, of Servco, AAHA or any Person acting on behalf of Servco or AAHA, to perform its obligations under the  Logistics Agreement between and among Servco, AAHA and PVP that terminated on or about June 30, 2008.

(h)PVP.  All Claims made directly or indirectly by PVP against or suffered by any Buyer Protected Party to the extent they arise from, relate to, or are connected with this Asset Purchase Agreement, any agreements ancillary to this Asset Purchase Agreement, or the transaction contemplated by this Asset Purchase Agreement, including without limitation any Claims for tortious interference, unfair competition, or antitrust.

(i)Excluded Assets and Excluded Liabilities.  All Claims made against or suffered by any Buyer Protected Party to the extent they arise from, relate to, or are connected with any action or omission, or failure or alleged failure, of Servco, AAHA or any Person acting on behalf of Servco or AAHA arising from, related to, or connected with any Excluded Assets or Excluded Liabilities.

10.4.2Buyer Covered Acts.  With respect to the indemnification obligations of Buyer, a “Covered Act” is any Claim to the extent it arises from, relates to, is connected with, or

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is caused by any of the following:

(a)Buyer’s Obligations Under This Agreement.  The breach by Buyer of any representation, warranty or covenant under this Agreement, including any applicable obligation of good faith under applicable common law.

(b)Assets and Assumed Liabilities.  All Claims made against or suffered by any Seller Protected Party to the extent attributable to any action or omission, or failure or alleged failure, of Buyer arising from, related to, or connected with the ownership or use of any Assets after the Closing or the failure to satisfy any Liability assumed by Buyer under Section 3.2.

10.5Indemnification Cap and Uncapped Claims.  Except as stated in the remainder of this Section 10.5, Servco’s and AAHA’s obligation to indemnify, defend, and hold Buyer harmless pursuant to Section 10.2 is limited to the Escrow Amount identified in Sections 2.4.2 and 2.5 (the “Cap”).  Notwithstanding the previous sentence, and except that the aggregate liability of AAHA and Servco shall not exceed the Purchase Price, Servco’s and AAHA’s obligation to indemnify, defend and hold Buyer harmless is not limited in any manner by other consideration received by Servco pursuant to this Agreement and is not limited by the Cap in the event of Claims (i) regarding breaches of representations, warranties and covenants set forth in Sections 4.4, 4.29, 4.30, 4.31, 4.33, 4.34 and Article 9; (ii) arising in the sixty (60) day period after Closing regarding breaches of representations, warranties and covenants set forth in Sections 4.5, 4.6, 4.8, and 4.25; (iii) regarding Servco’s or AAHA’s intentional misrepresentations or fraud; (iv) relating to Sections 10.4.1(e), 10.4.1(f), 10.4.1(g), 10.4.1(h), and 10.4.1(i); or (v) regarding a failure by Servco to make the payment to Buyer required by Section 2.4.4 (in each such case, an “Uncapped Claim”).  Buyer may recover directly from Servco and AAHA for any Uncapped Claim without recourse to, and depleting funds from, the Escrow Amount.  Except for (i) any Uncapped Claim or (ii) any remedy for the breach of any covenant by AAHA or Servco, Buyer’s exclusive remedy at law is to obtain payment for the Claim from the Escrow Amount identified in Sections 2.4.2 and 2.5, and such rights of Buyer are in derogation of any other rights to monetary recovery under any statutory law, common law, or equitable right or remedy.

10.6Special Sharing for Regulatory Claims.  To the extent that any Claim is made against Buyer with respect to any Covered Act described in Sections 10.4.1(b), 10.4.1(c), or 10.4.1(d), or with respect to any other actual or alleged violation by Servco or any Person acting on behalf of Servco of any Controlled Substance Law, Pharmaceutical Products, or Pedigree Law (collectively, a “Regulatory Claim”), then (i) Buyer will pay one-half (1/2) of such Regulatory Claim (including without limitation the costs of investigation, attorney fees, expert fees, fines, penalties, judgments, settlements, and otherwise), and Servco will pay the other one-half (1/2) of such Regulatory Claim (including without limitation the costs of investigation, attorney fees, expert fees, fines, penalties, judgments or otherwise), with Servco’s payment to be made with funds from the Escrow Amount and only to the extent that funds remain in the Escrow Amount; (ii) such Regulatory Claim shall be defended by counsel jointly chosen by Buyer and Servco; (iii) Buyer and Servco shall have joint and equal control over the direction of such defense; and (iv) the settlement of any Regulatory Claim requires the consent of both Buyer and Servco.  Notwithstanding the foregoing, (i) if Buyer or Servco wishes to defend or

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settle any Regulatory Claim on its own, it may do so at its own expense; (ii) Buyer may not agree to any non-monetary settlement that affects Servco or AAHA without their consent, and (iii) Servco may not agree to any non-monetary settlement that affects Buyer without Buyer’s consent.   A Regulatory Claim and the sharing set forth in this Section 10.6 does not apply to, and excludes, that portion of any Claims that are made against Servco, AAHA, or PVP, with the understanding that the sharing set forth in this Section 10.6 applies only to Regulatory Claims made against Buyer.

Article 11
REMEDIES

11.1Claim Notice and Cure Period.  In the event of a Claim, then the party seeking indemnification, remedy or cure shall provide reasonable written notice of the Claim to the party from whom such party seeks indemnification, remedy or cure.  From the date of notice the defaulting party shall have 30 days to cure the Claim.  If the Claim remains uncured after such 30-day period, then the party seeking indemnification, remedy or cure shall have all remedies provided by law and as stated in and modified by this Agreement.

11.2Purchase Price Offset.  Without limiting the availability of other remedies, when the Claims of Buyer, if any, in the aggregate exceed $25,000, Buyer shall have the right to offset, without penalty, from the Escrow Amount, subject to the terms and conditions of the Escrow Agreement, any damage suffered by Buyer relating to the amount that such Claims, in the aggregate, exceed $25,000.  The damage suffered by Buyer shall be an amount equal to the monetary damage, liability, expenses, fees, costs, or any combination thereof arising from, related to, or connected with the Claim, unless the amount is to be shared as set forth in Section 10.6 relating to Regulatory Claims.   The deduction shall occur on or after AAHA’s or Servco’s failure to cure the Claim and in compliance with the provisions of the Escrow Agreement.

11.3Purchase Price Offset:  Regulatory and Tax Claims.  Notwithstanding Section 11.2, with respect to any (i) Regulatory Claims or (ii) any Claims relating to Taxes, Buyer shall have the right to offset, without penalty, from the Escrow Amount, subject to the provisions of the Escrow Agreement, any damage suffered by Buyer from the first dollar.  By way of illustration, one-half (1/2) of any such Regulatory Claim (in accordance with the provisions of Section 10.6) and all of any Claims relating to Taxes shall not be limited to or subject to the attainment of $25,000 in Claims.

11.4Special Remedies for Noncompetition and Confidentiality Violations by Servco or AAHA.  Breach of the noncompetition agreement or the confidentiality agreement set forth in Article 9 will result in irreparable harm to Buyer, which cannot be reasonably or adequately compensated by damages.  Therefore, in addition to any other remedy or right of Buyer (including rights and remedies at law or in equity, including recovery of damages), Buyer shall have the following rights: (i) right to an immediate injunction or other equitable relief enjoining any threatened or actual breach, and (ii) the right to recover damages from each person or entity that breaches its obligations.  In the event of Servco’s or AAHA’s breach or anticipated breach of the noncompetition and confidentiality provisions of this Agreement, Buyer is not required to comply with the Claim Notice and Cure Period provision (set forth in Section 11.1) or the Claim Resolution Procedure provision (set forth in Section 11.11) to obtain

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non-monetary relief, but any Claims for monetary relief shall comply with the Claim Resolution Procedure provision (set forth in Section 11.11).

