<PAGE>
Filed Pursuant to Rule 424(b)(2)
File No. 333-28537
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 26, 1998)
1,750,000 STRYPES(SM)
MERRILL LYNCH & CO., INC.
[LOGO]
7 7/8% STRYPES(SM) DUE FEBRUARY 1, 2001
PAYABLE WITH SHARES OF COMMON STOCK OF
[LOGO]
CIBER, INC.
(OR CASH WITH AN EQUAL VALUE)
------------------------
The issue price of each Structured Yield Product Exchangeable for Stock(SM),
7 7/8% STRYPES(SM) Due February 1, 2001 (each, a "STRYPES") of Merrill Lynch &
Co., Inc. (the "Company") being offered hereby is $54.125, which amount is equal
to the last sale price of the Common Stock, par value $.01 per share (the "CIBER
Common Stock"), of CIBER, Inc., a Delaware corporation ("CIBER"), on January 26,
1998, as reported on the New York Stock Exchange (the "Initial Price"). The
STRYPES will mature on February 1, 2001 (the "Maturity Date"). Interest on the
STRYPES, at the rate of 7 7/8% of the issue price per annum, is payable in cash
quarterly in arrears on February 1, May 1, August 1 and November 1, beginning
May 1, 1998. The STRYPES will be unsecured obligations of the Company ranking
PARI PASSU with all of its other unsecured and unsubordinated indebtedness. In
addition, the STRYPES will not restrict the Company's ability to incur
additional indebtedness ranking senior to, or PARI PASSU with, the STRYPES. See
"Supplemental Description of the STRYPES--Ranking."
On the Maturity Date, the Company will pay and discharge each STRYPES by
delivering to the holder thereof a number of shares of CIBER Common Stock
(subject to the Company's right to deliver, with respect to all, but not less
than all, shares of CIBER Common Stock deliverable on the Maturity Date, cash
with an equal value) determined in accordance with the following formula (the
"Payment Rate Formula"), subject to certain adjustments: (a) if the Maturity
Price is greater than or equal to $91.4713 (the "Threshold Appreciation Price"),
0.7692 shares of CIBER Common Stock per STRYPES, (b) if the Maturity Price is
less than the Threshold Appreciation Price but is greater than $70.3625 (the
"Initial Appreciation Cap"), a fractional share of CIBER Common Stock per
STRYPES so that the value thereof (determined based on the Maturity Price)
equals the Initial Appreciation Cap, (c) if the Maturity Price is less than or
equal to the Initial Appreciation Cap but is greater than or equal to the
Initial Price, one share of CIBER Common Stock per STRYPES, (d) if the Maturity
Price is less than the Initial Price but is greater than or equal to $51.4188
(the "Downside Protection Threshold Price"), a number of shares of CIBER Common
Stock per STRYPES so that the value thereof (determined based on the Maturity
Price) equals the Initial Price and (e) if the Maturity Price is less than the
Downside Protection Threshold Price, 1.0526 shares of CIBER Common Stock per
STRYPES. The "Maturity Price" means the average Closing Price (as defined
herein) per share of CIBER Common Stock on the 20 Trading Days (as defined
herein) immediately prior to, but not including, the second Trading Day
preceding the Maturity Date. AS DESCRIBED HEREIN, THE MATURITY PRICE WILL
REPRESENT A DETERMINATION OF THE VALUE OF A SHARE OF CIBER COMMON STOCK
IMMEDIATELY PRIOR TO THE MATURITY DATE. THERE CAN BE NO ASSURANCE THAT THE
AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE MATURITY DATE WILL BE EQUAL
TO OR GREATER THAN THE ISSUE PRICE OF THE STRYPES. IF THE MATURITY PRICE OF THE
CIBER COMMON STOCK IS LESS THAN THE DOWNSIDE PROTECTION THRESHOLD PRICE, SUCH
AMOUNT RECEIVABLE ON THE MATURITY DATE WILL BE LESS THAN THE ISSUE PRICE PAID
FOR THE STRYPES, IN WHICH CASE AN INVESTMENT IN THE STRYPES WILL RESULT IN A
LOSS. See "Supplemental Description of the STRYPES."
Reference is made to the accompanying prospectus of CIBER with respect to
the shares of CIBER Common Stock which may be received by a holder of the
STRYPES on the Maturity Date. CIBER is not affiliated with the Company, will not
receive any of the proceeds from the sale of the STRYPES and will have no
obligations with respect to the STRYPES.
SEE "RISK FACTORS," BEGINNING ON PAGE S-9 OF THIS PROSPECTUS SUPPLEMENT, FOR
CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE STRYPES.
For a discussion of certain United States Federal income tax consequences
for holders of the STRYPES, see "Certain United States Federal Income Tax
Considerations."
The CIBER Common Stock is listed on the New York Stock Exchange ("NYSE")
under the trading symbol "CBR." The STRYPES have been approved for listing on
the NYSE, subject to official notice of issuance.
----------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
<S> <C> <C> <C>
Per STRYPES..................................................... $54.125 $1.62 $52.505
Total(4)........................................................ $94,718,750 $2,835,000 $91,883,750
</TABLE>
(1) Plus accrued interest, if any, from January 30, 1998 to the date of
delivery.
(2) The Company, CIBER and the Contracting Stockholder (as defined herein) have
agreed to indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by the Company.
(4) The Company has granted the Underwriter an option for 30 days to purchase up
to an additional 262,500 STRYPES at the initial public offering price per
STRYPES, less the underwriting discount, solely to cover over-allotments. If
such over-allotment option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Company will be $108,926,563,
$3,260,250 and $105,666,313, respectively. See "Underwriting."
------------------------------
The STRYPES are offered by the Underwriter, subject to prior sale, when, as
and if issued to and accepted by the Underwriter, and subject to certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the STRYPES will be made through the facilities of The Depository
Trust Company on or about January 30, 1998.
This Prospectus may be used by the Underwriter in connection with offers and
sales related to market-making transactions in the STRYPES. The Underwriter may
act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale.
- ----------------------------------
(SM) Service mark of Merrill Lynch & Co., Inc.
----------------------------------
MERRILL LYNCH & CO.
------------------
The date of this Prospectus Supplement is January 26, 1998.
<PAGE>
The Underwriter may engage in transactions that stabilize, maintain or
otherwise affect the price of the STRYPES or the CIBER Common Stock. Such
transactions may include stabilizing and the purchase of STRYPES to cover short
positions. For a description of these activities, see "Underwriting."
------------------------
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the STRYPES made hereby, nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus Supplement
or the Prospectus.
S-2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE INFORMATION
INCLUDED AND INCORPORATED BY REFERENCE IN THE ACCOMPANYING PROSPECTUS (THE
"ML&CO. PROSPECTUS") AND BY THE MORE DETAILED INFORMATION INCLUDED ELSEWHERE IN
THIS PROSPECTUS SUPPLEMENT. UNLESS OTHERWISE INDICATED, THE INFORMATION
CONTAINED IN THIS PROSPECTUS SUPPLEMENT ASSUMES THAT THE UNDERWRITER'S
OVER-ALLOTMENT OPTION IS NOT EXERCISED.
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), is one of the largest securities
firms in the world.
CIBER, INC.
CIBER is a nationwide provider of information technology consulting,
including application software staff supplementation, management consulting
solutions for "business/IT" problems, package software implementation services,
system life-cycle project responsibility, millennium date change conversion
services and networking procurement and engineering services. CIBER's revenues
are generated from two areas, the CIBER Information Services ("CIS") Division
and CIBER's Solutions Consulting Group ("CIBER Solutions"). The CIS Division
provides application software development and maintenance services and, through
its CIBR2000 Division, millennium date change solutions. CIBER Solutions
provides services through CIBER's wholly-owned subsidiaries Spectrum Technology
Group, Inc. ("Spectrum"), Business Information Technology, Inc. ("BIT") and
CIBER Network Services, Inc. ("CNSI"). Spectrum provides information technology
consulting solutions to business problems, specifically in the areas of data
warehousing, data modeling and enterprise architecture, as well as project
management and system integration services. BIT specializes in the
implementation and integration of human resource and financial software
application products, plus workflow automation and manufacturing/distribution
software systems, primarily for client/server networks. A substantial portion of
BIT's revenues is derived from assisting clients implementing PeopleSoft, Inc.
software. CNSI provides a wide range of local-area and wide-area network
solutions, from design and procurement to installation and maintenance, with
services including Internet and intranet connectivity.
Reference is made to the accompanying prospectus of CIBER (the "CIBER
Prospectus") with respect to the shares of CIBER Common Stock which may be
received by a holder of STRYPES on the Maturity Date. CIBER is not affiliated
with the Company, will not receive any of the proceeds from the sale of the
STRYPES and will have no obligations with respect to the STRYPES. THE CIBER
PROSPECTUS IS BEING ATTACHED HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF
STRYPES TOGETHER WITH THIS PROSPECTUS SUPPLEMENT AND THE ML&CO. PROSPECTUS FOR
CONVENIENCE OF REFERENCE ONLY. THE CIBER PROSPECTUS DOES NOT CONSTITUTE A PART
OF THIS PROSPECTUS SUPPLEMENT OR THE ML&CO. PROSPECTUS, NOR IS IT INCORPORATED
BY REFERENCE HEREIN OR THEREIN.
The CIBER Common Stock is listed on the NYSE under the trading symbol "CBR."
See "Price Range of CIBER Common Stock" for certain historical market prices of
the CIBER Common Stock.
S-3
<PAGE>
THE STRYPES
<TABLE>
<S> <C>
OFFERING........................ 1,750,000 STRYPES
ISSUE PRICE..................... $54.125 per STRYPES
MATURITY DATE................... February 1, 2001
INTEREST RATE................... 7 7/8 % of the issue price per annum, or $1.065575 per
STRYPES per quarter, payable in cash quarterly in arrears
INTEREST PAYMENT DATES.......... February 1, May 1, August 1 and November 1, beginning May
1, 1998
PAYMENT AT MATURITY............. On the Maturity Date, the Company will pay and discharge
each STRYPES by delivering to the holder thereof a number
of shares of CIBER Common Stock (subject to the Company's
right to deliver, with respect to all, but not less than
all, shares of CIBER Common Stock deliverable on the
Maturity Date, cash with an equal value) determined in
accordance with the following Payment Rate Formula,
subject to certain adjustments: (a) if the Maturity Price
is greater than or equal to $91.4713 (the "Threshold
Appreciation Price"), 0.7692 shares of CIBER Common Stock
per STRYPES, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than $70.3625
(the "Initial Appreciation Cap"), a fractional share of
CIBER Common Stock per STRYPES so that the value thereof
(determined based on the Maturity Price) equals the
Initial Appreciation Cap, (c) if the Maturity Price is
less than or equal to the Initial Appreciation Cap but is
greater than or equal to the Initial Price, one share of
CIBER Common Stock per STRYPES, (d) if the Maturity Price
is less than the Initial Price but is greater than or
equal to $51.4188 (the "Downside Protection Threshold
Price"), a number of shares of CIBER Common Stock per
STRYPES so that the value thereof (determined based on the
Maturity Price) equals the Initial Price and (e) if the
Maturity Price is less than the Downside Protection
Threshold Price, 1.0526 shares of CIBER Common Stock per
STRYPES. The "Maturity Price" means the average Closing
Price per share of CIBER Common Stock on the 20 Trading
Days immediately prior to, but not including, the second
Trading Day preceding the Maturity Date. AS DESCRIBED
HEREIN, THE MATURITY PRICE WILL REPRESENT A DETERMINATION
OF THE VALUE OF A SHARE OF CIBER COMMON STOCK IMMEDIATELY
PRIOR TO THE MATURITY DATE. THERE CAN BE NO ASSURANCE THAT
THE AMOUNT RECEIVABLE BY HOLDERS OF THE STRYPES ON THE
MATURITY DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE
PRICE OF THE STRYPES. IF THE MATURITY PRICE OF THE CIBER
COMMON STOCK IS LESS THAN THE DOWNSIDE PROTECTION
THRESHOLD PRICE, SUCH AMOUNT RECEIVABLE ON THE MATURITY
DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE
STRYPES, IN WHICH CASE AN INVESTMENT IN THE STRYPES WILL
RESULT IN A LOSS. See "Supplemental Description of the
STRYPES--General."
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
NO REDEMPTION, SINKING FUND OR
PAYMENT PRIOR TO MATURITY..... The STRYPES are not subject to redemption by the Company
prior to the Maturity Date and do not contain any sinking
fund or other mandatory redemption provisions. The STRYPES
are not subject to payment prior to the Maturity Date at
the option of the holder. See "Supplemental Description of
the STRYPES--No Redemption, Sinking Fund or Payment Prior
to Maturity."
RANKING......................... The STRYPES will be unsecured obligations of the Company
ranking PARI PASSU with all of its other unsecured and
unsubordinated indebtedness. See "Supplemental Description
of the STRYPES--Ranking" herein and "Description of the
STRYPES--Ranking" in the ML&Co. Prospectus.
RELATIONSHIP TO CIBER COMMON
STOCK......................... The STRYPES will bear interest at 7 7/8% of the issue
price per annum. CIBER has never declared or paid any cash
dividends on the CIBER Common Stock and has stated that it
has no current intention to pay cash dividends on the
CIBER Common Stock. Any future determination as to the
payment of dividends will be at the discretion of CIBER's
Board of Directors and will depend upon CIBER's operating
results, financial condition and capital requirements,
contractual restrictions, general business conditions and
such other factors as CIBER's Board of Directors deems
relevant. Holders of STRYPES will not be entitled to
receive any future dividends on the CIBER Common Stock
unless and until such time, if any, as the Company shall
have delivered shares of CIBER Common Stock for STRYPES on
the Maturity Date, and unless the applicable record date
for determining stockholders entitled to receive such
dividends occurs after such delivery. See "Risk
Factors--No Stockholder's Rights."
The opportunity for equity appreciation afforded by an
investment in the STRYPES is less than the opportunity for
equity appreciation afforded by a direct investment in the
CIBER Common Stock because the amount receivable by a
holder of a STRYPES on the Maturity Date will exceed the
Initial Appreciation Cap (which represents an appreciation
of 30% over the Initial Price) only if the Maturity Price
of the CIBER Common Stock exceeds the Threshold
Appreciation Price (which represents an appreciation of
69% over the Initial Price). Moreover, holders of the
STRYPES will be entitled to receive on the Maturity Date
only 76.92% (the percentage equal to the Initial
Appreciation Cap divided by the Threshold Appreciation
Price) of any appreciation of the value of CIBER Common
Stock above the Threshold Appreciation Price. See "Risk
Factors--Limitation on Opportunity for Equity
Appreciation."
Although the amount receivable by a holder of a STRYPES on
the Maturity Date may be less than the issue price paid
for the STRYPES, unlike a direct investment in CIBER
Common Stock, an investment in the STRYPES affords
protection from a depreciation in the value of the CIBER
Common Stock to the
</TABLE>
S-5
<PAGE>
<TABLE>
<S> <C>
extent that the Maturity Price does not fall below the
Downside Protection Threshold Price (which represents a
depreciation of 5% below the Initial Price). If the
Maturity Price is less than the Downside Protection
Threshold Price, holders of STRYPES will receive 1.0526
shares of CIBER Common Stock (or, pursuant to the option
of the Company, cash with an equal value) per STRYPES and,
accordingly, will have only limited protection from
depreciation below 95% of the Initial Price.
