Frequently Asked Questions
Updated 9 Nov 2009
In June 2009, SAIC stockholders approved the proposal to reclassify all class A preferred stock into common stock. The effective date of the reclassification of class A preferred stock into common stock is currently expected to be Monday, November 16, 2009. After the reclassification becomes effective, SAIC will only have common stock outstanding. All outstanding shares of class A preferred stock, including directly held restricted stock and shares held in the SAIC Retirement and Stock Compensation Plans will be automatically reclassified into common stock on a one-for-one basis. Options to purchase class A preferred stock will automatically become options to purchase common stock. Going forward, SAIC is currently expected to only issue common stock and options to purchase common stock. The reclassification will only affect class A preferred stock. The outstanding common stock will remain unchanged.
- Equity Holdings (Transfer Agent Application)
- Employee Grants and Awards (Stock Options and Restricted Stock)
- Employee Stock Purchase Plan (ESPP)
- Understanding and Reconciling Your Account After the Reclassification
- Cost-Basis Information
- Stock Transfers and Name Changes
- Account Access/Maintenance
- SAIC Retirement Plan
Equity Holdings (Transfer Agent Application)
1. How will the reclassification affect directly held class A preferred stock held in BNY Mellon's Equity Holdings application?
All outstanding shares of class A preferred stock held in BNY Mellon's Equity Holdings application will be automatically reclassified as shares of common stock on a one-for-one basis and will be held in a BNY Mellon common stock account and/or a newly created BNY Mellon Employee Stock Purchase Plan (ESPP) account. Your BNY Mellon class A preferred stock account balance will be zero after the reclassification.
2. Will there be a tax consequence to stockholders as a result of the reclassification?
SAIC believes that there would be no gain or loss recognized for federal income tax purposes by any stockholder upon the reclassification and conversion of shares of class A preferred stock into shares of common stock. Because tax consequences to individuals depend on their particular facts and circumstances, SAIC encourages all stockholders to consult their own tax advisors about any tax consequences to them, including tax reporting.
3. When the shares are converted, will the tax basis and holding period of the shares of class A preferred stock carry over to the shares of common stock?
Yes. The tax basis and holding period of the directly held shares of class A preferred stock will carry over to the shares of common stock received upon the conversion. However, tax basis detail for your shares will not be displayed in your common stock account at BNY Mellon.
4. How will my new directly held common stock appear within the BNY Mellon Equity Holdings application after the reclassification?
BNY Mellon will systematically process the reclassification of directly held class A preferred stock by debiting the individual receipt numbers in each stockholder's BNY Mellon class A preferred stock account. All shares of class A preferred stock held in your account will be reclassified as common stock and credited as a lump sum balance of shares into a BNY Mellon common stock account and/or credited into a newly created ESPP account for you. If you do not currently have a BNY Mellon common stock account, one will be created for you. Transaction origin and cost basis information will not be available for the shares of common stock issued as a result of the reclassification and deposited as a lump sum share balance into your common stock account. Please see Questions 25-28 for information on understanding and reconciling your account.
5. Why is cost basis and other share detail not available for shares held in a common stock account at BNY Mellon?
BNY Mellon is acting as the transfer agent for SAIC stock. Transfer agents perform basic record-keeping services such as maintaining the total number of shares held by each registered stockholder. The additional account detail provided to holders of SAIC class A preferred stock required unique programming and administrative support. The cost basis and share information on shares of publicly traded stock is more typically maintained by stockholders' brokerage firms.
6. How will shares issued from an option exercise or shares that vest from a restricted stock award be displayed within my Equity Holdings account after the reclassification?
Shares issued as a result of a stock option exercise after the reclassification will be credited to your Equity Holdings account with a transaction description of deposit. The transaction date and the market value on the date you submit your option exercise (market value is determined by reference to the closing sales price of SAIC common stock as quoted on the New York Stock Exchange for the trading day before the date the value is to be determined) will also be displayed but the transaction origin (stock option exercise) will not be displayed. Shares that vest from a restricted stock award after the reclassification will be credited to your Equity Holdings account with a transaction description of book-to-book. The transaction date and the fair-market value of the common stock on the vesting date of the restricted stock will also be displayed but the transaction origin (restricted stock vesting) will not be displayed.