11.5Special Remedies for Confidentiality Violations by Buyer.  Breach of the confidentiality agreement set forth in Article 9 will result in irreparable harm to Servco or AAHA, which cannot be reasonably or adequately compensated by damages.  Therefore, in addition to any other remedy or right of Servco or AAHA (including rights and remedies at law or in equity, including recovery of damages), Servco or AAHA shall have the following rights: (i) right to an immediate injunction or other equitable relief enjoining any threatened or actual breach, and (ii) the right to recover damages from each person or entity that breaches its obligations.  In the event of Buyer’s breach or anticipated breach of the confidentiality provisions of this Agreement, Servco or AAHA are not required to comply with Claim Notice and Cure Period provision (set forth in Section 11.1) and the Claim Resolution Procedure provision (set forth in Section 11.11), to obtain non-monetary relief, but any Claims for monetary relief shall comply with the Claim Resolution Procedure provision (set forth in Section 11.11).

11.6Handling Indemnification for Third-Party Claims

11.6.1Notice.  Promptly after receipt by a person entitled to indemnity under this Agreement (“Indemnified Person”) of notice of a Claim by a third party (“Third-Party Claim”) against it, the Indemnified Person shall give notice to the person obligated to indemnify under this Agreement (“Indemnifying Person”) of the assertion of the Third-Party Claim.  The failure to notify the Indemnifying Person will not relieve the Indemnifying Person of any liability that an Indemnifying Person has to any Indemnified Person, except to the extent that the Indemnifying Person demonstrates that the defense of the Third-Party Claim is prejudiced by the Indemnified Person’s failure to give such notice.

11.6.2Effect of Notice.  If an Indemnified Person gives notice to the Indemnifying Person pursuant to Section 11.6.1, the Indemnifying Person shall be entitled to assume the defense of the Third-Party Claim if the (i) Indemnifying Person provides reasonable assurance to the Indemnified Person of the Indemnifying Person’s financial capacity to defend and satisfy the Third-Party Claim; (ii) counsel engaged by the Indemnifying Person for the defense of the Third-Party Claim is reasonably satisfactory to the Indemnified Person; and (iii) subject to any reasonable reservation of rights, the Indemnifying Person expressly agrees in writing to the Indemnified Person that, as between the two, the Indemnifying Person is solely obligated to satisfy and discharge the Third-Party Claim.  If the Indemnifying Person is also a person against whom the Third-Party Claim is made and the Indemnified Person determines in good faith that joint representation would be inappropriate, then the Indemnifying Person is not entitled to assume the defense of the Third-Party Claim against the Indemnified Person.  If notice is received by an Indemnifying Person of the assertion of any Third-Party Claim and the Indemnifying Person does not, within ten (10) days after receipt of the notice, give notice to the Indemnified Person of the Indemnifying Person’s election to assume the defense of the Third-Party Claim in the manner provided above, the Indemnifying Person will be bound by any determination made relating to the Third-Party Claim or any reasonable compromise or settlement consummated by the Indemnified Person.  The Indemnifying Person shall not be responsible for the attorney fees and costs of more than one Indemnified Person regardless of the number of indemnified Persons involved in the Claim.

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11.6.3Defense.  After notice of the Indemnifying Person’s election to assume the defense of the Third-Party Claim, (i) subject to any reasonable reservation of rights, such assumption will conclusively establish for purposes of this Agreement that the Claims made in that Third-Party Claim are within the scope of and subject to indemnification; (ii) the Indemnifying Person shall not, so long as it diligently conducts such defense, be liable to the Indemnified Person under this Article 11 for any fees of other counsel or any other expenses related to the defense of the Third-Party Claim subsequently incurred by the Indemnified Person; (iii) the Indemnified Party may nevertheless thereafter participate in the defense but at its own expense; and (iv) compromise or settlement of the Third-Party Claims shall not be consummated by the Indemnifying Person without the Indemnified Person’s consent unless (a) there is no finding or admission of any violation of rights of any person or violation of any law, rule, regulation, license, permit, order, contract, or agreement; (b) the sole relief is monetary damages that are paid in full by the Indemnifying Person; and (c) the Indemnified Person shall have no liability with respect to any compromise or settlement.

11.6.4Reservation of Right to Defend.  If an Indemnified Person determines in good faith that there is a reasonable probability that a Third-Party Claim may adversely affect the Indemnified Person or its Affiliates other than as monetary damages (e.g., loss, revocation, denial, restriction or limitation of any permit, license, accreditation or registration), the Indemnified Person may, by notice to the Indemnifying Person, assume the exclusive right to defend, compromise or settle the Third-Party Claim.  In such event, the Indemnifying Person will not be obligated to pay the attorneys fees and costs of the Indemnified Person and will not be bound by (i) any determination of any Third-Party Claim so defended for the purposes of this Agreement or (ii) any compromise or settlement effected without its consent, which may not be unreasonably withheld.

11.6.5Cooperation.  With respect to any Third-Party Claim subject to indemnification, (i) each person shall keep the other person reasonably informed of the status of the Third-Party Claim and any related proceedings at all stages where such person is not represented by its own counsel; (ii) each party, at its own expense, shall render to each other such assistance as they may reasonably require of each other and to cooperate in good faith with each other in order to ensure the proper and adequate defense of any Third-Party Claim; and (iii) each party shall act preserve in full (to the extent possible) the confidentiality of all confidential information, the attorney-client privilege, and the work-product privilege.  The cooperation includes without limitation (i) avoiding production of confidential information (consistent with applicable law and rules of procedure), (ii) preserving confidential communications between each person and counsel responsible for or participating in the defense of any Third-Party Claim, and (iii) making available for preparation for testimony, and for testimony, the personnel of such party.

11.7Handling Indemnification for All Other Claims.  A request for indemnification of any Claim not involving a third party (as set forth in Section 11.6) may be asserted pursuant to Section 11.1.

11.8Payment of Claim.  Except as set forth in Sections 11.2 and 11.3, and without limiting the availability of other remedies, after determination, settlement or compromise of any Third-Party Claim pursuant to Section 11.6 or notice pursuant to Section 11.7, the Indemnifying

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Party shall promptly pay to the Indemnified Party the amount of the Claim.  The exercise in good faith of the right of offset, as set forth in Sections 11.2 and 11.3, whether or not ultimately determined to be justified, will not constitute an event of default or a violation or breach of any law, rule, regulation or agreement.  For purposes of calculating the amount of damages to which a party is entitled as a result of any Claim, such representation or warranty shall not be deemed qualified by any concept of “material,” “materiality,” “material adverse affect” or other similar qualification.

11.9Acts of PVP.  The obligation of AAHA and Servco to defend, indemnify and hold harmless the Buyer Protected Parties in connection with any Covered Act shall not be negated by, limited by, or otherwise affected by any law, rule, judicial decision, or otherwise that is based upon the sole, concurrent, contributory or comparative active or passive negligence or gross negligence of PVP, Servco or AAHA in connection with a Covered Act.

11.10Attorney Fees and Costs.  If a dispute shall arise as to whether either party is in default under this Agreement, the prevailing party shall be awarded reasonable attorney fees and costs in any suit, action or proceeding, including trial, arbitration, mediation, or appeal, as awarded by the court, arbiter or mediator.

11.11Disputes.  If a dispute arises between the parties regarding their rights or obligations under this Agreement, the parties shall first attempt to settle the dispute by direct discussions.  If the dispute cannot be settled by the parties by direct discussions, then the parties agree to endeavor to settle the dispute in an amicable manner by mediation administered by the American Arbitration Association under its Commercial Mediation Rules.  Thereafter, any unresolved dispute arising from or relating to this Agreement or a breach of this Agreement shall be resolved as provided by this Agreement and by law.

11.12Rights Cumulative.  Except as expressly provided in this Agreement, and to the extent permitted by law, any remedies described in this Agreement are cumulative and not alternative to any other remedies available at law or in equity.