TRADING PRICES.................. The trading prices of the STRYPES in the secondary market
will be affected by the trading prices of the CIBER Common
Stock in the secondary market. It is impossible to predict
whether the price of CIBER Common Stock will rise or fall.
In addition, any market that develops for the STRYPES is
likely to influence and be influenced by the market for
CIBER Common Stock. For example, the price of CIBER Common
Stock could be depressed by investors' anticipation of the
potential distribution into the market of substantial
amounts of CIBER Common Stock on the Maturity Date, by
possible sales of CIBER Common Stock by investors who view
the STRYPES as a more attractive means of equity
participation in CIBER, and by hedging or arbitrage
trading activity that may develop involving the STRYPES
and the CIBER Common Stock. See "Risk Factors--Factors
Affecting Trading Prices" and "--Impact of STRYPES on the
Market for CIBER Common Stock."
DILUTION........................ The number of shares of CIBER Common Stock (or the amount
of cash) that holders of the STRYPES are entitled to
receive upon payment and discharge on the Maturity Date
will not be adjusted for certain events, such as offerings
of CIBER Common Stock by CIBER for cash or in connection
with acquisitions. At December 31, 1997, the Contracting
Stockholder owned beneficially approximately 27% of the
outstanding CIBER Common Stock. CIBER is not restricted
from issuing additional CIBER Common Stock during the term
of the STRYPES and, because the Contracting Stockholder is
able to exercise significant influence on the business and
affairs of CIBER, any such decision to issue additional
shares of CIBER Common Stock will be influenced by the
Contracting Stockholder. In addition, principal
stockholders of CIBER (including the Contracting
Stockholder) are not precluded from selling shares of
CIBER Common Stock, either pursuant to Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"),
or by causing CIBER to register such shares. Neither CIBER
nor any stockholder of CIBER (including the Contracting
Stockholder) has any duty or obligation to consider the
interests of holders of STRYPES for any reason. Additional
issuances or sales may materially and adversely affect the
price of CIBER Common Stock and, because of the
relationship of the number of shares (or cash amount) to
be received upon payment and discharge of the STRYPES on
the Maturity Date to the price of the CIBER Common Stock,
such other events may adversely affect the trading price
and ultimate
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
value of the STRYPES. There can be no assurance that CIBER
will not take any of the foregoing actions, or that it
will not make offerings of, or that principal stockholders
(including the Contracting Stockholder) will not sell any,
CIBER Common Stock in the future, or as to the amount of
such offerings or sales. See "Risk Factors--Dilution of
CIBER Common Stock."
FORWARD PURCHASE CONTRACT WITH
THE CONTRACTING STOCKHOLDER... Pursuant to a forward purchase contract (the "Forward
Purchase Contract") among the Company, a wholly owned
subsidiary of the Company (the "ML&Co. Subsidiary"), The
Bank of New York, as agent for and on behalf of the ML&Co.
Subsidiary, and Bobby G. Stevenson, individually and as
settlor, beneficiary and trustee of the 1998 Bobby G.
Stevenson Revocable Trust (the "Contracting Stockholder"),
the Contracting Stockholder is obligated to deliver to the
ML&Co. Subsidiary on the Business Day immediately
preceding the Maturity Date a number of shares of CIBER
Common Stock equal to the number required by the Company
to pay and discharge all of the STRYPES (including any
STRYPES issued pursuant to the over-allotment option
granted by the Company to the Underwriter). In lieu of
delivering shares of CIBER Common Stock on the Business
Day immediately preceding the Maturity Date, the
Contracting Stockholder has the right to satisfy his
obligation under the Forward Purchase Contract by
delivering at such time cash in an amount equal to the
value of such number of shares of CIBER Common Stock at
the Maturity Price. Such right, if exercised by the
Contracting Stockholder, must be exercised with respect to
all shares of CIBER Common Stock then deliverable pursuant
to the Forward Purchase Contract. Under the Forward
Purchase Contract, the Company has agreed to pay and
discharge the STRYPES by delivering to the holders thereof
on the Maturity Date the form of consideration that the
ML&Co. Subsidiary receives from the Contracting
Stockholder.
The consideration to be paid by the ML&Co. Subsidiary
under the Forward Purchase Contract is $71,315,820 in the
aggregate, and is payable to the Contracting Stockholder
on or about January 30, 1998. No other consideration is
payable by the ML&Co. Subsidiary to the Contracting
Stockholder in connection with its acquisition of the
CIBER Common Stock pursuant to the Forward Purchase
Contract or the performance of the Forward Purchase
Contract by the Contracting Stockholder.
The Contracting Stockholder has no obligations with
respect to the STRYPES or amounts to be paid to holders
thereof, including any obligations to take the needs of
the Company or of holders of the STRYPES into
consideration in determining whether to deliver shares of
CIBER Common Stock or cash or for any other reason. The
Forward Purchase Contract among the Company, the ML&Co.
Subsidiary, The Bank of New York, as agent for and on
behalf of the ML&Co. Subsidiary, and the Contracting
Stockholder is a commercial transaction and does not
create any rights in, or for
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
the benefit of, any third party, including any holder of
STRYPES. See "Certain Arrangements with the Contracting
Stockholder."
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSIDERATIONS..... Prospective investors in the STRYPES should be aware that
there exists uncertainty concerning the proper United
States Federal income tax characterization and treatment
of the STRYPES. Accordingly, prospective investors should
consider the tax consequences of investing in the STRYPES.
See "Risk Factors-- Tax Matters" and "Certain United
States Federal Income Tax Considerations."
GLOBAL NOTES.................... Upon issuance, all STRYPES will be represented by one or
more global securities deposited with, and registered in
the name of, The Depository Trust Company, as Securities
Depository (the "Securities Depository"), or a nominee
thereof. As a result, the Securities Depository, or its
nominee, will be considered the sole owner of the STRYPES
under the Indenture (as defined herein). Ownership
interests of actual purchasers of STRYPES will be recorded
on the records of participants in the Securities
Depository. See "Description of the STRYPES--Securities
Depository" in the ML&Co. Prospectus.
USE OF PROCEEDS................. The net proceeds to the Company from the sale of the
STRYPES are expected to be $91,883,750, which will be used
to purchase an obligation of the ML&Co. Subsidiary. The
ML&Co. Subsidiary will use $71,315,820 of the
consideration that it receives from the Company to pay to
the Contracting Stockholder the consideration due under
the Forward Purchase Contract and will use the remainder
of such consideration for general corporate purposes.
</TABLE>
S-8
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS SHOULD READ CAREFULLY THIS ENTIRE PROSPECTUS
SUPPLEMENT AND THE ML&CO. PROSPECTUS AND SHOULD CONSIDER, AMONG OTHER THINGS,
THE FACTORS SET FORTH BELOW AND UNDER "RISK FACTORS" IN THE CIBER PROSPECTUS.
COMPARISON TO OTHER DEBT SECURITIES; RELATIONSHIP TO CIBER COMMON STOCK
The terms of the STRYPES differ from those of ordinary debt securities in
that the value of the CIBER Common Stock (or, pursuant to the option of the
Company, the amount of cash) that a holder of a STRYPES will receive on the
Maturity Date is not fixed, but is based on the Maturity Price of the CIBER
Common Stock (see "Supplemental Description of the STRYPES"). THERE CAN BE NO
ASSURANCE THAT SUCH AMOUNT RECEIVABLE BY THE HOLDER ON THE MATURITY DATE WILL BE
EQUAL TO OR GREATER THAN THE ISSUE PRICE OF THE STRYPES. ALTHOUGH AN INVESTMENT
IN THE STRYPES AFFORDS PROTECTION FROM A DEPRECIATION IN THE VALUE OF THE CIBER
COMMON STOCK TO THE EXTENT THAT THE MATURITY PRICE DOES NOT FALL BELOW THE
DOWNSIDE PROTECTION THRESHOLD PRICE, HOLDERS OF STRYPES WILL HAVE ONLY LIMITED
PROTECTION FROM DEPRECIATION BELOW 95% OF THE INITIAL PRICE. IF THE MATURITY
PRICE OF THE CIBER COMMON STOCK IS LESS THAN THE DOWNSIDE PROTECTION THRESHOLD
PRICE, SUCH AMOUNT RECEIVABLE ON THE MATURITY DATE WILL BE LESS THAN THE ISSUE
PRICE PAID FOR THE STRYPES, IN WHICH CASE AN INVESTMENT IN STRYPES WILL RESULT
IN A LOSS. ACCORDINGLY, A HOLDER OF STRYPES ASSUMES THE RISK THAT THE MARKET
VALUE OF THE CIBER COMMON STOCK MAY DECLINE BELOW 95% OF THE INITIAL PRICE, AND
THAT SUCH DECLINE COULD BE SUBSTANTIAL. THE CIBER PROSPECTUS INCLUDES
INFORMATION REGARDING THE SHARES OF CIBER COMMON STOCK WHICH MAY BE RECEIVED BY
A HOLDER OF THE STRYPES ON THE MATURITY DATE.
LIMITATION ON OPPORTUNITY FOR EQUITY APPRECIATION
The opportunity for equity appreciation afforded by an investment in the
STRYPES is less than the opportunity for equity appreciation afforded by a
direct investment in the CIBER Common Stock because the amount receivable by a
holder of a STRYPES on the Maturity Date will exceed the Initial Appreciation
Cap (which represents an appreciation of 30% over the Initial Price) only if the
Maturity Price of the CIBER Common Stock exceeds the Threshold Appreciation
Price (which represents an appreciation of 69% over the Initial Price).
Moreover, holders of the STRYPES will be entitled to receive on the Maturity
Date only 76.92% (the percentage equal to the Initial Appreciation Cap divided
by the Threshold Appreciation Price) of any appreciation of the value of CIBER
Common Stock above the Threshold Appreciation Price. See "Supplemental
Description of the STRYPES." Because the price of the CIBER Common Stock is
subject to market fluctuations, the value of the CIBER Common Stock (or,
pursuant to the option of the Company, the amount of cash) received by a holder
of a STRYPES on the Maturity Date, determined as described herein, may be more
or less than the issue price of the STRYPES. If the Maturity Price is less than
the Downside Protection Threshold Price, holders of STRYPES will have only
limited protection from depreciation below 95% of the Initial Price.
FACTORS AFFECTING TRADING PRICES
The trading prices of the STRYPES in the secondary market will be affected
by the trading prices of the CIBER Common Stock in the secondary market. It is
impossible to predict whether the price of CIBER Common Stock will rise or fall.
Trading prices of CIBER Common Stock will be influenced by CIBER's operating
results and prospects and by economic, financial and other factors and market
conditions that can affect the capital markets generally, the market segment of
which CIBER is a part, the NYSE (on which the CIBER Common Stock is traded),
including the level of, and fluctuations in, the trading prices of stocks
generally and sales of substantial amounts of CIBER Common Stock in the market
subsequent to the offering of the STRYPES or the perception that such sales
could occur, and by other events that are difficult to predict and beyond the
Company's control.
S-9
<PAGE>
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
It is not possible to predict how the STRYPES will trade in the secondary
market or whether such market will be liquid or illiquid. The STRYPES are novel
securities and there is currently no secondary market for the STRYPES. The
STRYPES have been approved for listing on the NYSE, subject to official notice
of issuance. However, there can be no assurance that the STRYPES will not later
be delisted or that trading of the STRYPES on the NYSE will not be suspended. In
the event of a delisting or suspension of trading on the NYSE, the Company will
apply for listing of the STRYPES on another national securities exchange or for
quotation on another trading market. If the STRYPES are not listed or traded on
any securities exchange or trading market, or if trading of the STRYPES is
suspended, pricing information for the STRYPES may be more difficult to obtain,
and the price and liquidity of the STRYPES may be adversely affected.
IMPACT OF STRYPES ON THE MARKET FOR CIBER COMMON STOCK
Any market that develops for the STRYPES is likely to influence and be
influenced by the market for CIBER Common Stock. For example, the price of CIBER
Common Stock could be depressed by investors' anticipation of the potential
distribution into the market of substantial amounts of CIBER Common Stock on the
Maturity Date of the STRYPES, by possible sales of CIBER Common Stock by
investors who view the STRYPES as a more attractive means of equity
participation in CIBER, and by hedging or arbitrage trading activity that may
develop involving the STRYPES and the CIBER Common Stock.
NO STOCKHOLDER'S RIGHTS
Holders of the STRYPES will not be entitled to any rights with respect to
the CIBER Common Stock (including, without limitation, voting rights and rights
to receive any dividends or other distributions in respect thereof) unless and
until such time, if any, as the Company shall have delivered shares of CIBER
Common Stock for STRYPES on the Maturity Date, and unless the applicable record
date, if any, for the exercise of such rights occurs after such date. For
example, in the event that an amendment is proposed to the Amended and Restated
Certificate of Incorporation of CIBER and the record date for determining the
stockholders of record entitled to vote on such amendment occurs prior to such
delivery, holders of the STRYPES will not be entitled to vote on such amendment.
NO AFFILIATION BETWEEN THE COMPANY AND CIBER
The Company has no affiliation with CIBER, and CIBER has no obligations with
respect to the STRYPES or amounts to be paid to holders thereof, including any
obligation to take the needs of the Company or of holders of the STRYPES into
consideration for any reason. CIBER will not receive any of the proceeds of the
offering of the STRYPES made hereby and is not responsible for, and has not
participated in, the determination or calculation of the amount receivable by
holders of the STRYPES on the Maturity Date. CIBER is not involved with the
administration or trading of the STRYPES and has no obligations with respect to
the amount receivable by holders of the STRYPES on the Maturity Date.
DILUTION OF CIBER COMMON STOCK
The number of shares of CIBER Common Stock (or the amount of cash) that
holders of the STRYPES are entitled to receive on the Maturity Date is subject
to adjustment for certain events arising from, among others, a merger or
consolidation in which CIBER is not the surviving or resulting corporation, a
sale or transfer of all or substantially all of the assets of CIBER, and the
liquidation, dissolution, winding up or bankruptcy of CIBER, as well as stock
splits and combinations, stock dividends and certain other actions of CIBER that
modify its capital structure. See "Supplemental Description of the
STRYPES--Dilution Adjustments." Such number of shares of CIBER Common Stock (or
cash amount) to be received by such holders on the Maturity Date will not be
adjusted for other events not specifically
S-10
<PAGE>
provided, such as offerings of CIBER Common Stock by CIBER for cash or in
connection with acquisitions. Likewise, no adjustments will be made for any
sales of CIBER Common Stock by any principal stockholder of CIBER (including the
Contracting Stockholder). At December 31, 1997, the Contracting Stockholder
owned beneficially approximately 27% of the outstanding CIBER Common Stock.
CIBER is not restricted from issuing additional shares of CIBER Common Stock
during the term of the STRYPES and, because the Contracting Stockholder is able
to exercise significant influence on the business and affairs of CIBER, any such
decision to issue additional shares of CIBER Common Stock will be influenced by
the Contracting Stockholder. In addition, the principal stockholders of CIBER
(including the Contracting Stockholder) are not precluded from selling shares of
CIBER Common Stock, either pursuant to Rule 144 under the Securities Act, or by
causing CIBER to register such shares. Neither CIBER nor any stockholder of
CIBER (including the Contracting Stockholder) has any duty or obligation to
consider the interests of the holders of the STRYPES for any reason. Additional
issuances or sales may materially and adversely affect the price of the CIBER
Common Stock and, because of the relationship of the number of shares of CIBER
Common Stock (or cash amount) to be received upon payment and discharge of the
STRYPES on the Maturity Date to the price of the CIBER Common Stock, such other
events may adversely affect the trading price and ultimate value of the STRYPES.