7. How will I be able to sell my directly held SAIC, Inc. common stock?
You may sell your directly held SAIC, Inc. common stock using the same methods that were available for the common stock before the reclassification.
8. Will BNY Mellon's share selling program still be available after the reclassification?
Yes, BNY Mellon's batch-share selling program will still be available after the reclassification. After the reclassification, you will be able to submit your sales request via telephone with a customer service agent in addition to submitting it online. Also, you will be able to sell any unrestricted shares held in your ESPP account directly from the Employee Stock Purchase application. Please see Questions 19 and 20 for more information.
9. Will I still have to identify the shares I want to sell in the BNY Mellon share selling program by receipt number after the reclassification?
No, receipt numbers will not exist after the reclassification and you will not be able to identify specific shares to sell under the BNY Mellon share selling program.
Employee Grants and Awards (Stock Options and Restricted Stock)
10. How will the reclassification affect stock options?
Stock options granted before the 2006 IPO (pre-October 2006) under the 1999 Stock Incentive Plan are options to purchase class A preferred stock. After the reclassification, these options will automatically become options to purchase common stock. The reclassification will not change the vesting period, exercise price, the number of shares underlying the options or any other terms or conditions of the plan or option agreements. There will be no change to options granted under the 2006 SAIC, Inc. Equity Incentive Plan after the IPO (post-October 2006) because those options are for the purchase of common stock.
11. Will there be any changes to the option exercise process after the reclassification?
No. However, the cashless hold exercise method will be made available for optionees to use for all grants, including those options granted before October 2006. This exercise method is currently available only for stock option awards granted after October 2006.
12. How will the reclassification affect shares of class A preferred stock that were issued under restricted stock awards?
All shares of class A preferred stock issued under restricted stock awards whether vested or unvested will be automatically reclassified as shares of common stock on a one-for-one basis. The reclassification will not change the vesting period or other terms or conditions of the plans or award agreements governing restricted stock awards.
Employee Stock Purchase Plan (ESPP)
13. How will the reclassification affect the Employee Stock Purchase Plan (ESPP)?
Shares of class A preferred stock purchased under the ESPP before the reclassification will automatically be reclassified as shares of common stock. Future purchases made under the ESPP will be shares of common stock.
14. Will there be any other changes to the administration of the ESPP after the reclassification?
Yes. All shares purchased under the ESPP after the reclassification will be held in a separate ESPP account set up for each ESPP participant. Remaining balances of ESPP shares purchased between March 31, 2008, and September 30, 2009, will be moved from the Equity Holdings account to your ESPP account. Each separate purchase will be credited as a separate line item.
15. Why are some ESPP shares being moved out of the Equity Holdings account to the stockholder's ESPP account after the reclassification?
After the reclassification, SAIC will not be able to specifically identify and track shares of common stock purchased through the ESPP unless these shares are held in a separate account. SAIC must be able to identify and track shares purchased under the ESPP for a certain period of time to meet its tax reporting obligations. Although this functionality is available when the shares purchased under the ESPP are class A preferred stock, it will not be available when shares purchased under the ESPP are common stock unless these shares are held in a separate ESPP account. Other ESPP shares which fall outside this time period do not need to be tracked and will be held in the Equity Holdings account.
16. Will all shares previously purchased under the ESPP be held in a stockholder's ESPP account after the reclassification?
No. Only the remaining balances of ESPP shares purchased between March 31, 2008, and September 30, 2009, will be transferred to and held in a stockholder's ESPP account. The remaining balances of ESPP shares purchased before March 31, 2008, will be moved to your BNY Mellon Equity Holdings common stock account as these shares no longer need to be tracked by SAIC.
17. What types of restrictions will apply to my ESPP shares after the reclassification?
The existing, one-year holding period will still apply to all historical and future shares purchased under the ESPP. During this one-year holding period, you may not transfer or sell your shares. In addition, beginning with the December 31, 2009, ESPP purchase, you will not be able to transfer your shares out of your ESPP account for 21 months after the purchase date. However, you may sell shares directly from your ESPP account after the one-year holding period even if those shares are still subject to the 21-month transfer restriction.
