10-Q

;

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

FORM 10-Q

_____________________

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2013

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ________________

Commission File Number 0-18859

_____________________

SONIC CORP.

(Exact name of registrant as specified in its charter)

_____________________

Delaware	73-1371046
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

300 Johnny Bench Drive	73104
Oklahoma City, Oklahoma	(Zip Code)
(Address of principal executive offices)

(405) 225-5000

(Registrant’s telephone number, including area code)

_____________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer                  x
Non-accelerated filer   o (Do no check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of June 26, 2013, approximately 55,885,737shares of the registrant’s common stock, par value $0.01 per share, were outstanding.

SONIC CORP.

Index

		Page
		Number
PART I.  FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets at May 31, 2013 and August 31, 2012	4
	Condensed Consolidated Statements of Income for the three and nine months ended May 31,2013 and 2012	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended May 31, 2013 and 2012	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II.  OTHER INFORMATION
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6.	Exhibits	22

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

SONIC CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(Unaudited)
	May 31,		August 31,
ASSETS	2013		2012
Current assets:
Cash and cash equivalents	$	53,554	$	52,647
Restricted cash		8,899		10,200
Accounts and notes receivable, net		32,479		27,073
Income taxes receivable		1,191		-
Prepaid expenses and other current assets		14,825		17,231
Total current assets		110,948		107,151
Noncurrent restricted cash		7,760		7,903
Notes receivable, net		11,613		11,641
Property, equipment and capital leases		728,770		764,893
Less accumulated depreciation and amortization		(327,802)		(321,885)
Property, equipment and capital leases, net		400,968		443,008
Goodwill		77,100		76,997
Debt origination costs, net		8,290		10,555
Other assets, net		25,825		23,505
Total assets	$	642,504	$	680,760
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	13,064	$	11,048
Deposits from franchisees		3,898		3,055
Accrued liabilities		33,960		32,607
Income taxes payable		2,001		14,326
Current maturities of long-term debt and capital leases		18,942		19,480
Total current liabilities		71,865		80,516
Obligations under capital leases due after one year		23,904		27,377
Long-term debt due after one year		436,135		466,613
Deferred income taxes		34,586		29,777
Other noncurrent liabilities		15,578		17,230
Total non-current liabilities		510,203		540,997
Stockholders’ equity:
Preferred stock, par value $.01; 1,000 shares authorized; none outstanding		-		-
Common stock, par value $.01; 245,000 shares authorized; 118,309 shares
issued (118,309 shares issued at August 31, 2012)		1,183		1,183
Paid-in capital		226,140		230,543
Retained earnings		746,189		722,614
Treasury stock, at cost; 62,466 common shares
(60,325 shares at August 31, 2012)		(913,076)		(895,093)
Total stockholders’ equity		60,436		59,247
Total liabilities and stockholders’ equity	$	642,504	$	680,760

The accompanying notes are an integral part of the consolidated financial statements.

4

SONIC CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
	Three months ended				Nine months ended
	May 31,				May 31,
	2013		2012		2013		2012
Revenues:
Company Drive-In sales	$	108,445	$	110,070	$	285,607	$	294,037
Franchise Drive-Ins:
Franchise royalties and fees		35,833		35,801		91,749		90,831
Lease revenue		1,089		2,056		3,524		4,605
Other		1,267		1,500		2,903		3,317
Total revenues		146,634		149,427		383,783		392,790
Costs and expenses:
Company Drive-Ins:
Food and packaging		30,776		30,600		80,954		83,011
Payroll and other employee benefits		37,924		38,539		102,837		106,363
Other operating expenses, exclusive of
depreciation and amortization included below		21,356		22,261		62,143		65,899
Total cost of Company Drive-In sales		90,056		91,400		245,934		255,273
Selling, general and administrative		16,943		16,951		48,540		48,452
Depreciation and amortization		9,783		10,288		30,447		31,264
Provision for impairment of long-lived assets		-		203		-		376
Other operating income, net		(142)		(151)		(353)		(613)
Total costs and expenses		116,640		118,691		324,568		334,752
Income from operations		29,994		30,736		59,215		58,038
Interest expense		7,170		7,836		22,293		23,807
Interest income		(153)		(174)		(462)		(477)
Loss from early extinguishment of debt		-		-		492		-
Net interest expense		7,017		7,662		22,323		23,330
Income before income taxes		22,977		23,074		36,892		34,708
Provision for income taxes		8,184		8,667		12,389		13,125
Net income	$	14,793	$	14,407	$	24,503	$	21,583
Basic income per share	$	0.26	$	0.24	$	0.43	$	0.36
Diluted income per share	$	0.26	$	0.24	$	0.43	$	0.36

The accompanying notes are an integral part of the consolidated financial statements.

5

SONIC CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
	Nine months ended
	May 31,
	2013		2012
Cash flows from operating activities:
Net income	$	24,503	$	21,583
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		30,447		31,264
Stock-based compensation expense		2,812		3,204
Other		(53)		(1,162)
(Increase) decrease in operating assets:
Restricted cash		1,112		2,455
Accounts receivable and other assets		(209)		(611)
Increase (decrease) in operating liabilities:
Accounts payable		2,102		834
Accrued and other liabilities		2,797		(1,286)
Income taxes		(7,661)		7,665
Total adjustments		31,347		42,363
Net cash provided by operating activities		55,850		63,946
Cash flows from investing activities:
Purchases of property and equipment		(28,378)		(12,938)
Proceeds from sale of assets		32,342		8,562
Other		140		(7,806)
Net cash provided by and (used in) investing activities		4,104		(12,182)
Cash flows from financing activities:
Payments on debt		(31,076)		(11,271)
Purchases of treasury stock		(36,538)		(25,534)
Proceeds from exercise of stock options		11,181		-
Other		(2,614)		(2,796)
Net cash used in financing activities		(59,047)		(39,601)
Net increase in cash and cash equivalents		907		12,163
Cash and cash equivalents at beginning of period		52,647		29,509
Cash and cash equivalents at end of period	$	53,554	$	41,672
Supplemental cash flow information
Non-cash investing and financing activities:
Change in obligation to acquire treasury stock	$	(1,058)	$	-
Notes receivable and direct financing leases from property disposition	$	8,661	$	-

The accompanying notes are an integral part of the consolidated financial statements.

6

SONIC CORP.

NOTES TO CONDENSED CONSOLIDATED FINANICAL STATEMENTS

(In thousands, expect per share data)

(Unaudited)

1.Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements of Sonic Corp. (the “Company”).  In the opinion of management, these financial statements reflect all adjustments of a normal recurring nature, including recurring accruals, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP.  In certain situations, recurring accruals, including franchise royalties, are based on more limited information at interim reporting dates than at the Company’s fiscal year end due to the abbreviated reporting period.  Actual results may differ from these estimates.  These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended August 31, 2012 included in the Company’s Annual Report on Form 10-K.  Interim results are not necessarily indicative of the results that may be expected for a full year or any other interim period.

Principles of Consolidation

The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries and a number of Company Drive-Ins in which a subsidiary has a controlling ownership interest.  All intercompany accounts and transactions have been eliminated.

Reclassifications

Certain amounts reported in previous years, which are not material, have been combined and reclassified to conform to the current-year presentation.

7

SONIC CORP.

NOTES TO CONDENSED CONSOLIDATED FINANICAL STATEMENTS

(In thousands, expect per share data)

(Unaudited)

2.Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three months ended				Nine months ended
	May 31,				May 31,
	2013		2012			2013		2012
Numerator:
Net income	$	14,793	$	14,407		$	24,503	$	21,583
Denominator:
Weighted average common shares outstanding– basic		56,005		59,936			56,492		60,736
Effect of dilutive employee stock options and
unvested restricted stock units		840		25			626		31
Weighted average common shares – diluted		56,845		59,961			57,118		60,767
Net income per common share – basic	$	0.26	$	0.24		$	0.43	$	0.36
Net income per common share – diluted	$	0.26	$	0.24		$	0.43	$	0.36
Anti-dilutive securities excluded(1)		3,327		7,382			3,877		7,269
—————————

(1) Anti-dilutive securities consist of stock options and unvested restricted stock units that were not included in the computation of diluted earnings per share because either the exercise price of the options was greater than the average market price of the common stock or the total assumed proceeds under the treasury stock method resulted in negative incremental shares and thus the inclusion would have been anti-dilutive.

3.Stock Repurchase Program

On August 15, 2012, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to purchase up to $40 million of its outstanding shares of common stock.  In January 2013, the Board of Directors increased the stock repurchase program to $55 million in authorized purchases through August 31, 2013.  During the first nine months of fiscal year 2013, approximately 3.3 million shares were acquired pursuant to this program for a total cost of $35.5 million.  Including the $1.1 million purchased in August 2012 and the repurchases in fiscal year 2013, the total remaining amount authorized, as of May 31, 2013, was $18.4million.  Share repurchases may be made from time to time in the open market or in negotiated transactions, depending on share price, market conditions and other factors.  The stock repurchase program may be extended, modified, suspended or discontinued at any time.

4.Income Taxes

The following table presents the Company’s provision for income taxes and effective income tax rate for the periods below:

	Three months ended						Nine months ended
	May 31,						May 31,
	2013			2012			2013			2012
Provision for income taxes	$	8,184		$	8,667		$	12,389		$	13,125
Effective income tax rate		35.6	%		37.6	%		33.6	%		37.8	%

8

SONIC CORP.

NOTES TO CONDENSED CONSOLIDATED FINANICAL STATEMENTS

(In thousands, expect per share data)

(Unaudited)

The decrease in the Company’s effective income tax rate during the third quarter of fiscal year 2013 was primarily attributable to tax benefits related to disqualifying dispositions on stock optionsand a favorable annual return to provision adjustment.  The decline in the effective income tax rate during the first nine months of fiscal year 2013 was attributable to the expiration of a state statute of limitations related to an uncertain tax position and legislation that reinstated and extended the Work Opportunity Tax Credit (“WOTC”) in the second quarter of fiscal year 2013, as well as an adjustment in fiscal year 2012 to deferred tax accounts.

As of May 31, 2013, the Company had $2.0million of unrecognized tax benefits, including $0.4million of interest and penalties.  During the first nine months of fiscal year 2013, the liability for unrecognized tax benefits decreased by $3.5million.  The majority of the change was due to the favorable resolution of a federal tax audit, a statute of limitations expiration of a state tax position, a tax method change and a new uncertain position related to a federal credit.  Of this change, only $0.1 million impacted the Company’s tax rate.  The Company recognizes estimated interest and penalties as a component of its income tax expense, net of federal benefit.If recognized, the entire amount of unrecognized tax benefits would favorably impact the effective tax rate.

The Company or one of its subsidiaries is subject to U.S. federal income tax and income tax in multiple U.S. state jurisdictions.  The Company is currently undergoing examinations or appeals by various state and federal authorities.  The Company anticipates that the finalization of these examinations or appeals, combined with the expiration of applicable statutes of limitations and the additional accrual of interest related to unrecognized benefits on various return positions taken in years still open for examination, could result in a change to the liability for unrecognized tax benefits during the next 12 months ranging from a decrease of $1.4million to anincreaseof $2.5million depending on the timing and terms of the examination resolutions.

5.Impairment of Long-Lived Assets and Goodwill

Long-Lived Assets

The Company assesses long-lived assets used in operations for possible impairment when events and circumstances indicate that such assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amount.  No materialimpairment charges for long-lived assets were recorded in the first nine months of fiscal year 2013 or in the same period last year. Projecting the cash flows for the impairment analysis involves significant estimates with regard to the performance of each drive-in, and it is reasonably possible that the estimates of cash flows may change in the near term resulting in the need to write down operating assets to fair value.

Goodwill

The Company is required to test goodwill for impairment on an annual basis and between annual tests as a result of allocating goodwill to Company Drive-Ins that are sold or whenever indications of impairment arise including, but not limited to, a significant decline in cash flows from store operations.  Such tests could result in impairment charges.  As of May 31,2013, the Company had $77.1 million of goodwill, of which $71.1 million was attributable to the Company Drive-Ins segment and $6.0 million was attributable to the Franchise Operations segment.  For more information regarding the Company’s goodwill and other intangible assets information, see note1  – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended August 31, 2012.

6.Accounts and Notes Receivable

Accounts and notes receivable consist of the following (in thousands):

	May 31,		August 31,
	2013		2012
Current Accounts and Notes Receivable:
Royalties and other trade receivables	$	17,664	$	17,030
Notes receivable from franchisees		4,656		1,304
Notes receivable from advertising funds		7,825		4,825
Other		4,436		6,109
Accounts and notes receivable, gross		34,581		29,268
Allowance for doubtful accounts and notes receivable		(2,102)		(2,195)
Accounts and notes receivable, net	$	32,479	$	27,073
Noncurrent Notes Receivable:
Notes receivable from franchisees	$	5,926	$	5,286
Notes receivable from advertising funds		6,495		7,152
Allowance for doubtful notes receivable		(808)		(797)
Notes receivable, net	$	11,613	$	11,641

9

SONIC CORP.

NOTES TO CONDENSED CONSOLIDATED FINANICAL STATEMENTS

(In thousands, expect per share data)

(Unaudited)

The Company’s receivables are primarily due from franchisees, all of whom are in the restaurant business.  Substantially all of the notes receivable from franchisees are collateralized by real estate or equipment.  During fiscal year 2013, notes receivable from franchisees increased as a result of the franchisee-exercised option discussed in note 7 – Other Operating Income.The notes receivable from advertising funds represent transactions in the normal course of business.

7.Other Operating Income

During the second quarter of fiscal year 2013, a franchiseeexercised an option to acquire land and buildings leased or subleased from the Company relating to previously refranchised drive-ins.  In December 2012, at the time of the sale, these assets had a carrying value of $38.4 million.  The Company received $29.7million in cash at closing and will receive the remaining $8.7 million (plus interest) over 24 months through the combination of a note receivable and a direct financing lease.  In conjunction with the sale and the assignment of third party leases, the Company removed its escalating lease liability related to the sold properties.  This resulted in a gain of $1.0 million, which is reflected in “Other operating income, net” on the Condensed Consolidated Statements of Income.For fiscal year 2012, lease revenue, net of sublease payments, related to these assets was approximately $4.8 million.  The Company’s debt covenants require the application of certain asset disposition proceeds as note prepayments, after a $5 million annual exclusion, if the proceeds are not reinvested in eligible assets within a twelve-month period.  During the second quarter of fiscal year2013, the Company prepaid $20.0 million of debt which was applied toward the prepayment requirements noted above.  See note 9  –Debt for additional information.  In addition, during the second quarter of fiscal year 2013, the Company recorded a charge of $0.8 million in “Other operating income, net”related to a straight-line lease adjustment and franchise rights that should have been expensed in prior years.  Management of the Company evaluated the impact of these adjustments and concluded the effect was immaterial to the current and prior-year financial statements.

8.Contingencies

The Company is involved in various legal proceedings and has certain unresolved claims pending. Based on the information currently available, management believes that all claims currently pending are either covered by insurance or would not have a material adverse effect on the Company’s business, operating results or financial condition.

The Company has obligations under various operatinglease agreements with third-party lessors related to the real estate for certain CompanyDrive-In operationsthat were sold to franchisees. During the second quarter of fiscal year 2013, the amount remaining under these guaranteed lease obligations increased as a result of the franchisee-exercised option discussed in note 7 – Other Operating Income.  Under these agreements, which expire

10

SONIC CORP.

NOTES TO CONDENSED CONSOLIDATED FINANICAL STATEMENTS

(In thousands, expect per share data)

(Unaudited)

through 2029, the Company remains secondarily liable for the lease payments for which it was responsible as the original lessee. As of May 31, 2013, the amount remaining under these guaranteed lease obligationstotaled $12.2 million.  At this time, the Company does not anticipate any material defaults under the foregoing leases; therefore, no liability has been provided.

9.Debt

During the second quarter of fiscal year 2013, the Company made a prepaymentof $20.0 million on its Series 2011-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2011 Fixed Rate Notes”).  The prepayment was made at par, as allowed under the terms of the 2011 Fixed Rate Notes.  The Company recognized a $0.5 million loss to record the pro-rata portion of debt origination costs on the early extinguishment of debt.

10.Fair Value of Financial Instruments

The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties. The Company has no financial liabilities that are required to be measured at fair value on a recurring basis.

The Company categorizes its assets and liabilities recorded at fair value based upon the following fair value hierarchy established by the Financial Accounting Standards Board:

•Level 1 valuations use quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date. An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

•Level 2 valuations use inputs other than actively quoted market prices included within Level 1 that are observable for the asset or liability,either directly or indirectly. Level 2 inputs include: (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical or similar assets or liabilities in markets that are not active, (c) inputs other thanquoted prices that are observable for the asset or liability such as interest rates and yield curves observable at commonly quoted intervals and (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3 valuations use unobservable inputs for the asset or liability. Unobservable inputs are used to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The table below sets forth our fair value hierarchy for financial assets measured at fair value on a recurring basis (in thousands):

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
May 31, 2013
Assets:
Cash equivalents	$	19,976	$	-	$	-	$	19,976
Restricted cash (current)		8,899		-		-		8,899
Restricted cash (noncurrent)		7,760		-		-		7,760
Total	$	36,635	$	-	$	-	$	36,635
August 31, 2012
Assets:
Cash equivalents	$	7,784	$	-	$	-	$	7,784
Restricted cash (current)		10,200		-		-		10,200
Restricted cash (noncurrent)		7,903		-		-		7,903
Total	$	25,887	$	-	$	-	$	25,887

11

SONIC CORP.

NOTES TO CONDENSED CONSOLIDATED FINANICAL STATEMENTS

(In thousands, expect per share data)

(Unaudited)

:

At May 31,2013, the fair value of theCompany’s 2011 Fixed Rate Notes was estimated at $474.9million versus a carrying value of $450.9million, including accrued interest.  At August31,2012, the fair value of the 2011 Fixed Rate Notes was estimated at $510.8 million versus a carrying value of $482.0 million, including accrued interest.  The fair value of the 2011 Fixed Rate Notes is estimated using Level 2 inputs from market information available for public debt transactions for companies with ratings that are similar to the Company’s ratings and from information gathered from brokers who trade in the Company’s notes.

11.Segment Information

Operating segments are generally defined as components of an enterprise for which separate discrete financial information is available as the basis for management to allocate resources and assess performance. 

Based on internal reporting and management structure, the Company has two reportable segments: Company Drive-Ins and Franchise Operations.  The Company Drive-Ins segment consists of the drive-in operations in which the Company owns a controlling ownership interest and derives its revenues from operating drive-in restaurants.  The Franchise Operations segment consists of franchising activities and derives its revenues from royalties, initial franchise fees and lease revenues received from franchisees.  The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in our most recent Annual Report on Form 10-K.  Segment information for total assets and capital expenditures is not presented as such information is not used in measuring segment performance or allocating resources between segments.

12

SONIC CORP.

NOTES TO CONDENSED CONSOLIDATED FINANICAL STATEMENTS

(In thousands, expect per share data)

(Unaudited)

The following table presents the revenues and income from operations for each reportable segment, along with reconciliation to reported revenue,  income from operations and income before income taxes:

	Three months ended				Nine months ended
	May 31,				May 31,
	2013		2012		2013		2012
Revenues:
Company Drive-Ins	$	108,445	$	110,070	$	285,607	$	294,037
Franchise Operations		36,922		37,857		95,273		95,436
Unallocated revenues		1,267		1,500		2,903		3,317
Total revenues	$	146,634	$	149,427	$	383,783	$	392,790
Income from operations:
Company Drive-Ins	$	18,389	$	18,670	$	39,673	$	38,764
Franchise Operations		36,922		37,857		95,273		95,436
Unallocated income		1,409		1,651		3,256		3,930
Unallocated expenses:
Selling, general and administrative		(16,943)		(16,951)		(48,540)		(48,452)
Depreciation and amortization		(9,783)		(10,288)		(30,447)		(31,264)
Provision for impairment of long-lived assets		-		(203)		-		(376)
Income from operations		29,994		30,736		59,215		58,038
Net interest expense		(7,017)		(7,662)		(22,323)		(23,330)
Income before income taxes	$	22,977	$	23,074	$	36,892	$	34,708

12.Subsequent Event

Subsequent to the end of the third fiscal quarter of 2013, the Company announced that certain of its subsidiaries intend to refinance a portion of the 2011 Fixed Rate Notes issued under their securitization debt facility.  The Company’s subsidiaries have entered into a commitment letter, pursuant to which a purchaser has agreed, subject to the conditions contained in the letter, to purchase at par approximately $155 million of Series 2013-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2013 Fixed Rate Notes”) to be issued under the securitization debt facility.  As specified in the commitment letter, the 2013 Fixed Rate Notes are expected to have a fixed interest rate of 3.75%, an anticipated contract monthly weighted average life of seven years and a final legal maturity date in 2043.

The net proceeds from the sale of the 2013 Fixed Rate Notes will be used to prepay $155 million of the 2011 Fixed Rate Notes at par.  The 2013 Fixed Rate Notes will be issued pursuant to the securitized financing facility which the Company’s subsidiaries have had in place since May 2011.  The 2011 Fixed Rate Notes have a fixed interest rate of 5.4% with $450.2 million outstanding as of May 31, 2013. 

13

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

In the Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “Sonic Corp.,” “the Company,” “we,” “us,” and “our” refer to Sonic Corp. and its subsidiaries.

Overview

System-wide same-store sales increased 0.1% during the third quarter and increased 0.9% for the first nine months of fiscal year 2013 as compared to an increase of 2.8% and 2.2%, respectively, for the same periods last year.  Same-store sales at Company Drive-Ins decreased 1.1% during the third quarter and increased 1.5% for the first nine months of fiscal year 2013 as compared to an increase of 3.7% and 2.3%, respectively, for the same periods last year.  Sales during the third quarter of fiscal year 2013 were impacted by unseasonably cold temperatures in March and April 2013.  We believe the initiatives we have implemented over the last few years, including product quality improvements, a greater emphasis on personalized service and a tiered pricing strategy, have set a solid foundation for growth which is reflected in our year-to-date operating results. We continue to focus on our innovative product pipeline, and our recent shift from local to national media expenditures is supporting our day-part promotional strategy to drive same-store sales.  To achieve earning growth we utilize a multi-layered growth strategy which incorporates same-store sales growth, operating leverage, new drive-in development, an ascending royalty rate and deployment of cash.  Positive system-wide same-store sales is the most important layer and drives operating leverage and increased operating cash flows.

Revenues decreased to $146.6 million for the third quarter of fiscal year 2013 from $149.4 million for the same period last year and decreased to $383.8 million for the first nine months of fiscal year 2013 from $392.8 million for the same period last year.  The decrease in revenues was primarily related to the decrease in Company Drive-In sales which were impacted by adverse weather during the quarter and the refranchising of 34 Company Drive-Ins during the second fiscal quarter of 2012.  Additionally, lease revenues have also declined as a result of a transactionduring the second quarter of fiscal year 2013 in which a franchisee exercised an option to acquire land and buildings leased or subleased from us, relating to previously refranchised drive-ins.  Restaurant margins at Company Drive-Ins were flat during the third quarter of fiscal year 2013.  Margins improved 70 basis points during the first nine months of fiscal year 2013 primarily as a result of leverage from same-store sales increases andthe refranchising of 34 lower performing drive-ins in the second fiscal quarter of 2012.

Third quarter results for fiscal year 2013 reflected net income of $14.8 million or $0.26 per diluted share, as compared to net income of $14.4 million or $0.24 per diluted share for the same period last year.  Net income and diluted earnings per share for the first nine months of fiscal year 2013 were $24.5 million and $0.43, respectively, as compared to net income of $21.6 million and $0.36 per diluted share for the same period last year.  Excluding the $0.3 million after-tax loss or $0.01 per diluted share from the early extinguishment of debt and the $0.7 million benefit or $0.02 per diluted share, which includes the retroactive reinstatement of the Work Opportunity Tax Credit (“WOTC”) and resolution of certain income tax matters during the second quarter of fiscal year 2013, net income and diluted earnings per share for the first nine months of fiscal year 2013 increased 12% and 17%, respectively.

The following non-GAAP adjustments are intended to supplement the presentation of the Company’s financial results in accordance with GAAP.  We believe the exclusion of these items in evaluating the change in net income and diluted earnings per share for the period below provides useful information to investors and management regarding the underlying business trends and the performance of our ongoing operations and is helpful for period-to-period and company-to-company comparisons, which management believes will assist investors in analyzing the financial results for the Company and predicting future performance.

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	Nine months ended					Nine months ended
	May 31, 2013				May 31, 2012
	Net		Diluted		Net		Diluted
	Income		EPS		Income		EPS
Reported – GAAP	$	24,503	$	0.43	$	21,583	$	0.36
After-tax loss from early extinguishment of debt		315		0.01		-		-
Retroactive tax benefit of WOTC and resolution of tax matters		(743)		(0.02)		-		-
Adjusted - Non-GAAP	$	24,075	$	0.42	$	21,583	$	0.36

The following table provides information regarding the number of Company Drive-Ins and Franchise Drive-Ins operating as of the end of the periods indicated as well as the system-wide change in sales and average unit volume. System-wide information includes both Company Drive-In and Franchise Drive-In information, which we believe is useful in analyzing the growth of the brand as well as the Company’s revenues, since franchisees pay royalties based on a percentage of sales.

System-wide Performance
($ in thousands)
	Three months ended						Nine months ended
	May 31,						May 31,
	2013			2012			2013			2012
Increase in total sales		0.1	%		2.4	%		1.0	%		2.9	%
System-wide drive-ins in operation(1):
Total at beginning of period		3,526			3,550			3,556			3,561
Opened		6			7			10			19
Closed (net of re-openings)		(6)			(7)			(40)			(30)
Total at end of period		3,526			3,550			3,526			3,550
Average sales per drive-in:	$	301		$	294		$	787		$	768
Change in same-store sales(2):		0.1	%		2.8	%		0.9	%		2.2	%
—————————

(1) Drive-ins that are temporarily closed for various reasons (repairs, remodeling, relocations, etc.) are not considered closed unless the Company determines that they are unlikely to reopen within a reasonable time.

(2) Represents percentage change for drive-ins open for a minimum of 15 months.

Results of Operations

Revenues.  The following table sets forth the components of revenue for the reported periods and the relative change between the comparable periods.

