August 26, 2002
Mr. Jonathan G. Katz
Re: File No. S7-22-02
Dear Mr. Katz:
ProLogis is pleased to have the opportunity to respond to the Securities and Exchange Commission ("Commission") regarding the proposals set forth in Release Nos. 33-8106 and 34-46084. ProLogis is a real estate investment trust that operates a global network of industrial distribution facilities.
ProLogis supports the Commission's efforts to provide investors with enhanced and "real-time" disclosure of important corporate events. We agree with most of the Commission's proposals relating to Form 8-K. However, ProLogis is concerned that one aspect of the proposals could be counterproductive to the interests of investors. ProLogis believes that requiring companies to disclose terms of material non-binding agreements would severely hinder the negotiating positions and competitiveness of companies.
Item 1.01--Entry into a Material Agreement
While ProLogis generally supports the Commission's position to require a company to disclose when it enters into a material agreement that is not made during the ordinary course of its business, we believe that letters of intent, non-binding agreements and other similar documents should not be required to be disclosed. We do not feel that such agreements can be deemed to be material until they become binding contracts. In addition, contracts potentially covered by these provisions typically contain many due diligence conditions that allow the purchaser to walk away from the contract if its due diligence is not completed to its satisfaction. Until such due diligence is satisfactorily concluded, these contracts are not binding and therefore should not have to be disclosed. Multiple filings that could be required through the "ups and downs" of contract negotiation would lead to investor confusion.
In addition, ProLogis is concerned that disclosure of such non-binding agreements would cause companies to disclose competitive terms and would otherwise severely disrupt the ability of companies to negotiate agreements on their own behalf and for the benefit of their investors. Companies would be disclosing negotiating terms that their competitors could review, which would harm a company's future negotiating position. Public companies would be placed in a significantly disadvantaged competitive position relative to privately held companies that are not required to disclose the terms of their agreements. Furthermore, ProLogis feels that the proposed regulation calls into question the legality of confidentiality provisions that normally apply to such non-binding agreements. This is of particular concern given the number of foreign jurisdictions in which ProLogis operates its business.
In order to promote uniform standards, we believe that Item 1.01 should be kept consistent with the current requirements of Exhibit 10 under Regulation S-K, Item 6.01(b)(10) which does not require the filing of non-binding agreements. Additionally, ProLogis supports the position that registrants should not be required to file the material agreements that are subject to the Form 8-K disclosure requirements as exhibits, because such agreements are required to be filed in Form 10-Q and/or Form 10-K. We would suggest that if Item 1.01 becomes a part of Form 8-K, the Form should include a box on the cover page that would allow a registrant to satisfy obligations under Rule 165, Rule 14d-2(b) and/or Rule 14a-12, as suggested by the Commission in its proposed rule.
ProLogis thanks the Commission for the opportunity to comment on this proposal. Please contact me if you have any questions regarding this letter.
Luke A. Lands