There can be no assurances that CIBER will not take any of the foregoing
actions, or that it will not make offerings of, or that principal stockholders
(including the Contracting Stockholder) will not sell any, CIBER Common Stock in
the future, or as to the amount of any such offerings or sales.
TAX MATTERS
Because of an absence of authority as to the proper characterization of the
STRYPES, their ultimate tax treatment is uncertain. Accordingly, no assurances
can be given that any particular characterization and tax treatment of the
STRYPES will be accepted by the Internal Revenue Service ("IRS") or upheld by a
court. However, it is the opinion of Brown & Wood LLP, counsel to the Company,
that the characterization and tax treatment of the STRYPES described herein (and
described in greater detail under "Certain United States Federal Income Tax
Considerations"), while not the only reasonable characterization and tax
treatment, is based on reasonable interpretations of law currently in effect
and, even if successfully challenged by the IRS, will not result in the
imposition of penalties. The Indenture will require that any holder subject to
U.S. Federal income tax include currently in income, for U.S. Federal income tax
purposes, payments denominated as interest that are made with respect to a
STRYPES in accordance with such holder's regular method of tax accounting. The
Indenture also requires the Company and holders to treat each STRYPES for tax
purposes as a unit (a "Unit") consisting of (i) a debt instrument (the "Debt
Instrument") with a fixed principal amount unconditionally payable on the
Maturity Date equal to the issue price of the STRYPES and bearing interest at
the stated interest rate on the STRYPES and (ii) a forward purchase contract
(the "Forward Contract") pursuant to which the holder agrees to use the
principal payment due on the Debt Instrument to purchase on the Maturity Date
the CIBER Common Stock which the Company is obligated to deliver at that time
(subject to the Company's right to deliver cash in lieu of CIBER Common Stock).
The Indenture also requires that upon the acquisition of a STRYPES and upon a
holder's sale or other disposition of a STRYPES prior to the Maturity Date, the
amount paid or realized by the holder be allocated by the holder between the
Debt Instrument and the Forward Contract based upon their relative fair market
values (as determined on the date of acquisition or disposition). For these
purposes, with respect to acquisitions of STRYPES in connection with the
original issuance thereof, the Company and each holder agrees, pursuant to the
terms of the Indenture, to assign $56.78 (I.E., 104.91%) of the initial purchase
price of a STRYPES (I.E., the issue price of a STRYPES) to the Debt Instrument
and to assign $2.655 (I.E., 4.91%) of the initial purchase price of a STRYPES to
the Forward Contract. As previously mentioned, the appropriate character and
timing of income, gain or loss to be recognized on a STRYPES is uncertain and
investors should consult their own tax advisors concerning the application of
the United States Federal income tax laws to their particular situations as well
as any consequences of the purchase, ownership and disposition of the STRYPES
arising under the
S-11
<PAGE>
laws of any other taxing jurisdiction. The tax consequences of investing in the
STRYPES are described in greater detail under "Certain United States Federal
Income Tax Considerations."
HOLDING COMPANY STRUCTURE
Since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the holders of the STRYPES), to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that claims of the
Company itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and under rules of
certain securities exchanges and other regulatory bodies.
S-12
<PAGE>
CIBER, INC.
CIBER is a nationwide provider of information technology consulting,
including application software staff supplementation, management consulting
solutions for "business/IT" problems, package software implementation services,
system life-cycle project responsibility, millennium date change conversion
services and networking procurement and engineering services. CIBER's revenues
are generated from two areas, the CIBER Information Services ("CIS") Division
and CIBER's Solutions Consulting Group ("CIBER Solutions"). The CIS Division
provides application software development and maintenance services and, through
its CIBR2000 Division, millennium date change solutions. CIBER Solutions
provides services through CIBER's wholly-owned subsidiaries Spectrum Technology
Group, Inc. ("Spectrum"), Business Information Technology, Inc. ("BIT") and
CIBER Network Services, Inc. ("CNSI"). Spectrum provides information technology
consulting solutions to business problems, specifically in the areas of data
warehousing, data modeling and enterprise architecture, as well as project
management and system integration services. BIT specializes in the
implementation and integration of human resource and financial software
application products, plus workflow automation and manufacturing/distribution
software systems, primarily for client/server networks. A substantial portion of
BIT's revenues is derived from assisting clients implementing PeopleSoft, Inc.
software. CNSI provides a wide range of local-area and wide-area network
solutions, from design and procurement to installation and maintenance, with
services including Internet and intranet connectivity.
CIBER is subject to the informational requirements of the Exchange Act.
Accordingly, CIBER files reports, proxy and information statements and other
information with the Commission. Copies of such material can be inspected and
copied at the public reference facilities maintained by the Commission at the
addresses specified under "Available Information" in the CIBER Prospectus.
Reports, proxy and information statements and other information concerning CIBER
may also be inspected at the offices of the NYSE. The Commission maintains a Web
site at http://www.sec.gov containing reports, proxy and information statements
and other information regarding registrants, including CIBER, that file
electronically with the Commission.
THE COMPANY IS NOT AFFILIATED WITH CIBER, AND CIBER HAS NO OBLIGATIONS WITH
RESPECT TO THE STRYPES. THIS PROSPECTUS SUPPLEMENT AND THE ML&CO. PROSPECTUS
RELATE ONLY TO THE STRYPES OFFERED HEREBY AND DO NOT RELATE TO THE CIBER COMMON
STOCK. CIBER HAS FILED A REGISTRATION STATEMENT ON FORM S-3 WITH THE COMMISSION
WITH RESPECT TO THE SHARES OF CIBER COMMON STOCK THAT MAY BE RECEIVED BY A
HOLDER OF STRYPES ON THE MATURITY DATE. THE PROSPECTUS OF CIBER CONSTITUTING A
PART OF SUCH REGISTRATION STATEMENT INCLUDES INFORMATION RELATING TO CIBER AND
THE CIBER COMMON STOCK, AS WELL AS A DISCUSSION OF CERTAIN RISK FACTORS RELEVANT
TO AN INVESTMENT IN CIBER COMMON STOCK. THE CIBER PROSPECTUS IS BEING ATTACHED
HERETO AND DELIVERED TO PROSPECTIVE PURCHASERS OF STRYPES TOGETHER WITH THIS
PROSPECTUS SUPPLEMENT AND THE ML&CO. PROSPECTUS FOR CONVENIENCE OF REFERENCE
ONLY. THE CIBER PROSPECTUS DOES NOT CONSTITUTE A PART OF THIS PROSPECTUS
SUPPLEMENT OR THE ML&CO. PROSPECTUS, NOR IS IT INCORPORATED BY REFERENCE HEREIN
OR THEREIN.
S-13
<PAGE>
PRICE RANGE OF CIBER COMMON STOCK
The CIBER Common Stock has been listed on the NYSE under the symbol "CBR"
since June 19, 1997 and was, prior to that date, traded on the NASDAQ National
Market ("NASDAQ"). The table below sets forth the high and low sales prices per
share of the CIBER Common Stock on NASDAQ or the NYSE, as applicable, for the
periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1996
First Quarter................................ $12 1/2 $8 3/8
Second Quarter............................... 17 1/8 9
Third Quarter................................ 16 7/8 9 5/8
Fourth Quarter............................... 25 14 7/8
FISCAL YEAR 1997
First Quarter................................ 39 13 1/4
Second Quarter............................... 41 3/4 29 1/4
Third Quarter................................ 34 1/4 22
Fourth Quarter............................... 44 7/8 22
FISCAL YEAR 1998
First Quarter................................ 48 1/2 33 1/8
Second Quarter............................... 58 39 1/2
Third Quarter (through January 26, 1998)..... 60 46 13/16
</TABLE>
The last reported sale price of the CIBER Common Stock on the NYSE on
January 26, 1998 was $54 1/8 per share. CIBER has estimated that, as of December
31, 1997, it had approximately 7,700 beneficial stockholders.
CIBER DIVIDEND POLICY
CIBER has never declared or paid any cash dividends on the CIBER Common
Stock. CIBER has stated that it currently intends to retain future earnings for
use in the operation and expansion of its business and therefore does not
anticipate paying cash dividends in the foreseeable future.
Holders of STRYPES will not be entitled to receive any future dividends on
the CIBER Common Stock unless and until such time, if any, as the Company shall
have delivered CIBER Common Stock upon payment and discharge of the STRYPES on
the Maturity Date, and unless the applicable record date for determining
stockholders entitled to receive such dividends occurs after such delivery. See
"Risk Factors-- No Stockholder's Rights."
SUPPLEMENTAL USE OF PROCEEDS
The net proceeds to the Company from the sale of STRYPES are expected to be
$91,883,750, which will be used to purchase an obligation of the ML&Co.
Subsidiary. The ML&Co. Subsidiary will use $71,315,820 of the consideration that
it receives from the Company to pay to the Contracting Stockholder the
consideration due under the Forward Purchase Contract and will use the remainder
of such consideration for general corporate purposes.
S-14
<PAGE>
SUPPLEMENTAL DESCRIPTION OF THE STRYPES
The STRYPES are a series of Senior Debt Securities to be issued under an
indenture, dated as of April 1, 1983 and restated as of April 1, 1987, as
amended and supplemented as of January 30, 1998 (the indenture dated as of April
1, 1983 and restated as of April 1, 1987, as amended and supplemented from time
to time, the "Indenture") between the Company and The Chase Manhattan Bank, as
trustee (the "Trustee"). Certain provisions of the Indenture are summarized in
the ML&Co. Prospectus. The following summary of certain provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Indenture, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and the ML&Co.
Prospectus are a part. All capitalized terms not otherwise defined herein have
the meanings specified in the Indenture. Whenever defined terms of the Indenture
are referred to herein, such defined terms are incorporated by reference herein.
GENERAL
The aggregate number of STRYPES to be issued under the Indenture will be
limited to 1,750,000, plus such additional number of STRYPES as may be issued
pursuant to the over-allotment option granted by the Company to the Underwriter.
See "Underwriting." No fractional STRYPES will be issued.
Each STRYPES, which will be issued at a price of $54.125 , will bear
interest at the rate of 7 7/8% of the issue price per annum (or $4.2623 per
annum) from January 30, 1998, or from the most recent Interest Payment Date to
which interest has been paid or provided for, until the Maturity Date or such
earlier date on which the issue price of such STRYPES is repaid pursuant to the
terms thereof. Interest on the STRYPES will be payable in cash quarterly in
arrears on February 1, May 1, August 1 and November 1, beginning May 1, 1998,
and on the Maturity Date (each, an "Interest Payment Date"), to the persons in
whose names the STRYPES are registered at the close of business on the fifteenth
calendar day (whether or not a Business Day) immediately preceding such Interest
Payment Date. Interest on the STRYPES will be computed on the basis of a 360-day
year of twelve 30-day months. If an Interest Payment Date falls on a day that is
not a Business Day, the interest payment to be made on such Interest Payment
Date will be made on the next succeeding Business Day with the same force and
effect as if made on such Interest Payment Date, and no additional interest will
accrue as a result of such delayed payment.
The STRYPES will mature on February 1, 2001. On the Maturity Date, the
Company will pay and discharge each STRYPES by delivering to the holder thereof
a number of shares (such number of shares being hereinafter referred to as the
"Payment Rate") of CIBER Common Stock (subject to the Company's right to
deliver, with respect to all, but not less than all, shares of CIBER Common
Stock deliverable on the Maturity Date, cash with an equal value) determined in
accordance with the following Payment Rate Formula, subject to adjustment as a
result of certain dilution events: (a) if the Maturity Price (as defined below)
is greater than or equal to the Threshold Appreciation Price, 0.7692 shares of
CIBER Common Stock per STRYPES, (b) if the Maturity Price is less than the
Threshold Appreciation Price but is greater than the Initial Appreciation Cap, a
fractional share of CIBER Common Stock per STRYPES so that the value thereof
(determined based on the Maturity Price) equals the Initial Appreciation Cap,
(c) if the Maturity Price is less than or equal to the Initial Appreciation Cap
but is greater than or equal to the Initial Price, one share of CIBER Common
Stock per STRYPES, (d) if the Maturity Price is less than the Initial Price but
is greater than or equal to the Downside Protection Threshold Price, a number of
shares of CIBER Common Stock per STRYPES so that the value thereof (determined
based on the Maturity Price) equals the Initial Price and (e) if the Maturity
Price is less than the Downside Protection Threshold Price, 1.0526 shares of
CIBER Common Stock per STRYPES. THE MATURITY PRICE WILL REPRESENT A
DETERMINATION OF THE VALUE OF A SHARE OF CIBER COMMON STOCK IMMEDIATELY PRIOR TO
THE MATURITY DATE. THERE CAN BE NO ASSURANCE THAT THE AMOUNT RECEIVABLE BY
HOLDERS OF THE STRYPES ON THE MATURITY DATE WILL BE EQUAL TO OR GREATER THAN THE
ISSUE PRICE OF THE STRYPES. IF THE MATURITY PRICE OF THE CIBER COMMON STOCK IS
LESS THAN THE DOWNSIDE PROTECTION THRESHOLD PRICE, SUCH AMOUNT RECEIVABLE ON THE
MATURITY DATE WILL BE LESS THAN THE ISSUE PRICE PAID FOR THE STRYPES, IN WHICH
CASE AN INVESTMENT IN STRYPES WILL RESULT IN A LOSS. The
S-15
<PAGE>
numbers of shares of CIBER Common Stock per STRYPES specified in clauses (a),
(c) and (e) of the Payment Rate Formula are hereinafter referred to as the
"Share Components."
Notwithstanding the foregoing, the Company may, in lieu of delivering shares
of CIBER Common Stock, deliver cash in an amount equal to the value of such
number of shares of CIBER Common Stock at the Maturity Price, subject to the
Company's agreement contained in the Forward Purchase Contract to deliver on the
Maturity Date the form of consideration that the ML&Co. Subsidiary receives from
the Contracting Stockholder. Such right, if exercised by the Company, must be
exercised with respect to all shares of CIBER Common Stock otherwise deliverable
on the Maturity Date in payment of all Outstanding STRYPES. On or prior to the
sixth Business Day prior to the Maturity Date, the Company will notify the
Securities Depository and the Trustee and publish a notice in THE WALL STREET
JOURNAL or another daily newspaper of national circulation stating whether the
STRYPES will be paid and discharged with shares of CIBER Common Stock or cash.
At the time such notice is published, the Maturity Price will not have been
determined. If the Company delivers shares of CIBER Common Stock, holders of the
STRYPES will be responsible for the payment of any and all brokerage costs upon
the subsequent sale of such stock.
The "Maturity Price" means the average Closing Price per share of CIBER
Common Stock on the 20 Trading Days immediately prior to, but not including, the
second Trading Day preceding the Maturity Date. The "Closing Price" of any
security on any date of determination means the closing sale price (or, if no
closing price is reported, the last reported sale price) of such security on the
NYSE on such date or, if such security is not listed for trading on the NYSE on
any such date, as reported in the composite transactions for the principal
United States securities exchange on which such security is so listed, or, if
such security is not so listed on a United States national or regional
securities exchange, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System, or, if such security is not so
reported, the last quoted bid price for such security in the over-the-counter
market as reported by the National Quotation Bureau or similar organization, or,
if such bid price is not available, the market value of such security on such
date as determined by a nationally recognized independent investment banking
firm retained for this purpose by the Company. In the event that the Payment
Rate Formula is adjusted as described under "--Dilution Adjustments" below, each
of the Closing Prices used in determining the Maturity Price will be similarly
adjusted to derive, for purposes of determining which clause of the Payment Rate
Formula will apply on the Maturity Date, a Maturity Price stated on a basis
comparable to the Downside Protection Threshold Price, the Initial Price, the
Initial Appreciation Cap and the Threshold Appreciation Price. A "Trading Day"
means a day on which the security the Closing Price of which is being determined
(A) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of business and
(B) has traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of such security. The term "Business Day" means any day that is not a
Saturday, a Sunday or a day on which the NYSE or banking institutions or trust
companies in The City of New York are authorized or obligated by law or
executive order to close.