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Revenues
($ in thousands)
	Three months ended						Percent
	May 31,				Increase		Increase
	2013		2012		(Decrease)		(Decrease)
Revenues:
Company Drive-In sales	$	108,445	$	110,070	$	(1,625)	(1.5)	%
Franchise Drive-Ins:
Franchise royalties		35,756		35,599		157	0.4
Franchise fees		77		202		(125)	(61.9)
Lease revenue		1,089		2,056		(967)	(47.0)
Other		1,267		1,500		(233)	(15.5)
Total revenues	$	146,634	$	149,427	$	(2,793)	(1.9)	%
		Nine months ended					Percent
		May 31,			Increase		Increase
		2013		2012	(Decrease)		(Decrease)
Revenues:
Company Drive-In sales	$	285,607	$	294,037	$	(8,430)	(2.9)	%
Franchise Drive-Ins:
Franchise royalties		91,491		89,980		1,511	1.7
Franchise fees		258		851		(593)	(69.7)
Lease revenue		3,524		4,605		(1,081)	(23.5)
Other		2,903		3,317		(414)	(12.5)
Total revenues	$	383,783	$	392,790	$	(9,007)	(2.3)	%

The following table reflects the changes in sales and same-store sales at Company Drive-Ins.  It also presents information about average unit volumes and the number of Company Drive-Ins, which is useful in analyzing the growth of Company Drive-In sales.

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Company Drive-In Sales
($ in thousands)
	Three months ended						Nine months ended
	May 31,						May 31,
	2013			2012			2013			2012
Company Drive-In Sales	$	108,445		$	110,070		$	285,607		$	294,037
Percentage decrease		(1.5)	%		(3.2)	%		(2.9)	%		(1.1)	%
Company Drive-Ins in operation(1):
Total at beginning of period		405			412			409			446
Opened		1			-			1			-
Acquired from (sold to) franchisees		1			(1)			1			(35)
Closed (net of re-openings)		-			(2)			(4)			(2)
Total at end of period		407			409			407			409
Average sales per Company Drive-In:	$	267		$	268		$	704		$	688
Change in same-store sales(2):		(1.1)	%		3.7	%		1.5	%		2.3	%
—————————

(1) Drive-ins that are temporarily closed for various reasons (repairs, remodeling, relocations, etc.) are not considered closed unless the Company determines that they are unlikely to reopen within a reasonable time.

(2) Represents percentage change for drive-ins open for a minimum of 15 months.

Same-store sales for Company Drive-Ins decreased 1.1% for the third quarter of fiscal year 2013 and increased 1.5% for the first nine months of fiscal year 2013, as compared to an increase of 3.7% and 2.3%, respectively, for the same periods last year.  Company Drive-In sales decreased $1.6 million, or 1.5%, during the third quarter of fiscal year 2013 as compared to the same period last year.  This decrease was primarily due to a $1.1 million reduction in same-store sales attributable to the unseasonably cold temperatures in March and April 2013 and a $0.9 million decrease related to drive-ins that were closed or sold during the preceding twelve months partially offset by $0.4 million of incremental sales from new drive-in openings.  Company Drive-In sales decreased $8.4 million, or 2.9%, for the first nine months of fiscal year 2013 as compared to the same period last year.  This decrease is primarily attributable to an $11.4 million reduction in sales from refranchised drive-ins and $1.8 million related to drive-ins that were closed during the preceding twelve months partially offset by a $4.0 million improvement in same-store sales and $0.8 million of incremental sales from new drive-in openings.

The following table reflects the change in franchise sales, the number of Franchise Drive-Ins, average unit volumes and franchising revenues. While we do not record Franchise Drive-In sales as revenues, we believe this information is important in understanding our financial performance since these sales are the basis on which we calculate and record franchise royalties. This information is also indicative of the financial health of our franchisees.

17

Franchise Information
($ in thousands)
	Three months ended						Nine months ended
	May 31,						May 31,
	2013			2012			2013			2012
Franchise Drive-In Sales	$	937,092		$	934,449		$	2,469,033		$	2,431,649
Percentage increase		0.3	%		3.1	%		1.5	%		3.4	%
Franchise Drive-Ins in operation(1):
Total at beginning of period		3,121			3,138			3,147			3,115
Opened		5			7			9			19
Acquired from (sold to) the company		(1)			1			(1)			35
Closed (net of re-openings)		(6)			(5)			(36)			(28)
Total at end of period		3,119			3,141			3,119			3,141
Average sales per Franchise Drive-In:	$	306		$	298		$	798		$	779
Change in same-store sales(2):		0.2	%		2.7	%		0.9	%		2.2	%
Franchising revenues(3)	$	36,922		$	37,857		$	95,273		$	95,436
Percentage increase (decrease)		(2.5)	%		2.2	%		(0.2)	%		1.2	%
Effective royalty rate(4)		3.82	%		3.81	%		3.71	%		3.70	%
—————————

(1) Drive-ins that are temporarily closed for various reasons (repairs, remodeling, relocations, etc.) are not considered closed unless the Company determines that they are unlikely to reopen within a reasonable time.

(2) Represents percentage change for drive-ins open for a minimum of 15 months.

(3) Consists of revenues derived from franchising activities, including royalties, franchise fees and lease revenues.  See Revenue Recognition Related to Franchise Fees and Royalties in the Critical Accounting Policies and Estimates section of Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended August 31, 2012.

(4) Represents franchise royalties as a percentage of Franchise Drive-In sales.

Same-store sales for Franchise Drive-Ins increased 0.2% for the third quarter of fiscal year 2013 and 0.9% for the first nine months of fiscal year 2013, as compared to an increase of 2.7% and 2.2%, respectively, for the same periods last year.  Franchising revenues decreased $0.9 million, or 2.5%, for the third quarter of fiscal year 2013 and decreased $0.2 million, or 0.2%, for the first nine months of fiscal year 2013.  The decrease in franchise revenues during the third quarter and first nine months of fiscal year 2013 was primarily attributable to a decrease in lease revenue resulting from the franchisee option, exercised during the second quarter of fiscal year 2013, to acquire land and buildings leased or subleased from the Company relating to previously refranchised drive-ins.  This decrease is partially offset by an increase in franchise royalties during the first nine months of fiscal year 2013 primarily attributable to an increase in same-store sales, partially offset by various development incentives and certain franchisee restructuring efforts.  In addition, approximately $0.8 million of the increase in franchising revenues during the first nine months of fiscal year 2013 was attributable to incremental royalties from the 34 refranchised drive-ins discussed earlier.

Operating Expenses.  The following table presents the overall costs of drive-in operations as a percentage of Company Drive-In sales.  Other operating expenses include direct operating costs such as marketing, telephone and utilities, repair and maintenance, rent, property tax and other controllable expenses.

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Company Drive-In Margins
	Three months ended
	May 31,				Percentage Points
	2013		2012		Increase (Decrease)
Costs and expenses:
Company Drive-Ins:
Food and packaging	28.4	%	27.8	%	0.6
Payroll and other employee benefits	35.0		35.0		-
Other operating expenses	19.6		20.2		(0.6)
Cost of Company Drive-In sales	83.0	%	83.0	%	-
	Nine months ended
	May 31,				Percentage Points
	2013		2012		Increase (Decrease)
Costs and expenses:
Company Drive-Ins:
Food and packaging	28.3	%	28.2	%	0.1
Payroll and other employee benefits	36.0		36.2		(0.2)
Other operating expenses	21.8		22.4		(0.6)
Cost of Company Drive-In sales	86.1	%	86.8	%	(0.7)

Drive-in level margins were flat during the third quarter of fiscal year 2013.  Margins improved 70 basis points during the first nine months of fiscal year 2013 primarily as a result of same-store sales increases and the refranchising of 34 lower performing drive-ins in the second fiscal quarter of 2012. Food and packaging costs were unfavorable by 60 basis points during the quarter and 10 basis points for the first nine months of fiscal year 2013, which primarily resulted from an unfavorable product mix shift due to our current promotions.  Payroll and other employee benefits, as well as other operating expenses, improved by a combined 60 basis points during the third quarter of fiscal year 2013, resulting primarily from a decrease in marketing expenses.  These expense categories were favorable by80 basis points during the first nine months of fiscal year 2013,primarily due to the refranchising of 34 lower performing drive-ins in the second fiscal quarter of 2012.

Selling, General and Administrative (“SG&A”).SG&A expenses were flat for the thirdquarter and first nine months of fiscal year 2013 as compared to the same periods last year reflecting $16.9 million and $48.5 million for the third quarter and first nine months of fiscal year 2013, respectively.

Depreciation and Amortization.Depreciation and amortization expense remained relatively flat for the third quarter and first nine months of fiscal year 2013, decreasing by $0.5 million to $9.8 million and $0.8 million to $30.4 million, respectively, as compared to the same periods last year.  This decline is primarily the result of the franchisee option, exercised during the second quarter of fiscal year 2013, to acquire land and buildings leased or subleased from the Company relating to previously refranchised drive-ins.

Net Interest Expense.  Net interest expense decreased $0.6 million in the third quarter and $1.0 million for the first nine months of fiscal year 2013 as compared to the same periods last year.  These decreaseswere primarily due to a decline in our long-term debt balance.  The decrease for the first nine months waspartially offset by a $0.5 million loss from the early extinguishment of debt related to our $20.0 million prepaymentduring the second quarter of fiscal year 2013.  For additional information on long-term debt see our Annual Report on Form 10-K for the year ended August 31, 2012.  

Income Taxes.The provision for income taxes reflects an effective tax rate of 35.6% for the third quarter of fiscal 2013 as compared to 37.6% for the same period in 2012.  This decline was primarily attributable to tax

19

benefits related to disqualifying dispositions on stock options and a favorable annual return to provision adjustment.  Our effective income tax rate decreased to 33.6% for the first nine months of fiscal year 2013 from 37.8% for the first nine months of fiscal year 2012.  This decline was attributable to the second quarter of fiscal year 2013 expiration of a state statute of limitations related to an uncertain tax position and legislationthat reinstated and extendedWOTC, as well as an adjustment in fiscal year 2012 to our deferred tax accounts.  Our tax rate may continue to vary significantly from quarter to quarter depending on the timing of stock option exercises and dispositions by option-holders, changes in tax credit legislation, changes to uncertain tax positions, and as circumstances on other tax matters change.

Financial Position

Total assets decreased $38.3 million, or 5.6%, to $642.5 million during the first nine months of fiscal year 2013 from $680.8 million at the end of fiscal year 2012.  The decrease in total assets is largely attributable to the decline in net property, equipment and capital leases of $42.0 million, primarily reflecting the second quarter of fiscal year 2013 sale of land and buildings to a franchisee for previously refranchised drive-ins, as well as from depreciation during the first nine months of the year, partially offset by capital additions.

Total liabilities decreased $39.4million, or 6.3%, to $582.1 million during the first nine months offiscal year 2013 from $621.5 million at the end of fiscal year  2012.  This decrease was primarily attributable to $31.1 million scheduled and early debt principal repayments during the first nine months of fiscal year 2013 and a decrease in income taxes payable of $12.3 million stemming mainly from tax payments during the first nine monthsof fiscal year 2013.

Total stockholders’ equity increased $1.2 million, or 2.0%, to $60.4 million during the first nine months of fiscal year 2013 from $59.2 million at the end of fiscal year 2012.  This increase was attributable to current-year earnings of $24.5 million and $12.8 million related to stock option exercises.  These increases were mostly offset by $35.5 million in purchases of common stock under our stock repurchase program during the first nine months of fiscal year 2013.

Liquidity and Sources of Capital

Operating Cash Flows.  Net cash provided by operating activities decreased $8.1 million to $55.9 million for the first nine months of fiscal year 2013 as compared to $63.9 million for the same period in fiscal year 2012. This decline primarily resulted from an increase in income tax payments in the first nine months of fiscal year 2013 as compared to the same period last year, partially offset by current-year earnings.

Investing Cash Flows.  Cash provided by investing activities during the first nine months of fiscal year 2013 increased $16.3 million to $4.1 million compared to the use of $12.2 million of cash for the same period in fiscal year 2012.  During the first nine months of fiscal year 2013, we used $28.4 million of cash for purchases of property and equipment as outlined in the table below.  These cash outflows were more than offset by $32.3 million in proceeds primarily related to the franchisee-exercised option to acquire land and buildings leased or subleased from us relating to previously refranchised drive-ins, described above.  The balance of the change largely relates to a prior-year use of cash to purchase intellectual property related to a point-of-sale system that is used by a majority of the Sonic system.  The following table sets forth the components of our investments in property and equipment for the first nine months of fiscal year 2013 (in millions):

Replacement equipment and technology for existing drive-ins	$	10.9
Corporate technology investments		9.2
New Company Drive-Ins, including drive-ins under construction		3.1
Rebuilds, relocations and remodels of existing drive-ins		2.3
Acquisition of underlying real estate for drive-ins		1.8
Retrofits, drive-thru additions and LED signs in existing drive-ins		1.1
Total purchases of property and equipment	$	28.4

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Financing Cash Flows.  Net cash used in financing activities increased $19.4 million to $59.0 million for the first nine months of fiscal year 2013 from $39.6 million for the same period in fiscal year 2012.  This increase primarily relates to the use of $20.0 million in cash during the second quarter of fiscal year 2013 to make a prepayment on our Series 2011-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2011 Fixed Rate Notes”).  Also attributable to the increase was the use of $36.5 million of cash during the first nine months of fiscal year 2013 to purchase outstanding common stock under our current stock repurchase program as compared to $25.5 million for the same period in fiscal year 2012 under a prior stock repurchase program. These uses of cash are being partially offset by $11.2 million in proceeds from stock option exercises during the first nine months of fiscal year 2013.

On August 15, 2012, our Board of Directors approved a stock repurchase program authorizing us to purchase up to $40 million of our outstanding shares of common stock.  In January 2013, our Board of Directors increased the stock repurchase program to $55 million in authorized purchases through August 31, 2013.  During the first nine months of fiscal year 2013, approximately 3.3 million shares were acquired pursuant to this program for a total cost of $35.5 million.  Including the $1.1 million purchased in August 2012 and the repurchases in fiscal year 2013, the total remaining amount authorized, as of May 31, 2013, was $18.4 million.  Share repurchases may be made from time to time in the open market or in negotiated transactions, depending on share price, market conditions and other factors.  The stock repurchase program may be extended, modified, suspended or discontinued at any time.

As of May 31, 2013, our total cash balance of $70.2 million ($53.6 million of unrestricted and $16.7 million of restricted cash balances) reflected the impact of the cash generated from operating activities, cash used for stock repurchases, debt prepayment, and capital expenditures mentioned above.  We believe that existing cash, funds generated from operations and the $100 million available under our Series 2011-1 Senior Secured Variable Funding Notes, Class A-1, will meet our needs for the foreseeable future.

Critical Accounting Policies and Estimates

Critical accounting policies are those the Company believes are most important to portraying its financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions.  There have been no material changes to the critical accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2012.  

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

There has been no material change in the quantitative and qualitative market risks set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended August 31, 2012.

Item 4.  Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-14 under the Securities Exchange Act of 1934).  Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.  Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

There were no significant changes in the Company’s internal control over financial reporting during the quarter ended May 31, 2013 that have materially affected, or are reasonably likely to materially affect, the

21

Company’s internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1.Legal Proceedings

The Company is involved in various legal proceedings and has certain unresolved claims pending.  Based on the information currently available, management believes that all claims currently pending are either covered by insurance or would not have a material adverse effect on the Company’s business, operating results or financial condition.

Item 1A.  Risk Factors

There has been no material change in the risk factors set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2012.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

(c) Issuer Purchases of Equity Securities

Shares repurchased during the third quarter of fiscal 2013 are as follows (in thousands, except per share amounts):

				Total Number
				of Shares	Maximum Dollar
				Purchased as	Value that May
	Total	Average		Part of Publicly	Yet Be
	Number of	Price		Announced	Purchased
	Shares	Paid per		Plans or	Under the
Period	Purchased	Share		Programs	Program(1)
March 1, 2013 through March 31, 2013	-	$	-	-	$	29,450
April 1, 2013 through April 30, 2013	657		12.64	657		21,151
May 1, 2013 through May 31, 2013	213		12.84	213	$	18,418
Total	870	$	12.69	870
—————

(1) On August 15, 2012, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to purchase up to $40 million of its outstanding shares of common stock.  In January 2013, the Board of Directors increased the stock repurchase program to $55 million in authorized purchases through August 31, 2013.  Share repurchases may be made from time to time in the open market or in negotiated transactions, depending on share price, market conditions and other factors. The stock repurchase program may be extended, modified, suspended or discontinued at any time.

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Item 6.  Exhibits

Exhibits.
10.1	Sonic Corp. Savings and Profit Sharing Plan, effective January 1, 2013
31.01	Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14
31.02	Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14
32.01	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.02	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

23

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SONIC CORP.
By:	/s/ Stephen C. Vaughan
	Stephen C. Vaughan, Executive Vice President
	and Chief Financial Officer

Date:  July 3, 2013

24

EXHIBIT INDEX

Exhibit Number and Description

10.1	Sonic Corp. Savings and Profit Sharing Plan, effective January 1, 2013
31.01	Certification of Chief Executive Officer Pursuant to SEC Rule 13a-14
31.02	Certification of Chief Financial Officer Pursuant to SEC Rule 13a-14
32.01	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.02	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

25

EX-10.1

SONIC CORP. SAVINGS AND PROFIT SHARING PLAN

Restatement Effective January 1, 2013

TABLE OF CONTENTS

		Page
ARTICLE I Definitions		1
1.1	Account Balance	1
1.2	Accounting Date	1
1.3	Administrator	2
1.4	Alternate Payee	2
1.5	Annual Additions	2
1.6	Beneficiary	2
1.7	Break in Service	4
1.8	Catch-Up Contributions	5
1.9	Code	5
1.10	Committee	5
1.11	Compensation	5
1.12	Corporate Eligible Employee	7
1.13	Disability	7
1.14	Distributee	7
1.15	Direct Rollover	7
1.16	Effective Date	7
1.17	Eligible Employee	7
1.18	Eligible Retirement Plan	8
1.19	Eligible Rollover Distribution	9
1.20	Employee	9
1.21	Employer	9
1.22	Employment Commencement Date	9
1.23	Entry Date	10
1.24	ERISA	10
1.25	Five Percent Owner	10
1.26	Forfeiture	10
1.27	Former Participant	10
1.28	401(k) Ceiling	10
1.29	Highly Compensated Employee	10
1.30	Hour of Service	11
1.31	Individual Accounts	11
1.32	Leased Employee	12
1.33	Limitation Year	12
1.34	Matching Contributions	12
1.35	Named Fiduciary	12
1.36	Nonelective Contributions	12
1.37	Nonforfeitable	12
1.38	Non-Highly Compensated Employee	12
1.39	Normal Retirement Age	12
1.40	Normal Retirement Date	13
1.41	Participant	13

1.42	Period of Severance	13
1.43	Plan	13
1.44	Plan Sponsor	13
1.45	Plan Year	13
1.46	Predecessor Employer	13
1.47	Profit Sharing Contributions	13
1.48	Re-Employment Commencement Date	13
1.49	Related Employer	14
1.50	Required Beginning Date	14
1.51	Rollover Contribution	14
1.52	Salary Deferral Contributions	15
1.53	Safe Harbor Matching Contributions	15
1.54	Service	15
1.55	Severance from Employment Date	15
1.56	Sonic Stock	16
1.57	Sonic Stock Fund	16
1.58	Testing Compensation	16
1.59	Top-Heavy Plan	16
1.60	Trust Agreement	20
1.61	Trust Fund	20
1.62	Trustee	20
1.63	Valuation Date	20
1.64	Year of Service	21

ARTICLE II   Eligibility and Participation		21
2.1	Eligibility Conditions	21
2.2	Participation Election	22
2.3	Participant Re-Entry	22

ARTICLE III  Contributions		22
3.1	Salary Deferral Contributions	22
3.2	Catch-Up Contributions	24
3.3	Safe Harbor Safe Harbor Matching Contributions	24
3.4	Profit Sharing Contributions	26
3.5	Nonelective Contributions	26
3.6	Rules Governing Deposits of Contributions	27
3.7	Adjustment of Individual Accounts	27
3.8	Participant Voluntary After Tax Contributions	28

ARTICLE IV Allocation of Employer Contributions to Individual Accounts		28
4.1	Allocation of Contributions	28
4.2	Application of Forfeitures	28
4.3	Limitations on Allocations Under Code Section 415	29
4.4	Top-Heavy Allocations	30
4.5	Post-Allocation Adjustments to Accounts	31

ARTICLE V In-Service Distributions		32
5.1	Withdrawal of Employer Contributions Before Severance From Employment	32
5.2	Withdrawal of Salary Deferral Contributions Before Severance From Employment	32
5.3	Hardship Distributions	33
5.4	Qualified Reservist Distributions	34
5.5	Reservist Severance Distributions	35

ARTICLE VI Distributions After Severance From Employment		35
6.1	Eligibility Due to Retirement, Death, or Disability	35
6.2	Eligibility Due To Severance from Employment	36
6.3	Vesting	36
6.4	Forfeiture	37
6.5	Determination of Amount of Vested Undistributed Account	37
6.6	Payment of Benefits	38

ARTICLE VII Mandatory Distribution of Benefits 39 

ARTICLE VIII Forms of Distribution		39
8.1	Forms of Payment of Benefits	39
8.2	Direct Rollover Benefit	40
8.3	Election to Receive Benefits	41
8.4	Minority or Disability	41
8.5	Unclaimed Account Procedure	41

ARTICLE IX Plan Sponsor and Employers		42
9.1	Employer Action	42
9.2	Plan Amendment	42
9.3	Discontinuance, Termination of Plan	43
9.4	Prohibition Against Reversion to Plan Sponsor or an Employer	44
9.5	Adoption by Related Employers	44
9.6	Authority of Administrator over Employers	47
9.7	Deficiency of Earnings or Profits	47

ARTICLE X Procedures for Qualified Domestic Relations Orders		47
10.1	Introduction	47
10.2	Administrator	48
10.3	Notices	48
10.4	Requests for Information for Drafting QDROs	48
10.5	Notice of Pending Order	49
10.6	Receipt of Order	49
10.7	Requirements of a Qualified Order	50
10.8	Participant’s Account During Determination Period	51
10.9	Determination That Order Is Not a QDRO	51
10.10	Determination That Order Is a QDRO	52

ARTICLE XI The Committee		53
11.1	Committee Appointment	53
11.2	Committee Action and Procedure	53
11.3	Committee Powers and Duties	54
11.4	Committee Reliance	54
11.5	Committee Authority	55
11.6	Conflicts of Interest	55
11.7	Appointment of Agent and Legal Counsel	55
11.8	Annual Accounting	55
11.9	Funding Policy	55

ARTICLE XII Administration		55
12.1	Administrator Appointment	55
12.2	Copies of Additional Documents	56
12.3	Documents Available for Examination	56
12.4	Notice of Participant Rights under ERISA	56
12.5	Notice to Participant on Participant Termination	56
12.6	Notice to Trustee on Participant Termination	56
12.7	Claims for Benefits	57
12.8	Appeals of Decisions of the Committee	57
12.9	Special Rules for Disability Claims	58

ARTICLE XIII Investment of Trust Assets		59
13.1	Appointment of Trustee	59
13.2	Investment of Accounts	60
13.3	Income and Expenses	61
13.4	Exclusive Benefit	61
13.5	Valuation	62
13.6	Investment Policy	62

ARTICLE XIV Participant Loans		63
14.1	General	63
14.2	Loan Policy	63
14.3	Special Rules under USERRA for Loan Repayments	63

ARTICLE XV Rollovers, Mergers, and Direct Transfers		63
15.1	Participant Rollover Contributions	63
15.2	Mergers and Direct Transfers	64
15.3	Rules Concerning Certain Rollovers, Mergers, and Direct Transfers	65

ARTICLE XVI Exclusive Benefit		65
16.1	Exclusive Benefit	65
16.2	Denial of Request for Approval	66
16.3	Mistake of Fact	66
16.4	Disallowance of Deduction	66
16.5	Spendthrift Clause	66
16.6	Termination	67

ARTICLE XVII Construction		68
17.1	Headings	68
17.2	Context	68
17.3	Employment Not Guaranteed	68
17.4	Waiver of Notice	69
17.5	State Law	69
17.6	Parties Bound	69
17.7	Severance	69
17.8	Qualified Military Service	69

Sonic Corp. Savings and Profit Sharing Plan

Sonic Corp., a Delaware corporation (the “Plan Sponsor”), hereby adopts this restatement of the Sonic Corp. Savings and Profit Sharing Plan (this “Plan”), effective January 1, 2013, or as otherwise specified herein.

R E C I T A L S:

WHEREAS, the Plan Sponsor has previously established the Plan for the exclusive benefit of its eligible Employees and their Beneficiaries and those of the Employers;

WHEREAS, the Plan Sponsor recognizes the lasting contribution made by its Employees to its successful operation and wants to reward their contribution by continuing the Plan;

WHEREAS, the Plan Sponsor wishes to amend and restate the existing Plan to incorporate the “safe harbor” requirements provided under Treasury Regulations section 1.401(k)-3 and Treasury Regulations section 1.401(m)-3 and to make certain other clarifying changes;

WHEREAS, the provisions of this Plan, as amended and restated, will apply solely to an Employee who terminates employment with an Employer on or after the restated Effective Date of this Plan; and

WHEREAS, if an Employee terminates employment with an Employer prior to the restated Effective Date, that Employee will be entitled to benefits under the Plan as the Plan existed on the Employee’s termination date.

NOW, THEREFORE, considering the premises and their mutual covenants, the Plan Sponsor agrees as follows:

ARTICLE I

Definitions

The following terms used in this Plan will have the meanings set forth in this Article unless a different meaning is clearly indicated by the context:

1.1       Account Balance

The amount standing in a Participant’s Individual Account(s) as of any date derived from amounts contributed to the Plan under ARTICLE III.

1.2       Accounting Date

The date that is the last business day of each Plan Year or such other date as may be designated by the Administrator, but only if the Administrator has specifically requested the Trustee to prepare an accounting on or before such date. 

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1.3Administrator

The Committee, unless the Plan Sponsor designates another person to hold the position of Administrator by written action. 

1.4      Alternate Payee

Any spouse, former spouse, child, or other dependent of a Participant who is recognized by a qualified domestic relations order, as defined in Code Section 414(p) as having a right to receive all, or a portion of, the benefits payable under this Plan with respect to such Participant.

1.5       Annual Additions

The sum of the following additions to a Participant’s Individual Accounts for the Limitation Year: (i) Employer contributions (including Salary Deferral Contributions, Safe Harbor Matching Contributions, Profit Sharing Contributions, and Nonelective Contributions); (ii) Participant contributions; and/or (iii) Forfeitures, if any.  For purposes of this definition, Annual Additions to other Employer defined contribution plans (also taken into account when applying the limitations in Section 4.3(a)) include any voluntary employee contributions to an account in a qualified defined benefit plan and any Employer contributions to an individual retirement account or annuity under Code Section 408 or to a medical account for a key employee under Code Sections 401(h) or 419A(d), except that the 25% of pay limit will not apply to Employer contributions to a key employee’s medical account after his or her separation from employment.

