Scheduled outage for OSC Electronic Filing Portal on Thursday, April 25, 2024 from 6:00 to 11:00 pm (EST)
Kierlin, Robert A. - MRRS Decision
Headnote
MRRS - registration and prospectus relief forgrants of options to employees by founder, director and CEOof U.S. incorporated company to Canadian employees - registrationrelief for transfer of common shares by the same individualto the Canadian employees upon exercise of the options by theemployees.
Applicable Ontario Statutory Provisions
Securities Act, R.S.O. 1009, c. S.5, as am.,s. 74(1).
OSC Rule 45-503 Trades to Employees, Executives and Consultants.
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
ONTARIO, BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN, MANITOBA,NOVA SCOTIA, NEWFOUNDLAND AND LABRADOR,
NEW BRUNSWICK, PRINCE EDWARD ISLAND AND QUÉBEC
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF
ROBERT A. KIERLIN
MRRS DECISION DOCUMENT
WHEREAS the Canadian securities regulatoryauthority or regulator (the "Decision Maker") in eachof Ontario, British Columbia, Alberta, Saskatchewan, Manitoba,Nova Scotia, Newfoundland and Labrador, New Brunswick, PrinceEdward Island and Québec (the "Jurisdictions")has received an application (the "Application") fromMr. Robert A. Kierlin ("Mr. Kierlin") for a decisionpursuant to the securities legislation of the Jurisdictions(the "Legislation") that:
(a) the requirements contained in the Legislationto be registered to trade in a security and to file and obtaina receipt for a preliminary prospectus and a prospectus (the"Registration and Prospectus Requirements") shallnot apply to certain trades to be made by or on behalf of Mr.Kierlin or his Agent (as defined below) of options (the "Options")to employees of Fastenal Company (the "Company") whoare resident in the Jurisdictions (collectively, the "CanadianEmployees") pursuant to the terms of the Robert A. KierlinStock Option Plan (the "Plan"); and
(b) the Registration Requirements in the Legislation, and theProspectus Requirements in Quebec, shall not apply to certaintrades by or on behalf of Mr. Kierlin or his Agent to (i) CanadianEmployees, or to (ii) former Canadian Employees during the 90day period immediately following the termination of their employment(collectively, the "Exercising Employees") of anycommon shares of the Company upon the exercise of Options grantedunder the Plan pursuant to this Decision (as defined below)by such Canadian Employees (the "Option Shares");
AND WHEREAS pursuant to the Mutual RelianceReview System for Exemptive Relief Applications (the "System"),the Ontario Securities Commission is the Principal Regulatorfor this application;
AND WHEREAS Mr. Kierlin has representedto the Decision Makers that:
Fastenal Company
1. The Company is a public (Nasdaq listed) Minnesotacompany based in Winona, Minnesota with operations in the UnitedStates, Puerto Rico, Canada, Mexico and Singapore. Mr. Kierlinis the founder, Chairman of the Board and Chief Executive Officerof the Company.
2. The Company is not a reporting issuer (orits equivalent) in any of the provinces of Canada.
3. As of March 5, 2002, the Company had 37,938,688common shares ($0.01 par value) issued and outstanding (the"Common Shares"). As of March 5, 2002, the largestshareholder was Ruane, Cunniff & Co., Inc., an institutionalinvestor.
4. As of March 5, 2002, Mr. Kierlin, the secondlargest shareholder, held approximately 3,903,036 Common Shares(or 10.31%) of the Company. Mr. Kierlin's holdings include the2,000,000 Common Shares that have been set aside as Option Sharesunder the Plan, 100 Common Shares that are held by his wifeand 2,200 Common Shares held by a local secondary school (the"School"), of which Mr. Kierlin is a director andmember of the investment committee. Mr. Kierlin shares votingand investment power with respect to the Common Shares heldby the School. Mr. Kierlin disclaims beneficial ownership ofthe Common Shares held by the School.
5. On April 15, 2002, the board of directorsof the Company approved a two-for-one stock split for the Company'soutstanding Common Shares. The Company issued the additionalshare for each Common Share held to each holder of record ofCommon Shares at the close of business on April 29, 2002. Thestock split took effect at the close of business on May 10,2002. After the split there were 75,877,376 Common Shares outstanding.
The Plan
6. Mr. Kierlin adopted the Plan on December30, 1999 for the purpose of "advancing the interests ofthe Company, its shareholders and its subsidiaries by encouragingand enabling selected employees ... to acquire and retain aproprietary interest in the Company". The Plan was effectiveJanuary 3, 2000. While the Plan is administered by the Boardof Directors of the Company, such role is administrative andministerial only and the Board has no authority to grant anyoption under or change any provisions of the Plan. Accordingly,the Plan is not created or administered by or on behalf of theCompany.