HYPOTHETICAL PAYMENTS AT MATURITY
For illustrative purposes only, the following table shows the number of
shares of CIBER Common Stock or the amount of cash that a holder of STRYPES
would receive for each STRYPES at various hypothetical Maturity Prices. The
table assumes that there will be no dilution adjustments to the Payment Rate
Formula as described below. Given the Downside Protection Threshold Price of
$51.42, the Initial Price of $54.13, the Initial Appreciation Cap of $70.36 and
the Threshold Appreciation Price of $91.47, a STRYPES holder would receive on
the Maturity Date the following number of shares of CIBER Common Stock or amount
of cash (if the Company elects to pay and discharge the STRYPES with cash) per
STRYPES:
S-16
<PAGE>
<TABLE>
<CAPTION>
MATURITY PRICE NUMBER OF
OF CIBER SHARES OF CIBER
COMMON STOCK COMMON STOCK AMOUNT OF CASH*
- -------------- ----------------- ----------------
<S> <C> <C>
$ 45.13 1.0526 $ 47.50
49.13 1.0526 51.71
51.42 1.0526 54.13
52.13 1.0384 54.13
54.13 1.0000 54.13
59.13 1.0000 59.13
64.13 1.0000 64.13
70.36 1.0000 70.36
74.13 0.9492 70.36
79.13 0.8893 70.36
84.13 0.8364 70.36
91.47 0.7692 70.36
94.13 0.7692 72.40
99.13 0.7692 76.25
</TABLE>
- ------------------------
* The preceding table does not take into account interest payable on the
STRYPES. Dollar amounts in the table have been rounded to two decimal places
and share amounts have been rounded to four decimal places.
Based on the same assumptions, the following graph illustrates, at various
hypothetical Maturity Prices, the value of the number (or fractional number) of
shares of CIBER Common Stock that a holder would receive for each STRYPES
relative to the value of a share of CIBER Common Stock.
[The graph sets forth, at various hypothetical Maturity Prices, the value of
the number (or fractional number) of shares of CIBER Common Stock that a holder
would receive for each STRYPES relative to the value of a share of CIBER Common
Stock, with the horizontal axis specifying the Maturity Price of CIBER Common
Stock in a range from $20 to $100 and the vertical axis specifying the Maturity
Value of the STRYPES in a range from $20 to $100.]
- ------------------------
* The preceding graph does not take into account interest payable on the
STRYPES.
S-17
<PAGE>
The hypothetical Maturity Prices set forth in the table and graph above are
for purposes of illustration only. There can be no assurance that the actual
Maturity Price will be within the range of hypothetical Maturity Prices shown.
The actual number of shares of CIBER Common Stock or the amount of cash that a
holder of STRYPES will receive for each STRYPES on the Maturity Date will depend
upon the actual Maturity Price, determined as described herein.
DILUTION ADJUSTMENTS
The Payment Rate Formula is subject to adjustment if CIBER shall: (i) pay a
stock dividend or make a distribution with respect to CIBER Common Stock in
shares of such stock; (ii) subdivide or split the outstanding shares of CIBER
Common Stock into a greater number of shares; (iii) combine the outstanding
shares of CIBER Common Stock into a smaller number of shares; (iv) issue by
reclassification of shares of CIBER Common Stock any shares of common stock of
CIBER; (v) issue rights or warrants to all holders of CIBER Common Stock
entitling them to subscribe for or purchase shares of CIBER Common Stock at a
price per share less than the then current market price of the CIBER Common
Stock (other than rights to purchase CIBER Common Stock pursuant to a plan for
the reinvestment of dividends or interest); or (vi) pay a dividend or make a
distribution to all holders of CIBER Common Stock of evidences of its
indebtedness or other assets (excluding any stock dividends or distributions
referred to in clause (i) above or any cash dividends other than any
Extraordinary Cash Dividend (as defined below)) or issue to all holders of CIBER
Common Stock rights or warrants to subscribe for or purchase any of its
securities (other than those referred to in clause (v) above).
In the case of the events referred to in clauses (i), (ii), (iii) and (iv)
above, the Payment Rate Formula shall be adjusted so that each holder of any
STRYPES shall thereafter be entitled to receive, upon payment and discharge of
such STRYPES, the number of shares of CIBER Common Stock (or, in the case of a
reclassification referred to in clause (iv) above, the number of shares of other
common stock of CIBER issued pursuant thereto) which such holder would have
owned or been entitled to receive immediately following any such event had such
STRYPES been paid and discharged immediately prior to such event or any record
date with respect thereto.
In the case of the event referred to in clause (v) above, the Payment Rate
Formula shall be adjusted by multiplying each of the Share Components in the
Payment Rate Formula in effect immediately prior to the date of issuance of the
rights or warrants referred to in clause (v) above by a fraction, the numerator
of which shall be the number of shares of CIBER Common Stock outstanding on the
date of issuance of such rights or warrants, immediately prior to such issuance,
plus the number of additional shares of CIBER Common Stock offered for
subscription or purchase pursuant to such rights or warrants, and the
denominator of which shall be the number of shares of CIBER Common Stock
outstanding on the date of issuance of such rights or warrants, immediately
prior to such issuance, plus the number of additional shares of CIBER Common
Stock which the aggregate offering price of the total number of shares of CIBER
Common Stock so offered for subscription or purchase pursuant to such rights or
warrants would purchase at the current market price (determined as the average
Closing Price per share of CIBER Common Stock on the 20 Trading Days immediately
prior to the date such rights or warrants are issued, subject to certain
adjustments), which shall be determined by multiplying such total number of
shares by the exercise price of such rights or warrants and dividing the product
so obtained by such current market price. To the extent that shares of CIBER
Common Stock are not delivered after the expiration of such rights or warrants,
the Payment Rate Formula shall be readjusted to the Payment Rate Formula which
would then be in effect had such adjustments for the issuance of such rights or
warrants been made upon the basis of delivery of only the number of shares of
CIBER Common Stock actually delivered.
In the case of the event referred to in clause (vi) above, the Payment Rate
Formula shall be adjusted by multiplying each of the Share Components in the
Payment Rate Formula in effect on the record date referred to below by a
fraction, the numerator of which shall be the market price per share of the
CIBER Common Stock on the record date for the determination of stockholders
entitled to receive the dividend or
S-18
<PAGE>
distribution or the rights or warrants referred to in clause (vi) above (such
market price being determined as the average Closing Price per share of CIBER
Common Stock on the 20 Trading Days immediately prior to such record date,
subject to certain adjustments), and the denominator of which shall be such
market price per share of CIBER Common Stock less the fair market value (as
determined by the Board of Directors of the Company, whose determination shall
be conclusive, and described in a resolution adopted with respect thereto) as of
such record date of the portion of the assets or evidences of indebtedness to be
distributed or of such subscription rights or warrants applicable to one share
of CIBER Common Stock.
An "Extraordinary Cash Dividend" means, with respect to any consecutive
12-month period, the amount, if any, by which the aggregate amount of all cash
dividends on the CIBER Common Stock occurring in such 12-month period (excluding
any such dividends occurring in such period for which a prior adjustment to the
Payment Rate Formula was previously made) exceeds on a per share basis 10% of
the average of the Closing Prices per share of the CIBER Common Stock over such
12-month period. All adjustments to the Payment Rate Formula will be calculated
to the nearest 1/10,000th of a share of CIBER Common Stock (or if there is not a
nearest 1/10,000th of a share to the next lower 1/10,000th of a share). No
adjustment in the Payment Rate Formula shall be required unless such adjustment
would require an increase or decrease of at least one percent therein; PROVIDED,
HOWEVER, that any adjustments which by reason of the foregoing are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment. If an adjustment is made to the Payment Rate Formula as described
above, an adjustment will also be made to the Maturity Price solely to determine
which clause of the Payment Rate Formula will apply on the Maturity Date. The
required adjustment to the Maturity Price will be made by multiplying each of
the Closing Prices used in determining the Maturity Price by a fraction, the
numerator of which shall be the Share Component in clause (c) of the Payment
Rate Formula immediately after such adjustment described above, and the
denominator of which shall be the Share Component in clause (c) of the Payment
Rate Formula immediately before such adjustment described above. Each such
adjustment to the Payment Rate Formula shall be made successively.
In the event of (A) any consolidation or merger of CIBER, or any surviving
entity or subsequent surviving entity of CIBER (a "CIBER Successor"), with or
into another entity (other than a consolidation or merger in which CIBER is the
continuing corporation and in which the CIBER Common Stock outstanding
immediately prior to the consolidation or merger is not exchanged for cash,
securities or other property of CIBER or another corporation), (B) any sale,
transfer, lease or conveyance to another entity of the property of CIBER or any
CIBER Successor as an entirety or substantially as an entirety, (C) any
statutory exchange of securities of CIBER or any CIBER Successor with another
entity (other than in connection with a merger or acquisition) or (D) any
liquidation, dissolution, winding up or bankruptcy of CIBER or any CIBER
Successor (any such event described in clause (A), (B), (C) or (D), a
"Reorganization Event"), the Payment Rate Formula used to determine the amount
payable on the Maturity Date for each STRYPES will be adjusted to provide that
each holder of STRYPES will receive on the Maturity Date for each STRYPES cash
in an amount equal to (a) if the Transaction Value (as defined below) is greater
than or equal to the Threshold Appreciation Price, 0.7692 (subject to adjustment
in the same manner and to the same extent as the Share Components in the Payment
Rate Formula are adjusted as described above) multiplied by the Transaction
Value, (b) if the Transaction Value is less than the Threshold Appreciation
Price but greater than the Initial Appreciation Cap, the Initial Appreciation
Cap, (c) if the Transaction Value is less than or equal to the Initial
Appreciation Cap but is greater than or equal to the Initial Price, the
Transaction Value, (d) if the Transaction Value is less than the Initial Price
but is greater than or equal to the Downside Protection Threshold Price, the
Initial Price and (e) if the Maturity Price is less than the Downside Protection
Threshold Price, 1.0526 (subject to adjustment in the same manner and to the
same extent as the Share Components in the Payment Rate Formula are adjusted as
described above) multiplied by the Transaction Value. "Transaction Value" means
(i) for any cash received in any such Reorganization Event, the amount of cash
received per share of CIBER Common Stock, (ii) for any property other than cash
or securities received in any such Reorganization Event, an amount equal to the
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market value on the third Business Day preceding the Maturity Date of such
property received per share of CIBER Common Stock as determined by a nationally
recognized independent investment banking firm retained for this purpose by the
Company and (iii) for any securities received in any such Reorganization Event,
an amount equal to the average Closing Price per unit of such securities on the
20 Trading Days immediately prior to, but not including, the second Trading Day
preceding the Maturity Date multiplied by the number of such securities (subject
to adjustment on a basis consistent with the adjustment provisions described
above) received for each share of CIBER Common Stock; PROVIDED, HOWEVER, if one
or more adjustments to the Payment Rate Formula shall have become effective
prior to the effective date for such Reorganization Event, then the Transaction
Value determined in accordance with the foregoing shall be adjusted by
multiplying such Transaction Value by the Share Component in clause (c) of the
Payment Rate Formula immediately before the effective date for such
Reorganization Event. Notwithstanding the foregoing, if any Marketable
Securities (as defined below) are received by holders of CIBER Common Stock in
such Reorganization Event, then in lieu of delivering cash as provided above,
the Company may at its option deliver a proportional amount of such Marketable
Securities. If the Company elects to deliver Marketable Securities, holders of
the STRYPES will be responsible for the payment of any and all brokerage and
other transactional costs upon the sale of such securities. "Marketable
Securities" means any securities listed on a U.S. national securities exchange
or reported by NASDAQ.
No adjustments will be made for certain other events, such as offerings of
CIBER Common Stock by CIBER for cash or in connection with acquisitions.
Likewise, no adjustments will be made for any sales of CIBER Common Stock by any
principal stockholder of CIBER (including the Contracting Stockholder).
The Company is required, within ten Business Days following the occurrence
of an event that requires an adjustment to the Payment Rate Formula (or if the
Company is not aware of such occurrence, as soon as practicable after becoming
so aware), to provide written notice to the Trustee and to the holders of the
STRYPES of the occurrence of such event and a statement in reasonable detail
setting forth the adjusted Payment Rate Formula and the method by which the
adjustment to the Payment Rate Formula was determined, provided that, in respect
of any adjustment to the Maturity Price, such notice will only disclose the
factor by which each of the Closing Prices used in determining the Maturity
Price is to be multiplied in order to determine the Payment Rate on the Maturity
Date. Until the Maturity Date, the Payment Rate itself cannot be determined.
FRACTIONAL SHARES
No fractional shares of CIBER Common Stock will be delivered if the Company
pays and discharges the STRYPES by delivering shares of CIBER Common Stock. In
lieu of any fractional share otherwise deliverable in respect of all STRYPES of
any holder on the Maturity Date, such holder shall be entitled to receive an
amount in cash equal to the value of such fractional share at the Maturity
Price.
NO REDEMPTION, SINKING FUND OR PAYMENT PRIOR TO MATURITY
The STRYPES are not subject to redemption prior to the Maturity Date at the
option of the Company and do not contain sinking fund or other mandatory
redemption provisions. The STRYPES are not subject to payment prior to the
Maturity Date at the option of the holder.
RANKING
The STRYPES will be unsecured obligations and will rank PARI PASSU with all
other unsecured and unsubordinated indebtedness of the Company. At September 26,
1997, the Company had long-term borrowings outstanding of $39,998 million. In
addition, at September 26, 1997, there were $2,333 million of bank loans and
$34,777 million of commercial paper outstanding.
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The Company had no secured debt at September 26, 1997. At such date,
collateralized financing transactions of the Company's subsidiaries consisted of
$7,905 million of cash deposits for securities loaned and $74,872 million of
securities sold under agreements to repurchase.
There are no contractual restrictions on the ability of the Company or its
subsidiaries to incur additional secured or unsecured debt. However, borrowings
by certain subsidiaries, including MLPF&S, are restricted by net capital
requirements under the Exchange Act and under rules of certain exchanges and
other regulatory bodies. See "Description of the STRYPES--Ranking" in the ML&Co.
Prospectus.
LISTING
The STRYPES have been approved for listing on the NYSE, subject to official
notice of issuance.
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CERTAIN ARRANGEMENTS WITH THE CONTRACTING STOCKHOLDER
Pursuant to the Forward Purchase Contract, the Contracting Stockholder is
obligated to deliver to the ML&Co. Subsidiary on the Business Day immediately
preceding the Maturity Date a number of shares of CIBER Common Stock equal to
the number required by the Company to pay and discharge all of the STRYPES
(including any STRYPES issued pursuant to the over-allotment option granted by
the Company to the Underwriter). In lieu of delivering shares of CIBER Common
Stock on the Business Day immediately preceding the Maturity Date, the
Contracting Stockholder has the right to satisfy his obligation under the
Forward Purchase Contract by delivering at such time cash in an amount equal to
the value of such number of shares of CIBER Common Stock at the Maturity Price.