1.6       Beneficiary

(a)   Beneficiary means any person or fiduciary designated by a Participant or Former Participant who is or may become entitled to receive benefits under this Plan following the death of the Participant or Former Participant. A Beneficiary who becomes entitled to a benefit under this Plan will remain a Beneficiary under this Plan until the Trustee has fully distributed the benefits to the Beneficiary. A Beneficiary’s right to information or data concerning this Plan, and the respective duties of the Administrator and the Trustee to provide to the Beneficiary information or data concerning this Plan, will not arise until the Beneficiary first becomes entitled to receive a benefit under this Plan. For purposes of determining whether this Plan is a Top-Heavy Plan, a Beneficiary of a deceased Participant will be considered a key employee or a non-key employee in accordance with the applicable Treasury Regulations.

(b)   Each Participant and Former Participant may from time to time designate one or more Beneficiaries to receive benefits under this Plan on the death of the Participant or Former Participant. The selection will be made in writing on a form provided by the Administrator and will be filed with the Administrator. Subject to Subsection (c) below, the last selection filed with the Administrator will control.

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(c)   Unless elected in accordance with Subsection (d) below, a Participant’s Beneficiary will be his or her spouse. Notwithstanding the foregoing, the Participant may designate a Beneficiary other than his or her spouse if:

(i)        The Participant has no spouse; or

(ii)       The spouse cannot be located.

(d)   In the case of a married Participant or Former Participant, the designation of a non-spouse as Beneficiary will be valid only if:

(i)        The spouse consents in writing to the designation;

(ii)       The designation specifies the Beneficiary and the method of payment of benefits and may not be changed without spousal consent (or the spouse’s consent expressly permits designations by the Participant without any requirement of further spousal consent); and

(iii)      The spouse’s consent acknowledges the effect of the election and the written consent is witnessed by a Plan representative or by a notary public.

(e)   The spousal consent requirements of Subsection (d) do not apply if:

(i)        The Participant and spouse are not married throughout the one year period ending on the date of the Participant’s death;

(ii)       The Participant’s spouse is the Participant’s sole primary Beneficiary;

(iii)      The Administrator is not able to locate the Participant’s spouse;

(iv)      The Participant is legally separated or has been abandoned (within the meaning of State law) and the Participant has a court order to that effect; or

(v)       Other circumstances exist under which the Secretary of the Treasury will excuse the consent requirement.

If the Participant’s spouse is legally incompetent to give consent, the spouse’s legal guardian (even if the guardian is the Participant) may give consent.

(f)   If a Participant dies without a spouse or alternative Beneficiary surviving; if the alternative Beneficiary (other than the spouse) does not survive until final distribution of the Participant’s balance; if a Participant who is not married dies without having designated a Beneficiary and/or alternative Beneficiary; or if a Participant who is not married dies after having made and revoked a designation but prior to having made a subsequent designation, then the amount remaining in the deceased Participant’s Individual Account will be payable in the following descending order to:

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(i)        The Participant’s surviving descendants, including adopted persons and their descendants;

(ii)       The Participant’s other living heirs-at-law determined under state laws concerning intestate succession; and

(iii)      The Participant’s estate.

The Administrator will determine the applicable person, class of persons, or legal entity to whom the benefit will be paid beginning with clause (i), in the descending order of clauses (i) to (iii). Each class will be determined to be not in existence and, therefore, inapplicable by the Administrator before proceeding to the next class. In determining if a classification is inapplicable, the Administrator will be required only to make reasonable inquiry into the existence of the person or persons.

(g)   Payment made pursuant to the power conferred on the Administrator in this Section will operate as a complete discharge of all obligations under this Plan concerning the share of a deceased Participant and will not be subject to review by anyone but will be final, binding and conclusive on all persons for all purposes.

(h)   If a married Participant designates the Participant’s spouse as the Participant’s Beneficiary, and subsequent to such designation the Participant and the Participant’s spouse are divorced, such designation shall automatically be voided.  In this instance the Participant’s Beneficiary shall be the contingent or successive Beneficiary designated pursuant to this Section 1.6, or if no such designation has been made, the Beneficiary determined under Section 1.6(f).  Should the Participant wish to designate an ex-spouse as his Beneficiary, he or she must affirmatively do so by completing a new Beneficiary designation form after his or her divorce, naming his or her ex-spouse as the Beneficiary.

1.7       Break in Service

(a)   A  Break in Service, for purposes of vesting, means a Period of Severance of 365 days.

(b)   An Employee will receive credit, for purposes of determining whether he has incurred a Break in Service, for the aggregate of all time period(s) commencing with the Employment Commencement Date (or Re-Employment Commencement Date) and ending on the Severance from Employment Date. An Employee will also receive credit for any Period of Severance of less than 365 days. Fractional periods of a year will be expressed in terms of days.

(c)   In the case of an Employee who is absent from work for “authorized reasons” or for “maternity or paternity reasons,” the 365-day period beginning on the first anniversary of the first day of such absence will not be a Break in Service.

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(i)        For purposes of this Section, absence from work for “authorized reasons” means an unpaid temporary cessation from active employment with the Employer pursuant to an established nondiscriminatory policy, whether occasioned by illness, military service, or any other reason.

(ii)For purposes of this Section, absence from work for “maternity or paternity reasons” means an absence from work for any period because of the pregnancy of the individual, the birth of a child of the individual, the placement of a child with the individual relating to the adoption of such child by such individual, or for the purpose of caring for such child for a period beginning immediately following such birth or placement. In the case of absence from work for “maternity or paternity reasons,” the period between the first and second anniversaries of the first date of absence due to said leave will be treated as neither a period of Service nor a Period of Severance.

1.8       Catch-Up Contributions

Catch-Up Contributions are amounts contributed by a Participant pursuant to Section 3.2 and allocated to a Participant’s Salary Deferral Contribution Account.

1.9       Code

The Internal Revenue Code of 1986, as amended from time to time. A reference to a Code Section in this Plan means the provisions or successor provisions of the particular Code Section, as amended or replaced from time to time.

1.10     Committee

The committee as from time to time constituted pursuant to ARITCLE XI.

1.11     Compensation

Compensation will include the total amount of salary, wages, commissions, bonuses, and overtime, paid or otherwise includable in the gross income of a Participant during the Plan Year plus any amounts excluded from a Participant’s income pursuant to Code Sections 125, 132(f)(4), or 401(k), but excluding:

(a)   Contributions by the Employer and any Related Employer to any deferred compensation plan (to the extent the contributions are not included in the Participant’s gross income for the taxable year in which contributed) or simplified employee pension under Code Section 408(k), to the extent the contributions are excludable from the Participant’s gross income (other than amounts excluded from a Participant’s income pursuant to Code Sections 125, 132(f)(4), or 401(k));

5

(b)   Distributions from any plan of deferred compensation, whether or not such amounts are includable in the gross income of the Employees when distributed;

(c)Amounts realized from the exercise of any nonqualified stock option, or when restricted stock becomes freely transferable or is no longer subject to a substantial risk of forfeiture;

(d)   Amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option described in Part II, Subchapter D, Chapter 1 of the Code;

(e)   Premiums paid by the Employer and any Related Employer, for group term life insurance (to the extent the premiums are includable in the Participant’s gross income) and any other amounts received under any Employer fringe benefit plan sponsored by the Employer or any Related Employer (to the extent not includable in the Participant’s gross income);

(f)   Severance pay, unfunded nonqualified deferred compensation, or parachute payments, if paid after his Severance from Employment Date, even if paid within two and one half (2½) months thereafter;

(g)   Amounts paid or reimbursed by the Employer for moving expenses or relocation expenses incurred by an Employee;

(h)   Reimbursements and other expense allowances under a nonaccountable Plan as described in Treasury Regulations Section 1.62-2(c);

(i)   Amounts treated as imputed income due to the Employee’s coverage of a dependent who does not qualify as the Employee’s tax dependent under any welfare benefit Plan maintained by the Employer or a Related Employer; and

(j)   Amounts paid by the Employer and designated as “Holiday Mint,” “Surprise and Delight,” “Company Picnic” and “Employee of the Month.”

Compensation shall not include amounts that would otherwise satisfy the definition of Compensation but are paid during the determination period while the Employee is not a Participant in the Plan.

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In addition to other applicable imitations set forth in this Plan, and notwithstanding any other provision of this Plan to the contrary, the Compensation of each Participant taken into account under this Plan shall not exceed $250,000 for the 2012 Plan Year and such compensation limit shall be adjusted by the Commissioner for increases in the cost of living in accordance with Code section 401(a)(17)(B).  The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined (determination period) beginning in such calendar year.  If a determination period consists of fewer than 12 months, the annual compensation limit shall be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12.

1.12     Corporate Eligible Employee

A Corporate Eligible Employee is an Eligible Employee who is employed by an Employer and is not: (i) designated on the books and records of an Employer as being employed at the Officer level, Director level, or Manager level; or (ii) a Multi-Unit Partner, Market Leader, Co-Manager or Operating Partner.

1.13     Disability

The inability to engage in any substantial, gainful activity because of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

1.14     Distributee

A Distributee includes an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving spouse and the Employee’s or former Employee’s spouse or former spouse who is the Alternate Payee under a qualified domestic relations order, as defined in Code Section 414(p) are Distributees with regard to the interest of the spouse or former spouse.

1.15     Direct Rollover

A Direct Rollover is a payment by this Plan to the Eligible Retirement Plan specified by the Distributee.

1.16     Effective Date

The original Effective Date of this Plan is January 1, 1978. The Effective Date of this Plan, as restated herein, is January 1, 2013, or as otherwise specified herein.

1.17     Eligible Employee

Each Employee other than:

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(a)   An Employee whose terms and conditions of employment are governed by a collective bargaining agreement, unless such agreement provides for coverage under this Plan;

(b) A nonresident alien who receives no earned income from the Employer that constitutes income from sources within the United States;

(c)A Leased Employee;

(d)   An individual who is deemed to be an Employee pursuant to Treasury Regulations   issued under Code Section 414(o);

(e)   An Employee who has waived participation in this Plan through any means, including, but not limited to, through a written agreement with the Employer (including an offer letter setting forth the terms and conditions of employment) that provides that the Employee is not eligible to participate in this Plan. (A general statement in the agreement, offer letter, or other communication stating that the Employee is not eligible for benefits will be construed to mean that Employee is not an Eligible Employee);

(f)   A special project employee, which, as used herein, means an Employee who is hired for the purpose of participating or otherwise assisting in a particular, discrete project which is anticipated to be completed in less than one (1) year; and

(g)   In the event that an individual is misclassified as anything other than an Employee and, as a result, is denied eligibility into this Plan, any reclassification of such individual as an Employee (by a court, administrative agency, or otherwise) shall only be effective for purposes of this Plan from the date of such determination (notwithstanding any retroactive classification of such individual as an Employee for any other purpose under the Code).

1.18     Eligible Retirement Plan

An Eligible Retirement Plan will mean one of the following plans or arrangements, provided such plan or arrangement accepts the Distributee’s Eligible Rollover Distribution:

(a)   An individual retirement account described in Code Section 408(a) or 408A(b);

(b)   An individual retirement annuity plan described in Code Section 408(b);

(c)An annuity plan described Code Section 403(a);

(d)   A qualified trust described in Code Section 401(a);

(e)   An annuity contract described in Code Section 403(b); and

8

(f)   An eligible plan under Code Section 457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and that agrees to separately account for amounts transferred into such plan from this Plan.

The definition of Eligible Retirement Plan will also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the Alternate Payee under a qualified domestic relation order, as defined in Code Section 414(p).

1.19    Eligible Rollover Distribution

An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9), the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities) and any distribution made on account of hardship pursuant to Section 5.3 hereof.

A portion of a distribution will not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions or Roth elective deferrals that are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Section 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution that is includible in gross income and the portion of such distribution that is not so includible.

1.20    Employee

An Employee includes any individual who is reported on the payroll records of an Employer as a common law employee. This term does not include any other common law employee or any Leased Employee.

1.21     Employer

The Plan Sponsor and any entity that is related to the Plan Sponsor, or that is a recipient of the services of a Leased Employee pursuant to a written agreement with the Plan Sponsor, and who elects to adopt this Plan pursuant to ARTICLE IX.  The sole Employers are:  Sonic Corp., Sonic Industries Services Inc., and Sonic Restaurants, Inc.

1.22     Employment Commencement Date

The date on which an Employee is first entitled to credit for an Hour of Service.

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1.23     Entry Date

An Eligible Employee’s Entry Date is the first day of the calendar quarter (January 1^st, April 1^st, July 1^st and October 1^st) next following the date on which the Eligible Employee, satisfies the eligibility criteria set forth in Section 2.1.

1.24     ERISA

The Employee Retirement Income Security Act of 1974, as amended.  A reference to an ERISA Section in this Plan means the provisions or successor provisions of the particular ERISA Section, as amended or replaced from time to time.

1.25     Five Percent Owner

A Participant who owns, or is considered as owning within the meaning of Code Section 318, more than five percent of the outstanding stock of the Employer or stock possessing more than five percent of the total combined voting power of all stock of the Employer; or in the case of an unincorporated business, any person who owns more than five percent of the capital or profits interest in the Employer.

1.26     Forfeiture

The loss, by a Participant or Beneficiary, of that part of the benefit that the Participant or Beneficiary otherwise would have received under this Plan at any time prior to the termination of this Plan or the complete discontinuance of benefits under this Plan, arising from the Participant’s severance of employment.

1.27     Former Participant

Any individual who (i) has been a Participant in this Plan, but who is either no longer employed by the Employer or is otherwise no longer eligible to participate; and (ii) has not yet received the entire benefit to which the individual is entitled under this Plan or incurred a five year Break in Service.

1.28     401(k) Ceiling

The 401(k) Ceiling is $17,000 (or such larger amount as may be determined by the Secretary of the Treasury for purposes of Code Section 402(g)(1) pursuant to Code Section 402(g)(4)) for Plan Years.

1.29     Highly Compensated Employee

Any Participant or Former Participant who is a Highly Compensated Employee as defined in Code Section 414(q). Generally, any Participant or Former Participant is considered a Highly Compensated Employee if:

(a)   At any time during the Plan Year or during the preceding Plan Year a Five Percent Owner; or

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(b)   For the preceding Plan Year (i) had Testing Compensation from the Employer in excess of $110,000, as adjusted by the Secretary of the Treasury for the relevant year, and (ii) if elected, was part of the top-paid 20% group of Employees (based on Testing Compensation for the preceding Plan Year).

1.30     Hour of Service

An Hour of Service is each hour for which an Employee is paid, or entitled to payment, for the performance of duties for the Employer during the applicable computation period.

1.31     Individual Accounts

Accounts or records maintained by the Administrator or its agent indicating the monetary value of the total interest in the Trust Fund of each Participant, each Former Participant, and each Beneficiary. The types of Individual Accounts under this Plan are:

(a)   Accounts established to account for Employer contributions made on behalf of an Employee, including:

(i)        Matching Contribution Accounts holding all Matching Contributions made prior to January 1, 2013 to this Plan and any earnings thereon.

(ii)       Safe Harbor Matching Contribution Accounts holding all Safe Harbor Matching Contributions made after January 1, 2013 to this Plan pursuant to Section 3.3 and any earnings thereon.

(iii)      Profit Sharing Contribution Accounts holding contributions made to this Plan pursuant to Section 3.4 for the benefit of an Employee that the Employee could not have elected to receive in the form of cash or other taxable benefit, if any.

(iv)      Nonelective Contribution Accounts holding contributions made to this Plan pursuant to Section 3.5 for the benefit of a Participant who is a Corporate Eligible Employee that the Corporate Eligible Employee could not have elected to receive in the form of cash or other taxable benefit, if any.

(b)   Accounts established to account for Employee contributions, including:

(i)     Rollover Accounts holding the Participant’s qualified rollover to this Plan pursuant to ARTICLEXV.

(ii)    Salary Deferral Contribution Accounts holding the amounts contributed by the Employer on behalf of a Participant as the result of an election by the Participant to have that amount contributed to this Plan rather than paid as cash or other taxable benefit pursuant to Sections 3.1 (Salary Deferral Contributions) and 3.2 (Catch-Up Contributions).

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1.32    Leased Employee

An individual who otherwise is not an Employee of the Employer, and who, pursuant to a leasing agreement between the Employer and a leasing organization, has performed services for the Employer (or for the Employer and any persons related to the Employer within the meaning of Code Section 414(n)(6)) on a substantially full time basis for at least one (1) year (unless such individual is otherwise earlier considered a Leased Employee treated as an Employee of the Employer pursuant to the eligibility conditions elected by an Employer) and such services are performed under the primary direction or control of the Employer.

1.33    Limitation Year

The Plan Year, as such term is defined in this ARTICLE I.

1.34    Matching Contributions

Matching Contributions are those contributions made to this Plan prior to January 1, 2013 for the benefit of a Participant and based upon the Salary Deferral Contributions made to the Plan by such Participant and allocated to a Participant’s Matching Contribution Account.

1.35    Named Fiduciary

One or more fiduciaries named in this Plan who jointly and severally will have authority to control or manage the operation and administration of this Plan. The Administrator will be the Named Fiduciary unless the Plan Sponsor designates another person by written action.

1.36     Nonelective Contributions

Nonelective Contributions are amounts (if any) contributed by an Employer pursuant to Section 3.5 and allocated to a Participant’s Nonelective Contribution Account.

1.37    Nonforfeitable

A vested interest attained by a Participant or Beneficiary in that part of the Participant’s benefit under this Plan arising from the Participant’s Service, which claim is unconditional and legally enforceable against this Plan.

1.38    Non-Highly Compensated Employee

An Employee, former Employee, or Beneficiary who is not a Highly Compensated Employee.

1.39     Normal Retirement Age

The date the Participant attains age sixty-five (65).

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1.40     Normal Retirement Date

The first day of the month coincident with or next following the date the Participant attains Normal Retirement Age.

1.41    Participant

An Eligible Employee of the Employer who has met the eligibility requirements of this Plan and who has been enrolled as a Participant in this Plan.

1.42    Period of Severance

The period of time commencing on the Severance from Employment Date and ending on the Re-Employment Commencement Date.

1.43     Plan

The qualified retirement plan embodied in this Plan, as amended from time to time, designated as the Sonic Corp. Savings and Profit Sharing Plan.

1.44     Plan Sponsor

Sonic Corp., and any successor corporation or business organization that may be substituted for the Plan Sponsor under this Plan. 

1.45     Plan Year

The twelve (12) consecutive month period from January 1 of each year to the next following December 31.

1.46    Predecessor Employer

A business organization, all or a portion of whose assets and business has been acquired by the Employer, whether by merger, stock purchase, or acquisition of the assets and business of the business organization.

1.47     Profit Sharing Contributions

Profit Sharing Contributions are amounts (if any) contributed by an Employer pursuant to Section 3.4 and allocated to a Participant’s Profit Sharing Contribution Account.

1.48     Re-Employment Commencement Date

The first date, following a Period of Severance that is not required to be considered under the Service rules, on which the Employee performs an Hour of Service for the Employer.

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1.49    Related Employer

A related group of employers is a controlled group of corporations (defined in Code Section 414(b)), trades or businesses (whether or not incorporated) that are under common control (defined in Code Section 414(c)) or an affiliated service group (defined in Code Section 414(m) or in Code Section 414(o)). If the Employer is a member of a related group, the term “Employer” includes the related group members for purposes of determining Service and Breaks in Service under ARTICLE II andARTICLE VI, applying the coverage test of Code Section 410(b), applying the limitations on allocations in ARTICLE IV, applying the top-heavy rules and the minimum allocation requirements of ARTICLE IV, the definitions of Employee, Highly Compensated Employee, Testing Compensation, and Leased Employee, and for any other purpose required by the applicable Code Section or by a Plan provision. However, a Related Employer may contribute to this Plan only by being an Employer under this Plan. If one or more of the Plan Sponsor’s related group members become Employers, the term “Employer” includes the participating related group members for all purposes of this Plan. For Plan allocation purposes, Compensation does not include Compensation received from a Related Employer that is not participating in this Plan.

1.50     Required Beginning Date

(a)   For a Participant who is a Five Percent Owner, the Required Beginning Date will commence on the first day of April following the later of:

(i)        The calendar year in which the Participant attains age seventy and one-half (70½) years; or

(ii)       The earlier of the calendar year with or within which ends during the Plan Year in which the Participant becomes a Five Percent Owner, or the calendar year in which the Participant retires.

(b)   For a Participant who is not a Five Percent Owner, the Required Beginning Date is the first day of April of the calendar year immediately following the later of:

(i)        The calendar year in which the Participant attains age seventy and one-half (70½); or

(ii)      The calendar year in which the Participant terminates employment with the Employer.

1.51    Rollover Contribution

A direct rollover of an eligible rollover distribution from:  (i) a qualified plan described in Code Section 401(a) or 403(a), excluding after-tax employee contributions; (ii) an annuity contract described in Code Section 403(b), excluding after-tax employee contributions; (iii) an eligible plan under Code Section 457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state; and (iv) portion of a distribution from an individual

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retirement account or annuity described in Code Section 408(a) or 408(b) that is eligible to be rolled over and would otherwise be includible in gross income.

1.52    Salary Deferral Contributions

Salary Deferral Contributions are those contributions made to this Plan on a pre-tax basis pursuant to a salary reduction agreement entered into by a Participant.  Salary Deferral Contributions are allocated to a Participant’s Salary Deferral Contribution Account.

1.53    Safe Harbor Matching Contributions

Safe Harbor Matching Contributions are those contributions made to this Plan on or after January 1, 2013 for the benefit of a Participant, based upon the Salary Deferral Contributions made to the Plan by such Participant, and intended to satisfy the safe harbor requirements of provided for under Treasury Regulations section 1.401(k)-3 and Treasury Regulations section 1.401(m)-3.  Safe Harbor Matching Contributions shall be allocated to a Participant’s Safe Harbor Matching Contribution Account. 

1.54    Service

Service includes any period of time commencing on the Employee’s Employment Commencement Date (or Re-Employment Commencement Date) and ending on the Employee’s Severance from Employment Date. Service will be determined using the elapsed time method as defined in Treasury Regulation Section 1.410(a)-7.

(a)   Service in all cases includes periods during which the Employee is on a leave of absence for “authorized reasons” or for “maternity or paternity reasons” pursuant to the definition of Break in Service. Leaves of absence also will include periods of absence in connection with military service during which the Employee’s re-employment rights are legally protected. Except for absence by reason of military service, leaves of absence will be for a maximum period of two (2) years. Leaves of absence will be granted on a uniform and nondiscriminatory basis.

(b)   If the Employer is a member of a group of Related Employers, then Year of Service will include Service with any Related Employer for the period during which such Employers are related. If the Employer maintains the plan of a Predecessor Employer, Service will include service for the Predecessor Employer. Service will include service of the Employee with any Predecessor Employer, as required under Treasury Regulation Section 1.411(a)-5(b)(3)(iv).

(c)Years of Service will include military service required to be counted for vesting purposes under Section 17.8.

1.55     Severance from Employment Date

The date on which occurs the earlier of:  (i) the Employee quits, retires, is discharged, or dies; or (ii) the first anniversary of the first date of a period in which an Employee

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remains absent from Service, with or without pay, with the Employer for any other reason, such as vacation, holiday, sickness, Disability, leave of absence or layoff.

1.56    Sonic Stock

Voting common stock of Sonic Corp., a Delaware corporation, provided, such stock must meet the requirements of Code Section 409(l).  Sonic Stock is currently traded on the over-the-counter market with price quotations reported on the NASDAQ National Market System under the symbol “SONC.”

1.57     Sonic Stock Fund

The investment fund which is invested solely in Sonic Stock.  Any dividends on Sonic Stock in this fund will also be invested in Sonic Stock.  Sonic Stock will be purchased on the open market and will be registered under the Securities Exchange Act of 1934.

1.58     Testing Compensation

Compensation that would be stated on an Employee’s Form W-2, “Wage and Tax Statement,” for the calendar year that ends with or within the Plan Year and includes amounts that would have been included on the Employee’s Form W-2 but for an election under Code Sections 125, 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k), or 457(b).

In addition to other applicable limitations set forth in this Plan, and notwithstanding any other provision of this Plan to the contrary, the Compensation of each Participant taken into account under this Plan shall not exceed $250,000 for the 2012 Plan Year and such compensation limit shall be adjusted by the Commissioner for increases in the cost of living in accordance with Code section 401(a)(17)(B).  The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined (determination period) beginning in such calendar year.  If a determination period consists of fewer than 12 months, the annual compensation limit shall be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12.

Notwithstanding any provision of this Plan to the contrary, a Participant’s Compensation shall include any military differential pay paid to the Participant by the Employer or any Related Employer with respect to any period of active military service in the uniformed services in the United States of more than 30 days and this Plan will not be treated as failing to meet the requirements of any provision described in Code Section 414(u)(1)(C) by reason of any contribution or benefit which is based on such military differential pay.

1.59     Top-Heavy Plan

For purposes of determining Top-Heavy Plan status, each Employer and its Related Employers will be deemed to maintain a separate plan. Related Employers will be considered a single employer for purposes of applying the limitations of this Section. However, Employers who are not Related Employers, but receive services of Employees

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of the Employer under an employee leasing arrangement will be treated as separate employers for purposes of these top-heavy rules.

A Plan will be a Top-Heavy Plan in any Plan Year in which, as of the Determination Date, (i) the Present Value of Accrued Benefits of Key Employees, or (ii) the sum of the Aggregate Accounts of Key Employees of any plan of an Aggregation Group, exceeds 60% of the Present Value of Accrued Benefits or Aggregate Accounts of all Participants under this Plan and any plan of an Aggregation Group.

If any Participant is a Non-Key Employee for any Plan Year, but the Participant was a Key Employee for any prior Plan Year, the Participant’s Aggregate Account balance will not be taken into account in determining whether this Plan is a Top-Heavy Plan (or whether any Aggregation Group that includes this Plan is a Top-Heavy Group) as further defined in Code Section 416(g) and the applicable Treasury Regulations.

For purposes of determining Top-Heavy Plan status, the following definitions will apply:

(a)   Aggregate Account means, as of the Determination Date, the sum of:

(i)        The Participants’ Account Balances as of the most recent Valuation Date occurring within a 12 month period ending on the Determination Date;

(ii)       The contributions that would be allocated as of a date not later than the Determination Date, even though those amounts are not yet made or required to be made;

(iii)      Any Plan distributions made during the Determination Period (however, in the case of distributions made after the Valuation Date and prior to the Determination Date, such distributions are not included as distributions for Top-Heavy purposes to the extent that the distributions are already included in the Participant’s Aggregate Account balance as of the Valuation Date);

(iv)      Any Employee contributions, whether voluntary or mandatory;

(v)       Regarding unrelated rollovers and plan-to-plan transfers (those that are (i) initiated by the Employee and (ii) made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, an unrelated rollover or plan-to-plan transfer will be considered as a distribution for purposes of this Section. If this Plan is the plan accepting an unrelated rollover or plan-to-plan transfer, an unrelated rollover or plan-to-plan will not be considered as part of the Participant’s Aggregate Account balance;

(vi)      Regarding related rollovers and plan-to-plan transfers (those either (i) not initiated by the Employee or (ii) made to a plan maintained by the same Employer), if this Plan provides for rollovers or plan-to-plan transfers, a related rollover or plan-to-plan transfer will be considered as a distribution

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for purposes of this Section. If this Plan is the plan accepting a related rollover or plan-to-plan transfer, a related rollover or plan-to-plan transfer will be considered as part of the Participant’s Aggregate Account balance, irrespective of the date on which the related rollover or plan-to-plan transfer is accepted; and

(vii)     The accounts of Participants who are Leased Employees, for purposes of these top-heavy rules, will be treated as being maintained under a separate plan by each respective Employer.

