From: Markey, Jim [jim.markey@kellogg.com]
Sent: Monday, December 09, 2002 12:17 PM
To: 'rule-comments@sec.gov'
Cc: Hughes, Christy; Kelly, Janet; Andrews, Alan; Pilnick, Gary; Nyberg,
Neil
Subject: Comments on Proposed Rule--File No. S7-42-02

December 9, 2002

Mr. Jonathan G. Katz
Secretary
Securities and Exchange Commission
Washington, D.C, 20549-0609 
rule-comments@sec.gov

Re: Comments on Proposed Rule for Disclosure in Management's Discussion and
Analysis About Off-Balance Sheet Arrangements, Contractual Obligations and
Continent Liabilities and Commitments---File No. S7-42-02 

Dear Mr. Katz:

I am Vice President and Chief Counsel-Securities and International of
Kellogg Company, and appreciate the opportunity to provide the following
comments on this proposed rule.

	1.	The proposed definition of the term "off-balance sheet
arrangement" is more comprehensive than intended.  For instance, proposed
Item 303(a)(4) of Regulation S-K seems to require disclosure of normal
course purchase orders with third party suppliers as "off-balance sheet
arrangements".  I would suggest that the final rule include an exception for
standard commercial agreements for the purchase or sale of products entered
into in the normal course of a reporting company's business.  Conversely, if
Item 303(a)(4) does require disclosure of these purchase orders, then Item
303(a)(5) should be revised to delete any reference to "Unconditional
Purchase Obligations".

	2.	Similarly, the proposed exclusion in Item 303(a)(4)(D) for
contingent liabilities arising out of litigation, arbitration or regulatory
actions (not otherwise related to off-balance sheet arrangements) is
probably too narrow. Arguably, disclosure would still be required of
possible contingent exposures that arise by operation of law.  For instance,
a reporting company apparently would technically still need to disclose that
it might be required to pay termination penalties under a distribution
agreement by operation of law if there was more than a remote chance it
might terminate a distribution agreement.  And unless a higher standard than
"remote" is applicable, disclosure would also apparently be required of
contractually provided termination penalties under distribution agreements
if there was more than a remote chance that the agreements might be
terminated.

	3.	It would be appropriate to define "contractual obligations"
and "contingent liabilities or commitments" for purposes of the proposed
tabular disclosure in M,D&A, for the reasons listed above, among others.  It
is also appropriate because it is not now clear whether the list of
contractual obligations in the proposed table is exclusive, or whether other
contractual obligations must be disclosed which are not listed in the
proposed table.  In connection with this, please clarify in the final rules
what "other pertinent data" about contingent liabilities, such as lines of
credit and standby letters of credit, must be disclosed in the footnotes to
the table.

	4.	Please clarify, in the final rule, whether the determination
of whether an off-balance sheet arrangement is currently material or could
be material in the future, is to be done in the aggregate, or on an
arrangement-by-arrangement basis.

	5.	As mentioned above, please also consider changing the
threshold for off-balance sheet arrangements to the "reasonably likely"
standard from the "remote" standard.  Otherwise, reporting companies will be
forced to give undue prominence to the off-balance sheet arrangements. 

I thank you again for giving me the opportunity to comment on the proposed
rule.

Sincerely,

/s/ Jim Markey

Jim Markey
Vice President and Chief Counsel--Securities and International
Kellogg Company