Such right, if exercised by the Contracting Stockholder, must be exercised with
respect to all shares of CIBER Common Stock then deliverable pursuant to the
Forward Purchase Contract. Under the Forward Purchase Contract, the Company has
agreed to pay and discharge the STRYPES by delivering to the holders thereof on
the Maturity Date the form of consideration that the ML&Co. Subsidiary receives
from the Contracting Stockholder.
The consideration to be paid by the ML&Co. Subsidiary under the Forward
Purchase Contract is $71,315,820 in the aggregate, and is payable to the
Contracting Stockholder on or about January 30, 1998. No other consideration is
payable by the ML&Co. Subsidiary to the Contracting Stockholder in connection
with its acquisition of the CIBER Common Stock or the performance of the Forward
Purchase Contract by the Contracting Stockholder. The Company has agreed with
the Contracting Stockholder that, without the prior consent of the Contracting
Stockholder, it will not amend, modify or supplement the Indenture or the
STRYPES in any respect that would adversely affect any obligation of the
Contracting Stockholder under the Forward Purchase Contract, including, without
limitation, increasing the consideration that the Contracting Stockholder is
obligated to deliver pursuant to the Forward Purchase Contract.
Until such time, if any, as the Contracting Stockholder shall have delivered
shares of CIBER Common Stock to the ML&Co. Subsidiary pursuant to the terms of
the Forward Purchase Contract, the Contracting Stockholder will retain all
ownership rights with respect to the CIBER Common Stock held by him (including,
without limitation, voting rights and rights to receive any dividends or other
distributions in respect thereof).
The Contracting Stockholder has no duties or obligations with respect to the
STRYPES or amounts to be paid to holders thereof, including any duty or
obligation to take the needs of the Company or holders of the STRYPES into
consideration in determining whether to deliver shares of CIBER Common Stock or
cash or for any other reason. The Forward Purchase Contract among the Company,
the ML&Co. Subsidiary, The Bank of New York, as agent for and on behalf of the
ML&Co. Subsidiary, and the Contracting Stockholder is a commercial transaction
and does not create any rights in, or for the benefit of, any third party,
including any holder of STRYPES.
To the extent that the Contracting Stockholder does not perform under the
Forward Purchase Contract, the Company will be required to otherwise acquire
shares of CIBER Common Stock for delivery to holders of the STRYPES on the
Maturity Date, unless, in the case of shares deliverable on the Maturity Date,
it elects to exercise its option to deliver cash with an equal value.
Merrill Lynch Capital Corporation, a wholly owned subsidiary of the Company,
will enter into a secured loan agreement with Bobby G. Stevenson, as trustee of
the 1998 Bobby G. Stevenson Revocable Trust, pursuant to which Mr. Stevenson, as
trustee of the 1998 Bobby G. Stevenson Revocable Trust, will borrow
approximately $20,567,930 for a term of three years.
For more information regarding the relationship between the Contracting
Stockholder and CIBER and the CIBER Common Stock that may be delivered to
holders of STRYPES on the Maturity Date, see the CIBER Prospectus which
accompanies this Prospectus Supplement and the ML&Co. Prospectus.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Set forth in full below is the opinion of Brown & Wood LLP, counsel to the
Company, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the STRYPES. Such opinion is based upon
laws, regulations, rulings and decisions now in effect, all of which are subject
to change (including retroactive changes in effective dates) or possible
differing interpretations. The discussion below deals only with STRYPES held as
capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, tax-exempt entities,
persons holding STRYPES in a tax-deferred or tax-advantaged account, or persons
holding STRYPES as a hedge against currency risks, as a position in a "straddle"
or as part of a "hedging" or "conversion" transaction for tax purposes. It also
does not deal with holders of STRYPES other than original purchasers thereof
(except where otherwise specifically noted herein). The following discussion
also does not address the tax consequences of investing in the STRYPES arising
under the laws of any state, local or foreign jurisdiction. Persons considering
the purchase of the STRYPES should consult their own tax advisors concerning the
application of the United States Federal income tax laws to their particular
situations as well as any consequences of the purchase, ownership and
disposition of the STRYPES arising under the laws of any other jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a STRYPES
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate the
income of which is subject to United States Federal income taxation regardless
of its source, (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust, or (v) any other person whose income or gain in respect
of a STRYPES is effectively connected with the conduct of a United States trade
or business. Notwithstanding the preceding sentence, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996, and
treated as United States persons prior to such date that elect to continue to be
treated as United States persons will also be a U.S. Holder. As used herein, the
term "non-U.S. Holder" means a beneficial owner of a STRYPES that is not a U.S.
Holder.
GENERAL
There are no statutory provisions, regulations (except possibly the Treasury
Regulations described below), published rulings or judicial decisions addressing
or involving the characterization, for United States Federal income tax
purposes, of the STRYPES or securities with terms substantially the same as the
STRYPES. Accordingly, the proper United States Federal income tax
characterization and treatment of the STRYPES is uncertain. Pursuant to the
terms of the Indenture, the Company and any holder of a STRYPES agree to treat
each STRYPES as a unit (a "Unit") consisting of (i) a debt instrument (the "Debt
Instrument") with a fixed principal amount unconditionally payable on the
Maturity Date equal to the issue price of the STRYPES and bearing interest at
the stated interest rate on the STRYPES and (ii) a forward purchase contract
(the "Forward Contract") pursuant to which the holder agrees to use the
principal payment due on the Debt Instrument to purchase on the Maturity Date
the CIBER Common Stock which the Company is obligated to deliver at that time
(subject to the Company's right to deliver cash in lieu of CIBER Common Stock).
Therefore, the Company currently intends to treat each STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract for United States
Federal income tax purposes and, where required, intends to file information
returns with the Internal Revenue Service ("IRS") in accordance with such
treatment, in the absence of any change or clarification in the law, by
regulation or otherwise, requiring a different characterization and treatment of
the STRYPES for United States Federal income tax purposes. In the opinion of
Brown & Wood LLP, counsel to the Company, such characterization and tax
treatment of the STRYPES, although not the only reasonable characterization
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and tax treatment, is based on reasonable interpretations of law currently in
effect and, even if successfully challenged by the IRS, will not result in the
imposition of penalties.
Prospective investors in the STRYPES should be aware, however, that no
ruling is being requested from the IRS with respect to the STRYPES, the IRS is
not bound by the characterization of each STRYPES by the Company and the holders
thereof as a Unit consisting of the Debt Instrument and the Forward Contract,
and the IRS could possibly assert a different position as to the proper United
States Federal income tax characterization and treatment of the STRYPES. For
instance, it is possible that the IRS could assert that each STRYPES should be
treated entirely as a single debt instrument of the Company for United States
Federal income tax purposes. Except where otherwise specifically provided
herein, the following discussion of the principal United States Federal income
tax consequences of the purchase, ownership and disposition of the STRYPES is
based upon the assumption that each STRYPES will be characterized and treated as
a Unit consisting of the Debt Instrument and the Forward Contract for United
States Federal income tax purposes. As discussed in greater detail herein, if
the STRYPES are not in fact ultimately characterized and treated as a Unit
consisting of the Debt Instrument and the Forward Contract for United States
Federal income tax purposes, then the United States Federal income tax treatment
of the purchase, ownership and disposition of the STRYPES could significantly
differ from the treatment discussed immediately below with the result that the
timing and character of income, gain or loss recognized on a STRYPES could
significantly differ from the timing and character of income, gain or loss
recognized on a STRYPES had each STRYPES in fact been characterized and treated
as a Unit consisting of the Debt Instrument and the Forward Contract for United
States Federal income tax purposes.
U.S. HOLDERS
As previously discussed, pursuant to the terms of the Indenture, the Company
and any holder of a STRYPES agree to treat each STRYPES as a Unit consisting of
the Debt Instrument and the Forward Contract. Consistent with this treatment of
the STRYPES, pursuant to the terms of the Indenture, a U.S. Holder of a STRYPES
will be required to include currently in income payments denominated as interest
that are made with respect to a STRYPES in accordance with such U.S. Holder's
regular method of tax accounting. Furthermore, pursuant to the agreement
contained in the Indenture to treat each STRYPES for tax purposes as a Unit
consisting of the Debt Instrument and the Forward Contract, any holder of a
STRYPES agrees to allocate the purchase price paid by such holder to acquire the
STRYPES between the two components of the Unit (I.E., the Debt Instrument and
the Forward Contract) based upon their relative fair market values (as
determined on the purchase date). The portion of the total purchase price so
allocated by the holder to each component of the Unit will generally constitute
the holder's initial tax basis for each such component of the Unit. Accordingly,
in the event that the fair market value of the Debt Instrument (as determined on
the purchase date) exceeds the purchase price paid by the holder to acquire the
STRYPES, the holder would be deemed to have acquired the Debt Instrument for an
amount equal to the fair market value of the Debt Instrument (as determined on
the purchase date) and would be deemed to have assumed the Forward Contract
component of the STRYPES in exchange for a payment in an amount equal to the
excess of the fair market value of the Debt Instrument (as determined on the
purchase date) over the purchase price paid by the holder to acquire the
STRYPES. In such event, such deemed payment received by the holder in respect of
the Forward Contract should only be taken in account by the holder as an
additional amount realized with respect to the Forward Contract on the earlier
of the sale or other disposition of the STRYPES by the holder or the Maturity
Date (which would either reduce the holder's tax basis in any CIBER Common Stock
received thereby or, if the STRYPES are paid entirely in cash on the Maturity
Date or are sold prior to the Maturity Date, increase the amount of gain or
decrease the amount of loss realized with respect to the Forward Contract).
Pursuant to the terms of the Indenture, with respect to acquisitions of STRYPES
in connection with the original issuance thereof, the Company and the holders
agree to assign $56.78 (I.E., 104.91%) of the initial purchase price of a
STRYPES (i.e., the issue price of a STRYPES) to the Debt Instrument component
and to assign $2.655 (I.E., 4.91%) of the initial purchase price of a STRYPES to
the Forward Contract component. Based upon the
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foregoing, pursuant to the agreement to treat each STRYPES as a Unit consisting
of the Debt Instrument and the Forward Contract, a holder who acquires a STRYPES
in connection with the original issuance thereof, will have agreed to treat such
acquisition of the STRYPES by the holder as a purchase of the Debt Instrument by
the holder for $56.78 and the receipt of an initial payment by the holder with
respect to the Forward Contract of $2.655.
Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument (E.G., the Debt Instrument) generally
will be taxable to a U.S. Holder as ordinary interest income at the time such
payments are accrued or are received (in accordance with the U.S. Holder's
regular method of tax accounting). In addition, a debt instrument will be
treated as having been issued with bond premium for United States Federal income
tax purposes to the extent that the issue price of the debt instrument exceeds
the stated redemption price at maturity of the debt instrument (generally the
debt instrument's stated principal amount). Pursuant to the agreement to treat
each STRYPES as a Unit consisting of the Debt Instrument and the Forward
Contract, each such Debt Instrument component will be treated for these purposes
as having an issue price equal to $56.78. Since the issue price of each such
Debt Instrument component (I.E., $56.78) exceeds its stated redemption price at
maturity (I.E., $54.125) the Debt Instrument component of each Unit will be
treated as having been issued at a premium.
Under the foregoing principles and in accordance with the agreement to treat
each STRYPES as a Unit consisting of the Debt Instrument and the Forward
Contract, the quarterly interest payments payable with respect to the STRYPES at
the stated interest rate of 7 7/8% of the issue price of the STRYPES per annum
(the "Interest Payments") generally will be taxable to a U.S. Holder as ordinary
interest income on the respective dates that such Interest Payments are accrued
or are received (in accordance with the U.S.Holder's regular method of tax
accounting). On the Maturity Date, pursuant to the agreement to treat each
STRYPES as a Unit consisting of the Debt Instrument and the Forward Contract, a
U.S. Holder will recognize capital gain or loss with respect to the Debt
Instrument in an amount equal to the difference, if any, between the principal
amount of the Debt Instrument (I.E., the issue price of the STRYPES) and such
U.S. Holder's adjusted tax basis (as defined below) in the Debt Instrument. A
U.S. Holder's adjusted tax basis in the Debt Instrument generally will equal
such U.S. Holder's initial investment in the Debt Instrument, reduced by any
bond premium deductions taken by the U.S. Holder (as discussed below). Such
capital gain or loss will generally be long-term capital gain or loss if the
STRYPES has been held by the U.S. Holder for more than one year as of the
Maturity Date. In addition, pursuant to the agreement to treat each STRYPES as a
Unit consisting of the Debt Instrument and the Forward Contract, on the Maturity
Date, if the Company delivers CIBER Common Stock upon payment of the STRYPES, a
U.S. Holder will generally not realize any taxable gain or loss on the exchange,
pursuant to the Forward Contract, of the principal amount of the Debt Instrument
for the CIBER Common Stock. However, a U.S. Holder will generally be required to
recognize taxable gain or loss with respect to any cash received in lieu of
fractional shares of CIBER Common Stock. The amount of such gain or loss
recognized by a U.S. Holder will be equal to the difference, if any, between the
amount of cash received by the U.S. Holder and the portion of the sum of (or the
difference between) the principal amount of the Debt Instrument and the U.S.
Holder's tax basis in the Forward Contract (or the amount deemed to have been
realized by the U.S. Holder in respect of the Forward Contract) that is
allocable to such fractional shares. Any such taxable gain or loss attributable
to cash received in lieu of fractional shares will be treated as short-term
capital gain or loss. A U.S. Holder will have an initial tax basis in any CIBER
Common Stock received on the Maturity Date in an amount equal to the sum of (or
the difference between) the principal amount of the Debt Instrument and the U.S.
Holder's tax basis in the Forward Contract (or the amount deemed to have been
realized by the U.S. Holder in respect of the Forward Contract) less the portion
of such sum (or difference) that is allocable to any fractional shares (as
described above) and will realize taxable gain or loss with respect to such
CIBER Common Stock received on the Maturity Date only upon the subsequent sale
or disposition by the U.S. Holder of such CIBER Common Stock. In addition, a
U.S. Holder's holding period for any CIBER Common Stock received by such U.S.
Holder on the Maturity Date will begin on
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the day immediately following the Maturity Date and will not include the period
during which the U.S. Holder held such STRYPES.
Alternatively, pursuant to the agreement to treat the STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract, if the Company pays
the STRYPES entirely in cash on the Maturity Date, a U.S. Holder will recognize
taxable gain or loss on the Maturity Date with respect to the Forward Contract
(in addition to any gain or loss recognized with respect to the Debt Instrument
as described above) in an amount equal to the difference, if any, between the
total amount of cash received by such U.S. Holder on the Maturity Date and an
amount equal to the sum of (or the difference between) the principal amount of
the Debt Instrument and the U.S. Holder's tax basis in the Forward Contract (or
the amount deemed to have been realized by the U.S. Holder in respect of the
Forward Contract). It is uncertain whether such gain or loss would be treated as
capital or ordinary gain or loss. If such gain or loss is properly treated as
capital gain or loss, then such gain or loss will be treated as long-term
capital gain or loss if the STRYPES has been held by the U.S. Holder for more
than one year as of the Maturity Date. If such gain or loss is properly treated
as ordinary gain or loss, it is possible that the deductibility of any loss
recognized with respect to the Forward Contract by a U.S. Holder who is an
individual could be subject to the limitations applicable to miscellaneous
itemized deductions provided for under Section 67(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). In general, Section 67(a) of the Code
provides that an individual may only deduct miscellaneous itemized deductions
for a particular taxable year to the extent that the aggregate amount of the
individual's miscellaneous itemized deductions for such taxable year exceed two
percent of the individual's adjusted gross income for such taxable year
(although, the miscellaneous itemized deductions allowable to high-income
individuals are generally subject to further limitations under Section 68 of the
Code). Prospective investors in the STRYPES who are individuals should also be
aware that miscellaneous itemized deductions are not allowable in computing the
United States alternative minimum tax imposed by Section 55 of the Code.