(b)   Aggregation Group means either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined.

(i)        Required Aggregation Group means the group of plans composed of (i) each plan of the Employer in which a Key Employee is a Participant or participated at any time during the Determination Period, regardless of whether the plan has terminated; and (ii) each other plan of the Employer that enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, which will be aggregated.

In the case of a Required Aggregation Group, each plan in the group will be considered a Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a Top-Heavy Plan if the Required Aggregation Group is not a Top-Heavy Group.

(ii)       Permissive Aggregation Group means the Required Aggregation Group plus any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy Code Sections 401(a)(4) and 410.

In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is a Top-Heavy Group. No plan in the Permissive Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is not a Top-Heavy Group.

(iii)      Only those plans of the Employer in which the Determination Dates fall within the same calendar year will be aggregated to determine whether the plans are Top-Heavy Plans.

(c)Determination Date means for any Plan Year (i) the last day of the preceding Plan Year, or (ii) in the case of the first Plan Year of this Plan, the last day of the first Plan Year.

(d)   Determination Period means the five year period ending on the Determination Date.

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(e)   Excluded Employees means any Employee who has not performed any Service for the Employer during the five year period ending on the Determination Date. Excluded Employees will be excluded for purposes of a Top-Heavy determination.

(f)   Key Employee means any Employee or former Employee, or Beneficiary of the Employee, who, for any Plan Year in the Determination Period is:

(i)        An officer of the Employer having Testing Compensation greater than $130,000 (as adjusted under Code Section 416(i)(1));

(ii)       A Five Percent Owner; or

(iii)      A one percent owner of the Employer having Testing Compensation of more than $150,000.

Notwithstanding the foregoing, Key Employee will have the meaning set forth in Code Section 416(i), as amended. For purposes of determining whether an Employee or former Employee is an officer under this Subsection (f), an officer of the Employer will have the meaning set forth in the regulations under Code Section 416(i).

(g)   Non-Key Employee means any Employee or former Employee, or Beneficiary of the Employee, who is not a Key Employee.

(h)   Present Value of Accrued Benefit. Solely for the purpose of determining if this Plan, or any other plan included in a Required Aggregation Group of which this Plan is a part, is a Top-Heavy Plan, the Accrued Benefit of a Non-Key Employee will be determined under (i) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Related Employers, or (ii) if there is no uniform method, in accordance with the slowest accrual rate permitted under the fractional accrual method described in Code Section 411(b)(1)(C). To calculate the Present Value of Accrued Benefits from a defined benefit plan, the Administrator will use the actuarial assumptions for interest and mortality only, prescribed by the defined benefit plan(s) to value benefits for top-heavy purposes. If an aggregated plan does not have a valuation date coinciding with the Determination Date, the Administrator must value the Accrued Benefits in the aggregated plan as of the most recent valuation date falling within the 12 month period ending on the Determination Date, except as Code Section 416 and applicable Treasury Regulations require for the first and second plan year of a defined benefit plan. The Administrator will determine whether a plan is top-heavy by referring to Determination Dates that fall within the same calendar year.

For purposes of determining the Present Values of Accrued Benefits and the amounts of Account Balances of Employees as of the Determination Date, the following will apply.

(i)        Distributions During Year Ending on the Determination Date. The Present Values of Accrued Benefits and the amounts of Account Balances of an

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Employee as of the Determination Date will be increased by the distributions made with respect to the Employee under this Plan and any Plan aggregated with this Plan under Code Section 416(g)(2) during the one-year period ending on the Determination Date. The preceding sentence will also apply to distributions under a terminated Plan that, had it not been terminated, would have been aggregated with this Plan under Code Section 416(g)(2)(A)(i). In the case of a distribution made for a reason other than separation from employment, death, or disability, this provision will be applied by substituting “five-year period” for “one-year period.”

(ii)       Employees Not Performing Services During Year Ending on the Determination Date. The Accrued Benefits and accounts of any individual who has not performed services for the Employer during the one-year period ending on the Determination Date will not be taken into account. 

(i)   Top-Heavy Group means an Aggregation Group in which, as of the Determination Date, the sum of:

(i)        The Present Value of Accrued Benefits of Key Employees under all defined benefit plans included in the group; and

(ii)       The Aggregate Accounts of Key Employees under all defined contribution plans included in the group

exceeds 60% of a similar sum determined for all Participants.

1.60    Trust Agreement

The agreement, entered into with the Trustee, or any successor Trustee, establishing the Trust Fund and specifying the duties of the Trustee.

1.61     Trust Fund

All assets of any kind and nature from time to time held by the Trustee or its agent under the Trust Agreement without distinction between income and principal. This Plan contemplates a single Trust Fund for all Employers under this Plan. However, the Trustee will maintain separate records of account to reflect properly each Participant’s Account Balance from each Employer, if any.

1.62    Trustee

The then acting Trustee or, collectively, if there is more than one, the then acting Trustees of the Trust Fund.

1.63    Valuation Date

Each business day of the Plan Year, or such other dates determined by the Administrator.

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1.64    Year of Service

Year of Service means a 365-day period of Service. For purposes of determining an Employee’s Years of Service, an Employee will receive credit for the aggregate of all time periods commencing on an Employee’s Employment Commencement Date (or Re-Employment Commencement Date) and ending on his or her Severance from Employment Date.

(a)   A Year of Service (including a fraction thereof) will be credited for each completed 365 days of elapsed time (as defined in Treasury Regulation Section 1.410(a)-7) that need not be consecutive. An Employee will receive credit towards the completion of a Year of Service for any Period of Severance of less than 365 days. 

(b)   In computing an Employee’s Years of Service, the following rules will apply:

(i)        For a Participant who terminates employment and who subsequently is re-employed after incurring five consecutive one year Breaks in Service, Years of Service after the Break in Service will not be taken into account for purposes of determining the Nonforfeitable percentage of an Employee’s Account Balance derived from Employer contributions that accrued before the Break in Service.

(ii)       For a Participant who terminates employment without any vested right to his Account Balance and who is re-employed after a one year Break in Service, Service before the Break in Service will not be taken into account if the number of consecutive one year Breaks in Service equals or exceeds the greater of (i) five, or (ii) the aggregate number of Years of Service before the Break in Service. A Participant is considered nonvested for this purpose only if:

(A)     The Participant has no vested interest in any amounts in his or her Account Balance; and

(B)     The Participant has no Salary Deferral Contributions in this Plan.

(iii)      Service with the Employer before a Participant enters this Plan will be considered for purposes of vesting.

ARTICLE II
Eligibility and Participation

2.1       Eligibility Conditions

Each Eligible Employee who was a Participant in the Plan on the Effective Date shall continue to be a Participant in the Plan after the Effective Date to the extent such Eligible Employee had satisfied the applicable eligibility requirements for the applicable contributions to be made under the Plan as set forth in ARTICLE III.  Otherwise, each Eligible Employee shall become a Participant as follows:

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(a)Each Eligible Employee shall become a Participant for purposes of electing to make a Salary Deferral Contribution in accordance with Section 3.1 and a Catch-Up Contribution in accordance with Section 3.2 on the appropriate Entry Date coincident with or immediately following the date on which such Eligible Employee attains age 21 and completes 90 days of Service;

(b)For all other purposes of this Plan, including without limitation, receiving Safe Harbor Matching Contributions under Section 3.3, receiving Profit Sharing Contributions under Section 3.4, or receiving Nonelective Contributions under Section 3.5, each Eligible Employee shall become a Participant for such purposes upon the attainment of age 21 and the completion of one Year of Service. 

2.2       Participation Election

Whenever a new Eligible Employee is hired by the Employer, the Employer immediately will give notice to the Administrator of the employment and will identify the new Employee. The Administrator will notify in writing each new Eligible Employee of the pending eligibility prior to the date on which the Employee will become eligible under Section 2.1 and will furnish the Employee a copy of this Plan or any other explanation of this Plan that the Administrator will provide for that purpose.

2.3       Participant Re-Entry

If the employment of a Participant is terminated and the Participant subsequently is re-employed as an Eligible Employee, the re-employed Eligible Employee will become a Participant on the Re-Employment Commencement Date. If an Eligible Employee terminates employment prior to satisfying the eligibility requirements of Section 2.1 and subsequently is re-employed as an Eligible Employee, the re-employed Employee will become a Participant after meeting the eligibility requirements of Section 2.1, but will be credited for Service retroactively to the Re-Employment Commencement Date for purposes of eligibility and vesting. If an Eligible Employee becomes eligible in accordance with Section 2.1 but terminates employment prior to the first Entry Date, and the Employee is later re-employed as an Eligible Employee, the Employee will become a Participant on the Re-Employment Commencement Date.

ARTICLE III
Contributions

3.1       Salary Deferral Contributions

The amount of the Salary Deferral Contributions to the Trust Fund will equal the amount determined under this Section. Subject to the limitations contained in this Section 3.1, each Participant may elect to defer any amount of his or her Compensation in whole percentages up to a maximum of 50% of the Participant’s Compensation, but may not elect to defer an amount to cause this Plan to violate the limitations of this Section or Code Section 415, or to exceed the applicable maximum amount allowable as a deduction to the Employer under Code Section 404. A Participant may elect to defer Compensation under this Section only in an amount that the Participant otherwise could elect to receive

22

in cash and that is currently available to the Participant. Compensation is not currently available to the Participant if the Participant is not eligible to receive it at the time of the deferral election. The amounts by which a Participant elects to reduce Compensation under this Plan will be his Salary Deferral Contribution. The Employer will contribute to the Trust Fund the amount of the Salary Deferral Contributions elected by each Participant and credit such amounts to the Salary Deferral Contribution Account of each Participant. 

A Participant’s Salary Deferral Contributions will not exceed the 401(k) Ceiling for the taxable year of the Participant in which such Salary Deferral Contribution is made to the Plan, except to the extent permitted under Code Section 414(v) and Section 3.2 referring to Catch-Up Contributions. “Excess Salary Deferrals” are Salary Deferral Contributions that exceed the 401(k) Ceiling and are includable in a Participant’s gross income under Code Section 402(g). Excess Salary Deferrals will be treated as Annual Additions under this Plan, unless such amounts are distributed no later than the first April 15 following the close of the Participant’s taxable year.

(a)   Salary Deferral Contributions means, for any taxable year, the sum of:

(i)        Any Employer contribution under a qualified cash or deferred arrangement defined in Code Section 401(k), determined without regard to the 401(k) Ceiling;

(ii)       Any Employer contribution under a simplified employee pension as defined in Code Section 408(k)(6), pursuant to a salary reduction agreement; and

(iii)      Any Employer contribution toward the purchase of a tax sheltered annuity contract as defined in Code Section 403(b), if any, pursuant to a salary reduction agreement.

Salary Deferral Contributions will not include any deferrals properly distributed as excess Annual Additions.

(b)   If the 401(k) Ceiling is exceeded, the Administrator will direct the Trustee to distribute the Excess Salary Deferrals, and any income or loss allocable to the Excess Salary Deferrals (determined in accordance with the requirements of Treasury Regulation Section 1.402(g)-1(e)(5), to the Participant not later than the first April 15 following the close of the Participant’s taxable year.

(i)        If a Participant is also a participant in (i) another qualified cash or deferred arrangement defined in Code Section 401(k); (ii) a simplified employee pension defined in Code Section 408(k); or (iii) a salary reduction arrangement pursuant to which an employer purchases a tax sheltered annuity contract defined in Code Section 403(b), and such Participant’s Salary Deferral Contributions made under the other arrangement(s) and this Plan cumulatively exceed the 401(k) Ceiling, then the Participant may, not later than March 1 following the close of the Participant’s

23

taxable year in which such excess occurred, notify the Administrator in writing of the excess and request that his Salary Deferral Contributions under this Plan be reduced by an amount specified by the Participant. The specified amount then will be distributed in the same manner as provided in clause (ii) above. A Participant is deemed to notify the Administrator of any Excess Salary Deferrals that arise by taking into account only those Salary Deferral Contributions made to this Plan and any other plans of the Employer.

(ii)       If any of the foregoing provisions of this Section do not conform with applicable Treasury Regulations, the nonconforming provisions may be amended retroactively to assure conformity.

3.2     Catch-Up Contributions

All Participants who are eligible to make Salary Deferral Contributions under this Plan and who have attained age 50 before the close of the Plan Year will be eligible to make Catch-Up Contributions in accordance with, and subject to the limitations of Code Section 414(v). Such Catch-Up Contributions will not be taken into account for purposes of the provisions of this Plan implementing the required limitations of Code Sections 402(g) and 415. This Plan will not be treated as failing to satisfy the provisions of this Plan implementing the requirements of Code Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable, by reason of the making of such Catch-Up Contributions.  A Participant’s Salary Deferral Contributions must reach the 401(k) Ceiling referenced in Section 3.1 of the Plan or the maximum annual addition limit in Section 4.3 of the Plan in order to make Catch-Up Contributions under this Section.  To the extent that a Participant’s Salary Deferral Contributions do not exceed the 401(k) Ceiling (or the maximum annual addition limit in Section 4.3), then any purported Catch-Up Contributions made pursuant to this Section shall be recharacterized as Salary Deferral Contributions. 

3.3       Safe Harbor Matching Contributions

(a)   A Participant who elects to have Salary Deferral Contributions made on his or her behalf to this Plan will accrue a Safe Harbor Matching Contribution each payroll period in an amount equal to:

(i)        100% of the amount of each Participant’s Salary Deferral Contributions and Catch-Up Contributions for the payroll period up to the first 3% of the Participant’s Compensation that is deferred for the payroll period; plus

(ii)       An additional amount on the next 3% of the Participant’s Compensation, determined as follows:

(A)      if the Participant is either (1) a Highly Compensated Employee, or (2) a Non-Highly Compensated Employee who is credited with less than 10 Years of Service, the additional Safe Harbor Matching Contribution shall be equal to 50% of the amount of each

24

Participant’s Salary Deferral Contributions and Catch-Up Contributions for the payroll period up to the next 3% of the Participant’s Compensation that is deferred for the payroll period;

(B)      if the Participant is a Non-Highly Compensated Employee who is credited with 10 or more Years of Services but less than 20 Years of Service, the additional Safe Harbor Matching Contribution shall be equal to 75% of the amount of each Participant’s Salary Deferral Contributions and Catch-Up Contributions for the payroll period up to the next 3% of the Participant’s Compensation that is deferred for the payroll period; or

(C)if the Participant is a Non-Highly Compensated Employee who is credited with 20 or more Years of Services, the additional Safe Harbor Matching Contribution shall be equal to 100% of the amount of each Participant’s Salary Deferral Contributions and Catch-Up Contributions for the payroll period up to the next 3% of the Participant’s Compensation that is deferred for the payroll period.

(iii)      True Up Safe Harbor Matching Contribution.In addition to amounts contributed under Section 3.3(a), for each Participant whose total Safe Harbor Matching Contribution for the Plan Year was limited to less than the maximum Safe Harbor Matching Contribution to which such Participant was entitled (as calculated under Section 3.3(a)) by virtue of the limits imposed under Code Section 401(a)(17) or the 401(k) Ceiling being reached before the Plan Year end, the Company shall contribute for each such Participant an additional “true up” Safe Harbor Matching Contribution as soon as administratively feasible following the end of each Plan Year (to be allocated to such Participant’s Individual Accounts as of the last day of such prior Plan Year) equal to the difference between:

(A)      the maximum Safe Harbor Matching Contribution to which the Participant was entitled (as calculated under Section 3.3(a)) based upon the formula set forth in Section 3.3(a), and

(B)      the amount of Safe Harbor Matching Contributions already allocated to such Participant’s Individual Accounts for such Plan Year.

(b)   Notwithstanding anything to the contrary herein, Salary Deferral Contributions that exceed six percent of a Participant’s Compensation will not be taken into account when calculating Safe Harbor Matching Contributions.

(c)   Notwithstanding the foregoing, the Safe Harbor Matching Contributions (together with all other applicable contributions) for any Plan Year will not exceed the applicable maximum amount allowable as a deduction to the Employer under Code

25

Section 404.  TheSafe Harbor Matching Contributions for any Plan Year on behalf of a Participant will not exceed the limitations on Annual Additions as described under Section 4.3, even if the contribution formula otherwise would require a larger contribution.  The Safe Harbor Matching Contributions on behalf of each Participant will be credited to such individual’sSafe Harbor Matching Contribution Account.

(d)   By virtue of the Safe Harbor Matching Contributions, this Plan is intended to be a “safe harbor plan” under the Code’s rules prohibiting discrimination in favor of Highly Compensated Employees.  Safe Harbor Matching Contributions are intended to be matching safe harbor contributions for the purposes of satisfying the requirements of Code Sections 401(k)(12)(B) and 401(m)(11).

3.4       Profit Sharing Contributions

At the Employer’s sole discretion, a discretionary Profit Sharing Contribution may be made to the Trust Fund each Plan Year on behalf of each Participant who is employed on the last day of the Plan Year. For each Plan Year, the amount of the discretionary Profit Sharing Contribution to the Trust Fund will be equal to an amount that the Employer from time to time may deem advisable. Unless an Employer affirmatively elects to make a discretionary Profit Sharing Contribution for a Plan Year on behalf of Participants, no such contribution will be made.

Notwithstanding the foregoing, the aggregate Profit Sharing Contributions (together with all other applicable contributions) for any Plan Year under this Section 3.4 will not exceed the applicable maximum amount allowable as a deduction to the Employer under Code Section 404. The aggregate Profit Sharing Contributions for any Plan Year on behalf of a Participant will not exceed the limitation on Annual Additions as described in Section 4.3, even if the contribution formula otherwise would require a larger contribution. The aggregate Profit Sharing Contributions on behalf of each Participant will be credited to such individual’s Profit Sharing Contribution Account.

3.5      Nonelective Contributions

At the Employer’s sole discretion, a discretionary Nonelective Contribution may be made to the Trust Fund each Plan Year on behalf of each Participant who is: (a) a Corporate Eligible Employee; and (b) employed on the date such Nonelective Contribution is made to the Trust Fund.  Nonelective Contributions shall be made as soon as administratively practicable following the declaration of such Nonelective Contribution by the Plan Sponsor.  For each Plan Year, the amount of the discretionary Nonelective Contribution to the Trust Fund, if made, will be equal to an amount as described in the attached Exhibit A to this Plan.  Unless an Employer affirmatively elects to make a Nonelective Contribution for a Plan Year on behalf of Participants who are Eligible Corporate Employees, no such Nonelective Contribution will be made.

Notwithstanding the foregoing, the aggregate Nonelective Contributions (together with all other applicable contributions) for any Plan Year under this Section 3.5 will not exceed the applicable maximum amount allowable as a deduction to the Employer under

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Code Section 404.  The aggregate Nonelective Contribution for any Plan Year on behalf of a Participant who is a Corporate Eligible Employee will not exceed the limitation on Annual Additions as described in Section 4.3, even if the contribution formula otherwise would require a larger contribution.  The aggregate Nonelective Contributions on behalf of each Participant who is a Corporate Eligible Employee will be credited to such individual’s Nonelective Contribution Account

3.6      Rules Governing Deposits of Contributions

(a)   Salary Deferral Contributions and Catch-Up Contributions accumulated through payroll deductions will be paid to the Trustee with reasonable promptness and not later than the time permitted by the U.S. Department of Labor under Labor Regulations at 29 C.F.R. § 2510.3-102.

(b)   The Employer will pay to the Trustee the Employer contributions (other than Salary Deferral Contributions and Catch-Up Contributions) at any time and from time to time; except that the total Employer contribution for any Plan Year will be paid in full not later than the time prescribed by Code Section 404(a)(6) to enable the Employer to obtain a deduction on its federal income tax return for the Employer’s taxable year.

(c)Upon payment to the Trustee, all Employer contributions will be added immediately to and become a part of the Trust Fund.

(d)   All Salary Deferral Contributions and Catch-Up Contributions, if any, will be credited to the Salary Deferral Contribution Account of each Participant as of the last day of each payroll period. All Safe Harbor Matching Contributions, Profit Sharing Contributions, and Nonelective Contributions, if any, will be credited to the Safe Harbor Matching Contribution Account, Profit Sharing Contribution Account, and Nonelective Contribution Account, respectively, of each Participant upon deposit with the Trustee in accordance with this Section 3.6.

3.7       Adjustment of Individual Accounts

As of each Valuation Date, before allocating and crediting contributions and Forfeitures, if any, for the Plan Year as provided in ARTICLE IV, the Trustee will adjust all Individual Accounts as follows:

(a)   The Trustee will determine the fair market value of the Participant’s directed investments.

(b)   The Trustee will adjust the value of the Participant’s Individual Accounts by crediting them with any increases in value since the last Valuation Date or, if applicable, since the date of acquisition of the Participant’s directed investments.

(c)The Trustee will credit the Participant’s Individual Accounts with any income and charge the Participant’s Individual Accounts with any expenditures resulting from the Participant’s directed investments.

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A Participant will be responsible for reviewing the information concerning investment directives and earnings allocations on his or her Participant statement. If there is any inaccuracy in the information contained on such statement, the Participant will report such inaccuracies to the Administrator or the Trustee within the ninety (90)-day period immediately following the date such statement was received. If a Participant fails to report an inaccuracy within this ninety (90)-day period, this Plan will not be required to make retroactive adjustments to the Participant’s Account but will rectify any errors on a prospective basis.

3.8       Participant Voluntary After Tax Contributions

This Plan does not permit or accept Participant voluntary after tax contributions.

ARTICLE IV
Allocation of Employer Contributions to Individual Accounts

4.1       Allocation of Contributions.

(a)   Salary Deferral Contributions and Catch-Up Contributions made by the Employer on a Participant’s behalf will be allocated to such Participant’s Salary Deferral Contribution Account in the amount determined in accordance with Sections 3.1 and 3.2, respectively. 

(b)   Safe Harbor Matching Contributions made by the Employer on a Participant’s behalf will be allocated to such Participant’s Safe Harbor Matching Contribution Account in the amount determined in accordance with Section 3.3.

(c)Profit Sharing Contributions, if any, made by the Employer on a Participant’s behalf pursuant to Section 3.4 will be allocated to the Profit Sharing Contribution Accounts of eligible Participants employed by the Employer on the last day of the Plan Year. The allocation to each such eligible Participant’s Profit Sharing Contribution Account will be that portion of the Profit Sharing Contribution that is in the same proportion that such Participant’s Compensation for such Plan Year bears to the total of all such Participants’ Compensation for such Plan Year.

(d)   Nonelective Contributions, if any, made by the Employer on a Corporate Eligible Employee’s behalf pursuant to Section 3.5 will be allocated to the Nonelective Contribution Accounts of such Corporate Eligible Employees in accordance with the attached Exhibit B to this Plan.

4.2      Application of Forfeitures.

Any amounts that are forfeited under any provision of this Plan during a Plan Year will be applied in the manner determined by the Administrator to: (i) first correct the improper exclusion of any otherwise Eligible Employees pursuant to Section 2.1 hereof; (ii) second reduce Safe Harbor Matching Contributions, Profit Sharing Contributions and Nonelective Contributions; and (iii) third reduce this Plan’s ordinary and necessary administrative expenses.  All forfeitures to be used under this Section shall be allocated

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promptly in the year in which such forfeitures occurred or in appropriate situations no later than the immediately succeeding Plan Year.

4.3       Limitations on Allocations Under Code Section 415.

Contributions hereunder will be subject to the limitations of Code Section 415 and Treasury Regulations published pursuant to such Code Section, the provisions of which are specifically incorporated by reference; to the extent any portion of this Section conflicts with such Treasury Regulations, the provisions of the regulations will govern.

(a)   The Annual Additions to a Participant’s Individual Accounts hereunder (together with the Annual Additions to the Participant’s account(s) under any other defined contribution plans required to be aggregated with this Plan) for any Limitation Year may not exceed the lesser of:

(i)        $50,000, subject to cost-of-living increases as allowed under Code Section 415(d); or

(ii)       100% of the Participant’s Testing Compensation for the Limitation Year.

In the event the preceding limitations apply to an individual who is a Participant in this Plan and was a Participant in any other defined contribution plan maintained by the Employer, the limitations will apply first to this Plan.  

(b)   In the event the limitations in this Section are not satisfied, correction will be made under the rules provided in Revenue Procedure 2008-50 (and any successor to that Revenue Procedure).

(c)For purposes of this Section 4.3, a Participant’s “annual compensation” shall also include Post Severance Compensation.  The term “Post-Severance Compensation” means the amount that would have been included in the definition of Compensation if the amounts were paid prior to the Employee’s Separation from Service with the Employer and that are paid to the Employee by the later of 2½ months after Separation from Service with the Employer or the end of the Limitation Year that includes the Employee’s date of Separation from Service with the Employer.  Regular pay after Separation from Service will be considered Post-Severance ComIensation if:

(i)        The payment is regular compensation for services during the Employee’s regular working hours, or compensation for services outside the Employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar payments; and

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(ii)       The payment would have been paid to the Employee prior to a Separation from Service if the Employee had continued in employment with the Employer.

4.4       Top-Heavy Allocations

(a)   Minimum Allocation. Notwithstanding the foregoing, for any Plan Year in which this Plan is determined to be Top-Heavy, the amount of Employer contributions and Forfeitures allocated to the Individual Accounts of each Non-Key Employee will be equal to the lesser of three percent of each Non-Key Employee’s Testing Compensation or the highest contribution rate for the Plan Year made on behalf of any Key Employee. However, if a defined benefit plan maintained by the Employer that benefits a Key Employee depends on this Plan to satisfy the nondiscrimination rules of Code Section 401(a)(4) or the coverage rules of Code Section 410(b) (or another plan benefiting the Key Employee so depends on the defined benefit plan), the top heavy minimum allocation is three percent of the Non-Key Employee’s Testing Compensation regardless of the contribution rate for the Key Employee.

(b)   Contribution Rate. For purposes of this Section, a Participant’s contribution rate is the sum of Employer contributions (not including Employer contributions to Social Security) and Forfeitures allocated to the Participant’s Individual Accounts for the Plan Year divided by his or her Testing Compensation for the entire Plan Year. To determine a Participant’s contribution rate, the Administrator must treat all qualified top-heavy defined contribution plans maintained by the Employer (or by any Related Employers) as a single plan. 