7. Currently, up to 2,000,000 Options may beissued under the Plan. Options may be issued to eligible employees(the "Employees") for as long as Options are availablefor granting under the Plan. Options that are cancelled priorto their exercise (e.g., on the termination of the Employee)may be re-issued under the Plan. The holder of an Option will,for each Option exercised, receive one of the 2,000,000 OptionShares that are currently registered in the name of Mr. Kierlinand held by Merchants National Bank of Winona, Minnesota (the"Agent") pursuant to the terms of the Plan. Pursuantto the Plan, each time that an Option is issued to an Employee,documentation evidencing the Options granted is to be forwardedto the recipient Employee.
8. The Option Shares are registered under theUnited States Securities Exchange Act of 1934 but not the UnitedStates Securities Exchange Act of 1933 (the "1933 Act").As a result, the Option Shares are included in, and obtain thebenefit of, the Company's public disclosure but they are notpublicly traded. Prior to the vesting of any of the Optionsthat are issued under the Plan (the first of such vestings areexpected to occur this July 1, 2002), the Company will filea registration statement under the 1933 Act. For the purposesof United States securities laws, the Option Shares will thenbe freely tradable on the Nasdaq Stock Market by Employees whohave exercised their Options.
9. The exercise price of an Option will be determinedand stated by Mr. Kierlin at the time of the grant of the Optionprovided, however, that such price shall not be less than theclosing price of the Common Shares on Nasdaq on the most recenttrading day preceding the grant.
10. The Plan has not been and is not requiredto be approved by Nasdaq.
11. The Options are not transferable other than by will or thelaws of descent and distribution.
12. Upon the grant of Options, Canadian Employeeswill receive (i) a certificate of stock option which sets out,among other things, the name of the recipient, the number ofOptions issued, the date of grant, the exercise period, theexercise price and the expiration date; and (ii) a Stock OptionPlan Information Guide, which sets out commonly asked questionsand answers (including tax consequences associated with exercisingOptions) and information regarding how to obtain a copy of theplan itself.
13. Mr. Kierlin intends to donate the net proceeds,after payment of applicable taxes and expenses, to charity.
The Company's Employees
14. As of February 1, 2002, there were 6,535employees in the Company. No more than 762,200 Options are currentlyavailable to be issued under the Plan to the Canadian Employees.
15. The Company will concurrently provide toits securityholders resident in Canada the same disclosure materialsprovided to the securityholders resident in the United States.Currently, residents of Canada do not own directly or indirectlymore than 10 percent of the outstanding Common Shares of theCompany, and do not represent in number more than 10 percentof the total number of owners directly or indirectly of CommonShares.
Mr. Kierlin
16. While Mr. Kierlin is the largest individualshareholder of the Company and has the ability to materiallyinfluence votes, corporate decisions and actions by virtue ofhis positions as Chairman of the Board, Chief Executive Officerand founder of the Company, he does not hold a sufficient numberof shares to entitle him to elect directors or block any significantcorporate actions. Therefore, while his shareholdings are sufficientto have Mr. Kierlin considered an "affiliate", andtherefore a "controlling person", for various purposesunder U.S. securities laws, Mr. Kierlin does not own or controla sufficient number of shares to affect materially the controlof the Company for Canadian securities laws purposes.
17. Mr. Kierlin is not in the business of tradingOptions, Option Shares (or any other securities) in Canada.
AND WHEREAS pursuant to the System thisMRRS Decision Document evidences the decision of the DecisionMakers (collectively, the "Decision");
AND WHEREAS each of the Decision Makers is satisfiedthat the test contained in the Legislation that provides theDecision Maker with the jurisdiction to make the Decision hasbeen met;
THE DECISION of the Decision Makers pursuantto the Legislation is that:
(a) the Registration and Prospectus Requirementscontained in the Legislation shall not apply to the trades ofOptions to be made by or on behalf of Mr. Kierlin or his Agentto Canadian Employees pursuant to the Plan provided that thefirst trade in any such Option acquired pursuant to this Decisionshall be deemed to be a distribution or primary distributionto the public; and
(b) the Registration Requirements in the Legislation,and the Prospectus Requirements in Quebec, shall not apply totrades of Option Shares by or on behalf of Mr. Kierlin or hisAgent to Exercising Employees (or their successor in the eventof the death of the Exercising Employee) upon the exercise ofOptions granted under the Plan pursuant to this Decision bysuch Exercising Employees (or their successor in the event ofthe death of the Exercising Employee), provided that in Quebec,the first trade in any such Option Shares acquired upon theexercise of Options granted under the Plan pursuant to thisDecision shall be deemed to be a distribution unless such tradeis executed through the facilities of a stock exchange outsideof Canada.
June 4, 2002.
"Harold P. Hands" "Robert W. Korthals"