18. Why will we have a one-year holding period and a 21-month transfer restriction period after the reclassification?
By imposing a one-year holding period, SAIC seeks to encourage long-term investment in our stock. The 21-month transfer restriction will be imposed to give SAIC the ability to track shares purchased under the ESPP for a certain period of time to meet its tax reporting obligations. Shares purchased under the ESPP and sold before two years after the offering date results in a disqualifying disposition. SAIC is required to report the amount of ordinary income resulting from a disqualifying disposition on the participant's W-2 wage statement for the year. Because the offering period is currently three months, a 21-month transfer restriction after the purchase date allows SAIC to track shares purchased under the ESPP through the end of the disqualifying disposition period.
19. What new functionality will be available with the new Employee Stock Purchase application with respect to the sale of ESPP shares after the reclassification?
In the new Employee Stock Purchase application, you will be able to sell your shares directly from your ESPP account. You will be able to submit a market or limit order and you will have the ability to obtain direct deposit of your sale proceeds. These new functionalities will only apply to shares that are held in the ESPP account.
20. Will the new functionality that will be available for selling shares directly from my ESPP account be available in the share selling program from my BNY Mellon Equity Holdings account?
No. BNY Mellon Shareowner Services performs two separate services for SAIC: stock plan administration and transfer agent services. The Equity Holdings account reflects shares held by BNY Mellon as the transfer agent for SAIC. The ESPP account reflects shares held by BNY Mellon as the stock plan administrator. These applications relate to completely separate lines of business at BNY Mellon and as a result, each one has different functionalities and features.
21. What does BNY Mellon do as the stock plan administrator, and how is that different from what it does as the transfer agent?
As the stock plan administrator, BNY Mellon processes enrollments, purchases and terminations under SAIC's ESPP. In this line of business, BNY Mellon is able to utilize their brokerage line of business to provide broker type functionality for stock sales. The sale functionality for shares held in the ESPP account is industry standard to facilitate sales of plan shares.
As the transfer agent, BNY Mellon keeps track of vested shares issued and cancelled in stockholder accounts. At SAIC's request, BNY Mellon offers the BNY Mellon share selling program for the convenience of stockholders. This program works differently than sales executed by their stock plan administration line of business because BNY Mellon is solely acting as an intermediary between the stockholder and the broker who actually sells the shares. Selling programs are often most attractive to stockholders with small account balances who do not have their own broker. Stockholders should consider the pros and cons of selling shares through this program vs. through their own broker.
22. How can I transfer stock from my BNY Mellon ESPP account after the reclassification?
ESPP shares can be transferred after applicable 21-month transfer restriction expires and can only initially be transferred to your BNY Mellon common stock account. If you do not have a BNY Mellon common stock account at the time of the transfer, one will be created for you. ESPP shares can be transferred via an online submission within the Employee Stock Purchase application. Once the ESPP shares have been moved to your BNY Mellon common stock account, you may further transfer these shares to another account or to your broker.
23. What statements will be provided for the shares held in the ESPP account after the reclassification?
ESPP statements will be provided for the shares held in the ESPP account. Statements will be mailed to stockholders after the reclassification, after each purchase and after any other transaction that is posted to your ESPP account.
24. Will there be any new requirements regarding my ESPP account after the reclassification?
If you have not previously certified your tax identification number on your Equity Holdings account with BNY Mellon, you will need to do so in your ESPP account. If you have previously certified your tax identification number on your Equity Holdings account and shares are transferred to your ESPP account, your tax certification will carry over to your ESPP account. If you do not certify your tax identification number before any dividend payment or sale of stock, you will be subject to a 28 percent U.S. backup withholding tax, which cannot be refunded by SAIC or BNY Mellon.
Understanding and Reconciling Your Account After the Reclassification
25. What statements will I receive from BNY Mellon reflecting the changes to my BNY Mellon account after the reclassification?