Notwithstanding the preceding:

(i)        Salary Deferral Contributions on behalf of Key Employees are taken into account in determining the minimum required contribution under Code Section 416(c)(2). However, Salary Deferral Contributions on behalf of Employees other than Key Employees may not be treated as Employer contributions for the minimum contribution or benefit requirement of Code Section 416.

(ii)       Safe Harbor Matching Contributions will be taken into account for purposes of satisfying the minimum contribution requirements of Code Section 416(c)(2). The preceding sentence will apply with respect to Safe Harbor Matching Contributions under this Plan or, if this Plan provides that the minimum contribution requirement will be met in another Plan, such other Plan. Safe Harbor Matching Contributions that are used to satisfy the minimum contribution requirements will be treated as matching contributions for purposes of the Actual Contribution Percentage Test and other requirements of Code Section 401(m). 

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(iii)      Qualified nonelective contributions described in Code Section 401(m)(4)(C) may be treated as Employer contributions for the minimum contribution or benefit requirement of Code Section 416.

(c)Participant Entitled to Top-Heavy Minimum Allocation. The minimum allocation under this Section will not be provided to any Participant who was not employed by the Employer on the last day of the Plan Year. The provisions of this Section will not apply to any Participant to the extent the Participant is covered under any other plan or plans of the Employer and any Related Employer under which the minimum allocation or benefit requirements under Code Section 416(c)(1) or (c)(2) are met for the Participant. Notwithstanding any limitations within this Plan’s definition of Testing Compensation, amounts earned during the period preceding a Participant’s Entry Date will be included for purposes of determining the minimum top-heavy allocation provided by this Section.

(d)   Compliance. The Plan will satisfy the top-heavy minimum allocation under this Section. The Administrator first will allocate the Employer contributions (and Forfeitures, if any) for the Plan Year pursuant to the allocation formula under ARTICLE IV. The Employer then will contribute an additional amount for the Individual Accounts of any Participant entitled under this Section to a top-heavy minimum allocation and whose contribution rate for the Plan Year, under this Plan and any other plan aggregated under this Section, is less than the top-heavy minimum allocation. The additional amount is the amount necessary to increase the Participant’s contribution rate to the top-heavy minimum allocation. The Administrator will allocate the additional contribution to the Individual Accounts of the Participant on whose behalf the Employer makes the contribution.

4.5       Post-Allocation Adjustments to Accounts

After the amount or amounts have been allocated and credited to each Participant’s Individual Accounts, as provided in this Article, the then value of the Participant’s Individual Accounts will remain unchanged until the next Accounting Date. Notwithstanding the foregoing, the Participant’s Account Balance may be adjusted prior to the next Accounting Date under:

(a)   Other provisions in this Plan authorizing the Administrator to reduce the Participant’s Individual Accounts by disbursements properly chargeable to them or increased by funds received and credited to them; or

(b)   A special valuation of the Participant’s Individual Accounts. 

For purposes of this Article, reference to the Individual Accounts of Participants will include the Individual Accounts of those Participants who die, become Disabled, or retire during the Plan Year.

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ARTICLE V
In-Service Distributions

5.1      Withdrawal of Employer Contributions Before Severance From Employment

Except as provided under Section 5.2 below, upon attainment of age 59½ years, a Participant will have the right to request withdrawal of all or any portion of the Participant’s fully vested and Nonforfeitable Individual Account(s). All determinations of the amount credited to a Participant’s Individual Accounts will be made as of the most recent Valuation Date. A Participant will make an election under this Section on a form prescribed by and delivered to the Administrator at any time during the Plan Year for which the election will be effective. In the written election, the Participant will specify the desired percentage or dollar amount to be distributed by the Trustee to the Participant. The Trustee will distribute to a Participant as elected under this Section within the 90 day period, or as soon as administratively feasible, after the Participant files the written election with the Administrator. The Trustee will distribute the balance of the Participant’s Individual Accounts not distributed pursuant to ARTICLE VIII when the Participant terminated employment with the Employer.

5.2      Withdrawal of Salary Deferral Contributions Before Severance From Employment

(a)   Statutory Restriction on Disbursements. Amounts held in a Participant’s Salary Deferral Contribution Account or Safe Harbor Matching Contribution Account may not be distributable prior to the earliest of:

(i)        Severance from Employment, Disability, or death;

(ii)       Attainment of age fifty-nine and one-half (59½) years;

(iii)      Plan termination (provided, that the Employer does not maintain an “alternative defined contribution plan” into which such amounts would be transferred under the requirements of Treasury Regulation Section 1.401(k)-1(d)(4)(i)); or

(iv)      Proven financial hardship, subject to the limitations described in Section 5.3.

For purposes of these distribution restrictions, “Severance from Employment” means when an Employee ceases to be an Employee of the Employer maintaining this Plan. An Employee does not have a Severance from Employment if, in connection with a change of employment, the Employee’s new employer maintains this Plan with respect to the Employee, by assuming sponsorship of this Plan or by accepting a transfer of Plan assets and liabilities (within the meaning of Code Section 414(l)) with respect to the Employee

For purposes of determining whether the Employer maintains an “alternative defined contribution plan” (described in Treasury Regulation Section 1.401(k)-1(d)(4)(i)) that would prevent the Employer from distributing Salary Deferral

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Contributions (and other amounts, such as qualified nonelective contributions, which are subject to the distribution restrictions that apply to Salary Deferral Contributions) from an otherwise terminated Plan, an alternative defined contribution plan does not include an employee stock ownership plan defined in Code Sections 4975(e)(7) or 409(a), a simplified employee pension as defined in Code Section 408(k), a SIMPLE IRA plan as defined in Code Section 408(p), a plan or contract that satisfies the requirements of Code Section 403(b), or a plan that is described in Code Sections 457(b) or (f).

5.3      Hardship Distributions

Distribution of a Participant’s Nonforfeitable Salary Deferral Contributions, Catch-up Contributions, Profit Sharing Contributions, Matching Contributions, and Nonelective Contributions, may be made to a Participant in the event of a hardship.  In no event shall amounts held in a Participant’s Safe Harbor Matching Contribution Account be eligible for distribution under this Section 5.3. For purposes of this Section, a “hardship distribution” is a distribution that is necessary to satisfy an immediate and heavy financial need of a Participant who lacks other available resources to satisfy such need.

(a)   A distribution will be considered to satisfy an immediate and heavy need of a Participant if the distribution is for:

(i)        Expenses incurred for or necessary to obtain medical care for the Participant, or the Participant’s spouse, children, dependents (as defined below in this Section 5.3(a)), or primary beneficiary (as defined below in this Section 5.3(a)) that would be deductible under Code Section 213(d) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income); 

(ii)       Costs directly related to the purchase, excluding mortgage payments, of a principal residence for the Participant; 

(iii)      Payment of tuition, related educational fees, and room and board expenses, for up to the next 12 months of post-secondary education for the Participant, or the Participant’s spouse, children, dependents (as defined below in this Section 5.3(a)), or primary beneficiary (as defined below in this Section 5.3(a));

(iv)      Payments necessary to prevent the eviction of the Participant from, or a foreclosure on the mortgage of, the Participant’s principal residence;

(v)       Payments for burial or funeral expenses for the Participant’s deceased parent, spouse, children, dependents (as defined below in this Section 5.3(a)), or primary beneficiary (as defined below in this Section 5.3(a)); or

(vi)      Expenses for the repair of damage to the Participant’s principal residence that would qualify for the casualty deduction under Code Section 165

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(determined without regard to whether the loss exceeds 10% of adjusted gross income).

For purposes of this Section 5.3(a), a “dependent” shall mean a dependent as defined in Code Section 152, and, without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B).  Furthermore, a “primary beneficiary” shall be an individual who is named as a Beneficiary under this Plan and has an unconditional right to all or a portion of the Participant’s Account Balance under the Plan upon the death of the Participant.

(b)   A distribution will be considered necessary to satisfy an immediate and heavy financial need of a Participant who lacks other available resources only if: 

(i)        The Participant represents in writing that the need cannot reasonably be relieved through reimbursement or compensation by insurance or otherwise; by liquidation of the Participant’s assets; by cessation of Salary Deferral Contributions under this Plan; by obtaining all distributions, other than hardship distributions, and all nontaxable loans currently available to him under all plans currently maintained by the Employers; or by borrowing from commercial sources on reasonable commercial terms; and

(ii)       The distribution is not in excess of the amount of an immediate and heavy financial need, including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution. 

(c)In addition to the conditions above each plan maintained by the Employer or a legally enforceable arrangement will provide that the Participant’s Salary Deferral Contributions, if any, will be suspended for six months after receipt of the hardship distribution.

(d)   A Participant’s hardship event, for purposes of this Section, includes an immediate and heavy financial need of the Participant’s primary Beneficiary, which would constitute a hardship event if it occurred with respect to the Participant’s spouse or dependent, as defined under Code Section 152. For purposes of this Subsection, such hardship events will be limited to educational expenses, funeral expenses and certain medical expenses.

5.4       Qualified Reservist Distributions

This Plan permits a Participant to elect a qualified reservist distribution. For this purpose, a “qualified reservist distribution” is any distribution to an individual who is ordered or called to active duty after September 11, 2001, if: (i) the distribution is from amounts attributable to Salary Deferral Contributions; (ii) the individual was (by reason of being a member of a reserve component, as defined in Section 101 of Title 37 of the United States Code) ordered or called to active duty for a period in excess of one hundred seventy nine (179) days or for an indefinite period; and (iii) this Plan makes the

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distribution during the period beginning on the date of such order or call, and ending at the close of the active duty period.

5.5       Reservist Severance Distributions

For purposes of receiving a distribution of his or her Individual Account, a Participant may elect to be treated hereunder as having had a Severance from Employment Date with his or her Employer during any period the Participant is performing service in the uniformed services of the United States Armed Forces while on active duty for a period of more than 30 days; provided however, that Participants that take a distribution pursuant hereto may not make Salary Deferra Contributions or Catch-up Contributions during the 6-month period beginning on the date of the distribution.

ARTICLE VI
Distributions After Severance from Employment

6.1       Eligibility Due to Retirement, Death, or Disability

(a)   Retirement.  At Normal Retirement Age, a Participant will be fully vested in his or her Individual Accounts and the Trustee will hold such Individual Accounts for the Participant’s benefit. If a Participant retires (or otherwise terminates employment) on or after his or her Normal Retirement Date, the Administrator will credit and adjust the Participant’s Individual Accounts as provided in ARTICLE III and ARTICLE IV, as of the Valuation Date immediately preceding a distribution pursuant to Section 6.6 below.

(b)   Death. Upon death, a Participant will be fully vested in his or her Individual Accounts and the Trustee will hold such Individual Accounts for the benefit of the Participant’s Beneficiary or Beneficiaries. The Administrator will credit and adjust the deceased Participant’s Individual Accounts as provided in ARTICLE III and ARTICLE IV, as of the Valuation Date immediately preceding the date of a distribution pursuant to Section 6.6 below. A Participant’s Beneficiary or Beneficiaries will be entitled to benefits under Section 6.6 after the death of the Participant or Former Participant.  If a Participant dies while performing qualified military service (as defined in Code Section 414(u)), the survivors of the Participant are entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) provided under this Plan as if the Participant had resumed and then terminated employment on account of death.

(c)Disability. As of his Severance from Employment Date due to Disability, a Participant will be fully vested in his or her Individual Accounts and the Trustee will hold the Individual Accounts for the Participant’s benefit. The Administrator will credit and adjust the Individual Accounts of a disabled Participant, as provided in ARTICLE III and ARTICLE IV, as of the Valuation Date immediately preceding the date of a distribution pursuant to Section 6.6 below. A disabled Participant will be entitled to benefits under Section 6.6 after the Participant’s date of Disability.

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6.2       Eligibility Due To Severance from Employment

If a Participant’s employment with the Employer will terminate for any reason other than retirement, death, or Disability, the Participant will be vested in his or her Individual Accounts as provided in Section 6.3 below, and the Trustee will hold the Nonforfeitable portion of the Participant’s Account Balance in his Individual Accounts for the Participant’s benefit. The Administrator will credit and adjust the Individual Accounts of the terminated Participant, as provided in ARTICLE III and ARTICLE IV, as of the Valuation Date immediately preceding the date of the distribution pursuant to Section 6.6 below. A terminated Participant will be entitled to benefits under this Section 6.2 and Section 6.3 after the Participant’s Severance from Employment Date.

6.3       Vesting

(a)   Fully Vested Accounts.  A Participant to whom Section 6.2 applies will be fully vested:

(i)        at all times in amounts credited to his or her (i) Salary Deferral Contribution Account, (ii) Rollover Contribution Account, and (iii) Safe Harbor Contribution Account; and

(ii)       for Nonelective Contributions made on or after January 1, 2013, in amounts credited to his or her Nonelective Contribution Account. 

(b)   Service-Based Vested Accounts.  In addition to being fully vested in those Individual Accounts identified in Section 6.3(a), a Participant to whom Section 6.2 applies will be also be entitled to receive the Nonforfeitable percentage of the balance credited to the Participant’s:

(i)        Matching Contribution Accounts,

(ii)       Profit Sharing Contribution Account, and/or

(iii)      Nonelective Contribution Account but only with respect to the those Nonelective Contributions made prior to January 1, 2013 to such Participant’s Nonelective Contribution Account

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determined under the following vesting schedule:

Years of Service	Nonforfeitable Percentage
Less than 2 years	0%
At least 2 but less than 3 years	20%
At least 3 but less than 4 years	40%
At least 4 but less than 5 years	60%
At least 5 but less than 6 years	80%
At least 6 years	100%

Notwithstanding the preceding, if a Participant has been granted credit for Years of Service with a Predecessor Employer, such Participant’s Nonforfeitable percentage will be no less than the Participant’s Nonforfeitable percentage with his Predecessor Employer.  The foregoing vesting schedule will also apply for any Plan Year in which this Plan is a Top-Heavy Plan.

6.4       Forfeiture

A Participant to whom this Article applies will forfeit that portion of the amount of his Individual Accounts to which the Participant is not entitled pursuant to Section 6.3 above.

(a)   A Participant who has had a Severance from Employment Date without a Nonforfeitable Account Balance will be deemed to have received a distribution of his Nonforfeitable Account Balance on the date of separation from employment.

(b)   The amount forfeited under this Section, to the extent attributable to Employer contributions, will remain in the Trust Fund and will be allocated as provided under Section 4.2 as of the Accounting Date of the Plan Year during which the forfeiture event occurred.

6.5       Determination of Amount of Vested Undistributed Account

(a)   If the Trustee pays any amount outstanding to the credit of a Participant in the Participant’s Individual Accounts while the Participant is not fully vested in his Individual Accounts, other than a lump sum distribution that occurs no later than the last day of the second Plan Year following the Plan Year in which the Participant separates from Service, and prior to the Anniversary Date on which the Participant will incur a five year Break in Service, the value of his or her vested and

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undistributed account will be held in a separate account and will be determined at any time prior to and including the Anniversary Date on which the Participant will incur a five year Break in Service under the following formula.

X = P(AB + (R x D)) – (R x D).

For this formula, the variables represent the following factors:

X is the value of the vested portion of the Participant’s Account;

P is the Participant’s Nonforfeitable percentage at the relevant time;

AB is the Account Balance at the relevant time;

D is the amount of the distribution; and

R is the ratio of the Account Balance at the relevant time to the Account Balance after the distribution.

The nonvested portion of the Participant’s Individual Accounts will be forfeited on the Anniversary Date on which the Participant incurs a five year Period of Severance.

6.6       Payment of Benefits

(a)   As soon as administratively feasible after a Participant separates from employment, and the Administrator has credited and adjusted the Individual Accounts of a Participant, the Trustee will make payments to the Participant or his Beneficiary or Beneficiaries pursuant to ARTICLE VIII, subject to the mandatory distribution requirements of ARTICLE VII. The Administrator will charge each payment to the Participant’s Individual Accounts and payments will continue until the Nonforfeitable Account Balance is paid to the Participant in full. Notwithstanding the preceding, in the event of a Participant’s death, the Administrator will distribute the Participant’s Individual Accounts no less rapidly than is required under ARTICLE VII.

(b)   Unless a Participant elects otherwise, payment of benefits will commence not later than the 60^th day after the end of the Plan Year in which the latest of the following events occurs: (i) the date on which the Participant attains the Normal Retirement Age under this Plan; (ii) the 10^th anniversary of the year in which the Participant commenced participation in this Plan; or (iii) the date on which the Participant terminates employment with the Employer. Notwithstanding the foregoing, a Participant may not defer commencement of benefits if such deferral would result in violation of ARTICLE VII.

(c)Notwithstanding the foregoing paragraph, if a Participant separates from employment with the Employer and the Participant’s Nonforfeitable Account Balance is $1,000 or less, the Administrator may direct the Trustee to make

38

immediate distribution to the Participant in the form of a lump sum distribution. For purposes of this paragraph, if the value of an Employee’s Nonforfeitable Account Balance is zero (0), the Employee will be deemed to have received a distribution of his or her Account Balance. However, if such Participant made any Salary Deferral Contributions to this Plan prior to separating from employment, such Participant will not be considered non‑vested under this Plan and will not be deemed to have received a distribution of his or her Account Balance. In the event of an involuntary distribution greater than $1,000, but not in excess of $5,000, if the Participant does not elect to receive such distribution or have it paid directly to an Eligible Retirement Plan (as defined in Section 8.2) specified by the Participant in a Direct Rollover, then the Administrator may pay the distribution in a Direct Rollover on behalf of the Participant to an individual retirement account (described in Code Section 408(a)) designated by the Administrator.

The value of a Participant’s Nonforfeitable Account Balance will be determined without regard to that portion of the Account Balance that is attributable to rollover contributions (and earnings allocable thereto) within the meaning of Code Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16). If the value of the Participant’s Nonforfeitable Account Balance as so determined is $1,000 or less, this Plan will immediately distribute the Participant’s entire Nonforfeitable Account Balance.

ARTICLE VII
Mandatory Distribution of Benefits

The Administrator may not direct the Trustee to distribute the Participant’s Nonforfeitable Account Balance, to the Participant or Beneficiary under a method of payment that, as of the Required Beginning Date, does not satisfy the minimum distribution requirements under Code Section 401(a)(9) and the corresponding Treasury Regulations, revenue rulings, notices, and other guidance published in the Internal Revenue Bulletin. Notwithstanding any provision of this Plan to the contrary, this Plan will (i) apply the minimum distribution requirements of Code Section 401(a)(9), including the incidental death benefit rule set forth under Code Section 401(a)(9)(G), and (ii) provide distributions in accordance with the applicable provisions of final Treasury Regulation Sections 1.401(a)(9)-1 through 1.401(a)(9)-9, the provisions of which are hereby incorporated into this Plan by reference.

ARTICLE VIII
Forms of Distribution

8.1       Forms of Payment of Benefits

(a)   Whenever a Participant, Former Participant, or Beneficiary is entitled to receive a distribution of benefits, he or she will receive such distribution in the form of a lump sum, payable in cash at the fair market value of the Nonforfeitable Account Balance when distributed.

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(b)   Notwithstanding the above, a Participant will have the right to receive payment of his benefits in any optional form of benefit payment to which that Participant would have been entitled under a plan sponsored by a Predecessor Employer in which that Participant was a Participant.

(c)Notwithstanding the foregoing, a distribution made pursuant to this Section will be subject to the immediate cashout provisions of Section 6.6.  

8.2       Direct Rollover Benefit

(a)   Direct Rollover. Notwithstanding any provision of this Plan to the contrary that would otherwise limit a Distributee’s election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

(b)   Direct Rollover of Non-Spousal Distribution

(i)        Non-Spouse Beneficiary Rollover Right. An individual other than the Participant’s spouse who is a Beneficiary under this Plan and Code Section 401(a)(9)(E) and the Treasury Regulations thereunder, by a Direct Rollover, may roll over all or any portion of his or her distribution to an individual retirement account the Beneficiary establishes for purposes of receiving the distribution. In order to be able to roll over the distribution, the distribution otherwise must satisfy the definition of an Eligible Rollover Distribution.

(ii)       Certain Requirements not Applicable. Although a non-spouse Beneficiary may roll over directly a distribution as provided in this Subsection, any distribution made prior to January 1, 2010 is not subject to the Direct Rollover requirements of Code Section 401(a)(31) (including Code Section 401(a)(31)(B), the notice requirements of Code Section 402(f), or the mandatory withholding requirements of Code Section 3405(c)). If a non-spouse Beneficiary receives a cash distribution from this Plan, the distribution is not eligible for a “60-day” rollover right.

(iii)      Trust Beneficiary. If the Participant’s named Beneficiary is a trust, this Plan may make a Direct Rollover to an individual retirement account on behalf of the trust, provided the trust satisfies the requirements to be a “designated beneficiary” within the meaning of Code Section 401(a)(9)(E).

(iv)      Required Minimum Distributions not Eligible for Rollover. A non-spouse Beneficiary may not roll over an amount that is a required minimum distribution, as determined under Code Section 401(a)(9), applicable Treasury Regulations, and other Internal Revenue Service guidance. If the Participant dies before his or her Required Beginning Date and the non-spouse Beneficiary rolls over to an individual retirement account the

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maximum amount eligible for rollover, the Beneficiary may elect to use either the five-year rule or the life expectancy rule, pursuant to Treasury Regulation Section 1.401(a)(9)-3, A-4(c), in determining the required minimum distributions from the individual retirement account that receives the non-spouse Beneficiary’s distribution.

8.3       Election to Receive Benefits

Notwithstanding the foregoing, a Participant who has a Severance from Employment Date from the Employer before his or her Normal Retirement Date, if any, may elect to leave his or her Nonforfeitable Account Balance under the management of the Trustee, subject to the requirements of Section 6.6 and ARTICLE VII. The Trustee will invest and reinvest and will credit and charge the Individual Accounts with their proportionate share of gains and losses of the Trust Fund pursuant to ARTICLE IV until the Nonforfeitable Account Balance is paid out to the Former Participant under this Article. The Participant, Former Participant, or Beneficiary will elect the form or forms of payment of benefits permitted in Section 8.1 that the Administrator and Trustee will implement.

8.4       Minority or Disability

During the minority or Disability of an individual entitled to receive benefits under this Plan, the court may direct the Administrator to instruct the Trustee to make payments due the individual directly to the individual or to the spouse or a relative or to any individual or institution having custody of the individual. Neither the Administrator nor the Trustee will be required to cause or to verify the application of any payments so made, and the receipt of the payee, including the endorsement of a check or checks, will be conclusive to all interested parties.

8.5       Unclaimed Account Procedure

The Plan does not require either the Trustee or the Administrator to search for, or to ascertain the whereabouts of, any Participant or Beneficiary. At the time the Participant’s or Beneficiary’s benefit becomes distributable under ARTICLE IV, the Administrator, by certified or registered mail addressed to his or her last known address of record with the Administrator or the Employer, must notify any Participant or Beneficiary, that he or she is entitled to a distribution under this Plan. The notice must quote the provisions of this Section and otherwise must comply with the applicable notice requirements of ARTICLE IV. If the Participant, or Beneficiary, fails to claim his or her distributive share or make his or her whereabouts known in writing to the Administrator, then the Administrator will treat the Participant’s or Beneficiary’s unclaimed payable Account Balance as forfeited

If a Participant or Beneficiary who has incurred a Forfeiture of his or her Account Balance under the provisions of the first paragraph of this Section makes a claim, at any time, for the forfeited Account Balance, the Administrator must restore the Participant’s or Beneficiary’s forfeited Account Balance.

Upon termination of this Plan, in lieu of the unclaimed account procedure set forth in this Section, Section 16.6 will apply.

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ARTICLE IX
Plan Sponsor and Employers

9.1       Employer Action

Whenever the Employer is permitted or required to do or perform any act under this Plan, it will be done and performed by a person duly authorized to do or perform the act by its legally constituted authority.

9.2       Plan Amendment

(a)   The Board of Directors (or a properly designated committee thereof) has the right to amend this Plan, at any time and from time to time, in any manner.

(b)   A Plan amendment will be in writing and take effect either after the approval of such amendment, as appropriate, by written resolution of the Board of Directors (or a properly designated committee thereof), or, if such authority has been delegated to an officer of the Plan Sponsor, then, alternatively, upon execution of the amendment by such officer.  Notwithstanding the preceding, an amendment that impacts the authority or responsibility of the Trustee will become effective only upon the consent of the Trustee.

(c)Unless it is made to secure the approval of the Commissioner of the Internal Revenue Service or other governmental bureau or agency, no amendment or modification of this Plan will:

(i)        Operate retroactively to reduce or divest the then Nonforfeitable interest in any Individual Accounts or to reduce or divest any benefit then payable hereunder unless all Participants, Former Participants, and Beneficiaries then having Individual Accounts or benefit payments affected thereby will consent to the amendments or modifications;

(ii)       Directly or indirectly affect any Participant’s Nonforfeitable percentage outside the protection of Treasury Regulation Section 1.411(a)(8);

(iii)      Decrease a Participant’s accrued benefit, except to the extent permitted under Code Section 412(c)(8), and reduce or eliminate Code Section 411(d)(6) protected benefits determined immediately prior to the adoption date (or, if later, the effective date) of the amendment, except as permitted by applicable Treasury Regulations. (An amendment reduces or eliminates Code Section 411(d)(6) protected benefits if the amendment has the effect of either: (A) eliminating or reducing a retirement-type subsidy (as defined in applicable Treasury Regulations); or (B) except as provided by applicable Treasury Regulations, eliminating an optional form of benefit. The Administrator must disregard an amendment to the extent application of the amendment would fail to satisfy this paragraph. If the Administrator must disregard an amendment because the amendment would violate clause (A) or clause (B), the Administrator must maintain a schedule of

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the optional forms of benefit this Plan must continue for the affected Participant); or

(iv)      Affect the rights, duties or responsibilities of the Trustees or the Administrator without the written consent or approval of the Trustee or Administrator.

Notwithstanding the foregoing, no amendment will retroactively decrease a Participant’s accrued benefits or otherwise retroactively place greater restrictions or conditions on a Participant’s rights to Code Section 411(d)(6) protected benefits, even if the amendment adds a restriction or condition that is otherwise permitted under Code Section 411(a), unless otherwise permitted under Treasury Regulation Sections 1.411(d)-3 or 1.411(d)-4. An optional form of benefit hereunder may be eliminated prospectively, provided that this Plan, as amended, will satisfy the requirements of Treasury Regulation Sections 1.411(d)-3(c), (d), or (e) or 1.411(d)-4.

(d)   If the vesting schedule described in Section 6.3 is amended, a Participant’s vested interest in any contribution to which the vesting schedule in Section 6.3 applied, will not be less than the Nonforfeitable percentage determined as of the later of the effective date of the amendment or the date of its adoption. A Participant with at least three (3) Years of Service on the last day of the election period described in this paragraph, may elect to have the Nonforfeitable percentage of his or her Account Balance determined without regard to the amendment. If a Participant fails to make an election, then the Participant will be subject to the new vesting schedule. The election period will commence on the date the amendment is adopted or deemed to be made and will end 60 days after the latest of:

(i)        The date of the adoption of the amendment;

(ii)       The effective date of the amendment; or

(iii)      The date the Participant receives written notice of the amendment from the Employer or Administrator.