Prospective investors in the STRYPES are urged to consult their own tax advisors
concerning the character of any gain or loss realized on the Maturity Date with
respect to the Forward Contract in the event that the Company elects to pay the
STRYPES in cash on the Maturity Date, as well as the deductibility of any such
loss.
Pursuant to the agreement to treat each STRYPES as a Unit consisting of the
Debt Instrument and the Forward Contract, upon the sale or other disposition of
a STRYPES prior to the Maturity Date, a U.S. Holder generally will be required
to allocate the total amount realized by such U.S. Holder upon such sale or
other disposition (other than amounts representing accrued and unpaid Interest
Payments) between the two components of the Unit (I.E., the Debt Instrument and
the Forward Contract) based upon their relative fair market values (as
determined on the date of disposition). Accordingly, in the event that the fair
market value of the Debt Instrument (as determined on the date of disposition)
exceeds the actual amount realized by the U.S. Holder upon the sale or other
disposition of a STRYPES prior to the Maturity Date, the U.S. Holder would be
deemed to have sold the Debt Instrument for an amount equal to the fair market
value of the Debt Instrument (as determined on the date of disposition) and
would be deemed to have made a payment to the purchaser of the STRYPES in
exchange for such purchaser's assumption of the Forward Contract in an amount
equal to the excess of the fair market value of the Debt Instrument (as
determined on the date of disposition) over the actual amount realized by the
U.S. Holder upon such sale or disposition of the STRYPES. A U.S. Holder will
generally be required to recognize taxable gain or loss with respect to each
such component in an amount equal to the difference, if any, between (or, in
some cases, the sum of) the amount realized (or paid) with respect to each such
component upon the sale or disposition of the STRYPES (as determined in the
manner described above) and the U.S. Holder's adjusted tax basis in each such
component (or the amount deemed to have been realized by the U.S. Holder in
respect of the Forward Contract). Any such gain or loss will generally be
treated as long-term capital gain or loss if the U.S. Holder has held the
STRYPES for more than one year at the time of disposition.
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As previously discussed, prospective investors in the STRYPES should be
aware that the IRS is not bound by the characterization of the STRYPES by the
Company and the holders thereof as a Unit consisting of the Debt Instrument and
the Forward Contract, and the IRS could possibly assert a different position as
to the proper United States Federal income tax characterization and treatment of
the STRYPES. For instance, it is possible that the IRS could assert that each
STRYPES should be treated entirely as a single debt instrument of the Company
for United States Federal income tax purposes.
If the STRYPES were ultimately characterized and treated entirely as debt
instruments of the Company for United States Federal income tax purposes, then
the timing and character of income, gain or loss recognized on a STRYPES would
substantially differ from the timing and character of income, gain or loss
recognized on a STRYPES had each STRYPES in fact been characterized and treated
for United States Federal income tax purposes as a Unit consisting of the Debt
Instrument and the Forward Contract. On June 11, 1996, the Treasury Department
issued final regulations (the "Treasury Regulations") concerning the proper
United States Federal income tax treatment of contingent payment debt
instruments. The Treasury Regulations apply to debt instruments issued on or
after August 13, 1996. If the STRYPES were ultimately characterized and treated
entirely as indebtedness of the Company for United States Federal income tax
purposes, the STRYPES would constitute contingent payment debt instruments. The
Treasury Regulations provide no definitive guidance as to whether or not an
instrument is properly characterized as a single debt instrument for United
States Federal income tax purposes. Since the STRYPES will be issued after the
effective date of the Treasury Regulations, the Treasury Regulations would apply
to the STRYPES if the STRYPES were characterized and treated entirely as debt
instruments of the Company for the United States Federal income tax purposes. In
general, the Treasury Regulations would cause the timing and character of
income, gain or loss reported on the STRYPES to substantially differ from the
timing and character of income, gain or loss reported on the STRYPES had the
STRYPES in fact been characterized and treated for United States Federal income
tax purposes as a Unit consisting of the Debt Instrument and the Forward
Contract. Specifically, the Treasury Regulations generally require a U.S. Holder
of a contingent payment debt instrument to include future contingent and
noncontingent interest payments in income as such interest accrues based upon a
projected payment schedule. Moreover, in general, under the Treasury
Regulations, any gain recognized by a U.S. Holder on the sale, exchange, or
retirement of a contingent payment debt instrument would be treated as ordinary
income and all or a portion of any loss realized could be treated as ordinary
loss as opposed to capital loss (depending upon the circumstances).
In particular, in the event that the Treasury Regulations were applied to
the STRYPES, solely for purposes of applying the Treasury Regulations to the
STRYPES, the Company would be required to construct a projected payment schedule
for the STRYPES based upon the Company's current borrowing cost (determined as
of the STRYPES issue date) for comparable debt instruments of the Company. The
Company has determined, subject to certain estimates and assumptions, that the
projected payment schedule for the STRYPES would consist of payment during the
term of the STRYPES of the Interest Payments and payment on the Maturity Date of
an amount (payable in CIBER Common Stock or cash) equal to $52.009 (the
"Estimated Maturity Repayment Amount"). This represents an estimated yield on
the STRYPES equal to approximately 6.07% per annum (compounded quarterly).
However, as described below, the calculation of the Estimated Maturity Repayment
Amount (I.E., $52.009) has been made solely for the purposes of applying the
Treasury Regulations (in the event they are applicable to the STRYPES), and such
calculation is based upon a number of estimates and assumptions and is not a
prediction of the actual amounts, if any, which may be payable to a holder of
STRYPES on the Maturity Date. In the event that the Treasury Regulations were
applied to the STRYPES, during the term of the STRYPES, a U.S. Holder of a
STRYPES would be required to include in income as ordinary interest an amount
equal to the sum of the daily portions of interest on the STRYPES that would be
deemed to accrue at this estimated yield for each day during the taxable year
(or portion of the taxable year) on which the U.S. Holder holds such STRYPES.
The amount of interest that would be deemed to accrue in any accrual period
(I.E., generally each three month period during which the STRYPES are
outstanding) would equal the product of this estimated yield (properly adjusted
for the length of the accrual period) and the STRYPES adjusted
S-27
<PAGE>
issued price (as defined below) at the beginning of the accrual period. The
daily portions of interest would be determined by allocating to each day in the
accrual period the ratable portion of the interest that would be deemed to
accrue during the accrual period. In general, for these purposes, a STRYPES
adjusted issue price would equal the STRYPES issue price (I.E., $54.125),
increased by the interest previously accrued on the STRYPES, and reduced by the
Interest Payments made on the STRYPES. On the Maturity Date of a STRYPES, in the
event that the actual amount payable on the Maturity Date (the "Actual Maturity
Repayment Amount"), if any, exceeded $52.009, a U.S. Holder would be required to
include the excess of the Actual Maturity Repayment Amount over $52.009 in
income as ordinary interest on the Maturity Date. Alternatively, in the event
that the Actual Maturity Repayment Amount, if any, was less than $52.009, the
excess of $52.009 over the Actual Maturity Repayment Amount (the "Negative
Adjustment Amount") would be treated (i) first as an offset to any interest
otherwise includible in income by the U.S. Holder with respect to the STRYPES
for the taxable year in which the Maturity Date occurs to the extent of the
amount of such includible interest, and (ii) a U.S. Holder would be permitted to
recognize and deduct, as an ordinary loss that is not subject to the limitations
applicable to miscellaneous itemized deductions, any remaining portion of the
Negative Adjustment Amount that is not treated as an interest offset pursuant to
the foregoing rule (but only to the extent such remaining portion does not
exceed the amount of all interest previously included in income by the U.S.
Holder with respect to the STRYPES). To the extent that the Negative Adjustment
Amount exceeded the sum of the amounts described in (i) and (ii) above, a U.S.
Holder would treat such excess as a long-term capital loss (assuming that the
STRYPES had been held by the U.S. Holder for more than one year). A U.S.
Holder's initial tax basis in any CIBER Common Stock received by such U.S.
Holder on the Maturity Date generally would equal the fair market value (as
determined on the Maturity Date) of the CIBER Common Stock received by such U.S.
Holder. Furthermore, a U.S. Holder's holding period for any CIBER Common Stock
received by such U.S. Holder on the Maturity Date would begin on the day
immediately following the Maturity Date and would not include the period during
which the U.S. Holder held the STRYPES.
Under the Treasury Regulations, upon the sale or exchange of a STRYPES prior
to the Maturity Date, a U.S. Holder would be required to recognize taxable gain
or loss in an amount equal to the difference, if any, between the amount
realized by the U.S. Holder upon such sale or exchange and the U.S. Holders
adjusted tax basis in the STRYPES as of the date of disposition. A U.S. Holder's
adjusted tax basis in a STRYPES generally would equal such U.S. Holder's initial
investment in the STRYPES, increased by any interest previously included in
income with respect to the STRYPES by the U.S. Holder, and decreased by any
Interest Payments received by the U.S. Holder. Any such taxable loss generally
would first be treated as ordinary loss to the extent of the U.S. Holder's total
interest inclusions on the STRYPES. Any remaining loss generally would be
treated as long-term or short-term capital loss (depending upon the U.S.
Holder's holding period for the STRYPES). All amounts includible in income by a
U.S. Holder as ordinary interest pursuant to the Treasury Regulations would be
treated as original issue discount.
In the event that the Treasury Regulations were applied to the STRYPES, U.S.
Holders purchasing a STRYPES at a price that differs from the adjusted issue
price of the STRYPES as of the purchase date (e.g., subsequent purchasers) would
be subject to special rules providing for certain adjustments to the foregoing
rules and such U.S. Holders should consult their own tax advisors concerning
these rules in the event that the Treasury Regulations were applied to the
STRYPES.
The projected payment schedule (including the Estimated Maturity Repayment
Amount and the estimated yield on the STRYPES) has been determined solely for
United States Federal income tax purposes (I.E., for purposes of applying the
Treasury Regulations to the STRYPES in the event that the Treasury Regulations
were applied to the STRYPES). The calculation of such projected payment schedule
(including the Estimated Maturity Repayment Amount and such estimated yield) is
based upon a number of assumptions and estimates and is not a prediction of the
actual yield on the STRYPES or the actual amount, if any, which may be payable
to holders of STRYPES on the Maturity Date.
S-28
<PAGE>
Prospective investors in the STRYPES should also be aware that it is
possible that the ultimate characterization and treatment of the STRYPES for
United States Federal income tax purposes could differ from the possible
characterizations and treatments described herein with the result that the
ultimate United States Federal income tax treatment of the purchase, ownership
and disposition of the STRYPES could significantly differ from any of the
treatments described herein.
Despite the foregoing, as previously discussed, pursuant to the agreement
contained in the Indenture to treat each STRYPES as a Unit consisting of the
Debt Instrument and the Forward Contract, the Company, where required, currently
intends to file information returns with the IRS treating each STRYPES as a Unit
consisting of the Debt Instrument and the Forward Contract for United States
Federal income tax purposes (as described above), in the absence of any change
or clarification in the law, by regulation or otherwise, requiring another
characterization and treatment of the STRYPES for United States Federal income
tax purposes.
MARKET DISCOUNT AND PREMIUM
In general, if a U.S. Holder purchases a debt instrument (E.G., the Debt
Instrument component of a Unit) for an amount that is less than the principal
amount thereof, the amount of the difference will be treated as "market
discount," unless such difference is less than a specified DE MINIMIS amount
(generally 1/4 of 1% of the debt instrument's stated principal amount multiplied
by the number of complete years to maturity from the date the U.S. Holder
purchased such debt instrument).
Under the market discount rules, a U.S. Holder will be required to treat any
gain realized on the sale, exchange, retirement or other disposition of a debt
instrument as ordinary income to the extent of the lesser of (i) the amount of
such realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such debt instrument at
the time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the maturity of
the debt instrument, unless the U.S. Holder elects to accrue market discount on
the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a debt instrument with market discount until the maturity of
the debt instrument or its earlier disposition in a taxable transaction and
certain nontaxable transactions, because a current deduction is only allowed to
the extent that the interest expense exceeds an allocable portion of the market
discount. A U.S. Holder may elect to include market discount in income currently
as it accrues (on either a ratable or semiannual compounding basis), in which
case the rules described above regarding the deferral of interest deductions
will not apply. Generally, such currently included market discount is treated as
ordinary interest income for United States Federal income tax purposes and a
U.S. Holder would increase its tax basis in a debt instrument by the amount of
any such currently included market discount. Such an election will apply to all
debt instruments acquired by the U.S. Holder on or after the first day of the
first taxable year to which such election applies and may be revoked only with
the consent of the IRS.
In general, if a U.S. Holder purchases a debt instrument for an amount that
is greater than the principal amount thereof, such U.S. Holder will be
considered to have purchased the debt instrument with "amortizable bond premium"
equal in amount to such excess. A U.S. Holder may elect to amortize such premium
using a constant yield method over the remaining term of the debt instrument and
may offset ordinary interest otherwise required to be included in respect of the
debt instrument during any taxable year by the amortized amount of such premium
for such year (or, prior years, if such amortized premium for prior years has
not yet offset interest) and would reduce its tax basis in the debt instrument
by the amount of any such interest offset taken. Such election, if made, would
apply to all debt instruments held by the U.S. Holder at the beginning of the
first taxable year to which such election applies and to all debt instruments
acquired by the U.S. Holder thereafter. Such election would also be irrevocable
once made,
S-29
<PAGE>
unless the U.S. Holder making such an election obtains the express written
consent of the IRS to revoke such election.
MISCELLANEOUS TAX MATTERS
Special tax rules may apply to persons holding a STRYPES as part of a
"synthetic security" or other integrated investment, or as part of a straddle,
hedging transaction or other combination of offsetting positions. For instance,
Section 1258 of the Code may possibly require certain U.S. Holders of the
STRYPES who enter into hedging transactions or offsetting positions with respect
to the STRYPES to treat all or a portion of any gain realized on the STRYPES as
ordinary income in instances where such gain may have otherwise been treated as
capital gain. U.S. Holders hedging their positions with respect to the STRYPES
or otherwise holding their STRYPES in a manner described above should consult
their own tax advisors regarding the applicability of Section 1258 of the Code,
or any other provision of the Code, to their investment in the STRYPES.
THE TAXPAYER RELIEF ACT OF 1997
On August 5, 1997, the Taxpayer Relief Act of 1997 (the "Tax Act") was
enacted into law. The Tax Act reduces the maximum rates on long-term capital
gains recognized on capital assets held by individual taxpayers for more than
eighteen months as of the date of disposition (and would further reduce the
maximum rates on such gains in the year 2001 and thereafter for certain
individual taxpayers who meet specified conditions). Prospective investors
should consult their own tax advisers concerning these tax law changes.
NON-U.S. HOLDERS
Based on the treatment of each STRYPES as a Unit consisting of the Debt
Instrument and the Forward Contract, in the case of a non-U.S. Holder, payments
of interest made with respect to the STRYPES should not be subject to United
States withholding tax, provided that such non-U.S. Holder complies with
applicable certification requirements and that such payments are not effectively
connected with a United States trade or business of such non-U.S. Holder. Any
capital gain realized upon the sale or other disposition of a STRYPES by a
non-U.S. Holder will generally not be subject to United States Federal income
tax if (i) such gain is not effectively connected with a United States trade or
business of such non-U.S. Holder and (ii) in the case of an individual non-U.S.