To help you understand and reconcile your stock account balance before and after the reclassification, you may receive up to four statements from BNY Mellon depending on your individual stock ownership. These include:
| Statement | Function | Additional Information |
|---|---|---|
| Pre-Reclassification Investor Activity Report (IAR) |
|
|
| Post-Reclassification Investor Activity Report (IAR) |
|
|
| SAIC, Inc. Common Stock Statement |
|
|
| SAIC, Inc. Employee Stock Purchase Plan (ESPP) Statement |
|
|
26. How will I receive these statements?
These statements will be sent to all stockholders via standard U.S. mail. In addition, if you are enrolled in MLink℠, your IARs and initial common stock statement will be posted to your MLink mailbox. However, you will not receive an email notification of these postings.
Going forward, if you are enrolled in MLink, you will receive an email notification when a new common stock statement is posted to your MLink mailbox. If you are not enrolled in MLink, you will receive your common stock statements in the mail.
All ESPP statements will be mailed directly to your address of record. Electronic delivery via MLink is only available for accounts within the BNY Mellon Equity Holdings application. Because ESPP shares are not held in the Equity Holdings application, electronic delivery of ESPP statements is not currently available.
27. How will I be able to reconcile my former class A preferred stock account balance to my new common stock and/or ESPP account balance after the reclassification?
SAIC Stock Programs has developed a guide to help you understand and reconcile your accounts after the reclassification using your statements from BNY Mellon.
Depending on the acquisition source of those shares, shares of common stock resulting from the reclassification will be moved either (1) solely into your BNY Mellon common stock account, (2) solely into your BNY Mellon ESPP account or (3) moved partially into both your BNY Mellon common stock account and your BNY Mellon ESPP account.
The sum of the shares with a transaction origin of RCLC and RCLE on your Post-Reclassification IAR should match the balance of shares of class A preferred stock reflected in your Pre-Reclassification IAR. The only exception would be if you submitted a sales request between about 1 p.m. ET on Tuesday, November 10, and about 1 p.m. ET on Friday, November 13, 2009. This sales transaction would be finalized as of the actual sale date and would show a transaction origin of "Sale" on your Post-Reclassification IAR. The total of all shares with a transaction origin of RCLC will be posted to your BNY Mellon common stock account as a deposit on November 16, 2009. Each individual receipt number with a transaction origin of RCLE will appear as a separate line item in your BNY Mellon ESPP account.
28. What do the transaction origin codes of RCLC and RCLE mean?
RCLC is BNY Mellon's code for a reclassification of class A preferred stock to common stock. RCLE is BNY Mellon's code for a reclassification of class A preferred stock to common stock and transfer to an ESPP account.
29. Will I be able to access my former class A preferred stock account history online after the reclassification?
Yes. Through May 31, 2010, stockholders will be able to access the transaction history and Investor Activity Reports for their former class A preferred stock accounts online via BNY Mellon. After this date, the preferred stock account history will not be available online.
Cost-Basis Information
30. Why do I need to know the cost basis for my shares?
You will need to have the cost basis for the shares you have acquired for tax purposes. We recommend you keep track of your shares and cost basis as you are responsible for maintaining your cost-basis information.
31. How can I determine the transaction origin and cost-basis information for shares of class A preferred stock after these shares have been reclassified into common stock?
Your Post-Reclassification IAR will have the transaction origin and cost basis for shares of class A preferred stock to the extent that it is available. The tax basis and holding period of the directly held shares of class A preferred stock will carry over to the shares of common stock received upon the reclassification.
32. How can I determine the cost basis for shares marked "N/A" on my IAR?
An "N/A" is displayed for shares where the cost basis could not be systematically derived when stockholder data was converted over from SAIC Stock Programs to BNY Mellon Shareowner Services in 2006.
If you have an "N/A" listed under the 'Adjusted Acquisition Cost Per Share' column of your IAR from BNY Mellon, the cost basis should be available by cross-referencing your SAIC Stock History report dated January 31, 2006. If you need assistance determining the cost basis for these transactions, please contact SAIC Stock Programs (programs_stock@saic.com) or via telephone at 800-785-7764.