9.3       Discontinuance, Termination of Plan

(a)   The Plan Sponsor has the right, at any time, to suspend or discontinue its contributions under this Plan to the Trust Fund, and to terminate, at any time, this Plan and the Trust. The Plan will terminate on the first to occur of the following events:

(i)        The date this Plan is terminated by action of the Plan Sponsor;

(ii)       The date the Plan Sponsor is judicially declared bankrupt or insolvent, unless the proceeding authorized continued maintenance of this Plan; or

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(iii)      The dissolution, merger, consolidation or reorganization of the Plan Sponsor or the sale by the Plan Sponsor of all or substantially all of its assets, unless the successor or purchaser elects and makes provision to continue this Plan, in which event the successor or purchaser will substitute itself as the Plan Sponsor under this Plan.

(b)   Upon either full or partial termination of this Plan, or, if applicable, upon complete discontinuance of contributions to this Plan, the Individual Accounts of all Participants, Former Participants, and Beneficiaries will be and become fully vested and Nonforfeitable, notwithstanding the Nonforfeitable percentage that otherwise would apply. The Trustee, in its discretion, may convert some or all of the Trust Fund to cash, and will deduct therefrom all unpaid charges and expenses, except as the same may be paid by the Employer. The Administrator then will adjust the balance of all Individual Accounts on the basis of the net cash balance and fair market value of all property in the Trust Fund. Thereafter, the Trustee will distribute the amount to the credit of each Participant, Former Participant, and Beneficiary in cash, in kind, or partly in cash and partly in kind, as the Administrator will direct. Notwithstanding the foregoing, a distribution made because of a termination of this Plan will be subject to the mandatory distribution requirements of ARTICLE VII and the immediate cashout distribution provisions of Section 6.6.

(c)To the extent that this Plan is maintained as a multiple employer plan, the provisions governing the discontinuance or termination of this Plan with respect to an Employer that is not a Related Employer will be governed under Section 9.5.

9.4       Prohibition Against Reversion to Plan Sponsor or an Employer

Under no circumstances or conditions, other than those specifically provided herein, will the Trust Fund or any portion thereof revert to the Plan Sponsor or any Employer or be used for or diverted to purposes other than the exclusive benefit of the Participants, Former Participants, and Beneficiaries. No amendment or revocation by the Plan Sponsor of this Section may cause or permit any portion of the Trust Fund to revert to or become a property of the Plan Sponsor or any Employer.

9.5       Adoption by Related Employers

(a)   With the written consent of the Plan Sponsor, any other association, corporation, or other business organization, may adopt this Plan and Trust in its entirety, participate herein and be known as an Employer. The participation of an Employer that is a recipient of Leased Employee services from the Plan Sponsor will be limited to such Leased Employees unless otherwise provided in the Employer’s participation agreement.

(b)   The following requirements will apply to any Employer who elects to adopt this Plan pursuant to this Article:

(i)        Each Employer will be required to use the same Trustee as provided in this Plan.

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(ii)       The Trustee may, but will not be required to, commingle, hold, and invest as one (1) Trust Fund all contributions made by Employers and all increments thereof.

(iii)      The transfer of any Participant from or to any Employer participating in this Plan, whether the Participant is an Employee of the Plan Sponsor or an Employer, will not affect the Participant’s rights under this Plan; all amounts credited to the Participant’s Individual Accounts, all accumulated Service with the transferor or Predecessor Employer, and the length of participation in this Plan will continue to the Participant’s credit.

(c)All rights and values forfeited by a Participant upon a Severance from Employment Date will inure only to the benefit of the Employees and Participants of the Employer that employed the forfeiting Participant, except, if the Forfeiture is for an Employee whose Employer is a Related Employer. Should an Employee of one (“First”) Employer be transferred to a Related (“Second”) Employer the transfer will not cause the Employee’s Account Balance, generated while an Employee of the First Employer, in any manner or by any amount, to be forfeited. The Employee’s Account Balance for all purposes of this Plan, including length of Service, will be considered as though the Employee had always been employed by the Second Employer and as such had received contributions, Forfeitures, earnings or losses, and appreciation or depreciation in value of assets totaling the amount so transferred.

(d)   Upon an Employee’s transfer between Employers, the Employee involved will carry accumulated Service. No transfer will effect a Severance from Employment Date under this Plan and the Employer to which the Employee transfers will thereupon become obligated under this Plan to the Employee in the same manner as the Employer from whom the Employee transfers.

(e)   Any expenses of this Plan and Trust Fund that are to be paid by the Employer or borne by the Trust Fund will be paid by each Employer in the same proportion that the total amount standing to the credit of all Participants employed by the Employer bears to the total amount standing to the credit of all Participants.

(f)   Any contribution made by an Employer that is a Related Employer will be paid to and held by the Trustee for the exclusive benefit of the Employees of the Employer and the Beneficiaries of the Employees, subject to all the terms and conditions of this Plan. Any payment to the Employer made by an entity that is a recipient of the services of Leased Employees pursuant to a written agreement with the Employer that is deposited with the Trustee will be held by the Trustee for the exclusive benefit of the Participants providing Leased Employee services and their Beneficiaries, subject to all the terms and conditions of this Plan.

(g)   Based on information furnished by each Employer, the Administrator and the Trustee will keep separate books and records concerning the affairs of each Employer and of the Account Balances of the Participants of each Employer. All

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contributions or payments made by an Employer will be determined separately on the basis of its net profit and total Compensation paid.

(h)   Each Employer indemnifies and holds harmless the other Employers, the Plan Sponsor, the Administrator, the members of the Committee, the Trustee, and each of their employees and agents from and against any and all loss resulting from liability to which the other Employers, the Plan Sponsor, the Administrator, the Trustees, or the members of the Committee, or their employees and agents, may be subjected by reason of the failure by the deemed separate plan of such Employer to satisfy the minimum coverage requirements under Code Section 410(b), the nondiscrimination requirements under Code Sections 401(a)(4), 401(k), and 401(m), Code Section 415 limitations, Code Section 416 top-heavy requirements, and any other qualification requirements that may be applicable to the Employer on a deemed separate plan basis. Further, the Employers and the Plan Sponsor will indemnify and hold harmless the Administrator, the members of the Committee, the Trustee or their employees and agents, from and against any and all loss resulting from liability to which the Administrator and the Committee, or the members of the Committee, and each of their employees and agents, may be subjected by reason of any act or conduct (except willful misconduct or gross negligence) in their official capacities in the administration of this Trust Fund or Plan or both, including all expenses reasonably incurred in their defense, in case the Employers or the Plan Sponsor fail to provide such defense. The indemnification provisions of this Section do not relieve the Administrator, any Committee member, or the Trustee, or their employees and agents, from any liability under ERISA for breach of a fiduciary duty. Moreover, the Administrator, the Committee members, the Trustee, the Plan Sponsor, the Employers, and their employees and agents, may execute a letter agreement further delineating the indemnification agreement of this Section, provided the letter agreement is consistent with and does not violate ERISA.

(i)   Each Employer will be deemed to be a part of this Plan. However, each Employer will be deemed to have designated irrevocably the Plan Sponsor as its agent in all of its relations with the Trustee, the Committee, and the Administrator.

(j)   Any Employer will be permitted to discontinue or revoke its participation in this Plan. Upon any discontinuance or revocation, satisfactory evidence thereof, and of any applicable conditions imposed will be delivered to the Trustee. The Trustee will thereafter transfer, deliver, and assign contracts and other Trust Fund assets allocable to the Participants of the Employer to the new plan as will have been designated by the Employer, if it has established a separate employee benefit pension plan for its employees. If no successor plan is designated, the Trustee will retain the assets for the Employees of the Employer under ARTICLE IX. No part of the corpus or income of the Trust Fund relating to an Employer will be used for or diverted to purposes other than the exclusive benefit of the Employees of that Employer and the Beneficiaries of the Employees.

(k)   A withdrawal by any Employer without any provision for the continuation of a plan for its Employees or, if the Employer is a recipient of the services of Leased

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Employees, for its Leased Employees, will constitute a partial termination of this Plan with respect to that Employer. Withdrawal from this Plan by any Employer will not affect the continued operation of this Plan solely with respect to the other Employers; provided, however, in the event of the withdrawal of an Employer that is a member of a group of Related Employers with respect to which this Plan constitutes a single plan and in the event that provision is made for the continuation of a defined contribution plan for its Employers separate and distinct from this Plan herein set forth, the share of the assets of the Trust Fund allocable to such group of Employers that is transferred to such other Plan will be determined by the Administrator subject to the provisions of Section 15.2.

9.6       Authority of Administrator over Employers

The Administrator will have the authority to make any and all necessary rules or regulations binding on all Employers and all Participants and Beneficiaries to effectuate the purposes of this Article.

9.7       Deficiency of Earnings or Profits

If any Employer is prevented in whole or in part from making a contribution to the Trust Fund that it otherwise would have made under this Plan because of having no current or accumulated earnings or profits, or because the earnings or profits are less than the contribution that it otherwise would have made, then so much of the contribution that the Employer was prevented from making may be made for the benefit of the participating Employees of the Employer by the other Employers that are Related Employers. The contribution by each other Employer will be limited to the proportion of its total current and accumulated earnings or profits remaining after adjustment for its contribution to this Plan made without regard to this Section, which the total prevented contribution bears to the total current and accumulated earnings or profits of all the Employers remaining after adjustment for all contributions made to this Plan without regard to this Section. An Employer on behalf of whose Employees a contribution is made under this Section will not reimburse the contributing Employer unless it has otherwise agreed to do so in writing.

ARTICLE X
Procedures for Qualified Domestic Relations Orders

10.1     Introduction

This Plan, as required under applicable federal law, generally prohibits the payment of benefits to individuals other than Plan participants and their beneficiaries. An exception to this general rule is the payment of benefits to the spouse, former spouse, child, or other dependent of a participant (“Alternate Payee”) if the payment is mandated by a domestic relations order that is qualified. A domestic relations order (“Order”) is defined as any judgment, decree, or order, including the approval of a marital property settlement, issued by a state authority (generally a court) that is related to alimony payments, child support, or division of marital property rights and that satisfies certain other requirements.

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The purpose of these QDRO procedures is to establish reasonable and consistent procedures for determining the qualified status of an Order and for making distributions pursuant to an Order that qualifies (“QDRO”) under Section 206(d)(3) of ERISA and Code Section 414(p). This Plan will not make any distribution pursuant to an Order unless it is determined to be qualified under these QDRO procedures, this Plan, and applicable federal law.

10.2     Administrator

The Administrator is designated by this Plan and is a fiduciary under ERISA section 3(21)(A).  The Administrator has exclusive discretionary authority and responsibility for administering the QDRO Procedures. The Administrator will provide only factual information concerning this Plan’s terms and a participant’s benefits under this Plan. Parties seeking QDROs may not rely on the Administrator for advice concerning which type of QDRO is appropriate for them. If any party is unsure as to the legal requirements of a QDRO or the benefits to which the party is entitled, that party should consult a legal advisor.

10.3     Notices

Any notice provided under the QDRO Procedures will be mailed or otherwise sent to the addresses provided in the Order. If the Order does not specify an address or if a notice is being provided before this Plan’s receipt of an Order, the notice will be sent to the last address of each party that is known to the Administrator.

The Alternate Payee and the affected Participant may each designate a representative for receipt of copies of notices that are sent to the Alternate Payee and the Participant under these QDRO procedures. Unless the Alternate Payee or the Participant otherwise requests, whenever notices are sent to the Alternate Payee or the Participant under these QDRO procedures, copies also will be sent to their respective designated representatives.

10.4     Requests for Information for Drafting QDROs

A prospective Alternate Payee, or the Alternate Payee’s representative, may submit a written request to the Administrator for information that is reasonably required to prepare a QDRO, including a copy of these QDRO procedures, this Plan’s summary plan description, and statements of the Participant’s Account Balance under this Plan. The Administrator may require the prospective Alternate Payee to provide the Participant’s authorization or other documentation before disclosing any information about the amount of the Participant’s Account Balance.

The Administrator will also provide a copy of this Plan’s model QDRO for the parties to use in drafting an Order if they so choose. The model QDRO should be modified to fit the requirements of the parties and the courts. Use of the model QDRO is not required.

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10.5     Notice of Pending Order

If, prior to this Plan’s receipt of an Order, the Administrator receives written notice that a Participant’s Individual Account is likely to be subject to a forthcoming Order based on a pending domestic relations action, the following will apply.

(a)   Notification of Participant and Alternate Payee.  The Administrator will promptly notify the Participant and each potential Alternate Payee (specified in the written notice as entitled to a payment of benefits under this Plan) of receipt of the notice. The Administrator will provide a copy of the QDRO Procedures with the notification.

(b)   Actions Relating to Participant’s Account.  If the Participant’s benefit under this Plan is not in pay status, the Administrator will take any actions as the Administrator deems necessary to maintain the status of the Participant’s Individual Account, including, but not limited to, the suspension of the Participant’s right to distributions or to take loans from this Plan.  If this Plan does not receive an Order within 90 days after receiving the notice, the Administrator will revoke any actions taken under these QDRO procedures, including canceling the suspension of the Participant’s right to distributions or loans, and will administer this Plan as if the Administrator had not received the notice.  If the Administrator receives a subsequent written notice before or after the expiration of the 90-day period, and the Participant’s Individual Account under this Plan is not in pay status, the Administrator may apply the suspension provisions with respect to the subsequent notice.  If this Plan receives an Order relating to the Participant’s Individual Account under this Plan within 90 days after receiving the notice, the Administrator will proceed to determine the qualified status of the Order.  If the Participant’s Individual Account under this Plan is in pay status, the Administrator will take no action to suspend distributions or loans or otherwise to maintain the status of the Participant’s Individual Account until the Administrator receives an Order.

10.6     Receipt of Order

When this Plan receives an Order that purports to be a QDRO, the following will apply.

(a)   Notification of Receipt of Order.  The Administrator will promptly notify the Participant and each Alternate Payee (specified in the Order as entitled to a payment of benefits under this Plan) of the receipt of the Order. The Administrator will provide a copy of the QDRO Procedures to the Participant and to each Alternate Payee with the notification.

(b)   Review of Order.  The Administrator will review the Order and may request that its legal counsel review the Order to determine whether the Order is qualified. The determination of whether the Order is a QDRO will be made within a reasonable period after receipt of the Order.

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(c)Notice of Determination.  The Administrator will promptly notify in writing the Participant and each Alternate Payee (specified in the Order as entitled to a payment of benefits under this Plan) of the determination of the qualified status of the Order.

10.7     Requirements of a Qualified Order

An Order will be determined to be qualified if the Administrator determines that it meets the requirements of a qualified Order under ERISA Section 206(d)(3) and Code Section 414(p), which include the following.

(a)   Valid Domestic Relations Order.  The Order is a valid domestic relations order issued by a state authority. The Order creates or recognizes the existence of an Alternate Payee’s right, or assigns to an Alternate Payee the right, to receive all or a portion of the Account Balance payable with respect to the Participant under this Plan.

(b)   No Prohibited Benefits or Options.  The Order does not require this Plan to provide any type or form of benefit, or any option, not otherwise provided under this Plan. The Order does not require this Plan to provide increased benefits (determined on the basis of actuarial value). The Order does not require the payment of benefits to an Alternate Payee which are required to be paid to another Alternate Payee under another Order previously determined to be a QDRO.

(c)Timing and Subsequent Orders.  Subject to the other requirements of the QDRO Procedures, an Order will not fail to be treated as qualified solely because of the time at which it is issued or solely because the Order is issued after, or revises, another Order or QDRO (but only if the Order does not assign benefits that are assigned to another Alternate Payee under another QDRO).

(d)   Required Information.  The Order must clearly specify the following information:

(i)Name and Address. The name and last known mailing address of the Participant and of each Alternate Payee covered by the Order.

(ii)       Amount of Benefits. The amount or percentage of the Participant’s Account Balance to be paid by this Plan to each Alternate Payee, or the manner in which the amount or percentage is to be determined, including whether the amount of the Alternate Payee’s benefit includes a corresponding share of the Participant’s Account Balance earnings and losses from the date that serves as the measurement for determining the amount of the Alternate Payee’s benefit.

(iii)      Number of Payments or Time Period. The number of payments or the period to which the Order applies.

(iv)      Identification of Plan. The name of each plan to which the Order applies.

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10.8     Participant’s Account During Determination Period

During the period that the qualified status of the Order is being determined (Determination Period), the following will apply with respect to the Participant’s Individual Account under this Plan.

(a)   Separate Accounting.  During the Determination Period, the Administrator will separately account for the amounts that would have been payable currently to the Alternate Payee during the Determination Period if the Order had been determined to be a QDRO. The Administrator will not separately account for amounts that would not otherwise be payable currently to the Alternate Payee during the Determination Period.  The Administrator will preserve the amount, if any, subject to separate accounting, for not longer than an 18-month period beginning on the later of: (1) the date of receipt of the Order; or (2) the first date on which a payment would be required to be made under an Order. If it is determined that the Order is not a QDRO, or if the determination as to the qualified status of the Order is not made or otherwise resolved within the 18-month period, the Administrator will pay the amounts (including any earnings or losses) to whomever would have been entitled to the amounts if there had been no Order unless there is a cure period in effect under ARTICLE IX of these QDRO Procedures. Any determination that the Order is a QDRO after the 18-month period will be applied prospectively only.

(b)   Suspension of Participant Distributions and Loans.  The Administrator will take steps to provide that amounts that would have been payable to the Alternate Payee, if the Order were a QDRO, are not distributed to the Participant or any other person during the Determination Period. If the Participant is receiving distributions from this Plan at the time of receipt of the Order, the Administrator will suspend distributions to the Participant to the extent the Administrator deems necessary to comply with the Order should the Administrator eventually determine that the Order is a QDRO. The Administrator will suspend the Participant’s right to take loans during the Determination Period.

(c)Death of Participant or Alternative Payee. An Order will not fail to be a QDRO merely because it was issued after the death of the Participant or Alternate Payee. If the Alternate Payee dies before receiving benefits from this Plan, and the Alternate Payee has not designated a beneficiary, the Alternate Payee’s benefit payments, if any, shall be paid in accordance with the distribution provisions of this Plan treating the Alternate Payee as if the Alternate Payee were the Participant for purposes of determining who is entitled to benefit payments upon the Alternate Payee’s death.

(d)   Participant-Directed Investments.  This Plan will continue to permit the Participant’s investment directions during the Determination Period.

10.9     Determination That Order Is Not a QDRO

If the Administrator determines that the Order is not qualified, the following will apply.

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(a)   Written Notice of Adverse Decision.  The Administrator will provide a written notice to the Participant and each Alternate Payee of the adverse decision and will include the following in the notice: (1) the reasons for the adverse decision; (2) specific references to this Plan provisions on which the Administrator’s determination is based; (3) an explanation of any time limits that apply to appeal rights available to the parties under this Plan; and (4) a description of any additional material, information, or modifications necessary for the Order to be determined to be qualified. The Administrator will include a copy of this Plan’s claims procedures with the written notice of an adverse decision.

(b)   Review of Adverse Determination.  If either party specified in the Order wishes a review of the adverse determination, the party must follow this Plan’s claim procedures, including adhering to any relevant time limitations.

(c)Procedures During Period of Curing Defects.  If the Administrator determines that the Order is not a QDRO within the 18-month period described these QDRO procedures, the Administrator may continue to delay distribution of any benefits subject to the Order if the Administrator has reason to believe that a party will seek to cure the defects in the Order. The Administrator may continue to delay distribution so long as the Administrator determines a delay is necessary to fulfill the Administrator’s fiduciary duties under this Plan, but no longer than the end of the 18-month period.

10.10   Determination That Order Is a QDRO

If the Administrator determines that the Order is qualified, the following will apply.

(a)   Notice of Determination.  The Administrator will provide a written notice to the Participant and each Alternate Payee of the determination that the Order is a QDRO.

(b)   Alternate Payee’s Benefit.  Unless the Order specifies otherwise, this Plan will establish and maintain a separate recordkeeping account for each Alternate Payee until this Plan has completed the payment of benefits under the QDRO. If the QDRO requires immediate payment, this Plan will pay the designated benefits, including, if applicable, any earning or loss adjustments that are payable to the Alternate Payee, as soon as administratively feasible.  The Alternate Payee’s benefit will be taken proportionately from each investment in the Participant’s  Individual Accounts and will be invested according to the Alternate Payee’s investment directions or, in the absence of the Alternate Payee’s direction, this Plan’s default investment rules. None of any outstanding loan balance, however, will be allocated to the Alternate Payee’s account. Pro rata earnings and losses will be allocated to the Alternate Payee for the period between the date specified in the QDRO for determining the Alternate Payee’s benefit and the date of transfer under this ARTICLE X. The Participant will direct investment of the Alternate Payee’s benefit if the QDRO provides that no separate account be established.  The provisions of this Plan applicable to Participants will apply to the Alternate Payee.  Any expenses that are charged

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against Participants’ Individual Accounts generally (for example, investment fees) will be charged against the Alternate Payee’s separate account, if applicable. 

(c)Participant’s Beneficiary Designation.  The Participant’s beneficiary designation of the Alternate Payee as the Participant’s beneficiary, if applicable, will not be effective after the date that the Order is determined to be qualified unless the Participant executes a new beneficiary designation after that date that designates the Alternate Payee as the Participant’s named beneficiary.

ARTICLE XI
The Committee

11.1     Committee Appointment

The Board of Directors of the Plan Sponsor (or a committee thereof) will appoint the Committee consisting of three or more members. The Board of Directors may remove any member of the Committee at any time and a member may resign by written notice to the Board of Directors. Any vacancy in the membership of the Committee will be filled by appointment made by the Board of Directors, but pending the filling of any vacancy, the then members of the Committee may act under this Plan as though they alone constitute the full Committee. The Plan Sponsor will notify the Trustee promptly of the appointment of the Committee and of any change in the membership of the Committee. Upon the termination of the employment of a Committee member with the Employer and all Related Employers, his or her membership on the Committee will be deemed to be resigned effective as of the date on which the member’s employment is terminated.

11.2     Committee Action and Procedure

(a)   Any and all acts and decisions of the Committee will be by at least a majority of the then members. The Committee may delegate to any one or more of its members the authority to sign notices or other documents on its behalf or to perform ministerial acts for it, in which event the Trustee and any other person may accept the notice, document or act without question as having been authorized by the Committee.

(b)   The Committee may, but need not, call or hold formal meetings, and any decisions made or actions taken pursuant to written approval of a majority of the then members will be sufficient.

(c)The Committee will maintain adequate records of its decisions, which records will be subject to inspection by the Employer and by any Participant, Former Participant, or Beneficiary, but only to the extent that they apply to the individuals.

(d)   The Committee may designate one of its members as chairman and one of its members as secretary and may establish policies and procedures governing it if they are consistent with this Plan.

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11.3     Committee Powers and Duties

The Committee will perform the duties and may exercise the powers and discretion given to it in this Plan, and its decisions and actions will be final and conclusive regarding all persons affected thereby. The Committee will exercise its discretion at all times in a nondiscriminatory manner. Subject to any limitations stated in this Plan, the Committee is authorized and empowered with the following powers, rights, and duties:

(a)   To determine the rights of eligibility of an Employee to participate in this Plan, the value of a Participant’s Account Balance, and the Nonforfeitable percentage of each Participant’s Individual Accounts;

(b)   To adopt rules of procedure and regulations necessary for the proper and efficient administration of this Plan provided the rules are consistent with the terms of this Plan;

(c)To construe and enforce the terms of this Plan and the rules and regulations it adopts, including interpretation of this Plan documents and documents related to this Plan’s operation;

(d)   To direct the Trustee concerning the crediting and distribution of the Trust Fund;

(e)   To review and render decisions respecting a claim for, or denial of a claim for, a benefit under this Plan;

(f)   To furnish the Employer with information that the Employer may require for tax or other purposes;

(g)   To engage the service of agents whom it may deem advisable to assist it with the performance of its duties;

(h)   To engage the services of an Investment Manager or Managers (as defined in ERISA Section 3(38)), each of whom will have full power and authority to manage, acquire or dispose, or direct the Trustee with respect to acquisition or disposition, of any Plan asset under its control; and

(i)   To establish, in its sole discretion, a nondiscriminatory policy, pursuant to this Section, which the Trustee must observe in making loans, if any, to Participants and Beneficiaries.

11.4     Committee Reliance

The Trustee may rely without question on any notices or other documents received from the Committee. The Plan Sponsor and each Employer will furnish the Committee with all data and information available to the Employer, which the Committee may reasonably require to perform its functions under this Plan. The Committee may rely without question on any data or information furnished by the Plan Sponsor and each Employer.

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11.5     Committee Authority

Any and all disputes that may arise involving Participants, Former Participants, Beneficiaries, and/or the Trustee will be referred to the Committee, and its decisions will be final and conclusive regarding all affected persons. Furthermore, if any issue arises concerning the meaning, interpretation or application of any provisions of this Plan, the decision of the Committee on any issue will be final.

11.6     Conflicts of Interest

Notwithstanding any other provisions of this Plan, no member of the Committee may vote or otherwise act on any matter involving the Committee member’s rights, benefits, or other participation under this Plan.

11.7     Appointment of Agent and Legal Counsel

The Committee may engage agents to assist it and may engage legal counsel who may be counsel for the Plan Sponsor. All reasonable expenses incurred by the Committee will be paid by the Plan Sponsor.

11.8     Annual Accounting

As soon as administratively feasible after the last day of each Plan Year, but within the time prescribed by ERISA and the applicable Labor Regulations and at least annually, the Committee will advise each Participant, Former Participant, and Beneficiary for whom Individual Accounts are held under this Plan of the then balance in the Participant’s Individual Accounts and the other information ERISA requires to be furnished. No Participant except a member of the Committee will have the right to inspect the records reflecting the Individual Accounts of any other Participant.

11.9     Funding Policy

The Committee will review, not less often than annually, all pertinent Employee information and Plan data to establish the funding policy of this Plan and to determine the appropriate methods of carrying out this Plan’s objectives. The Committee must communicate periodically, as it deems appropriate, to the Trustee this Plan’s short-term and long-term financial needs so the investment policy can be coordinated with Plan financial requirements.

ARTICLE XII
Administration

12.1     Administrator Appointment

The Committee will be the Administrator of this Plan and will be responsible for filing all reporting and disclosure documents required by the Department of Labor and the Internal Revenue Service in accordance with ERISA, the Code, and the respective regulations.

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Service of process on this Plan or Trust Fund may be obtained by personal service on the Employer or any Committee member.

