Payment of the Special Dividend
To: SAIC Employees and Stockholders with U.S. Addresses
From: SAIC Stock Programs and SAIC Retirement Programs
Updated: September 6, 2007
Issue Date: October 18, 2006
Subject: Payment of the Special Dividend
Set forth below are definitions of terms and a chart that describe the payment, taxation and reporting of the special dividend declared by Science Applications International Corporation (Old SAIC) to its stockholders of record as of October 12, 2006.
The special dividend was paid on or about November 9, 2006.
The special dividend was not paid on outstanding stock options. Instead, outstanding options that were granted before the dividend record date (October 12, 2006) were adjusted to preserve their pre-dividend value.
For questions regarding the payment, taxation and reporting of the special dividend, please contact the following:
- SAIC Stock Programs - Vested and Vesting SAIC Stock
- Vanguard - SAIC Stock Funds in SAIC Retirement Plan
- Newport Group - SAIC Stock in Non-qualified Plans
Defined Terms
Record Date - A special dividend was paid to Science Applications International Corporation's stockholders of record as of October 12, 2006.
Dividend Amount - The amount of the special dividend was $15 per share of Class A Common Stock and $300 per share of Class B Common Stock.
Payment Date - The special dividend was paid on or about November 9, 2006.
The following chart describes how the special dividend was paid, and how it is expected to be taxed and reported.
PAYMENT, TAXATION AND REPORTING OF THE SPECIAL DIVIDEND
(For Stockholders with U.S. Addresses)
| STOCK TYPE | DISTRIBUTION | WHAT TAXES COULD BE OWED/WITHHELD | EXPECTED TAX TREATMENT | TAX REPORTING |
| Vested SAIC Stock | Mellon mailed dividend checks via regular mail to the address on the Equity Holdings account. | Federal, state and local taxes (but not FICA taxes) were owed on the dividend. Mellon did not withhold any taxes IF you have a certified tax identification number (Form W-9) on file with Mellon. If Mellon did not have a certified W-9 form for you, then Mellon was required to withhold 28% back-up withholding taxes. |
Dividend Tax Rate Treatment (15% in 2006) | 1099-DIV |
| Vesting SAIC Stock | SAIC distributed the dividend via a special payroll check or special direct deposit (together with any distribution relating to the non-qualified plans - see below) | Treated as compensation for purposes of taxation and certain other payroll deductions (regular ESPP deductions were deducted). Federal, state, local and FICA taxes were owed on the dividend. SAIC withheld FICA taxes and Federal, state and local income taxes as applicable at supplemental rates.* |
Ordinary Income | W-2 |
| SAIC Stock funds in SAIC Retirement Plan (the "Plan") | Vanguard allocated the dividend to participants' individual accounts in the Plan at the end of March 2007. | No federal, state and local taxes, were owed. | Taxation deferred because dividend was allocated to participants' individual accounts in the Plan. | 1099-DIV |
SAIC Stock in Non-qualified Plans
|
SAIC distributed the dividend equivalent via a special payroll check together with any dividend distribution relating to vesting stock) | Treated as compensation for purposes of taxation and certain other payroll deductions (regular ESPP deductions were deducted). Federal, state, local and FICA taxes were owed on the dividend equivalent. FICA taxes were only due against dividend equivalents paid on non-vested share units. SAIC withheld FICA taxes and Federal, state and local income taxes as applicable at supplemental rates.* |
Ordinary Income | W-2 |
*Supplemental Rates for Federal/State Taxes: The supplemental rate for federal taxes is set by the IRS and is subject to change annually. The IRS supplemental rate in effect at the time of the dividend distribution was 25%. The supplemental rates for state taxes are set by each state.