11.13Nonwaiver of Remedies.  The failure or neglect of a party to enforce any remedy available by reason of the failure of the other party to observe or perform a term or condition set forth in this Agreement shall not constitute a waiver of the term or condition.  A waiver by a party (i) shall not affect any term or condition other than the one specified in the waiver, and (ii) shall waive a specified term or condition only for the time and in a manner specifically stated in the waiver.

11.14Governing Law, Jurisdiction, and Venue.  This Agreement shall be governed by Idaho law.  Any proceeding initiated by Buyer arising out of or in connection with this Agreement will be determined solely by the federal court sitting in the City and County of Denver, Colorado (or, if the federal court denies jurisdiction, the state court sitting in the City and County of Denver, Colorado), and any proceeding initiated by AAHA or Servco arising out of or in connection with this Agreement will be determined solely by the federal court sitting in Ada County, Idaho (or, if the federal court denies jurisdiction, the state court sitting in Ada County, Idaho), and the parties consent to the jurisdiction and venue of those courts.

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Article 12
GENERAL PROVISIONS.

12.1Press Releases.  No party to this Agreement shall issue any press release or make any public announcement relating to the existence or substance of this Agreement unless (i) the party has received the prior written agreement of Buyer, or (ii) the disclosure is required by applicable law.  To the extent that the Buyer is obligated to disclose any matter related to this Agreement under state or federal securities laws, the Buyer will provide a reasonable opportunity for AAHA and Servco to review and comment upon such disclosure and will not unreasonably withhold its consent to any requested change to such disclosure to the extent that such change does not cause the Buyer to fail to satisfy its obligations under applicable law.

12.2Notices.  All notices and other communications (“Notices”) shall be in writing and may be delivered (i) in person, with the date of notice being the date of personal delivery, (ii) by United States Mail, postage prepaid for certified or registered mail, return receipt requested, with the date of notice being the date of the postmark on the return receipt, (iii) by fax, with confirmation of the transmittal of the fax and a copy of the fax deposited on the same day in the United States Mail, with the date of notice being the date of the fax, (iv) by e-mail, with confirmation of sending of the e-mail and a copy of the e-mail deposited on the same day in the United States Mail, with the date of notice being the date of the e-mail, or (v) by nationally recognized delivery service such as Federal Express, with the date of notice being the date of delivery as shown on the confirmation provided by the delivery service.  Notices shall be addressed to the following addresses, or such other address as one party shall provide the other parties:

If to Buyer:	Jim Cleary
	Chief Executive Officer
	MWI Veterinary Supply Co.
	651 S. Stratford, Suite 100
	Meridian, Idaho 83680
	Fax:
	Email: JCleary@mwivet.com
with copy to:	Brian C. Larsen
	Hawley Troxell Ennis & Hawley LLP
	877 West Main Street, Suite 1000
	P.O. Box 1617
	Boise, Idaho 83702
	Fax: (208) 342-3829
	Email: blar@hteh.com
If to AAHA or Servco:	John Albers, DVM
	Executive Director
	American Animal Hospital Association
	12575 W. Bayaud Ave.
	Lakewood, Colorado, 80228
	Fax: (303) 986-1700
	Email: john.albers@aahanet.org

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with copy to:	William E. Walters
	Kelly Garnsey Hubbell & Lass LLC
	1441 18th Street, Suite 300
	Denver, CO 80202-1225
	Fax: (303) 293-8705
	Email: bwalters@kghllaw.com
and another copy to:	James F. Wood
	Sherman & Howard L.L.C.
	633 17th Street, Suite 3000
	Denver, CO 80202
	Fax: (303) 298-0940
	Email: jwood@sah.com

12.3Payment of Expenses.  Buyer and AAHA shall each pay their own fees and expenses, including fees and expenses of their respective attorneys, accountants, advisors, agents and other representatives, incidental to the preparation and performance of  this Agreement.

12.4Time of the Essence.  Time is of the essence with respect to the obligations to be performed under this Agreement.

12.5Entire Agreement.  All Schedules to this Agreement constitute a part of this Agreement.  This Agreement, together with the accompanying Schedules, constitutes the entire, completely integrated agreement among the parties and supersedes all prior memoranda, correspondence, conversations and negotiations.

12.6Disclosures.  The parties shall make various disclosures in this Agreement and in various schedules to this Agreement.  The schedules are bound in a separate volume entitled “Disclosure Schedules for Asset Purchase Agreement Between MWI Veterinary Supply Co. as Buyer and AAHA Services Corporation and American Animal Hospital Association” (“Disclosure Schedules”) and are incorporated into this Agreement.  A qualification or exception to any representation, warranty, or covenant contained in this Agreement shall not be construed as a qualification or exception to any other representation, warranty, or covenant contained in this Agreement unless the qualification or exception expressly refers to the other representation, warranty, or covenant or unless the applicability of such qualification or exception to another representation, warranty, or covenant is readily apparent on the face of such qualification or exception.

12.7Severability.  The invalidity of any portion of this Agreement shall not affect the validity of any other portion of this Agreement.  If the invalidity or unenforceability is due to the unreasonableness of time or geographical restrictions, the restrictions shall be effective for the period of time and area as a court may determine to be reasonable.

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12.8Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

Article 13
SIGNATURES

	AMERICAN ANIMAL HOSPITAL ASSOCIATION
Date: July 1, 2008	By:	/s/ John Albers, DVM
		John Albers, DVM
		Its: Executive Director
	AAHA SERVICES CORPORATION
Date: July 1, 2008	By:	/s/ John Albers, DVM
		John Albers, DVM
		Its: Chief Executive Officer
	MWI VETERINARY SUPPLY CO.
Date: July 1, 2008	By:	/s/ Jim Cleary
		Jim Cleary
		Its: Chief Executive Officer

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EX-10.14

Exhibit 10.14

* * –  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

LICENSE AGREEMENT

THIS AGREEMENT dated and effective July 1, 2008, is between the AMERICAN ANIMAL HOSPITAL ASSOCIATION (“AAHA”), with its principal offices located at 12575 W. Bayaud Ave., Lakewood, CO 80228 and MWI Veterinary Supply Co. (“MWI”) with its principal offices located at 651 S. Stratford, Suite 100,  Meridian, Idaho 83680.

WHEREAS,  AAHA is an organization exempt from federal income tax under Section 501(c)(6) of the Internal Revenue Code;

WHEREAS,  MWI is an Idaho for profit corporation engaged in distributing animal health products to veterinarians including members of AAHA;

WHEREAS,  AAHA and MWI desire to enter into an agreement whereby MWI shall be granted an exclusive license to use the registered trademark “AAHA MarketLink” and such other Proprietary Materials as defined in this Agreement solely in connection with the AAHA Marketlink Program (“Program”) whereby MWI shall market and sell veterinary products to AAHA members; and

WHEREAS,  MWI shall market its products to AAHA members in connection with the Program and under the name AAHA Marketlink;

NOW, THEREFORE, in consideration of the mutual promises set forth in this Agreement and other good and valuable consideration, the parties agree as follows:

1.             Statement of Purposes and Objectives.  MWI shall be recognized as the sole AAHA endorsed distributor of veterinary products to AAHA members in connection with the Program.  The overall objective of AAHA in granting a license to MWI is to provide a key economic benefit to AAHA members, generate revenue that can be used by AAHA for its existing programs and services and develop new programs and services that meet the needs of AAHA and its membership.

2.             Relationship of the Parties.  Neither party shall represent or hold itself out to be a legal representative, joint venturer, or partner of the other party.  MWI and AAHA are independent contractors and are not authorized to make any contract, agreement, warranty or representation on behalf of the other party or to create any obligations, express or implied, on behalf of the other party without the prior written consent of that party.

3.             Licensing Royalty and Payments.  In exchange for an exclusive license to use the federally registered mark  “AAHA Marketlink” as well as a non-exclusive license to use the AAHA name (collectively the “Marks”) and the AAHA membership and mailing lists  (all such intellectual property is collectively referred to as “Proprietary Materials”) only in conjunction with the Program,  MWI agrees to:

3.1.          Minimum License Payment.  During the term of this Agreement, and any renewal terms, pay AAHA a minimum license royalty of $25,000 per year. (“Minimum License Payment”) The first installment shall be payable upon execution of this Agreement and subsequent installments shall be payable on July 15^th of each year.