12.2     Copies of Additional Documents

Upon written request from a Participant or Beneficiary receiving benefits, the Administrator will furnish a copy of any one (1) or all of the following documents: the latest updated summary plan description, the latest annual report, any terminal report, Trust agreement, contract or other instruments under which this Plan was established or is operated. The Administrator may make a reasonable charge to cover the cost of furnishing complete copies.

12.3     Documents Available for Examination

Copies of this Plan description and the latest annual report, Trust agreement, contract or other instruments under which this Plan was established or is operated will be available for examination at the principal office of the Employer by any Participant or Beneficiary receiving benefits. Examination may be made during reasonable hours in person or by agent, accountant, or attorney.

12.4     Notice of Participant Rights under ERISA

The Administrator will furnish to each Participant and to each Beneficiary receiving benefits information on their rights under this Plan and how the rights may be protected by law.

12.5     Notice to Participant on Participant Termination

The Administrator will furnish a statement to a Participant who terminated Service with the Employer for any of the reasons set forth in ARTICLE V, through ARTICLE VIII, describing the nature, amount and form of the Nonforfeitable Account Balance, if any, to which the Participant is entitled as soon as administratively feasible after the close of the Plan Year in which the Participant terminated Service.

12.6     Notice to Trustee on Participant Termination

(a)   As soon as practicable after a Participant terminates employment with the Employer for any of the reasons set forth in ARTICLE IV, the Administrator will give written notice to the Trustee, including the following information and directions that may be necessary or advisable under the circumstances:

(i)        Name and address of the Participant;

(ii)       Reason the Participant terminated employment with the Employer;

(iii)      Name and address of the Beneficiary or Beneficiaries of a deceased Participant;

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(iv)      Nonforfeitable percentage or amount to which the Participant is entitled as of his Severance from Employment Date pursuant to ARTICLE VI; and

(v) Time, manner, and amount of payment to be made pursuant to the Participant’s election under ARTICLE VIII.

If a Former Participant or Beneficiary dies, the Administrator will give like notice to the Trustee, but only if the Administrator learns of the death.

(b)   At any time and from time to time after giving the notice provided under this Section, the Administrator may modify the original notice or any subsequent notice by a further written notice or notices to the Trustee, but any action taken or payments made by the Trustee pursuant to a prior notice will not be affected by a subsequent notice.

(c)A copy of each notice provided under this Section will be mailed by the Administrator to the Participant, Former Participant, or Beneficiary involved, but the failure to send or receive the copy will not affect the validity of any action taken or payment made pursuant thereto.

(d)   Upon receipt of any notice provided under this Section, the Trustee will promptly take any action and make any payments directed in the notice. The Trustee may rely on the information and directions in the notice absolutely and without question. However, the Trustee may inform the Administrator of any error or oversight that the Trustee believes to exist in any notice.

12.7     Claims for Benefits

Normally, whenever a Participant or Beneficiary becomes entitled to benefits under this Plan, the Administrator and the Trustee will automatically initiate procedures to provide for the payment of the benefits. If a Participant or Beneficiary believes that he or she is entitled to the payment of benefits under this Plan and no action is forthcoming from the Administrator or the Trustee, then the Participant or Beneficiary may file a written claim for benefits with the Administrator or the Trustee.

12.8     Appeals of Decisions of the Committee

(a)   If any Participant or Beneficiary (“Claimant”) files a claim for benefits under this Plan and the claim is denied in whole or in part, the Administrator will give notice of the decision to the Claimant in writing setting forth:

(i)        The specific reasons for the denial;

(ii)       A specific reference to pertinent provisions of this Plan, if any, upon which the denial is based;

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(iii)      A description of any additional material or information necessary for the Claimant to perfect the claim with an explanation of the necessity therefor; and

(iv)      That any appeal the Claimant wishes to make of the adverse determination must be in writing to the Administrator within 60 days after receipt of the Administrator’s notice of denial of benefits. The Administrator’s notice must further advise the Claimant that failure to appeal the action in writing within the 60 day period will render the Administrator’s determination final, binding and conclusive.

(b)   The written notice will be given to the Claimant as soon as administratively feasible after the decision is made, but not later than 60 days after the claim is filed. The Claimant will have the right to be represented, to review pertinent documents and to present written and oral evidence.

(c)If the Claimant should appeal to the Administrator, the Claimant or the duly authorized representative, may submit, in writing, issues and comments the Claimant or the duly authorized representative considers pertinent. The Administrator will render the decision on the review and will set forth the specific reasons for the decision with specific references to pertinent provisions. The Administrator will render the decision in writing within 60 days after receipt of the request for review unless special circumstances, such as the need for a hearing, require an extension that will not exceed an additional 60 days.

12.9     Special Rules for Disability Claims

Notwithstanding Sections 12.7 and 12.8 above, the following rules and procedures will apply to claims and appeals arising on account of a Participant’s Disability.

(a)   Disability Benefit Claims. The Administrator will review all claims for Disability benefits, and will notify the Claimant of any adverse benefit determination within a reasonable period of time, but generally no later than 45 days after receipt of the claim by this Plan. Such notice will contain the information required under Section 12.8(a) above.

(i)        This initial 45-day period may be extended up to an additional 30 days, where the Administrator determines that the extension is necessary due to matters beyond the control of this Plan. The Administrator will notify the Claimant of any extension before the expiration of the initial 45-day period. This notice will indicate the special circumstances requiring an extension and the date by which the Administrator expects to render a decision. This notice will also specifically explain the standards on which entitlement to a claim is based, the unresolved issues that prevent a decision, and any additional information needed to resolve these issues. Where the Administrator determines that a second 30-day extension is necessary due to matters beyond the control of this Plan, a similar

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extension notice will be provided to the Claimant before the end of the first 30-day extension period.

(ii)       The Claimant will have an additional 45 days from receipt of an extension notice to provide any additional specified information. The period for making the benefit determination will be suspended until the Claimant provides this information. A Claimant’s failure to respond to a request for additional information within 45 days, however, will lead to an adverse determination on his or her claim.

(b)   Disability Benefit Appeals. A Claimant may file an appeal of an adverse determination on a Disability benefit claim within 180 days following receipt of a notification of the adverse determination.

(i)        The review will not afford deference to the initial adverse determination, and the review will be conducted by an appropriate Named Fiduciary of this Plan who is neither the individual who made the initial adverse determination, nor that individual’s subordinate.

(ii)       In deciding the appeal of any adverse determination that is based in whole or in part on medical judgment, the appropriate Named Fiduciary will consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment. The health care professional engaged for this purpose will be an individual who was neither consulted in connection with the initial adverse determination, nor any subordinate of such person. The Named Fiduciary will identify any medical or vocational experts whose advice was obtained in connection with a Claimant’s adverse determination, without regard to whether the advice was relied upon in making the benefit determination.

(iii)      The Claims Administrator will notify the claimant of its benefit determination in writing within a reasonable period following receipt of the claimant’s request for review, but no later than 45 days after receipt of the Claimant’s appeal.

ARTICLE XIII
Investment of Trust Assets

13.1     Appointment of Trustee

The Plan Sponsor will determine the number of Trustees, will appoint such Trustees, and may at any time, and from time to time, increase or decrease the number of Trustees. The Plan Sponsor may remove any Trustee at any time and appoint a successor Trustee or Trustees or reduce the number of Trustees (but not to less than one). The Trustee or Trustees will have such rights, powers, and duties as will from time to time be specified in or determined pursuant to the Trust Agreement. The Trust Agreement will form a part of this Plan, and the Trust Fund assets will be administered in accordance with the terms of this Plan and the Trust Agreement.

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13.2     Investment of Accounts

(a)   All Individual Accounts will be invested and reinvested by the Trustee in accordance with Participant direction, as provided herein.

(i)        Each Participant, in his written application for participation or through such other means as may be authorized by the Administrator, if any, will direct the Administrator and the Trustee as to which Investment Fund(s) he wishes to utilize and the percentage of his Individual Accounts he wishes to have invested in each fund.

(ii)       A Participant may change his designation of the manner for investment of such Participant’s Individual Accounts, or current contributions made on behalf of or by the Participant, or both, to any other manner permitted hereunder. This change may be made in writing to the Administrator or through such other means as may be authorized by the Administrator, if any. A change will be applicable as soon as administratively feasible following its delivery to the Trustee. In order to comply with applicable federal or state securities laws, the Administrator may establish such rules with respect to the change of investment designation by Participants as it will deem necessary or advisable to prevent possible violations of such laws.

(iii)      To the extent a Participant fails to direct the investment of all or any portion of his or her Individual Accounts, the Administrator will direct the Trustee to invest such Individual Accounts in one of the Investment Funds available for the Participants to choose among, in accordance with applicable Labor Regulations.

The Administrator may permit a Participant to make an election under this Section through any electronic or telephonic means authorized by the Administrator.

(b)   Investment Funds. The Administrator will select the “Investment Funds” available under this Plan in accordance with a separate written investment policy. The Administrator will select and maintain such Investment Funds in accordance with the Administrator’s written investment policy. Such Investment Funds will be communicated to Participants in writing. All Individual Accounts will be allocated by the Administrator to the Investment Funds specified in the separate written investment policy. Dividends, interest, and other distributions will be reinvested in the same Investment Fund from which they are received.

Except as otherwise provided, the assets of each Investment Fund will be invested exclusively in shares of the registered investment company designated by the Administrator, provided that such shares constitute securities described in ERISA Section 401(b)(1). Amounts invested in any such Investment Fund in amounts estimated by the Trustee to be needed for cash withdrawals, or in amounts too small to be reasonably invested, or in amounts that the Trustee deems to be in the best

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interest of the Participants, may be retained by the Trustee in cash or invested temporarily.

(c)   Investment in Sonic Stock Fund.  In addition to the investment funds designated under subsection (b) above, this Plan shall maintain the Sonic Stock Fund as an investment fund within this Plan.  The Sonic Stock Fund will invest solely in Sonic Stock.  Sonic Stock is currently traded on the over-the-counter market with price quotations reported on the NASDAQ National Market System under the symbol SONC.  No Participant shall be allowed to direct more than twenty-five percent (25%) of each single Salary Deferral Contribution or Catch-Up Contribution to be in invested in the Sonic Stock Fund.  Subject to the preceding sentence, a Participant shall be allowed to direct the Trustee to transfer amounts into and out of the Sonic Stock Fund without restriction.

The accounting methods or formulae to be used under this Plan for the purpose of maintaining a Participant’s Account Balance with respect to any portion thereof invested in the Sonic Stock Fund shall be determined by the Committee and shall be based upon the unit accounting method, whereby all Plan assets in the Sonic Stock Fund are carried as units, as opposed to actual shares of Sonic Stock.  Thus, Participants shall not have any individual Sonic Stock allocated to their Account Balances, but rather they shall be allocated an undivided percentage interest, denominated in units, in the entire Sonic Stock Fund, representing the portion of the Sonic Stock Fund allocated to their Account Balances.  The accounting methods or formulae selected by the Committee may be revised from time to time in order to accomplish the foregoing purposes, but shall at all times conform to the general principles in this subsection 13.2(c).

13.3     Income and Expenses

(a)   The dividends, capital gains distributions, and other earnings received on an Investment Fund that is specifically credited to a Participant’s or Former Participant’s separate Individual Accounts under this Plan will be allocated to such separate Individual Accounts and immediately reinvested, to the extent practicable, in additional shares of such Investment Fund.

(b)   Fees charged by the Trustee and other expenses of operating the Trust will be paid by the Employers or, in the absence of such payments (that are not obligatory), out of the general Trust Fund assets and charged to the separate Individual Accounts of all Participants and Former Participants under this Plan in the ratio that the fair market value of each such Individual Account bears to the total fair market value of all separate Individual Accounts; provided, however, that such amounts will be adjusted to reflect any revenue sharing payments received from an Investment Fund.

13.4     Exclusive Benefit

The Plan and the Trust Fund are established and will be maintained for the exclusive benefit of the Participants, Former Participants, and their Beneficiaries. Subject to the

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exceptions expressly set forth in this Plan or the Trust Agreement, no part of the Trust Fund assets may ever revert to an Employer or be used for or diverted to purposes other than the exclusive benefit of the Participants, Former Participants, and Beneficiaries.

13.5     Valuation

The value of each Participant’s Individual Accounts will be determined as of each Valuation Date, on the basis of the fair market value of the assets allocated to each such Participant’s Individual Accounts, as appraised by the Trustee.

(a)   As of each Valuation Date, the Administrator will determine the fair market value of each Investment Fund being administered by the Trustee. With respect to each such Investment Fund, the Administrator will determine (i) the change in value between the current Valuation Date and the then last preceding Valuation Date, (ii) the net gain or loss resulting from expenses paid (including fees and expenses, if any, which are to be charged to such Investment Fund), and (iii) realized and unrealized gains and losses.

The transfer of funds to or from an Investment Fund and payments, distributions, and withdrawals from an Investment Fund to provide benefits under this Plan for Participants or Beneficiaries will not be deemed to be gains, expenses, or losses of an Investment Fund.

As of each Valuation Date, the Administrator will direct the Trustee to allocate the net gain or loss of each Investment Fund on the Valuation Date to the Individual Accounts of Participants participating in such Investment Fund on such Valuation Date. Contributions and rollovers received and credited to Participants’ Individual Accounts as of such Valuation Date, or as of an earlier date since the last preceding Valuation Date will not be considered in allocating gains or losses allocated to Participants’ Individual Accounts.

(b)   The reasonable and equitable decision of the Administrator as to the value of each Investment Fund, and of any Individual Account as of each Valuation Date will be conclusive and binding upon all persons having any interest, direct or indirect, in the Investment Funds or in any account.

13.6     Investment Policy

The Trustee will be obliged only to use good faith and to exercise its honest judgment as to what investments are from time to time in the best interests of the Trust Fund and the Participants and their Beneficiaries. Furthermore, the Trustee may hold any portion of the Trust Fund in cash and uninvested whenever it deems such holding necessary or advisable.

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ARTICLE XIV
Participant Loans

14.1     General

Unless otherwise provided by the Administrator, this Plan authorizes the Trustee to make loans on a nondiscriminatory basis to a Participant or Beneficiary in accordance with the written loan policy established by the Administrator, provided (i) the loan policy satisfies the requirements of Code Section 72(p); (ii) loans are available to all Participants and Beneficiaries on a reasonably equivalent basis and are not available in a greater amount for Highly Compensated Employees than for other Employees; (iii) any loan is adequately secured and bears a reasonable rate of interest; (iv) the loan provides for repayment within a specified time; (v) the default provisions of the note prohibit offset of the Participant’s Nonforfeitable Account Balance prior to the time the Trustee otherwise would distribute the Participant’s Nonforfeitable Account Balance; and (vii) the loan otherwise conforms to the exemption provided by Code Section 4975(d)(1).

14.2     Loan Policy

If the Administrator adopts a loan policy, pursuant to Sections 11.3(i) and 14.1, the loan policy must be a written document and must include (i) the identity of the person or positions authorized to administer the Participant loan program; (ii) a procedure for applying for the loan; (iii) the criteria for approving or denying a loan; (iv) the limitations, if any, on the types and amounts of loans available; (v) the procedure for determining a reasonable rate of interest; (vi) the types of collateral that may secure the loan; and (vii) the events constituting default and the steps this Plan will take to preserve Plan assets in the event of default. This Section specifically incorporates any written loan policy adopted by the Administrator as part of this Plan.

14.3     Special Rules under USERRA for Loan Repayments.

Loan repayments will be suspended under this Plan, as permitted under Code Section 414(u)(4), on behalf of those Participants who are on an authorized leave of absence pursuant to qualified military service.

ARTICLE XV
Rollovers, Mergers, and Direct Transfers

15.1     Participant Rollover Contributions

Any Participant who has the Administrator’s written consent and who has filed with the Trustee the form prescribed by the Administrator may contribute cash or other property to the Trust other than as a voluntary contribution if the contribution is a Rollover Contribution that the Code permits an Employee to transfer either directly or indirectly from one qualified plan to another qualified plan. Before accepting a Rollover Contribution, the Trustee may require an Employee to furnish satisfactory evidence that the proposed transfer is in fact a Rollover Contribution that the Code permits an

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Employee to make to a qualified plan. A Rollover Contribution is not an Annual Addition for purposes of Code Section 415.

An Eligible Employee, prior to satisfying this Plan’s conditions, may make a Rollover Contribution to the Trust Fund to the same extent and in the same manner as a Participant. If an Employee makes a Rollover Contribution to the Trust Fund prior to satisfying this Plan’s eligibility conditions, the Administrator and Trustee must treat the Eligible Employee as a Participant for all purposes of this Plan except the Eligible Employee is not a Participant for purposes of sharing in Employer contributions or Forfeitures under this Plan until the Eligible Employee actually becomes a Participant in this Plan. If the Eligible Employee has a Severance from Employment Date prior to becoming a Participant, the Trustee will distribute the Rollover Account to the individual.

For any Rollover Contribution, the following requirements will be met:

(a)   The Administrator will maintain a Participant’s Rollover Contributions in a separate Rollover Account.

(b)   Except with respect to a Plan asset properly subject to Employer, Participant, or Administrator direction of investment, the Trustee will invest the Rollover Contribution in a segregated investment Rollover Account for the Participant’s sole benefit unless the Trustee, in its sole discretion, agrees to invest the Rollover Contribution as part of the Trust Fund. The Trustee will not have any investment responsibility for a Participant’s segregated Rollover Account. The Participant, however, from time to time, may direct the Trustee in writing on the investment of the segregated Rollover Account in an Investment Fund. A Participant’s segregated Rollover Account alone will bear any extraordinary expenses resulting from investments made at the direction of the Participant. As of the Valuation Date, the Administrator will allocate and credit the net income or charge the net loss from a Participant’s segregated Rollover Account and credit or charge respectively the increase or decrease in the fair market value of the assets of a segregated Rollover Account solely to that Rollover Account. The Trustee is not liable nor responsible for any loss resulting to any Beneficiary, nor to any Participant, because of any sale or investment made or other action taken pursuant to and in accordance with the direction of the Participant. In all other respects, the Trustee will hold, administer, and distribute a Rollover Contribution in the same manner as any Employer contribution made to the Trust Fund.

(c)   A Participant’s Rollover Contributions will not be forfeitable nor reduce in any way the obligations of the Employer under this Plan.

15.2     Mergers and Direct Transfers

To the extent directed by the Administrator, the Trustee possesses the specific authority to enter into merger agreements or direct transfer of assets agreements with the trustees of other retirement plans described in Code Section 401(a), and to accept the direct transfer of Plan assets or to transfer plan assets, as a party to any agreement. Further, the Trustee

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may permit the transfer of Plan assets to an individual retirement account or an individual retirement annuity. However, the Trustee, before any merger or direct transfer is consummated, will be satisfied that the holding of any transferred assets is permitted by the transferee trusts. In addition, the Trustee must reasonably determine, prior to permitting such a transfer, that the transferee plan will continue the distribution restrictions of Code Sections 401(k)(2) and 401(k)(10) on any transferred amounts that are attributable to Salary Deferral Contributions of Participants. When the Trustee is so satisfied, the Trustee will accept the direct transfer of plan assets or will cause to be transferred the assets directed to be transferred. The Trustee may accept a direct transfer of plan assets on behalf of an Employee prior to the date the Employee satisfies this Plan’s eligibility conditions. If the Trustee accepts a direct transfer of plan assets, the Administrator and Trustee must treat the Employee as a Participant for all purposes of this Plan except that the Employee is not a Participant for purposes of sharing in any Employer contributions or Forfeitures under this Plan until the Employee actually becomes a Participant in this Plan.

The Trustee may not consent to, or be a party to, any merger or consolidation with another plan or to a transfer of assets and liabilities to another plan, unless, immediately after the merger, consolidation or transfer the surviving plan provides each Participant a benefit equal to or greater than the benefit each Participant would have received had the plan terminated immediately before the merger, consolidation, or transfer.

15.3     Rules Concerning Certain Rollovers, Mergers, and Direct Transfers

The Trustee will hold, administer, and distribute the transferred assets as a part of the Trust Fund and the Trustee must maintain a separate Individual Accounts for the benefit of the Employees on whose behalf the Trustee accepted the transfer to reflect the value of the transferred assets.

The Plan will preserve all Code Section 411(d)(6) protected benefits with respect to those transferred assets, in the manner described in Section 9.2(c)(iii).

If this Plan receives a direct transfer, by merger or otherwise, of Salary Deferral Contributions, or amounts treated as Salary Deferral Contributions, under a plan with a Code Section 401(k) arrangement, the distribution restrictions of Code Sections 401(k)(2) and 401(k)(10) continue to apply to those transferred Salary Deferral Contributions.

ARTICLE XVI
Exclusive Benefit

16.1     Exclusive Benefit

Except as otherwise provided, no Employer will have a beneficial interest in any asset of the Trust Fund and no part of any asset in the Trust Fund may ever revert to or be repaid to an Employer, either directly or indirectly. Further, prior to the satisfaction of all liabilities with respect to the Participants and their Beneficiaries under this Plan, no part of the corpus or income of the Trust Fund, or any asset of the Trust Fund, may be used for, or diverted to, purposes other than the exclusive benefit of the Participants or their

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Beneficiaries. No amendment or revocation by the Administrator or Plan Sponsor of this Section may cause or permit any portion of the Trust Fund to revert to or become a property of the Employer.

16.2     Denial of Request for Approval

Any contribution to the Trust Fund associated with this Plan is conditioned on qualification of this Plan under applicable Code Sections and of the exemption of the Trust Fund created under this Plan under Code Section 501(a). If the Commissioner of the Internal Revenue Service, upon this Plan Sponsor’s request for approval of this Plan and Trust, determines that this Plan is not qualified or the Trust Fund is not exempt, then the Trustee may return to the Employer, within one (1) year after the date of final disposition of the Plan Sponsor’s request for initial approval, any contribution made by the Employer, and any increment attributable to the contribution.

16.3     Mistake of Fact

Notwithstanding any contrary provision in this Plan, if a contribution is made by an Employer by a mistake of fact, the contribution may be returned to the Employer within one (1) year after the payment of the contribution. The amount of the mistaken contribution is equal to the excess of (i) the amount contributed over (ii) the amount that would have been contributed had there not occurred a mistake of fact. Earnings attributable to mistaken contributions may not be returned to the Employer, but losses attributable thereto will reduce the amount to be returned.

16.4     Disallowance of Deduction

Notwithstanding any contrary provision in this Plan, any contributions by the Employer to this Plan and Trust are conditioned on the deductibility of the contribution by the Employer under the Code. To the extent any deduction is disallowed, the Employer, within one (1) year following a final determination of the disallowance, whether by agreement with the Internal Revenue Service or by final decision in a court of competent jurisdiction, may demand repayment of the disallowed contribution, and the Trustee will return the contribution within one (1) year following the disallowance. Earnings attributable to excess contributions may not be returned to the Employer, but losses attributable thereto will reduce the amount to be returned.

16.5     Spendthrift Clause

Except as provided below, no Participant, Former Participant, or Beneficiary will have the right to anticipate, assign, or alienate any benefit provided under this Plan and the Trustee will not recognize any anticipation, assignment or alienation. Furthermore, a benefit under this Plan is not subject to attachment, garnishment, levy, execution, or other legal or equitable process. All provisions of this Plan will be for the exclusive benefit of those designated herein. These restrictions will not apply in the following case(s):

(a)   Distributions Pursuant to Qualified Domestic Relations Orders. The Administrator may direct the Trustee under the nondiscriminatory policy adopted by the

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Administrator to pay an Alternate Payee designated under a qualified domestic relations order as defined in Code Section 414(p) or any domestic relations order entered before January 1, 1985 if payment of benefits pursuant to the order has commenced as of that date. To the extent provided under a qualified domestic relations order, a former spouse of a Participant will be treated as the spouse or for all purposes of this Plan.

A domestic relations order that otherwise satisfies the requirements for a qualified domestic relations order will not fail to be qualified: (i) solely because the order is issued after, or revises, another domestic relations order; or (ii) solely because of the time at which the order is issued, including issuance after the Participant’s death.

(b)   Participant Loans. If a Participant, Former Participant, or Beneficiary who has become entitled to receive payment of benefits under this Plan is indebted to the Trustee, by virtue of a Participant loan, the Administrator may direct the Trustee to pay the indebtedness and charge it against the Account Balance of the Participant, Former Participant, or Beneficiary.

(c)   Distributions Under Certain Judgments and Settlements. Nothing contained in this Plan prevents the Trustee from complying with a judgment or settlement that requires the Trustee to reduce a Participant’s benefits under this Plan by an amount that the Participant is ordered or required to pay to this Plan if each of the following criteria are satisfied:

(i)        The order or requirement must arise –

(A)      Under a judgment or conviction for a crime involving this Plan;

(B)      Under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with an actual or alleged violation of Part 4 of Title I of ERISA; or

(C)      Under a settlement agreement with either the Secretary of Labor or the Pension Benefit Guarantee Corporation and the Participant in connection with an actual or alleged violation of Part 4 of Title I of ERISA by a fiduciary or any other person.

(ii)       The decree, judgment, order, or settlement expressly provides for the offset of all or part of the amount ordered or required to be paid to this Plan against the Participant’s benefits under this Plan.

16.6     Termination

Upon termination of this Plan, in lieu of the distribution provisions of ARTICLE VIII, the Administrator will direct the Trustee to distribute each Participant’s Nonforfeitable Account Balance, in a single sum, as soon as administratively feasible after the later of the termination of this Plan or the receipt of a favorable determination letter from the Internal Revenue Service, if an application is filed, irrespective of the present value of the

67

Participant’s Nonforfeitable Account Balance and whether the Participant consents to that distribution. This paragraph applies only if:

(a)   The Plan does not provide an annuity option;

(b)   The Plan is a profit sharing plan on its termination date; and

(c)   As of the period between this Plan termination date and the final distribution of assets, the Employer does not maintain any other defined contribution plan (other than an employee stock ownership plan).

For Participants or Beneficiaries who cannot be located upon Plan termination, and whose Nonforfeitable Account Balance exceeds $1,000, to liquidate the Trust, the Trustee will purchase a deferred annuity contract, distribute the benefits to an individual retirement account, or transfer the account to an ongoing qualified plan of the Employer or a Related Employer. If the Administrator distributes the lost Participant’s or Beneficiary’s benefits to an individual retirement account or purchases an annuity, and the Participant’s or Beneficiary’s whereabouts remain unknown for the duration of the escheat period, the benefits will ultimately escheat to the state under applicable state law.

Notwithstanding the foregoing, distributions may not be made following termination of this Plan if the Plan Sponsor establishes or maintains an alternative defined contribution plan as described in Treasury Regulation Section 1.401(k)‑1(d)(4)(i).

ARTICLE XVII
Construction

17.1     Headings

The headings in this Plan are for convenience only and will not be considered in construing this Plan.

17.2     Context

In this Plan, wherever the context of this Plan dictates, words used in the masculine may be construed in the feminine, the plural includes the singular and the singular includes the plural.