Holder, such individual is not present in the United States for 183 days or more
in the taxable year of the sale or other disposition, or the gain is not
attributable to a fixed place of business maintained by such individual in the
United States and such individual does not have a "tax home" (as defined for
United States Federal income tax purposes) in the United States.
As discussed above, alternative characterizations of the STRYPES for United
States Federal income tax purposes are possible. Should an alternative
characterization of the STRYPES, by reason of a change or clarification of the
law, by regulation or otherwise, cause payments with respect to the STRYPES to
become subject to withholding tax, the Company will withhold tax at the
statutory rate. Prospective non-U.S. Holders of the STRYPES should consult their
own tax advisors in this regard.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A beneficial owner of a STRYPES may be subject to information reporting and
to backup withholding at a rate of 31 percent of certain amounts paid to the
beneficial owner unless such beneficial owner provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the backup withholding rules.
S-30
<PAGE>
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the "New
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1998, subject to certain transitional rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement, the
Company has agreed to sell to Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the "Underwriter"), and the Underwriter has agreed to purchase from the
Company, 1,750,000 STRYPES. Under the terms and conditions of the Purchase
Agreement, the Underwriter is committed to take and pay for all of the STRYPES,
if any are taken.
The Underwriter has advised the Company that it proposes initially to offer
the STRYPES directly to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of $.97 per STRYPES. After the initial public
offering, the public offering price and concession may be changed.
The Company has granted the Underwriter an option exercisable for 30 days
after the date of this Prospectus Supplement to purchase up to an aggregate of
262,500 additional STRYPES at the public offering price set forth on the cover
page of this Prospectus Supplement, less the underwriting discount. The
Underwriter may exercise this option only to cover over-allotments, if any, made
on the sale of the STRYPES offered hereby.
CIBER and the directors and executive officers of CIBER have agreed not to
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
or file or cause to be filed a registration statement under the Securities Act
with respect to, any shares of CIBER Common Stock, securities convertible into,
exchangeable for or repayable with such shares or rights or warrants to acquire
such shares, for a period of 90 days after the date of this Prospectus
Supplement without the prior written consent of the Underwriter, except that
CIBER may, without such consent, issue shares of CIBER Common Stock or grant
options to purchase such shares pursuant to its benefit plans or issue shares of
CIBER Common Stock upon exercise of options, or issue up to a specified number
of shares of CIBER Common Stock in connection with business combinations. The
Contracting Stockholder has agreed not to offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, or cause to be filed a
registration statement under the Securities Act with respect to, any shares of
CIBER Common Stock, securities convertible into, exchangeable for or repayable
with such shares or rights or warrants to acquire such shares, for a period of
90 days after the date of this Prospectus Supplement without the prior written
consent of the Underwriter.
The underwriting of the STRYPES will conform to the requirements set forth
in the applicable sections of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
The STRYPES have been approved for listing on the NYSE, subject to official
notice of issuance.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act, relating to this
Prospectus Supplement and the ML&Co. Prospectus (including the documents
incorporated by reference therein).
S-31
<PAGE>
Until the distribution of the STRYPES is completed, rules of the Commission
may limit the ability of the Underwriter to bid for and purchase STRYPES. As an
exception to these rules, the Underwriter is permitted to engage in certain
transactions that stabilize the price of the STRYPES or the CIBER Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the STRYPES or the CIBER Common Stock.
If the Underwriter creates a short position in the STRYPES in connection
with the offering, i.e., if it sells more STRYPES than are set forth on the
cover page of this Prospectus Supplement, the Underwriter may reduce that short
position by purchasing STRYPES in the open market. The Underwriter may also
elect to reduce any short position by exercising all or part of the
over-allotment option described above.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the STRYPES or the CIBER Common Stock.
In addition, neither the Company nor the Underwriter makes any representation
that the Underwriter will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.
VALIDITY OF THE STRYPES
The validity of the STRYPES offered hereby will be passed upon for the
Company and for the Underwriter by Brown & Wood LLP, New York, New York.
S-32
<PAGE>
PROSPECTUS
[LOGO]
MERRILL LYNCH & CO., INC.
STRYPES-SM-
PAYABLE WITH SHARES OF COMMON STOCK OR OTHER SECURITIES
OF THE UNDERLYING ISSUER
(OR CASH WITH AN EQUAL VALUE)
------------------
Merrill Lynch & Co., Inc. (the "Company") intends to sell from time to time
its Structured Yield Product Exchangeable for Stock-SM-, STRYPES-SM-. The
STRYPES will be offered to the public in series and on terms determined by
market conditions at the time of sale and set forth in the accompanying
prospectus supplement (the "Prospectus Supplement"). The STRYPES will be
unsecured obligations of the Company ranking PARI PASSU with all of its other
unsecured and unsubordinated indebtedness. See "Description of the
STRYPES--Ranking".
On the maturity date of each series of STRYPES (the "Maturity Date"), the
Company will pay and discharge such STRYPES by delivering to the holder thereof
a number of shares of common stock or other securities (the "Underlying
Securities") of the unaffiliated corporation identified in the Prospectus
Supplement (the "Underlying Issuer") determined in accordance with a payment
rate formula specified in the Prospectus Supplement (subject to the Company's
right to deliver cash, or a combination of cash and Underlying Securities, with
an equal value). THERE CAN BE NO ASSURANCE THAT THE VALUE OF THE UNDERLYING
SECURITIES (OR CASH) PAYABLE TO HOLDERS OF A SERIES OF STRYPES ON THE MATURITY
DATE WILL BE EQUAL TO OR GREATER THAN THE ISSUE PRICE OF SUCH STRYPES. IF THE
VALUE OF THE UNDERLYING SECURITIES (OR CASH) RECEIVED ON THE MATURITY DATE OF A
SERIES OF STRYPES IS LESS THAN THE ISSUE PRICE PAID FOR SUCH STRYPES, AN
INVESTMENT IN STRYPES WILL RESULT IN A LOSS. SEE "DESCRIPTION OF THE STRYPES".
Each series of STRYPES may vary, where applicable, as to aggregate issue
price, Maturity Date, Underlying Issuer, Underlying Securities deliverable upon
maturity, formula or other method by which the amount of such Underlying
Securities will be determined, public offering or purchase price, interest rate
or rates, if any, and timing of payments thereof, provision for redemption,
currencies of denomination or currencies otherwise applicable thereto and any
other variable terms and method of distribution. The accompanying Prospectus
Supplement sets forth the specific terms with regard to the series of STRYPES in
respect of which this Prospectus is being delivered.
Reference is made to any accompanying prospectus of the Underlying Issuer
covering the Underlying Securities which may be received by holders of a series
of STRYPES on the Maturity Date.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The STRYPES may be sold through Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"). STRYPES may not be sold without delivery
of a Prospectus Supplement describing such issue of STRYPES and the method and
terms of offering thereof, and any accompanying prospectus of the Underlying
Issuer covering the Underlying Securities which may be received by holders of a
series of STRYPES on the Maturity Date.
- ------------------------
- -SM- Service mark of Merrill Lynch & Co., Inc.
------------------------------
The date of this Prospectus is January 26, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Midwest Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Reports, proxy and information
statements and other information concerning the Company may also be inspected at
the offices of the New York Stock Exchange, the American Stock Exchange, the
Chicago Stock Exchange and the Pacific Exchange. The Commission maintains a Web
site at http://www.sec.gov containing reports, proxy and information statements
and other information regarding registrants, including the Company, that file
electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 27,
1996, Quarterly Reports on Form 10-Q for the periods ended March 28, 1997, June
27, 1997 and September 26, 1997, and Current Reports on Form 8-K dated January
13, 1997, January 27, 1997, February 25, 1997, March 14, 1997, April 15, 1997,
May 2, 1997, May 30, 1997, June 3, 1997, July 16, 1997, July 30, 1997, August 1,
1997, September 24, 1997, September 29, 1997, October 15, 1997, October 29,
1997, November 20, 1997, November 26, 1997, December 2, 1997, December 16, 1997,
December 23, 1997 and January 20, 1998 filed pursuant to Section 13 of the
Exchange Act, are hereby incorporated by reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the STRYPES shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
(WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE) OF
ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. REQUESTS
FOR SUCH COPIES SHOULD BE DIRECTED TO LAWRENCE M. EGAN, JR., CORPORATE
SECRETARY'S OFFICE, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
------------------------
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED OR
DISAPPROVED THE OFFERING OF THE SECURITIES MADE HEREBY, NOR HAS THE COMMISSIONER
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one of the
largest securities firms in the world, is a leading broker in securities,
options contracts, and commodity and financial futures contracts; a leading
dealer in options and in corporate and municipal securities; a leading
investment banking firm that provides advice to, and raises capital for, its
clients; and an underwriter of selected insurance products. Other subsidiaries
provide financial services on a global basis similar to those of MLPF&S and are
engaged in such other activities as international banking, lending, and
providing other investment and financing services. Merrill Lynch International
Incorporated, through subsidiaries and affiliates, provides investment,
financing, and related services outside the United States and Canada. Merrill
Lynch Asset Management, LP and Fund Asset Management, LP together constitute one
of the largest mutual fund managers in the world and provide investment advisory
services. Merrill Lynch Government Securities Inc. is a primary dealer in
obligations issued or guaranteed by the U.S. Government and its agencies.
Merrill Lynch Capital Services, Inc., Merrill Lynch Derivative Products AG, and
Merrill Lynch International are the Company's primary derivative product dealers
and enter into interest rate and currency swaps and other derivative
transactions as intermediaries and as principals. The Company's insurance
underwriting operations consist of the underwriting of life insurance and
annuity products. Banking, trust, and mortgage lending operations conducted
through subsidiaries of the Company include issuing certificates of deposit,
offering money market deposit accounts, making secured loans, and providing
currency exchange facilities and other related services.
The principal executive office of the Company is located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281; its telephone
number is (212) 449-1000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the STRYPES for
general corporate purposes, unless otherwise specified in the Prospectus
Supplement relating to such STRYPES. Such general corporate purposes may include
the funding of investments in, or extensions of credit to, its subsidiaries, the
funding of assets of the Company and its subsidiaries, the lengthening of the
average maturity of the Company's borrowings, and the financing of acquisitions.
Pending such applications, the net proceeds will be applied to the reduction of
short-term indebtedness or temporarily invested. Management of the Company
expects that it will, on a recurrent basis, engage in additional financings as
the need arises to finance the growth of the Company, through acquisitions or
otherwise, or to lengthen the average maturity of its borrowings. To the extent
that STRYPES being purchased for resale by MLPF&S are not resold, the aggregate
proceeds to the Company and its subsidiaries would be reduced.
3
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN DECEMBER
--------------------------------------------------
1992 1993 1994 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges....................................... 1.3 1.4 1.2 1.2
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 26,
1996 1997
----- -----------------
<S> <C> <C>
Ratio of earnings to fixed charges....................................... 1.2 1.2
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consist of earnings from continuing operations before income taxes
and fixed charges. "Fixed charges" consist of interest costs, amortization of
debt expense, preferred stock dividend requirements of majority-owned
subsidiaries, and that portion of rentals estimated to be representative of the
interest factor.
RECENT DEVELOPMENTS
On November 19, 1997, the Company, through ML Invest plc, an indirect,
wholly owned subsidiary, offered (the "Offer") to acquire all of the outstanding
share capital of Mercury Asset Management Group plc ("MAM") at a price of L17
per share, with an aggregate offer value for the outstanding shares of
approximately L3.1 billion (approximately $5.3 billion). On December 22, 1997,
the Company announced that its Offer had become unconditional in all respects.
As of January 6, 1998, ML Invest plc has received acceptances relating to more
than 90 percent of the outstanding shares of MAM. The Offer will remain open for
acceptances until further notice. Upon confirmation that requisite thresholds
have been attained, the Company will commence the statutory procedure to
compulsorily acquire all MAM shares not tendered into the Offer.
4
<PAGE>
DESCRIPTION OF THE STRYPES
Each issue of STRYPES will be a series of Senior Debt Securities to be
issued under an indenture (the "1983 Indenture"), dated as of April 1, 1983, as
amended and restated, between the Company and The Chase Manhattan Bank, formerly
known as Chemical Bank (successor by merger to Manufacturers Hanover Trust
Company), as trustee (the "Trustee"), as further amended and supplemented by a
supplemental indenture to be entered into by the Company and the Trustee
relating to each series of STRYPES (the "Supplemental Indenture") (the 1983
Indenture, as so amended and supplemented by the Supplemental Indenture with
respect to each series of STRYPES, the "Indenture"). The following summary of
certain provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture. All capitalized terms
not otherwise defined herein have the meanings specified in the Indenture.
Whenever defined terms of the Indenture are referred to herein, such defined
terms are incorporated by reference herein.
GENERAL
The Supplemental Indenture will provide that STRYPES of the related series
may be issued from time to time under the Indenture, up to a specified aggregate
issue price, upon satisfaction of certain conditions precedent. The Supplemental
Indenture will establish the terms of the related series of STRYPES, including:
(1) the issue price per STRYPES; (2) the date on which such STRYPES will mature;
(3) the consideration deliverable or payable with respect to such STRYPES,
whether at maturity or upon earlier acceleration, and the formula or other
method by which the amount of such consideration will be determined; (4) the
rate or rates per annum (which may be fixed or variable) at which such STRYPES
will bear interest, if any; (5) the dates on which such interest, if any, will
be payable; (6) the provisions for redemption of such STRYPES, if any, the
redemption price and any remarketing arrangements relating thereto; (7) the
sinking fund requirements, if any, with respect to such STRYPES; (8) whether
such STRYPES are denominated or provide for payment in United States dollars or
a foreign currency or units of two or more of such foreign currencies; (9)
whether and under what circumstances the Company will pay additional amounts
("Additional Amounts") in respect of such STRYPES held by a person who is not a
U.S. person (as defined in the Prospectus Supplement, as applicable) in respect
of specified taxes, assessments or other governmental charges and whether the
Company has the option to redeem the affected STRYPES rather than pay such
Additional Amounts; (10) the title of the STRYPES and the series of which such
STRYPES shall be a part; and (11) the obligation of the Company to pay and
discharge such STRYPES at maturity by delivery of Underlying Securities (or,
cash, or a combination of cash and Underlying Securities, with an equal value),
the formula or other method by which the amount of such Underlying Securities
will be determined, and the terms and conditions upon which such payment and
discharge shall be effected. Reference is made to the Prospectus Supplement for
the terms of the STRYPES being offered thereby.
Under the Indenture, the Company will have the ability, in addition to the
ability to issue STRYPES with terms different from those of STRYPES previously
issued, to "reopen" a previous series of STRYPES and issue additional STRYPES of
such series.
Issue price and interest, premium and Additional Amounts, if any, and
Underlying Securities will be payable or deliverable in the manner, at the
places and subject to the restrictions set forth in the Indenture, the STRYPES
and the Prospectus Supplement relating thereto, provided that payment of any
interest and any Additional Amounts may be made at the option of the Company by
check mailed to the holders of registered STRYPES at their registered addresses.