3.2.          Yearly Royalty Payment.  For a period no longer then ten (10) years, MWI shall pay an amount equal to 0.10% of the Gross Sales to AAHA members  from July 1 to June 30 (whether purchasing through the Program or MWI) which exceeds the Sales Base, less the Minimum License Payment (“Yearly Payment”).   For purposes of this Agreement, “Gross Sales” shall be defined as MWI’s invoiced sales plus agency orders transmitted by MWI to Merial.  The Yearly Payment shall be payable by MWI to AAHA by July 15^th of each year.

3.3.          Sales Base.  The “Sales Base” shall be defined as AAHA Services Corporation’s and MWI’s total revenues and Merial agency sales to AAHA members (whether purchasing through the Program or MWI) for the period from May 1, 2007, through April 30, 2008, equal to /**/.  For a period of sixty (60) days from the effective date of this Agreement, the parties may revise the Sales Base, as applicable, to accurately reflect the total revenues and Merial agency sales to AAHA members (whether purchasing through the Program or MWI) for the period from May 1, 2007, through April 30, 2008.

3.4           Example.  If Gross Sales to AAHA members in year 2009 equaled /**/, the Yearly Royalty Payment due and payble to AAHA would equal /**/ calculated as follows: ((/**/ - - /**/) * 0.10%) - $25,000 = /**/.

4.             Usage of License.  This license is solely for use in connection with the Program and may not be used for purposes of suggesting AAHA’s approval or endorsement of any other products or services of MWI.  In the event of termination of this Agreement as provided for in this Agreement, this license will be forfeited immediately by MWI to AAHA.

5.Usage of Proprietary Materials.  MWI agrees that it will comply with AAHA’s written guidelines with respect to the use of the Marks, as set forth on Exhibit A.  MWI acknowledges and agrees that:  (i) it shall not use the AAHA Marks in a manner likely to diminish the AAHA Marks’ commercial value; (ii) it shall not knowingly permit any third party to use the AAHA Marks unless authorized to do so in writing by AAHA; (iii) it shall not knowingly use or permit the use of any mark, name, or image likely to cause confusion with the AAHA Marks; (iv) it shall not use or permit the use the AAHA Marks in such a manner as to create the impression that AAHA has endorsed, directly or indirectly, any of the goods and services of MWI; (v) all goodwill associated with the Marks and the Program shall inure to

AAHA and all goodwill associated with MWI shall inure to MWI; (vi) the AAHA Marks and the Proprietary Materials are and shall remain the sole property of AAHA; and (vi) nothing in this Agreement shall confer in MWI any right of ownership in the AAHA Marks and the Proprietary Materials and MWI shall not make any representation to that effect, or use the Marks or Proprietary Materials in a manner that suggests that such rights of ownership have been conferred.

6.             Control of AAHA Proprietary Materials.  MWI acknowledges and agrees that AAHA has invested substantial time, money and other resources in the development of its Proprietary Materials.  MWI acknowledges and agrees that the Proprietary Materials and all right, title and interest therein, is and shall remain the exclusive property of AAHA.  AAHA shall have the right to obtain and to hold in its trademarks, servicemarks, copyrights, registrations or such other protection as may be appropriate to protect the Proprietary Materialsand MWI shall do nothing to invalidate them.   Nothing contained in this Agreement shall give MWI any right, title or interest in the Proprietary Materials except as specifically provided for in this Agreement.   MWI shall not assign, transfer or otherwise convey its license to use the Proprietary Materials nor grant a sublicense to use the Proprietary Materials to any person, firm or entity, including but not limited to, any parent, subsidiary, associated, affiliated or related company without written approval from AAHA; provided, however, that MWI may license the right to use any of its marks which incorporate the AAHA logo upon prior written approval from AAHA.  Upon MWI becoming aware of the unauthorized use of the Proprietary Materials, MWI agrees to notify AAHA of any unauthorized use of the Proprietary Materials within five (5) days after such unauthorized use comes to the attention of MWI.

7.Database Services. On a quarterly basis, AAHA shall provide MWI with certain data concerning the current membership of AAHA for the purpose of marketing the Program to AAHA members.  Upon request, AAHA shall provide data in the appropriate format (e.g., electronic medium or mailing labels) to MWI.   Nothing herein shall be construed to grant MWI any ownership rights in or to the data base owned by AAHA.

8.Participation and Reporting Requirements.   Only current AAHA members, in good standing with AAHA, shall be permitted to participate in the Program.  Except as otherwise required by applicable federal, state, provincial or local laws, rules or regulations, MWI shall distribute and ship products only to the address of the AAHA member as it appears in AAHA’s membership data base and MWI shall take reasonable steps necessary to insure that participating AAHA members do not re-sell products to other veterinarians, other practices (without regard to membership or entity) or to the public through catalogs or other distribution outlets.  On at least a quarterly basis, MWI shall provide AAHA with a list of all AAHA members enrolled in the Program as set forth in this Agreement.   Upon receipt of such list, AAHA will verify that all such AAHA members are in good standing with AAHA, with applicable dues current and paid.   Any persons who are no longer current AAHA members will be identified to MWI and MWI shall advise such persons that they are no longer eligible to participate in the Program.

9.             Inspection and Review.  Upon reasonable notice, AAHA shall have the right, at its own expense and without unduly disrupting the business of MWI, to conduct periodic onsite reviews or audits of MWI’s Program files and information with respect to the computation of the

Yearly Royalty Payment, as described in Section 3.2, and MWI’s use of the Proprietary Materials.

10.           Obligations of MWI.  In addition to its other duties and obligations under this Agreement, MWI represents and warrants to AAHA that it shall:

A.Use its reasonable best efforts to market the Program to AAHA member customers.

B.Meet periodically with AAHA representatives to review the Program, and develop recommendations for consideration by AAHA. MWI and AAHA shall attend such meetings at their own expense.

C.Seek to advise and keep AAHA informed of the relative desirability of the structure of the Program, potential new programs and general trends and changes in the market.

D.With respect to this Agreement and the terms and conditions set forth herein, materially comply with any and all practices and procedures required by the laws or regulations of any state or other jurisdiction.

E.Become aware of other AAHA programs and services to assist MWI in marketing the Program to AAHA members

11.           Obligations of AAHA.  AAHA agrees that it shall provide the following to MWI:

A.Provide access to AAHA membership information, including use of AAHA membership and mailing lists, as set forth in this Agreement.

B.Provide MWI the opportunity to participate as an exhibitor, advertiser, or sponsor in all AAHA programs, publications, and services under the same terms and conditions offered to all commercial companies, and at the same fees as charged to others.

C.At such events that AAHA maintains a special exhibit area to promote AAHA membership and other member benefit programs (such as insurance and retirement programs), AAHA agrees to provide exhibit space within this area to MWI, at a cost equal to that charged to other exhibitors for comparable space.

D.Pay its own costs and expenses necessary in order to carry out its obligations under this Agreement, except as otherwise provided in this Agreement.

E.Provide to MWI verification of the AAHA membership of all AAHA member customers as may be reasonably requested by MWI.

F.Respond to correspondence and inquiries received directly from AAHA members relating to the Program and supply to such members, upon request, MWI brochures and sales materials and refer such persons to MWI.

G.With respect to this Agreement and the terms and conditions set forth herein, materially comply with any and all practices and procedures required by the laws or regulations of any state or other jurisdiction.