33. How can I track the transaction origin and cost basis information for shares of common stock acquired after the reclassification and held in my BNY Mellon common stock account?
In some cases, transaction origin and cost basis information will not be available in the BNY Mellon common stock account. For shares of common stock issued as a result of a stock option exercise or shares that vest from a restricted stock award, the fair-market value on the date you submit your option exercise or the fair-market value of the common stock on the vesting date of the restricted stock will be provided on your common stock statement. However, you are responsible for maintaining the cost basis for your shares. SAIC Stock Programs has developed a form that may help you in tracking your shares acquired after the reclassification and information to assist you in determining your cost basis.
Stock Transfers and Name Changes
34. What are the transfer restrictions on the common stock?
There are no restrictions on who may receive a transfer of common stock. SAIC Inc.'s Certificate of Incorporation only restricted the transfer of class A preferred stock to a "permitted transferee."
There are restrictions on which shares may be transferred. For all ESPP purchases, there is a one-year holding period during which you cannot transfer or sell your shares. After the reclassification, beginning with the December 31, 2009, ESPP purchase, there will also be an additional 21-month transfer restriction during which you cannot transfer your ESPP shares out of your ESPP account other than to sell these ESPP shares after the lapse of the one year holding period. For more details, please see Questions 17 and 18.
The trading restrictions in SAIC's Policy SG-2, Insider Trading and Disclosure, will also continue to apply.
35. How will the procedure to transfer shares from my BNY Mellon common stock account to an individual, joint or trust account or a charitable organization change?
You will not need to convert class A preferred stock into common stock before transfer since you will only hold shares of common stock after the reclassification. Also, the transfer process may be simpler depending on the number of shares you wish to transfer. Please see Question 37.
36. Will there be any changes in the procedure to transfer shares from my BNY Mellon common stock account to my own broker after the reclassification?
Yes. First, you will not need to convert your class A preferred stock into common stock before transfer since you will only hold shares of common stock after the reclassification. Your shares will be available immediately for your broker to take the action and transfer the shares of common stock from BNY Mellon. If you want BNY Mellon to transfer the shares to your broker, you will need to obtain a Medallion Signature Guarantee from the broker receiving the transfer of shares. Before the reclassification, you could obtain a Medallion Signature Guarantee from any entity that participated in the Medallion Signature Guarantee program. Finally, you may establish a standing broker authorization to facilitate future transfers to the brokerage account you have on file. Please also see Question 22 for information on transferring shares from your BNY Mellon ESPP Account.
37. What enhancements will be made to the process to transfer shares from my BNY Mellon common stock account after the reclassification?
There will be some enhancements to the transfer process from your BNY Mellon common account via Equity Holdings:
- There are no restrictions on who may receive a transfer of common stock.
- Prior conversion of class A preferred stock is no longer required, so transfers can be processed faster.
- Brokerage account information can be maintained at BNY Mellon, so you only have to fill out a form, obtain a Medallion Signature Guarantee from that broker and submit your brokerage account information once. After your brokerage information is on file with BNY Mellon, you will be able to contact a BNY Mellon customer service representative and request shares be transferred to your brokerage account on file.
- A Medallion Signature Guarantee is no longer required on the transfer form for certain transfers of 250 shares or less to another account at BNY Mellon. Please note, for transfers of more than 250 shares a Medallion Signature Guarantee is still required.
- Certain requests to transfer 250 shares or less to another account at BNY Mellon can be submitted online.
- Certain requests to transfer 50 shares or less to another account at BNY Mellon can be submitted on the phone via a BNY Mellon customer service representative.
38. Will there be any changes in the procedure to change the name on my BNY Mellon common stock account?
No, there are no changes in the procedure to change the name on your BNY Mellon common stock account. You will need to use a slightly revised form, but you will follow the same procedure.
Account Access/Maintenance
39. Will there be any changes in accessing my BNY Mellon account online or by telephone after the reclassification?
No. You will continue to access your BNY Mellon account online with the same Access ID and Password/PIN that you previously had, or by telephone at 866-400-SAIC (7242).