STRYPES may be presented for exchange, and registered STRYPES may be
presented for transfer, in the manner, at the places and subject to the
restrictions set forth in the Indenture, the STRYPES and the Prospectus
Supplement relating thereto. No service charge will be made for any transfer or
exchange of
5
<PAGE>
STRYPES, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
RANKING
The STRYPES will be unsecured obligations and will rank PARI PASSU with all
other unsecured and unsubordinated indebtedness of the Company. Since the
Company is a holding company, the right of the Company, and hence the right of
creditors of the Company (including the holders of the STRYPES), to participate
in any distribution of the assets of any subsidiary upon its liquidation or
reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of the Company
itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Exchange Act
and under rules of certain exchanges and other regulatory bodies.
SECURITIES DEPOSITORY
Upon issuance, each series of STRYPES will be represented by one or more
fully registered global securities (the "Global Notes"). Each such Global Note
will be deposited with, or on behalf of, The Depository Trust Company, as
Securities Depository (the "Securities Depository"), and registered in the name
of the Securities Depository or a nominee thereof. Unless and until it is
exchanged in whole or in part for STRYPES in definitive form under the limited
circumstances described below, no Global Note may be transferred except as a
whole by the Securities Depository to a nominee of such Securities Depository or
by a nominee of such Securities Depository to such Securities Depository or
another nominee of such Securities Depository or by such Securities Depository
or any such nominee to a successor of such Securities Depository or a nominee of
such successor.
The Securities Depository has advised the Company as follows: The Securities
Depository is a limited-purpose trust company organized under the Banking Law of
the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Securities Depository was created to hold securities of its
participants ("Participants") and to facilitate the clearance and settlement of
securities transactions among its Participants in such securities through
electronic book-entry changes in accounts of the Participants, thereby
eliminating the need for physical movement of securities certificates. The
Securities Depository's Participants include securities brokers and dealers
(including MLPF&S), banks, trust companies, clearing corporations, and certain
other organizations.
The Securities Depository is owned by a number of Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the Securities
Depository's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ("Indirect
Participants").
Purchases of STRYPES must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each STRYPES ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmations from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written confirmation providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Ownership of
beneficial interest in such Global Note will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained by
the Securities Depository (with respect to interests of Participants) and on the
records of Participants (with respect to interests of persons held through
Participants). The laws of some states may require that certain
6
<PAGE>
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to own, transfer or
pledge beneficial interests in Global Notes.
SO LONG AS THE SECURITIES DEPOSITORY, OR ITS NOMINEE, IS THE REGISTERED
OWNER OF A GLOBAL NOTE, THE SECURITIES DEPOSITORY OR ITS NOMINEE, AS THE CASE
MAY BE, WILL BE CONSIDERED THE SOLE OWNER OR HOLDER OF THE STRYPES REPRESENTED
BY SUCH GLOBAL NOTE FOR ALL PURPOSES UNDER THE INDENTURE. EXCEPT AS PROVIDED
BELOW, BENEFICIAL OWNERS IN A GLOBAL NOTE WILL NOT BE ENTITLED TO HAVE THE
STRYPES REPRESENTED BY SUCH GLOBAL NOTES REGISTERED IN THEIR NAMES, WILL NOT
RECEIVE OR BE ENTITLED TO RECEIVE PHYSICAL DELIVERY OF THE STRYPES IN DEFINITIVE
FORM AND WILL NOT BE CONSIDERED THE OWNERS OR HOLDERS THEREOF UNDER THE
INDENTURE. ACCORDINGLY, EACH PERSON OWNING A BENEFICIAL INTEREST IN A GLOBAL
NOTE MUST RELY ON THE PROCEDURES OF THE SECURITIES DEPOSITORY AND, IF SUCH
PERSON IS NOT A PARTICIPANT, ON THE PROCEDURES OF THE PARTICIPANT THROUGH WHICH
SUCH PERSON OWNS ITS INTEREST, TO EXERCISE ANY RIGHTS OF A HOLDER UNDER THE
INDENTURE. The Company understands that under existing industry practices, in
the event that the Company requests any action of holders or that an owner of a
beneficial interest in such a Global Note desires to give or take any action
which a holder is entitled to give or take under the Indenture, the Securities
Depository would authorize the Participants holding the relevant beneficial
interests to give or take such action, and such Participants would authorize
Beneficial Owners owning through such Participants to give or take such action
or would otherwise act upon the instructions of Beneficial Owners. Conveyance of
notices and other communications by the Securities Depository to Participants,
by Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Payment of any amount with respect to STRYPES registered in the name of the
Securities Depository or its nominee will be made to the Securities Depository
or its nominee, as the case may be, as the holder of the Global Notes
representing such STRYPES. None of the Company, the Trustee or any other agent
of the Company or agent of the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests or for supervising or reviewing any records
relating to such beneficial ownership interests. The Company expects that the
Securities Depository, upon receipt of any payment in respect of a Global Note,
will credit the accounts of the Participants with payment in amounts
proportionate to their respective holdings of beneficial interest in such Global
Note as shown on the records of the Securities Depository. The Company also
expects that payments by Participants to Beneficial Owners will be governed by
standing customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such Participants.
If, with respect to a series of STRYPES, (x) the Securities Depository is at
any time unwilling or unable to continue as Securities Depository and a
successor depository is not appointed by the Company within 60 days, (y) the
Company executes and delivers to the Trustee a Company Order to the effect that
the Global Notes shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to any STRYPES of that series, the Company will
issue STRYPES in definitive form in exchange for all of the Global Notes
representing the STRYPES of that series. Such definitive STRYPES shall be
registered in such name or names as the Securities Depository shall instruct the
Trustee. It is expected that such instructions may be based upon directions
received by the Securities Depository from Participants with respect to
ownership of beneficial interests in such Global Notes.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other corporation, and
the Company may sell, lease or convey all or substantially all of its assets to
any corporation, provided that (i) the corporation (if other than the Company)
formed by or resulting from any such consolidation or merger or which shall have
received such assets shall be a corporation organized and existing under the
laws of the United States of America or a state thereof and shall assume the due
and punctual delivery or payment of the Underlying Securities (or cash with an
equal value) in respect of, any interest and Additional Amounts on, and any
7
<PAGE>
other amounts payable with respect to, the STRYPES of each series and the due
and punctual performance and observance of all of the covenants and conditions
of the Indenture to be performed or observed by the Company, and (ii) the
Company or such successor corporation, as the case may be, shall not immediately
thereafter be in default under the Indenture.
LIMITATIONS UPON LIENS
The Indenture provides that the Company may not, and may not permit any
Subsidiary (defined in the Indenture as any corporation of which at the time of
determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly 50% of the shares of Voting Stock of such corporation)
to, create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Indenture) on the Voting Stock owned directly or
indirectly by the Company of any Subsidiary (other than a Subsidiary which, at
the time of incurrence of such secured indebtedness, has a net worth of less
than $3,000,000) without making effective provision whereby the Outstanding
STRYPES will be secured equally and ratably with such secured indebtedness.
LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS BY,
MLPF&S
The Indenture provides that the Company may not sell, transfer or otherwise
dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue, sell or
otherwise dispose of any of its Voting Stock, unless, after giving effect to any
such transaction, MLPF&S remains a Controlled Subsidiary (defined in the
Indenture to mean a corporation more than 80% of the outstanding shares of
Voting Stock of which are owned directly or indirectly by the Company). In
addition, the Indenture provides that the Company may not permit MLPF&S to (i)
merge or consolidate, unless the surviving company is a Controlled Subsidiary,
or (ii) convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
EVENTS OF DEFAULT
Unless otherwise specified in a Prospectus Supplement, each of the following
will constitute an Event of Default under the Indenture with respect to each
series of STRYPES: (a) failure to pay and discharge the STRYPES of that series
with the Underlying Securities or, if the Company so elects, to pay an
equivalent amount in cash in lieu thereof when due; (b) failure to pay the
Redemption Price or any redemption premium with respect to any STRYPES of that
series when due; (c) failure to deposit any sinking fund payment, when and as
due by the terms of any STRYPES of that series; (d) failure to pay any interest
on or any Additional Amounts in respect of any STRYPES of that series when due,
continued for 30 days; (e) failure to perform any other covenant of the Company
contained in the Indenture for the benefit of that series or in the STRYPES of
that series, continued for 60 days after written notice has been given to the
Company by the Trustee, or to the Company and the Trustee by the holders of at
least 10% of the aggregate issue price of the Outstanding STRYPES of that
series, as provided in the Indenture; (f) certain events in bankruptcy,
insolvency or reorganization of the Company; and (g) any other Event of Default
provided with respect to STRYPES of that series.
Unless otherwise specified in a Prospectus Supplement, if an Event of
Default (other than an Event of Default described in clause (f) of the
immediately preceding paragraph) with respect to the STRYPES of any series shall
occur and be continuing, either the Trustee or the holders of at least 25% of
the aggregate issue price of the Outstanding STRYPES of that series by notice as
provided in the Indenture may declare an amount equal to the aggregate issue
price of all the STRYPES of that series and the interest accrued thereon and
Additional Amounts payable in respect thereof, if any, to be immediately due and
payable in cash. If an Event of Default described in said clause (f) shall
occur, an amount equal to the aggregate issue price of all the STRYPES of that
series and the interest accrued thereon and Additional Amounts payable in
respect thereof, if any, will become immediately due and payable in cash without
any declaration or
8
<PAGE>
other action on the part of the Trustee or any holder. After such acceleration,
but before a judgment or decree based on acceleration, the holders of a majority
of the aggregate issue price of the Outstanding STRYPES of that series may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than the non-payment of the amount equal to the aggregate
issue price of all the STRYPES of that series due by reason of such
acceleration, have been cured or waived as provided in the Indenture. See
"Modification and Waiver" below.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of STRYPES of any
series, unless such holders of that series shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction.
Subject to such provisions for the indemnification of the Trustee, the holders
of a majority of the aggregate issue price of the STRYPES of any series will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee with respect to the STRYPES of that series.
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their knowledge,
is in default in the fulfillment of any of its obligations under the Indenture
and, if so, specifying all such known defaults.
The STRYPES and other series of Senior Debt Securities issued under the
Indenture will not have the benefit of any cross-default provisions with other
indebtedness of the Company.
MODIFICATION AND WAIVER
Unless otherwise specified in a Prospectus Supplement, modifications of and
amendments to the Indenture affecting a series of STRYPES may be made by the
Company and the Trustee with the consent of the holders of 66 2/3% of the
aggregate issue price of the Outstanding STRYPES of such series; provided,
however, that no such modification or amendment may, without the consent of the
holder of each Outstanding STRYPES of such series affected thereby, (a) change
the Maturity Date or the Stated Maturity of any installment of interest or
Additional Amounts on any STRYPES or any premium payable on the redemption
thereof, or change the Redemption Price, (b) reduce the amount of Underlying
Securities payable with respect to any STRYPES (or reduce the amount of cash, or
cash and Underlying Securities, payable in lieu thereof), (c) reduce the amount
of interest or Additional Amounts payable on any STRYPES or reduce the amount of
cash payable with respect to any STRYPES upon acceleration of the maturity
thereof, (d) change the place or currency of payment of interest or Additional
Amounts on, or any amount of cash payable with respect to, any STRYPES, (e)
impair the right to institute suit for the enforcement of any payment on or with
respect to any STRYPES, including the payment of Underlying Securities with
respect to any STRYPES, (f) reduce the percentage of the aggregate issue price
of Outstanding STRYPES of such series, the consent of whose holders is required
to modify or amend the Indenture, (g) reduce the percentage of the aggregate
issue price of Outstanding STRYPES of such series necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults or (h) modify such provisions with respect to modification and waiver.
Except as provided in the Indenture, no modification of or amendment to the
Indenture may adversely affect the rights of a holder of any other Senior Debt
Security without the consent of such holder.
The holders of a majority of the aggregate issue price of each series of
STRYPES may waive compliance by the Company with certain restrictive provisions
of the Indenture. The holders of a majority of the aggregate issue price of each
series of STRYPES may waive any past default under the Indenture, except a
default in the payment of the Underlying Securities with respect to any STRYPES
of that series, or of cash payable in lieu thereof, or in the payment of any
premium, interest or Additional Amounts on any STRYPES of that series for which
payment had not been subsequently made or in respect of a
9
<PAGE>
covenant and provision of the Indenture which cannot be modified or amended
without the consent of the holder of each Outstanding STRYPES of such series
affected.
GOVERNING LAW
The Indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
PLAN OF DISTRIBUTION
The Company may sell STRYPES to the public through MLPF&S. The accompanying
Prospectus Supplement describes the terms of the STRYPES offered thereby,
including the public offering or purchase price, any discounts and commissions
to be allowed or paid, all other items constituting underwriting compensation,
the discounts and commissions to be allowed or paid to dealers, if any, and the
exchanges, if any, on which the STRYPES will be listed. Under certain
circumstances, the Company may repurchase STRYPES and reoffer them to the public
as set forth above. The Company may also arrange for repurchases and resales of
such STRYPES by dealers.
The underwriting of STRYPES will conform to the requirements set forth in
the applicable sections of Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1996 Annual Report on Form 10-K, and incorporated by
reference in this Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating Results",
"Financial Position" and "Common Share Data" for each of the five years in the
period ended December 27, 1996 included in the 1996 Annual Report to
Stockholders of the Company, and incorporated by reference herein, has been
derived from consolidated financial statements audited by Deloitte & Touche LLP,
as set forth in their reports included as an exhibit to the Registration
Statement or incorporated by reference herein. Such consolidated financial
statements and related financial statement schedules, and such Selected
Financial Data appearing or incorporated by reference in this Prospectus and the
Registration Statement of which this Prospectus is a part, have been included or
incorporated herein by reference in reliance upon such reports of Deloitte &
Touche LLP given upon their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in the Quarterly Reports on Form 10-Q which are incorporated herein by
reference, Deloitte & Touche LLP have applied limited procedures in accordance
with professional standards for a review of such information. However, as stated
in their report included in such Quarterly Reports on Form 10-Q and incorporated
by reference herein, they did not audit and they do not express an opinion on
such interim financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited nature
of the review procedures applied. Deloitte & Touche LLP are not subject to the
liability provisions of Section 11 of the Securities Act of 1933, as amended
(the "Act"), for any such report on unaudited interim financial information
because any such report is not a "report" or a "part" of the Registration
Statement prepared or certified by an accountant within the meaning of Sections
7 and 11 of the Act.
10
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THOSE SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES
OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE
AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
PAGE
---------
Summary............................... S-3
Risk Factors.......................... S-9
CIBER, Inc............................ S-13
Price Range of CIBER Common Stock..... S-14
CIBER Dividend Policy................. S-14
Supplemental Use of Proceeds.......... S-14
Supplemental Description of the
STRYPES............................. S-15
Certain Arrangements with the
Contracting Stockholder............. S-22
Certain United States Federal Income
Tax Considerations.................. S-23
Underwriting.......................... S-31
Validity of the STRYPES............... S-32
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Merrill Lynch & Co., Inc.............. 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 4
Recent Developments................... 4
Description of the STRYPES............ 5
Plan of Distribution.................. 10
Experts............................... 10
</TABLE>
PROSPECTUS RELATING TO COMMON STOCK
OF CIBER, INC.
1,750,000 STRYPES(SM)
[LOGO]
MERRILL LYNCH & CO., INC.
7 7/8% STRYPES(SM)
DUE FEBRUARY 1, 2001
PAYABLE WITH SHARES OF
COMMON STOCK OF
[LOGO]
(OR CASH WITH AN EQUAL VALUE)
------------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
JANUARY 26, 1998
(SM)SERVICE MARK OF MERRILL LYNCH & CO., INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