13.Additional Program Development by MWI or AAHA.  MWI and AAHA acknowledge that the Program described in this Agreement is limited to the matters described herein.  Except as otherwise set forth herein or that certain “Asset Purchase Agreement” entered by and between MWI, AAHA and AAHA Services Corporation effective as of July 1, 2008, or the Sponsorship Agreement between MWI and AAHA effecive July 1, 2008, the parties agree that (i) AAHA may in the future develop other programs which are not related to the Program in which AAHA has a proprietary interest in all such additional programs and that MWI will do nothing to interfere with AAHA’s development or marketing of such additional programs, and (ii) this Agreement will not impact or restrict MWI or their affiliates from participation in transactions with other groups of veterinary practices.

14.           Term.  This Agreement shall commence effective July 1, 2008, and shall continue for a period of ten (10) years, and shall automatically renew thereafter for successive one year periods, unless either party shall provide one hundred eighty (180) days written notice, to the other party, electing to not renew the Agreement.  In the event of a renewal of this Agreement, all terms and conditions of this Agreement shall apply to such renewal period.  Notwithstanding the forgoing, in the event of a renewal of this Agreement, Section 3.2 and 3.3 shall terminate in their entirety, and thereafter, the only fees payable under this Agreement, for any renewal term, shall be the Minimum License Payment.

15.           Termination.  Except as otherwise provided herein, this Agreement may be terminated at any time by either party for a breach of any of their respective obligations as set forth in this Agreement upon ninety (90) days written notice to the breaching party.  Breaching party shall have thirty (30) calendar days from the receipt of notice to cure the breach.  If the breaching party fails to cure within the thirty days from the receipt of notice, this Agreement may be immediately terminated by the non-breaching party. Upon termination, MWI shall be obligated to surrender all Proprietary Materials to AAHA as soon as commercially reasonable but no later than thirty (30) days afer termination.  Additionally, upon termination, MWI shall surrender any and all right, title or interest in the Program.

This Agreement may also be terminated upon fifteen (15) days notice by AAHA  or MWI, subject to the right of cure as set forth above, upon the occurrence of any of the following events:

A.MWI’s failure to make any payment of royalty to AAHA when due (provided however that all minimum royalties shall become immediately due and payable as well as the amount for additional royalties based upon a good faith estimate);

B.MWI ceases or threatens to cease to function as a going concern, becomes insolvent, makes an assignment for the benefit of creditors, files a petition in bankruptcy, permits a petition in bankruptcy to be filed against it, admits in writing its inability to pay its debts as they become due, or has a receiver appointed for a substantial part of its assets;

C.The sale, dissolution or liquidation of MWI or the sale of substantially all of MWI’s assets to a non-affiliate provided that AAHA shall consider whether or not to approve any such transfer to a non-affiliate; and

D.A breach by MWI of any of the provisions of this Agreement relating to the use of the Proprietary Materials;.

16.           Proprietary Materials Protection.    AAHA has all rights in and to the Proprietary Materials.  The Proprietary Materials do not infringe upon or violate any copyright, trade secret, trade name, trademark, servicemark or any other proprietary right of any third party.  If any written claim of infringement is made by any third party against MWI with respect to the Proprietary Materials, MWI shall promptly notify AAHA, and AAHA shall defend and indemnify MWI against such claim.  Should any part of the Proprietary Materials, or in AAHA’s opinion is likely to become the subject  of any claim of infringement, AAHA shall seek to (i) procure the right for MWI to continue to use the Proprietary Materials, or (ii) replace or modify the Proprietary Materials to make them non-infringing; or (iii) terminate this Agreement.

17.           Indemnification.  Each party (“Indemnifying Party”) agrees to indemnify and hold the other party (“Indemnified Party”) and the Indemnified Party’s officers, members, directors, employees or agents harmless from and against any lawsuits, claims, action or causes of action, arising out of, or in connection with, any errors or omissions of the Indemnifying Party, its agents, representatives or employees, with respect to the Indemnifying Party’s duties and obligations set forth in this Agreement.  This obligation includes, but is not limited to, the cost of defense, payment of any judgments and payment of any expenses for attorneys’ fees and other costs which may be incurred.

18.           Disputes.  If a dispute arises between the parties regarding their rights or obligations under this Agreement, the parties shall first attempt to settle the dispute by direct discussions within thirty (30) days.  If the dispute cannot be settled by the parties by direct discussions, then the parties agree to endeavor to settle the dispute in an amicable manner by mediation administered by the American Arbitration Association under its Commercial Mediation Rules within thirty (30) days.  Thereafter, any unresolved dispute arising from or relating to this Agreement or a breach of this Agreement shall be resolved as provided by this Agreement and by law; provided, however,in the event of any action relating to the use or misuse

of the Proprietary Materials, AAHA may seek injunctive relief in any court of competent jurisdiction

19.           Assignment.  Neither party may assign this Agreement or any of the rights granted hereunder without the prior written approval of the other party.  Any assignment without both parties prior written approval shall be void.

20.           Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to this Agreement and any related transactions, and supersedes all prior arrangements, understandings, agreements and covenants among the parties.

21.           Severability.  Should any term of this Agreement be declared by any court of competent jurisdiction to be invalid for any reason, then the remainder of this Agreement shall remain in full force and effect and that portion which is determined to be invalid shall be severed.

22.           Waiver and Amendment.  Any term or condition of this Agreement may be waived at any time by a party entitled to the benefit thereof if such waiver is in writing and signed by the waiving party.  A waiver of any term or provision shall not be construed as a waiver of any other term or provision of this Agreement.  This Agreement may be amended at any time if such amendment is in writing and signed by each of the parties hereto.

23.           Governing Law.  This Agreement shall be governed by Colorado law.  Any proceeding initiated by MWI arising out of or in connection with this Agreement will be determined solely by the federal court sitting in the  City and County of Denver, Colorado (or, if the federal court denies jurisdiction, the state court sitting in the City and County of Denver, Colorado), and any proceeding initiated by AAHA arising out of or in connection with this Agreement will be determined solely by the federal court sitting in Ada County, Idaho (or, if the federal court denies jurisdiction, the state court sitting in Ada County, Idaho), and the parties consent to the jurisdiction and venue of those courts.

24.           Notice.  Any notice required or permitted to be given to the parties pursuant to the terms of this Agreement shall be sent certified mail, return receipt requested, or by facsimile transmission to the parties at the address stated below.  All notices shall be deemed given when deposited in the mails, postage prepaid.

AAHA:	12575 W. Bayaud Ave.
	Lakewood, CO 80228
	ATTN:	John W. Albers, DVM
		Executive Director
MWI:	651 S. Stratford, Suite 100
	Meridian, Idaho 83680
	ATTN:	Jim Cleary,
		Chief Executive Officer

Either party may change the address at which it is to receive notice by notifying the other party in writing of the change.

25.           Representation of Authority.  Both parties represent and warrant that they each have the authority to enter into and carry out all of its obligations set forth in this Agreement.

26.           Amendment to Preserve Exempt Status.  Notwithstanding any other provision in this Agreement to the contrary, this Agreement shall be amended to the extent necessary to preserve the continued qualification of AAHA as an exempt organization under Section 501(c)(6) of the Internal Revenue Code.  In the event that it becomes necessary to amend this Agreement for such purpose, then either party may, in lieu of such amendment, terminate this Agreement by giving thirty (30) days’ notice to the other party.  Notwithstanding the forgoing, in the event this Agreement is terminated pursuant to this Section 26, the parties will attempt, in good faith, to enter a similar agreement consistent with all rules, regulations and laws regarding AAHA’s exempt organization status.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first written above.

AMERICAN ANIMAL HOSPITAL ASSOCIATION
By	/s/ John Albers, DVM
Its	Executive Director
Date		7/01/08
MWI VETERINARY SUPPLY CO.
By	/s/ Jim Cleary
Its	Chief Executive Officer
Date		7/1/2008

EX-10.15

Exhibit 10.15

	12575 W. Bayaud Ave.
	Lakewood, Colorado USA 80228
	Mailing Address: PO Box 150899
	Denver, Colorado USA 80215-0899
	303/986-2800               800/252-2242
	Fax: 303/986-1700
	www.aahanet.org

SPONSORSHIP LETTER OF AGREEMENT

June 30, 2008

MWI Veterinary Supply Co.