40. How will I change my personal mailing address on my BNY Mellon accounts after the reclassification?
After the reclassification, to change your address on your Equity Holdings account, you must change your address directly with BNY Mellon. BNY Mellon will utilize an authentication process to confirm the identity of the individual requesting the change when requested to change an address on any account. Address changes processed either through SAIC Human Resources or through ISSAIC will no longer automatically change your address on your Equity Holdings account but for active employees, it will automatically change your address in the Employee Grants and Awards application and the Employee Stock Purchase application. Former employees should change their address for the Employee Grants and Awards and/or Employee Stock Purchase applications directly with BNY Mellon.
SAIC Retirement Plan
41. How will the reclassification of class A preferred stock into common stock affect stock held in the SAIC Retirement Plan?
Currently, the SAIC Retirement Plan has two separate company stock funds: 1) The Preferred Stock Fund and 2) the Common Stock Fund. The Preferred Stock Fund has been closed to new investments since April 2007. At the time of the reclassification, the SAIC Preferred Stock Fund will be renamed the SAIC Closed Stock Fund, and all class A preferred shares held in the SAIC Closed Stock Fund will automatically become shares of common stock. The SAIC Common Stock Fund will remain unchanged. The Plan will continue to maintain two separate SAIC Stock Funds (the SAIC Closed Stock Fund and the SAIC Common Stock Fund) after the reclassification to calculate a separate cost basis for each fund. The cost basis is necessary when a participant elects to take a distribution from the Plan in shares of SAIC common stock. The SAIC Common Stock Fund will continue to accept new investments and exchanges following the reclassification.
42. Will the SAIC Stock Funds in the SAIC Retirement Plan be closed to trading (exchanges or investment of new contributions) while SAIC class A preferred stock is being reclassified into SAIC common stock?
The reclassification process is not expected to affect your ability to exchange in or out of the SAIC Stock Funds held in the SAIC Retirement Plan. The reclassification is scheduled to occur after the close of the market on a Friday and be completed before the market opens on Monday. If the reclassification is not fully completed by the time the market reopens on Monday, Vanguard expects to continue to process exchanges out of the Preferred Stock Fund, in part by using the Preferred Stock Fund's cash position.
43. Is the cost basis of shares of SAIC stock held in the SAIC Retirement Plan relevant to participants who have balances in the SAIC Stock Funds?
The cost basis of your balances in the SAIC Stock Funds is only relevant to SAIC Retirement Plan participants who choose to take a distribution from the Plan in shares of SAIC common stock. You will not need to keep track of the cost basis of your SAIC Stock Funds. Vanguard will continue to maintain this information for you and will provide it upon request.
44. Will I receive a statement from Vanguard or SAIC Retirement Programs showing that the shares of class A preferred stock in my SAIC Closed Stock Fund (formerly the SAIC Preferred Stock Fund) have been reclassified into shares of SAIC common stock?
No. Following the reclassification of shares of class A preferred stock into shares of common stock, the SAIC Closed Stock Fund (formerly the SAIC Preferred Stock Fund) will have the same number of shares of common stock that it previously held in class A preferred stock. The cost basis in this fund will not change as a result of the reclassification.
45. Is there any impact if I decide to consolidate my SAIC common stock in the SAIC Retirement Plan by moving the share units from the SAIC Closed Stock Fund into the SAIC Common Stock Fund?
If you move (exchange out) the share units from the SAIC Closed Stock Fund into the SAIC Common Stock Fund, you will receive a new cost basis for the shares and the prior cost basis, which may be lower particularly if you held the shares for a long period of time, will go away. As discussed in Question 43, the cost basis of balances in the SAIC Stock Funds is only relevant to Plan participants who choose to take a distribution of the SAIC Stock Funds in shares of SAIC common stock (an in-kind distribution). Depending on your circumstances, there may be certain tax advantages in taking an in-kind distribution. If you do take an in-kind distribution, having a lower cost basis generally would be more advantageous. Tax laws are complicated and change from time to time. If you are considering taking an in-kind distribution, you should discuss this matter with your personal tax or financial advisor.