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&lt;p style="margin-top: 12px; margin-bottom: 0px;"&gt;&lt;font style="font-family: Times New Roman;" class="_mt" size="2"&gt;(7) Contingencies &lt;/font&gt;&lt;/p&gt;
&lt;p style="margin-top: 12px; margin-bottom: 0px;"&gt;&lt;font style="font-family: Times New Roman;" class="_mt" size="2"&gt;In July 2010, we received a letter from the Civil Division of the Department of Justice (the 'DOJ') advising that they intended to be ready to commence litigation against us regarding a contract we entered into with the United States General Services Administration (the 'GSA') in 2000. We discontinued the GSA contract in 2005. The letter is related to an audit conducted by the GSA Office of Inspector General (the 'OIG') in 2005-06 that suggested we had not complied with certain pricing and product requirement provisions, and had potentially overcharged government customers under the contract. We have communicated our disagreement with the audit report, and have participated in several meetings and discussions with the OIG and DOJ on these disputed issues during the past several years. A subpoena dated March&amp;nbsp;25, 2010 was sent to us from the DOJ seeking information about the Company's position concerning our compliance under the contract, and we provided responsive information to the DOJ in May 2010. Discussions between the DOJ and Fastenal relating to our compliance with the pricing and product requirement provisions under the contract are ongoing. As of June&amp;nbsp;30, 2010, the DOJ had offered to resolve this matter for a payment by us of $9.5 million and we had offered $750 thousand, which amount we had accrued. During the third quarter of 2010 we continued our discussions with the DOJ. The DOJ has currently offered to resolve this matter for $8.5 million and we have offered $2.75 million, which amount we have accrued as of September&amp;nbsp;30, 2010. The timing and outcome of these discussions are uncertain and could include settlement or civil litigation by the DOJ to recover, among other amounts, treble damages and penalties under the False Claims Act. While this matter is not expected to have a material adverse effect on our financial position, an unfavorable resolution could result in payments by the Company in excess of the amounts reserved. We continue to believe that we have complied with our obligations under the GSA contract in all material respects. &lt;/font&gt;&lt;/p&gt;
&lt;p style="margin-top: 12px; margin-bottom: 0px;"&gt;&lt;font style="font-family: Times New Roman;" class="_mt" size="2"&gt;In early February 2010, we received a letter from a California fastener supplier dated January&amp;nbsp;26, 2010. This letter threatened to sue us for our alleged violation of an exclusive distribution arrangement this supplier believes exists between our organizations. In addition, this supplier provided a press release and a video regarding the claim that they threatened to make public unless we agreed to mediation of the claim. Shortly after receipt of this letter, we performed a preliminary internal review to understand (1)&amp;nbsp;who this supplier was and (2)&amp;nbsp;the nature of our relationship with this supplier. Based on that review, we determined that this supplier manufactures a niche type of fastener and that the total volume of purchases by us, from all suppliers, over the purported term of the alleged exclusivity arrangement of this niche type of fastener does not exceed $1 million. Following completion of our preliminary internal review, we requested additional information and documentation from the supplier. The supplier's response failed to provide the requested information and documentation. By letter dated February&amp;nbsp;26, 2010, we quantified for the supplier our total volume of purchases as discussed above and informed the supplier that we believed their claim was grossly exaggerated and completely unsupported. We have not received any direct response to our February&amp;nbsp;26, 2010 letter. On May&amp;nbsp;3, 2010, this supplier filed suit in Arkansas alleging damages. In response, we filed a motion to dismiss. This motion to dismiss was denied on August&amp;nbsp;16, 2010. It is too early to determine how this case will progress. Based on current information, we believe that the prospect that we will incur a material liability as a result of this claim is remote. While we are not required to disclose this matter under the rules of the SEC, we initially disclosed the existence of this threat in February 2010 as we believed that disclosure was prudent due to the alleged amount ($180 million) of the claim and the threat to make these allegations public. &lt;/font&gt;&lt;/p&gt;
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