Jim Cleary, President

651 S. Stratford, Suite 100

Meridian, Idaho 83680

Dear Jim:

This letter will set forth the terms and conditions of the sponsorship agreement between the American Animal Hospital Association (“AAHA”) and MWI Veterinary Supply Co. (“MWI”) setting forth our respective rights and obligations.

Term

The term of this Agreement will be for a period of ten (10) years commencing July 1, 2008, and will terminate on June 30, 2018.

Financial Obligation

The total financial commitment of MWI for the term of this Agreement will be One Million Five Hundred Thousand Dollars ($1,500,000.00) payable in annual installments of $150,000 (“Sponsorship Fee”).

Sponsorship Opportunities

In exchange for the Sponsorship Fee and for the term of this Agreement, AAHA will recognize MWI as its Exclusive Endorsed Distributor of Animal Health Products and present sponsorship opportunities for MWI’s consideration no later than April 30^th of each year during the term of this Agreement.  MWI shall then have until June 15^th of each year to confer with AAHA and decide upon the allocation of the various sponsorship opportunities presented by AAHA.  The $150,000 annual installment shall be paid by MWI on or before July 31^st of each year.  For the first year of this Agreement, the parties agree that the sponsorship opportunities will be presented no later than July 30, 2008, and MWI shall have until August 30, 2008, to confer with AAHA

and decide upon the allocation of the sponsorship opportunities.  The initial $150,000 Sponsorship Fee will be due on or before September 15, 2008.

AAHA agrees to present annual sponsorship opportunities which are equal to the $150,000 annual Sponsorship Fee.  Such opportunities will be similar to those provided to AAHA Services Corporation prior to the execution of this Letter of Agreement.

Non-disparagement

Neither MWI nor AAHA shall make any statement regarding the other, or any of their products, that would tend to (i) portray such party or product in an unfavorable light, (ii) disparage such party or product, or (iii) imply anything negative about the efficacy, safety or quality of any such product.

Use of Confidential Information

Except as required by any services to be provided hereunder, AAHA and MWI agree that each will not use, disclose, lecture upon or publish articles concerning any confidential or proprietary information disclosed to it by or on behalf of the other party without the prior written consent of that party and will hold all documents containing confidential or proprietary information in a safe and secure manner so as to prevent their inadvertent disclosure to third parties.

Indemnification

AAHA shall indemnify and hold harmless MWI, its parent companies, subsidiaries, affiliates, officers, directors and employees (each an “Indemnitee”) from and against any and all liabilities, claims, damages, suits and losses of any kind (including reasonable attorneys’ fees and expenses) which may be suffered or incurred by an Indemnitee as a result of any breach by AAHA of this Agreement, AAHA’s negligence or willful misconduct, or AAHA’s infringement of any third party’s intellectual property rights.

MWI shall indemnify and hold harmless AAHA, its subsidiaries, affiliates, officers, directors and employees (each an “Indemnitee”) from and against any and all liabilities, claims, damages, suits and losses of any kind (including reasonable attorneys’ fees and expenses) which may be suffered or incurred by Indemnitee as a result of any breach by MWI of this Agreement, MWI’s negligence or willful misconduct, or MWI’s infringement of any third party’s intellectual property.

Authority of parties

This agreement does not constitute either party as the agent, employee or representative of the other for any purpose whatsoever. Neither party is granted an express or implied right or authority by the other party to assume or create any obligation or responsibility on behalf of, or in the name of, the other party, or to bind the other party in any manner whatsoever.

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Intellectual Property

Each of the parties acknowledges and agrees that the other party has and will invest substantial time, money and other resources in the development of their respective Intellectual Property.  Each party also acknowledges the other party’s ownership of and license to their existing Intellectual Property and agrees that it shall not do anything to invalidate such property of the other party.   Nothing contained in this Agreement shall give a party any right, title or interest in the Intellectual Property of the other party.  Without the written consent of the other party, neither party shall use the Intellectual Property, or any part thereof, of the other party as a part of the party’s corporate or trade name or the corporate or trade name of any parent, subsidiary, associated, affiliated or related company.  Both parties agree that they will not take any action that would create any confusion in the other party’s Intellectual Property.  Neither party shall assign, transfer or otherwise convey the other party’s Intellectual Property nor grant a license to use the Intellectual Property to any person, firm or entity, including but not limited to, any parent, subsidiary, associated, affiliated or related company.  Each party agrees to notify the other party of any unauthorized use of the Intellectual Property within five (5) days after such unauthorized use comes to the attention of the that party.  MWI agrees that it will not use any of AAHA’s Intellectual Property in connection with such marketing without AAHA’s prior written approval.  AAHA agrees that it will not use any of MWI’s Intellectual Property in connection with such marketing without MWI’s prior written approval.  The parties agree that their remedies at law may be inadequate in the event a party violates this provision and that the non-breaching party may obtain injunctive relief against the breaching party in addition to any other remedies at law which the party may have. “Intellectual Property” shall include all trademarks, servicemarks, copyrights, any applications therefore, logos, symbols, business manuals or policies created by MWI or AAHA, and tangible or intangible material created by MWI or AAHA and that are used by MWI or AAHA.

Termination

This Agreement may only be terminated before the termination date set forth in Section 2 by either party for a material breach by the other party of any of its obligations as set forth in this Agreement upon forty-five days (45) written notice to the breaching party.  The breaching party shall then have thirty (30) days to make reasonable efforts to cure the default.  Upon termination, the terms and conditions of this agreement which are intended to survive shall continue in full force and effect.  This Agreement may also be terminated upon forty-five days (45) days notice, subject to the right to cure, by AAHA or MWI upon the occurrence of any of the following events: (a) MWI’s failure to make any payments to AAHA when due (in which case the entire amounts due shall become immediately due and payable); (b) AAHA or MWI cease or threaten to cease to function as a going concern, becomes insolvent, make an assignment for the benefit of creditors, file a petition in bankruptcy, permit a petition in bankruptcy to be filed against it, admit in writing the inability to pay debts as they become due, or have a receiver appointed for a substantial part of its assets; or (c) the misuse of the Proprietary Materials by either party.

Dispute Resolution

If a dispute arises between the parties regarding their rights or obligations under this Agreement, the parties shall first attempt to settle the dispute by direct discussions.  If the dispute cannot be settled by the parties by direct discussions, then the parties agree to endeavor to settle the dispute in an amicable manner by mediation administered by the American Arbitration Association under its Commercial Mediation Rules.  Thereafter, any unresolved dispute arising from or

3

relating to this Agreement or a breach of this Agreement shall be resolved as provided by this Agreement and by law.

Assignment

Neither AAHA nor MWI may assign this Agreement or any of the rights granted hereunder without the prior written approval of the other party.  Any assignment without such prior written approval shall be void.

Entire Agreement and Amendments

This Agreement contains the entire agreement between the parties with respect to this Agreement and any related transactions, and supersedes all prior arrangements, understandings, agreements and covenants among the parties.  This Agreement may be amended at any time if such amendment is in writing and signed by each of the parties hereto.

Severability

Should any term of this Agreement be declared by any court of competent jurisdiction to be invalid for any reason, then the remainder of this Agreement shall remain in full force and effect and that portion which is determined to be invalid shall be severed.

Waiver

Any term or condition of this Agreement may be waived at any time by a party entitled to the benefit thereof if such waiver is in writing and signed by the waiving party.  A waiver of any term or provision shall not be construed as a waiver of any other term or provision of this Agreement.

Governing Law

This Agreement shall be governed by Colorado law.  Any proceeding initiated by MWI arising out of or in connection with this Agreement will be determined solely by the federal court sitting in the City and County of Denver, Colorado (or, if the federal court denies jurisdiction, the state court sitting in the City and County, Colorado), and any proceeding initiated by AAHA arising out of or in connection with this Agreement will be determined solely by the federal court sitting in Ada County, Idaho (or, if the federal court denies jurisdiction, the state court sitting in Ada County, Idaho), and the parties consent to the jurisdiction and venue of those courts.

Notice

Any notice required or permitted to be given to the parties pursuant to the terms of this Agreement shall be sent certified mail, return receipt requested, or by facsimile transmission to the parties at the address stated below.  All notices shall be deemed given when deposited in the mails, postage prepaid.

AAHA:	American Animal Hospital Association
	Attn: John W. Albers, Executive Director
	12575 W. Bayaud Ave.
	Lakewood, CO 80228
	Fax: (303) 986-1700

4

MWI:	Jim Cleary
	Chief Executive Officer
	MWI Veterinary Supply Co.
	651 S. Stratford, Suite 100
	Meridian, Idaho 83680

Either party may change the address at which it is to receive notice by notifying the other party in writing of the change.

Thank you for your continued support of AAHA, our members and the veterinary profession. We look forward to working with you on as we continue to expand and grow the relationship between AAHA and MWI. If this Letter of Agreement is acceptable to MWI, please sign two copies of this letter and return them to me. We will sign the copies and return one to you.

AMERICAN ANIMAL HOSPITAL ASSOCIATION

/s/ John W. Albers, DVM	7/01/08
John W. Albers, DVM, Executive Director	Date

MWI VETERINARY SUPPLY CO.

/s/ Jim Cleary	7/1/2008
Jim Cleary, President	Date

5

EX-10.16

Exhibit 10.16

* * –  CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION.  CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

COMPANION ANIMAL AAHA MARKETLINK MANAGEMENT AGREEMENT

This Agreement dated and effective as of July 1, 2008 is made by and between Pfizer Inc., 235 East 42nd Street, New York, New York 10017 (hereinafter, “PFIZER”) and MWI Veterinary Supply Co., 651 S. Stratford Drive, Ste 100, Meridian, ID 83642 (“MWI”).

1.             PFIZER hereby agrees to supply MWI as a designated product supplier for the PFIZER companion animal Products set forth on Exhibit A (the “Products”), to purchase from PFIZER and to resell to certain selected Veterinary Hospitals serviced by MWI who are members of the AAHA/MarketLink arrangement and listed in Exhibit E hereto, subject to the following terms and conditions.

2.             MWI recognizes and agrees to the following:

(a) PFIZER has elected to work with MWI as a designated supplier to MWI serviced hospitals at the request of MWI. MWI agrees to work closely with PFIZER to coordinate logistics for the supply of Products to such hospitals;

(b)           PFIZER intends to sell to MWI as the logistics supplier for the hospitals. MWI understands and agrees that PFIZER has, and may in the future, run promotions and other activities that would be seriously prejudiced if MWI resells the Products to distributors or veterinarians who will resell the Products as a distributor. Incentive payments under Exhibit D hereto will only be paid by PFIZER to MWI for sales to the hospitals listed on Exhibit B below or such customers who are added to Exhibit B by mutual agreement of Pfizer and MWI.

3.             MWI agrees to:

(a)           use its reasonable best efforts to sell the Products by focusing its primary effort at reselling to veterinary hospitals associated with MWI and to pet owner pharmaceutical customers of MWI serviced hospitals.

(b)           store and handle its inventory of Products under conditions that will ensure that such Products retain their potency, purity, quality, and identity;

(c)           accept shipments from Pfizer of Product at MWI 12 warehouse locations and provide all appropriate shipment and delivery options to the accounts serviced by MWI under this Agreement;

(d)           not sell the Products to distributors, manufacturers or to veterinarians who will resell any PFIZER Companion Animal Products outside an established veterinary/client/patient relationship, nor shall MWI sell the Products through brokers or non-employee agents;

(e)           set its resale prices for the Products independently and at its sole discretion;

(f)            provide PFIZER a projected monthly purchase schedule by the end of the second week of each month;

(g)           cooperate fully with PFIZER by actively participating in such strategy sessions as PFIZER reasonably may require, for the purpose of developing programs to increase use of the Products; and to cooperate fully with PFIZER in implementing all promotions and sales campaigns for the Products;

(h)           distribute the Products only under the labeling provided by PFIZER; prescribe, recommend, suggest, and advertise each Product for use only under the conditions stated in the labeling provided by PFIZER; and observe all federal, state, and local laws governing the distribution of animal drugs. In the case of Products bearing the legend, “CAUTION: FEDERAL LAW RESTRICTS THIS DRUG TO USE BY OR ON THE

ORDER OF A LICENSED VETERINARIAN,” or any similar legend, sell such Products only to or on the order of a licensed veterinarian for use in the course of his or her professional practice or to another person or entity regularly and lawfully engaged in the use, distribution or dispensing of such legend drugs;

(i)            MWI agrees that credit limits established by PFIZER shall be subject to change by PFIZER in its sole discretion and that no shipments will be made to MWI in excess of the established credit limits;

(j)            take no action, whether or not identified above, that would harm the goodwill or name of PFIZER, or damage the interests of PFIZER or the Products;

(k)           MWI shall immediately notify PFIZER in the event MWI obtains information indicating that any of the Products may have to be recalled either by virtue of applicable law or regulation or good business judgment. PFIZER shall control all efforts necessary to conduct any such recall. MWl shall cooperate with PFIZER, at PFIZER’s expense, and MWI agrees to maintain adequate records to conduct such recall, including the name, address and Product purchases of all purchasers of PFIZER Products;

(l)            Make payment to PFIZER for all product purchased from PFIZER /**/;

(m)          Provide to PFIZER by the close of business on the last business day of each PFIZER Accounting Period (as set forth in Exhibit F hereto) an inventory report covering all inventory purchased from PFIZER.

(n)           Provide Pfizer with a monthly accounting of sales via EDI for purposes of allowing Pfizer proper credit to its sale professionals and provide to Covansys by the close of business on the last day of each Pfizer Accounting Period an inventory report covering all Product inventory purchased from Pfizer and setting forth in dollars at MWI’s acquisition cost from Pfizer the amount of inventory by Product. MWI agrees that Pfizer shall have the right, upon reasonable advance notice and during business hours to audit inventory in the possession of MWI to confirm compliance with this paragraph 4(n) and to confirm the accuracy of the data contained in the report.

(o)           Provide to Covansys its Health Industry Number, Customer Health Industry Number, Pfizer Product number, transaction date, ship to zip code, number of units and price with respect to each sale of Product, and unit inventories on each Pfizer Product sku that MWI sells.

(p)           MWI will also provide to Pfizer the information, services and opportunities set forth in Exhibit B hereto. MWI represents and warrants to Pfizer that it will only provide data to Pfizer, including specific patient and animal owner information that is allowable by law.

4.             PFIZER shall:

(a)           sell the Products to MWI at the prices provided for in Exhibit A. PFIZER shall have the unrestricted right to revise the prices, terms and conditions of the Price List, and to add or delete Products or package sizes, at anytime, and the revisions shall be effective on all orders submitted after the effective date of the price revisions. In all cases of orders received for other than immediate shipment, the price for the Products shall be that in effect at the time of shipment. Nothing herein shall prohibit PFIZER from raising or amending prices for Products. PFIZER agrees to provide MWI /**/ notice of any price increases. PFIZER shall be free to limit sales of Products to MWI in advance of any price increases;

(b)           Compensate MWI in accordance with Exhibit D hereto;

(c)           allow MWI credit on prepaid returns in accordance with PFIZER’s Outdated Products Policy which is in effect at the time;

5.             Nothing in this Agreement shall be deemed to limit PFIZER’s ability to sell Products to any other party.

6.             All purchases by MWI pursuant to this Agreement shall be in accordance with the terms of PFIZER’s Pricing and Shipping Policies, as may be amended by PFIZER from time to time.

7.             The following standard conditions shall apply to all sales under this Agreement:

(a)           all orders are subject to acceptance by PFIZER’s Home Office. Title to the goods shall pass to MWI once they have been property delivered to the address designated by MWI. Products requiring temperature control will be shipped F.O.B. destination;

(b)           any tax or other charge upon the sale and/or shipment of the goods now or hereafter imposed by federal, state or municipal authorities (other than PFIZER’S income taxes) shall be paid by MWI. In the event that the price of any article includes transportation charges, any increase or decrease in transportation charges shall be for MWI’s account;

(c)           EXCEPT AS SET FORTH IN THIS AGREEMENT, OR IN THE LABELING OF THE PRODUCTS SOLD HEREUNDER, PFIZER MAKES NO EXPRESS OR IMPLIED WARRANTIES WITH RESPECT TO THE PRODUCTS;

(d)           Pfizer shall defend, indemnify, and hold MWI harmless from all liabilities, claims, demands, damages, costs and expenses, or money judgments incurred by MWI or rendered against it resulting from (a) any breach by Pfizer of this Agreement, (b) third party claims or actions for personal injury or property damage which arise out of the distribution or sale of Pfizer products or the failure to warn, except to the extent that such personal injury or property damage arises out of the negligence or willful misconduct of MWI, and (c) any claim that the Products, as sold by Pfizer, were defective, or (d) any claim that a Product or its associated labeling or advertising prepared by Pfizer infringes any patent, trademark, trademark, copyright or other intellectual property right of any third party. Pfizer shall assume the defense of each such claim promptly after written notice from MWI. In the event Pfizer is found by any court of competent jurisdiction to be liable for any claim based in products liability, then Pfizer shall reimburse MWI’s reasonable legal fees incurred in the course of cooperating with Pfizer’s defense. To be covered by this defense and indemnity, MWI must: promptly notify Pfizer of any such claim; allow Pfizer to fully control the defense and/or resolution of the claim; and cooperate fully with Pfizer in the matter. This defense, indemnity and payment for legal fees shall not apply to claims alleging: MWI alteration, negligent handling or improper storage of the Products; sale of outdated Products; sale or recommendation of the Products for uses or in a manner not set forth in either the labeling supplied by Pfizer or as otherwise specified by Pfizer in writing; or sale of the Products after receipt of written notice from Pfizer that such sales should be halted;

(e)           in no event shall either party be liable to the other for special, collateral, incidental, or consequential damages in connection with or arising out of the purchase, resale, or use of the Products. Except as provided under subparagraph 7(d), above, total damages recoverable against PFIZER by MWI shall be exclusively limited to the purchase price of the Products with respect to which damages are claimed;

(f)            failure of PFIZER to make or of MWI to take, when due, any delivery (or portion thereof) pursuant to an order hereunder, if occasioned by any circumstance or condition beyond the control of the party so failing, shall not subject the failing party to any liability to the other and, at the option of either party, that order or portion thereof not delivered may be canceled;

(g)           acceptance of MWI’s order by PFIZER is expressly made conditional upon the MWI’s acceptance of the conditions of sale as set forth herein, and the prices, terms and conditions of the Price List then in effect, notwithstanding acknowledgment or receipt of MWI’s purchase order containing additional or different provisions, or conflicting oral representations by any agent of PFIZER.

(h)           All orders to MWI will receive free shipping regardless of order size.

(i)            Payment Due Date: /**/. Payment Discount: None.

8.             This Agreement shall not be binding upon PFIZER until it is approved by PFIZER at its New York, New York headquarters.

9.             This Agreement shall be effective as of the date first written above and shall continue in force until December 31, 2008. Either party may terminate this agreement prior to the expiration date (i) with or without cause,

upon thirty (30) days written notice to the other party, or (ii) immediately upon written notice, in the event of a material breach by the other party. In addition, PFIZER may terminate this Agreement at any time on 15 days written notice to MWI in the event that PFIZER determines, in its sole discretion, that MWI has failed to comply with the terms and conditions set forth in paragraph 3 above.

10.           MWI and PFIZER acknowledge that in the performance of their duties hereunder MWI and PFIZER may obtain access to “Confidential Information” (as defined below) of each other. MWI and PFIZER agree that during the term of this Agreement and for a period of three (3) years after the termination of this Agreement, unless specifically permitted in writing by the other party, to (a) retain in confidence and not disclose to any third party and (b) use only for the purpose of carrying out their duties hereunder, any such Confidential Information. As used herein the term “Confidential Information” means any information, or data, whether of a business or scientific nature and whether in written, oral or tangible form, relating to PFIZER’s and MWI’s business or potential business or its research and development activities, not generally available to or known to the public, and not otherwise known to the receiving party, that is disclosed to or learned by the other party pursuant hereto. Upon completion of the work provided for hereunder or other termination of this Agreement each party will return to the other party any documents, or copies thereof, or any product samples, containing or constituting Confidential Information disclosed to or generated by either party in connection with this Agreement.

11.           This Agreement shall be governed by the laws of the State of New York applicable to contracts to be fully performed therein. This Agreement is not assignable without the express written consent of PFIZER, and may be modified or amended only in writing signed by the party to be bound.

12.           This Agreement and documents referred to herein embody the entire understanding between the parties hereto, will supersede prior agreements relating to the Products, and may be modified only in writing and signed by the parties to be bound. No activities conducted pursuant to this Agreement or related thereto, including but not limited to the future planning activities of the parties, shall be deemed to give rise to any obligations on the part of either party other than as expressly provided for herein.

IN WITNESS WHEREOF, intending to be legally bound, the parties have executed this Agreement.

MWI VETERINARY SUPPLY CO.		PFIZER INC.
BY:	/s/ James F. Cleary Jr.	BY:	/s/ Clinton A. Lewis
			Clinton A. Lewis
Print Name: James F. Cleary Jr.			President
			U.S. Operations, Pfizer Animal Health
Title: President and CEO
Date: July 30, 2008		Date: 8/4/08

EX-21.1

EXHIBIT 21.1

MWI Veterinary Supply, Inc.

Subsidiaries of the Registrant

Name	State of Incorporation/Organization
MWI Veterinary Supply Co.	Idaho
Memorial Pet Care, Inc.	Idaho
Securos Europe, GmbH	Germany

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-127879, 333-127880, and 333-149275 on Form S-8 and Registration Statement No. 333-141078 on Form S-3 of our reports dated November 21, 2008, relating to the consolidated financial statements and consolidated financial statement schedule of MWI Veterinary Supply, Inc. (which report expresses an unqualified opinion and includes an explanatory paragraph regarding the adoption, on October 1, 2007, of Financial Accounting Standards Board Interpretation No 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No 109), and the effectiveness of MWI Veterinary Supply, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of MWI Veterinary Supply, Inc. for the year ended September 30, 2008.

/s/ DELOITTE & TOUCHE LLP

Boise, Idaho

November 21, 2008

EX-31.1

EXHIBIT 31.1

MWI VETERINARY SUPPLY, INC.

CERTIFICATIONS PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, James F. Cleary, Jr., certify that:

1.I have reviewed this annual report on Form 10-K of MWI Veterinary Supply, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 21, 2008	/s/ James F. Cleary, Jr.
	James F. Cleary, Jr.
	President and
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

MWI VETERINARY SUPPLY, INC.

CERTIFICATIONS PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Mary Patricia B. Thompson, certify that:

1.I have reviewed this annual report on Form 10-K of MWI Veterinary Supply, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 21, 2008	/s/ Mary Patricia B. Thompson
	Mary Patricia B. Thompson
	Senior Vice President of Finance and Administration,  and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of MWI Veterinary Supply, Inc. (the “Company”) for the period ended September 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, James F. Cleary, Jr., President and Chief Executive Officer, and Mary Patricia B. Thompson, Senior Vice President of Finance and Administration, Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

November 21, 2008

/s/ James F. Cleary, Jr.

James F. Cleary, Jr.

President and Chief Executive Officer

/s/ Mary Patricia B. Thompson

Mary Patricia B. Thompson

Senior Vice President of Finance and Administration,

Chief Financial Officer