17.3     Employment Not Guaranteed

Nothing contained in this Plan, or regarding the establishment of this Plan or Trust Fund, or any modification or amendment to this Plan or Trust Fund, or in the creation of any Individual Accounts, or the payment of any benefit, will be construed as giving any Employee, Participant, or Beneficiary any right to continue in the employment of the Employer, any legal or equitable right against the Administrator, against the Employer, its stockholders, officers, or directors, or against the Trustee, except as expressly provided by this Plan, the Trust Fund, ERISA, or by separate agreement. Employment of

68

all persons by the Employer will remain subject to termination by the Employer to the same extent as if this Plan had never been executed.

17.4     Waiver of Notice

Any person entitled to notice under this Plan may waive the notice unless the Code or Treasury Regulations prescribe the notice or ERISA specifically or impliedly prohibits a waiver.

17.5     State Law

This Plan and each of its provisions will be construed and their validity determined by the laws of the State of Oklahoma and applicable Federal law to the extent Federal statute supersedes Oklahoma law.

17.6     Parties Bound

This Plan will be binding on all persons entitled to benefits under this Plan, their respective heirs and legal representatives, on the Employer, its successors and assigns, and on the Trustee, the Administrator, and their successors.

17.7     Severance

If any provisions of this Plan will be invalid or unenforceable, the remaining provisions will continue to be fully effective.

17.8     Qualified Military Service

Notwithstanding any provision of this Plan to the contrary, contributions, benefits, and Service credits, with respect to qualified military service, will be provided in accordance with Code Section 414(u).

69

IN WITNESS WHEREOF, the Plan Sponsor, SONIC CORP., has caused this instrument to be executed on this _____ day of ________ 2012, to be effective as of the 1st day of January 1, 2013.

SONIC CORP.

By: ______________________________________

Title: _____________________________________

70

Exhibit A

If approved by the Employer, Nonelective Contributions pursuant to Section 3.5 of the Plan shall be made in accordance with the benefit level of the eligible Participant, as designated in the records of the Employer’s People Department, as follows:

Benefit Level	Amount of Contribution
I	$350
II	$875
III	$1,750

71

EX-31.01

EXHIBIT 31.01

CERTIFICATION PURSUANT TO

SEC RULE 13a-14

I, J. Clifford Hudson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sonic Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 3, 2013

/s/ J. Clifford Hudson

J. Clifford Hudson

Chief Executive Officer

EX-31.02

EXHIBIT 31.02

CERTIFICATION PURSUANT TO

SEC RULE 13a-14

I, Stephen C. Vaughan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Sonic Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this  report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this  report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: July 3, 2013

/s/ Stephen C. Vaughan

Stephen C. Vaughan

Chief Financial Officer

EX-32.01

EXHIBIT 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned hereby certifies that to his knowledge the quarterly report of Sonic Corp. (the “Company”) filed with the Securities and Exchange Commission on the date hereof fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly represents, in all material respects, the financial condition and results of operations of the Company.

Date:  July 3, 2013

/s/ J. Clifford Hudson

J. Clifford Hudson

Chief Executive Officer

EX-32.02

EXHIBIT 32.02

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned hereby certifies that to his knowledge the quarterly report of Sonic Corp. (the “Company”) filed with the Securities and Exchange Commission on the date hereof fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly represents, in all material respects, the financial condition and results of operations of the Company.

Date:  July 3, 2013

/s/ Stephen C. Vaughan

Stephen C. Vaughan

Chief Financial Officer

XML

Subsequent Event

9 Months Ended

May 31, 2013

Subsequent Event [Abstract]

Subsequent Event

12.Subsequent Event

Subsequent to the end of the third fiscal quarter of 2013, the Company announced that certain of its subsidiaries intend to refinance a portion of the 2011 Fixed Rate Notes issued under their securitization debt facility.  The Company’s subsidiaries have entered into a commitment letter, pursuant to which a purchaser has agreed, subject to the conditions contained in the letter, to purchase at par approximately $155 million of Series 2013-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2013 Fixed Rate Notes”) to be issued under the securitization debt facility.  As specified in the commitment letter, the 2013 Fixed Rate Notes are expected to have a fixed interest rate of 3.75%, an anticipated contract monthly weighted average life of seven years and a final legal maturity date in 2043.

The net proceeds from the sale of the 2013 Fixed Rate Notes will be used to prepay $155 million of the 2011 Fixed Rate Notes at par.  The 2013 Fixed Rate Notes will be issued pursuant to the securitized financing facility which the Company’s subsidiaries have had in place since May 2011.  The 2011 Fixed Rate Notes have a fixed interest rate of 5.4% with $450.2million outstanding as of May 31, 2013. 

XML

Condensed Consolidated Statements Of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013	May 31, 2012
Revenues:
Company Drive-In sales	$ 108,445	$ 110,070	$ 285,607	$ 294,037
Franchise Drive-Ins:
Franchise royalties and fees	35,833	35,801	91,749	90,831
Lease revenue	1,089	2,056	3,524	4,605
Other	1,267	1,500	2,903	3,317
Total revenues	146,634	149,427	383,783	392,790
Costs and expenses:
Food and packaging	30,776	30,600	80,954	83,011
Payroll and other employee benefits	37,924	38,539	102,837	106,363
Other operating expenses, exclusive of depreciation and amortization included below	21,356	22,261	62,143	65,899
Total cost of company drive-in sales	90,056	91,400	245,934	255,273
Selling, general and administrative	16,943	16,951	48,540	48,452
Depreciation and amortization	9,783	10,288	30,447	31,264
Provision for impairment of long-lived assets		203		376
Other operating income, net	(142)	(151)	(353)	(613)
Total costs and expenses	116,640	118,691	324,568	334,752
Income from operations	29,994	30,736	59,215	58,038
Interest expense	7,170	7,836	22,293	23,807
Interest income	(153)	(174)	(462)	(477)
Loss from early extinguishment of debt			492
Net interest expense	7,017	7,662	22,323	23,330
Income before income taxes	22,977	23,074	36,892	34,708
Provision for income taxes	8,184	8,667	12,389	13,125
Net income	$ 14,793	$ 14,407	$ 24,503	$ 21,583
Basic income per share	$ 0.26	$ 0.24	$ 0.43	$ 0.36
Diluted income per share	$ 0.26	$ 0.24	$ 0.43	$ 0.36

XML

Impairment Of Long-Lived Assets And Goodwill

9 Months Ended

May 31, 2013

Impairment Of Long-Lived Assets And Goodwill [Abstract]

Impairment Of Long-Lived Assets And Goodwill

5.Impairment of Long-Lived Assets and Goodwill

Long-Lived Assets

The Company assesses long-lived assets used in operations for possible impairment when events and circumstances indicate that such assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amount.  No material impairment charges for long-lived assets were recorded in the first nine months of fiscal year 2013 or in the same period last year. Projecting the cash flows for the impairment analysis involves significant estimates with regard to the performance of each drive-in, and it is reasonably possible that the estimates of cash flows may change in the near term resulting in the need to write down operating assets to fair value.

Goodwill

The Company is required to test goodwill for impairment on an annual basis and between annual tests as a result of allocating goodwill to Company Drive-Ins that are sold or whenever indications of impairment arise including, but not limited to, a significant decline in cash flows from store operations.  Such tests could result in impairment charges.  As of May 31, 2013, the Company had $77.1 million of goodwill, of which $71.1 million was attributable to the Company Drive-Ins segment and $6.0 million was attributable to the Franchise Operations segment.  For more information regarding the Company’s goodwill and other intangible assets information, see note1 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended August 31, 2012.

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Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				9 Months Ended
	May 31, 2013		May 31, 2012		May 31, 2013		May 31, 2012
Earnings Per Share [Abstract]
Net income	$ 14,793		$ 14,407		$ 24,503		$ 21,583
Weighted average common shares outstanding – basic	56,005		59,936		56,492		60,736
Effect of dilutive employee stock options and unvested restricted stock units	840		25		626		31
Weighted average common shares - diluted	56,845		59,961		57,118		60,767
Net income per common share - basic	$ 0.26		$ 0.24		$ 0.43		$ 0.36
Net income per common share - diluted	$ 0.26		$ 0.24		$ 0.43		$ 0.36
Anti-dilutive securities excluded	3,327	[1]	7,382	[1]	3,877	[1]	7,269	[1]

[1] Anti-dilutive securities consist of stock options and unvested restricted stock units that were not included in the computation of diluted earnings per share because either the exercise price of the options was greater than the average market price of the common stock or the total assumed proceeds under the treasury stock method resulted in negative incremental shares and thus the inclusion would have been anti-dilutive.

XML

Basis Of Presentation (Policy)

9 Months Ended

May 31, 2013

Basis Of Presentation [Abstract]

Principles Of Consolidation

Principles of Consolidation

The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries and a number of Company Drive-Ins in which a subsidiary has a controlling ownership interest.  All intercompany accounts and transactions have been eliminated.

Reclassifications

Reclassifications

Certain amounts reported in previous years, which are not material, have been combined and reclassified to conform to the current-year presentation.

XML

Income Taxes (Schedule Of Provision (Benefit) For Income Taxes And Effective Income Tax Rate) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013	May 31, 2012
Income Taxes [Abstract]
Provision for income taxes	$ 8,184	$ 8,667	$ 12,389	$ 13,125
Effective income tax rate	35.60%	37.60%	33.60%	37.80%

XML

Income Taxes (Narrative) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	May 31, 2013
Income Taxes [Abstract]
Unrecognized tax benefits	$ 2.0
Unrecognized tax benefits in interest and penalties	0.4
Decrease in unrecognized tax benefits	3.5
Decrease in unrecognized tax benefits impacting tax rate	0.1
Possible change in unrecognized tax benefits, lower bound	1.4
Possible change in unrecognized tax benefits, upper bound	$ 2.5

XML

Fair Value Of Financial Instruments (Financial Assets Measured At Fair Value On A Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	May 31, 2013	Aug. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	$ 19,976	$ 7,784
Restricted cash (current)	8,899	10,200
Restricted cash (noncurrent)	7,760	7,903
Total	36,635	25,887
Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents	19,976	7,784
Restricted cash (current)	8,899	10,200
Restricted cash (noncurrent)	7,760	7,903
Total	36,635	25,887
Significant Other Observable Inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents
Restricted cash (current)
Restricted cash (noncurrent)
Total
Significant Unobservable Inputs (Level 3) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents
Restricted cash (current)
Restricted cash (noncurrent)
Total

XML

Contingencies (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	May 31, 2013
Contingencies [Abstract]
Guaranteed operating lease obligations agreement, expiration year	2029
Guaranteed operating lease obligations	$ 12.2
Guaranteed operating lease liability	$ 0

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Stock Repurchase Program (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended	1 Months Ended		9 Months Ended
	Aug. 15, 2012	Jan. 31, 2013	Aug. 31, 2012	May 31, 2013
Stock Repurchase Program [Abstract]
Shares repurchase authorized amount	$ 40.0	$ 55.0
Shares acquired through stock repurchase program				3.3
Purchase of treasury stock			1.1	35.5
Remaining amount authorized for repurchase through stock repurchase program				$ 18.4

XML

Basis Of Presentation

9 Months Ended

May 31, 2013

Basis Of Presentation [Abstract]

Basis Of Presentation

1.Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and with the rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements of Sonic Corp. (the “Company”).  In the opinion of management, these financial statements reflect all adjustments of a normal recurring nature, including recurring accruals, necessary for the fair presentation of the Company’s financial position, results of operations and cash flows for the interim periods presented in conformity with GAAP.  In certain situations, recurring accruals, including franchise royalties, are based on more limited information at interim reporting dates than at the Company’s fiscal year end due to the abbreviated reporting period.  Actual results may differ from these estimates.  These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended August 31, 2012 included in the Company’s Annual Report on Form 10-K.  Interim results are not necessarily indicative of the results that may be expected for a full year or any other interim period.

Principles of Consolidation

The accompanying financial statements include the accounts of the Company, its wholly owned subsidiaries and a number of Company Drive-Ins in which a subsidiary has a controlling ownership interest.  All intercompany accounts and transactions have been eliminated.

Reclassifications

Certain amounts reported in previous years, which are not material, have been combined and reclassified to conform to the current-year presentation.

XML

Stock Repurchase Program

9 Months Ended

May 31, 2013

Stock Repurchase Program [Abstract]

Stock Repurchase Program

3.Stock Repurchase Program

On August 15, 2012, the Company’s Board of Directors approved a stock repurchase program authorizing the Company to purchase up to $40 million of its outstanding shares of common stock.  In January 2013, the Board of Directors increased the stock repurchase program to $55 million in authorized purchases through August 31, 2013.  During the first nine months of fiscal year 2013, approximately 3.3 million shares were acquired pursuant to this program for a total cost of $35.5 million.  Including the $1.1 million purchased in August 2012 and the repurchases in fiscal year 2013, the total remaining amount authorized, as of May 31, 2013, was $18.4million.  Share repurchases may be made from time to time in the open market or in negotiated transactions, depending on share price, market conditions and other factors.  The stock repurchase program may be extended, modified, suspended or discontinued at any time.

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Accounts And Notes Receivable

9 Months Ended

May 31, 2013

Accounts And Notes Receivable [Abstract]

Accounts And Notes Receivable

6.Accounts and Notes Receivable

Accounts and notes receivable consist of the following (in thousands):

	May 31,		August 31,
	2013		2012
Current Accounts and Notes Receivable:
Royalties and other trade receivables	$	17,664	$	17,030
Notes receivable from franchisees		4,656		1,304
Notes receivable from advertising funds		7,825		4,825
Other		4,436		6,109
Accounts and notes receivable, gross		34,581		29,268
Allowance for doubtful accounts and notes receivable		(2,102)		(2,195)
Accounts and notes receivable, net	$	32,479	$	27,073
Noncurrent Notes Receivable:
Notes receivable from franchisees	$	5,926	$	5,286
Notes receivable from advertising funds		6,495		7,152
Allowance for doubtful notes receivable		(808)		(797)
Notes receivable, net	$	11,613	$	11,641

The Company’s receivables are primarily due from franchisees, all of whom are in the restaurant business.  Substantially all of the notes receivable from franchisees are collateralized by real estate or equipment.  During fiscal year 2013, notes receivable from franchisees increased as a result of the franchisee-exercised option discussed in note 7 – Other Operating Income.  The notes receivable from advertising funds represent transactions in the normal course of business.

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Income Taxes

9 Months Ended

May 31, 2013

Income Taxes [Abstract]

Income Taxes

4.Income Taxes

The following table presents the Company’s provision for income taxes and effective income tax rate for the periods below:

	Three months ended						Nine months ended
	May 31,						May 31,
	2013			2012			2013			2012
Provision for income taxes	$	8,184		$	8,667		$	12,389		$	13,125
Effective income tax rate		35.6	%		37.6	%		33.6	%		37.8	%

The decrease in the Company’s effective income tax rate during the third quarter of fiscal year 2013 was primarily attributable to tax benefits related to disqualifying dispositions on stock options and a favorable annual return to provision adjustment.  The decline in the effective income tax rate during the first nine months of fiscal year 2013 was attributable to the expiration of a state statute of limitations related to an uncertain tax position and legislation that reinstated and extended the Work Opportunity Tax Credit (“WOTC”) in the second quarter of fiscal year 2013, as well as an adjustment in fiscal year 2012 to deferred tax accounts.

As of May 31, 2013, the Company had $2.0million of unrecognized tax benefits, including $0.4million of interest and penalties.  During the first nine months of fiscal year 2013, the liability for unrecognized tax benefits decreased by $3.5million.  The majority of the change was due to the favorable resolution of a federal tax audit, a statute of limitations expiration of a state tax position, a tax method change and a new uncertain position related to a federal credit.  Of this change, only $0.1 million impacted the Company’s tax rate.  The Company recognizes estimated interest and penalties as a component of its income tax expense, net of federal benefit.If recognized, the entire amount of unrecognized tax benefits would favorably impact the effective tax rate.

The Company or one of its subsidiaries is subject to U.S. federal income tax and income tax in multiple U.S. state jurisdictions.  The Company is currently undergoing examinations or appeals by various state and federal authorities.  The Company anticipates that the finalization of these examinations or appeals, combined with the expiration of applicable statutes of limitations and the additional accrual of interest related to unrecognized benefits on various return positions taken in years still open for examination, could result in a change to the liability for unrecognized tax benefits during the next 12 months ranging from a decrease of $1.4million to anincreaseof $2.5million depending on the timing and terms of the examination resolutions.

XML

Impairment Of Long-Lived Assets And Goodwill (Details) (USD $) In Thousands, unless otherwise specified	May 31, 2013	Aug. 31, 2012
Goodwill [Line Items]
Goodwill	$ 77,100	$ 76,997
Company Drive-Ins [Member]
Goodwill [Line Items]
Goodwill	71,100
Franchise Operations [Member]
Goodwill [Line Items]
Goodwill	$ 6,000

XML

Debt (Details) (USD $)	3 Months Ended	9 Months Ended
	Feb. 28, 2013	May 31, 2013
Debt [Abstract]
Debt prepayment	$ 20,000,000
Loss from early extinguishment of debt		$ 492,000

XML

Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	May 31, 2013	Aug. 31, 2012
Condensed Consolidated Balance Sheets [Abstract]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	245,000	245,000
Common stock, shares issued	118,309	118,309
Treasury stock, shares	62,466	60,325

XML

Debt

9 Months Ended

May 31, 2013

Debt [Abstract]

Debt

9.Debt

During the second quarter of fiscal year 2013, the Company made a prepayment of $20.0 million on its Series 2011-1 Senior Secured Fixed Rate Notes, Class A-2 (the “2011 Fixed Rate Notes”).  The prepayment was made at par, as allowed under the terms of the 2011 Fixed Rate Notes.  The Company recognized a $0.5 million loss to record the pro-rata portion of debt origination costs on the early extinguishment of debt.

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	May 31, 2013	May 31, 2012
Cash flows from operating activities
Net income	$ 24,503	$ 21,583
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	30,447	31,264
Stock-based compensation expense	2,812	3,204
Other	(53)	(1,162)
(Increase) decrease in operating assets:
Restricted cash	1,112	2,455
Accounts receivable and other assets	(209)	(611)
Increase (decrease) in operating liabilities:
Accounts payable	2,102	834
Accrued and other liabilities	2,797	(1,286)
Income taxes	(7,661)	7,665
Total adjustments	31,347	42,363
Net cash provided by operating activities	55,850	63,946
Cash flows from investing activities
Purchases of property and equipment	(28,378)	(12,938)
Proceeds from sale of assets	32,342	8,562
Other	140	(7,806)
Net cash provided by and (used in) investing activities	4,104	(12,182)
Cash flows from financing activities
Payments on debt	(31,076)	(11,271)
Purchases of treasury stock	(36,538)	(25,534)
Proceeds from exercise of stock options	11,181
Other	(2,614)	(2,796)
Net cash used in financing activities	(59,047)	(39,601)
Net increase in cash and cash equivalents	907	12,163
Cash and cash equivalents at beginning of period	52,647	29,509
Cash and cash equivalents at end of period	53,554	41,672
Non-cash investing and financing activities:
Change in obligation to acquire treasury stock	(1,058)
Notes receivable and direct financing leases from property disposition	$ 8,661

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	May 31, 2013	Aug. 31, 2012
Current assets:
Cash and cash equivalents	$ 53,554	$ 52,647
Restricted cash	8,899	10,200
Accounts and notes receivable, net	32,479	27,073
Income taxes receivable	1,191
Prepaid expenses and other current assets	14,825	17,231
Total current assets	110,948	107,151
Noncurrent restricted cash	7,760	7,903
Notes receivable, net	11,613	11,641
Property, equipment and capital leases	728,770	764,893
Less accumulated depreciation and amortization	(327,802)	(321,885)
Property, equipment and capital leases, net	400,968	443,008
Goodwill	77,100	76,997
Debt origination costs, net	8,290	10,555
Other assets, net	25,825	23,505
Total assets	642,504	680,760
Current liabilities:
Accounts payable	13,064	11,048
Deposits from franchisees	3,898	3,055
Accrued liabilities	33,960	32,607
Income taxes payable	2,001	14,326
Current maturities of long-term debt and capital leases	18,942	19,480
Total current liabilities	71,865	80,516
Obligations under capital leases due after one year	23,904	27,377
Long-term debt due after one year	436,135	466,613
Deferred income taxes	34,586	29,777
Other noncurrent liabilities	15,578	17,230
Total non-current liabilities	510,203	540,997
Stockholders' equity:
Preferred stock, par value $.01; 1,000 shares authorized; none outstanding
Common stock, par value $.01; 245,000 shares authorized; 118,309 shares issued (118,309 shares issued at August 31, 2012)	1,183	1,183
Paid-in capital	226,140	230,543
Retained earnings	746,189	722,614
Treasury stock, at cost; 62,466 common shares (60,325 shares at August 31, 2012)	(913,076)	(895,093)
Total stockholders’ equity	60,436	59,247
Total liabilities and stockholders' equity	$ 642,504	$ 680,760

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Accounts And Notes Receivable (Details) (USD $) In Thousands, unless otherwise specified	May 31, 2013	Aug. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Royalties and other trade receivables	$ 17,664	$ 17,030
Current accounts and notes receivable, gross	34,581	29,268
Allowance for doubtful accounts and notes receivable, current	(2,102)	(2,195)
Accounts and notes receivable, net	32,479	27,073
Notes receivable from franchisees	5,926	5,286
Notes receivable from advertising funds	6,495	7,152
Allowance for doubtful notes receivable	(808)	(797)
Notes receivable, net	11,613	11,641
Notes Receivable From Franchisees [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current accounts and notes receivable, gross	4,656	1,304
Notes Receivable From Advertising Funds [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current accounts and notes receivable, gross	7,825	4,825
Other [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Current accounts and notes receivable, gross	$ 4,436	$ 6,109

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Segment Information (Tables)

9 Months Ended

May 31, 2013

Segment Information [Abstract]

Reconciliation Of Reported Revenue, Income From Operations From Segments And Income Before Income Taxes

	Three months ended				Nine months ended
	May 31,				May 31,
	2013		2012		2013		2012
Revenues:
Company Drive-Ins	$	108,445	$	110,070	$	285,607	$	294,037
Franchise Operations		36,922		37,857		95,273		95,436
Unallocated revenues		1,267		1,500		2,903		3,317
Total revenues	$	146,634	$	149,427	$	383,783	$	392,790
Income from operations:
Company Drive-Ins	$	18,389	$	18,670	$	39,673	$	38,764
Franchise Operations		36,922		37,857		95,273		95,436
Unallocated income		1,409		1,651		3,256		3,930
Unallocated expenses:
Selling, general and administrative		(16,943)		(16,951)		(48,540)		(48,452)
Depreciation and amortization		(9,783)		(10,288)		(30,447)		(31,264)
Provision for impairment of long-lived assets		-		(203)		-		(376)
Income from operations		29,994		30,736		59,215		58,038
Net interest expense		(7,017)		(7,662)		(22,323)		(23,330)
Income before income taxes	$	22,977	$	23,074	$	36,892	$	34,708

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Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013 segment	May 31, 2012
Segment Information [Abstract]
Reportable business segments			2
Company Drive-Ins	$ 108,445	$ 110,070	$ 285,607	$ 294,037
Franchise Operations	36,922	37,857	95,273	95,436
Unallocated revenues	1,267	1,500	2,903	3,317
Total revenues	146,634	149,427	383,783	392,790
Company Drive-Ins	18,389	18,670	39,673	38,764
Franchise Operations	36,922	37,857	95,273	95,436
Unallocated income	1,409	1,651	3,256	3,930
Selling, general and administrative	(16,943)	(16,951)	(48,540)	(48,452)
Depreciation and amortization	(9,783)	(10,288)	(30,447)	(31,264)
Provision for impairment of long-lived assets		(203)		(376)
Income from operations	29,994	30,736	59,215	58,038
Net interest expense	(7,017)	(7,662)	(22,323)	(23,330)
Income before income taxes	$ 22,977	$ 23,074	$ 36,892	$ 34,708

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Subsequent Event (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Aug. 31, 2013 Subsequent Event [Member]	Aug. 31, 2013 2013 Fixed Rate Notes [Member] Subsequent Event [Member]	May 31, 2013 2011 Fixed Rate Notes [Member]
Subsequent Event [Line Items]
Long-term debt		$ 155.0	$ 450.2
Senior secured notes interest rate, percentage		3.75%	5.40%
Expected life of debt instrument		7 years
Maturity date		2043
Proceeds from issuance of debt	$ 155.0

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Contingencies

9 Months Ended

May 31, 2013

Contingencies [Abstract]

Contingencies

8.Contingencies

The Company is involved in various legal proceedings and has certain unresolved claims pending.  Based on the information currently available, management believes that all claims currently pending are either covered by insurance or would not have a material adverse effect on the Company’s business, operating results or financial condition.

The Company has obligations under various operating lease agreements with third-party lessors related to the real estate for certain Company Drive-In operations that were sold to franchisees.  During the second quarter of fiscal year 2013, the amount remaining under these guaranteed lease obligations increased as a result of the franchisee-exercised option discussed in note 7 – Other Operating Income.  Under these agreements, which expire through 2029, the Company remains secondarily liable for the lease payments for which it was responsible as the original lessee.  As of May 31, 2013, the amount remaining under these guaranteed lease obligations totaled $12.2 million.  At this time, the Company does not anticipate any material defaults under the foregoing leases; therefore, no liability has been provided.

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Other Operating Income (Details) (USD $)	1 Months Ended	3 Months Ended			9 Months Ended		12 Months Ended	1 Months Ended
	Dec. 31, 2012	May 31, 2013	Feb. 28, 2013	May 31, 2012	May 31, 2013	May 31, 2012	Aug. 31, 2012 Assets Held-For-Sale [Member]	Dec. 31, 2012 Notes Receivable And Direct Financing Leases From Property Disposition [Member]
Carrying value of assets at time of sale	$ 38,400,000
Proceeds from sale	29,700,000							8,700,000
Period in which remaining proceeds will be received			24 months
Gain on disposition of property			1,000,000
Lease revenue		1,089,000		2,056,000	3,524,000	4,605,000	4,800,000
Note prepayment exclusion amount			5,000,000
Debt prepayment			20,000,000
Straight-line lease adjustment and franchise rights			$ 800,000

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Segment Information

9 Months Ended

May 31, 2013

Segment Information [Abstract]

Segment Information

11.Segment Information

Operating segments are generally defined as components of an enterprise for which separate discrete financial information is available as the basis for management to allocate resources and assess performance. 

Based on internal reporting and management structure, the Company has two reportable segments: Company Drive-Ins and Franchise Operations.  The Company Drive-Ins segment consists of the drive-in operations in which the Company owns a controlling ownership interest and derives its revenues from operating drive-in restaurants.  The Franchise Operations segment consists of franchising activities and derives its revenues from royalties, initial franchise fees and lease revenues received from franchisees.  The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies in our most recent Annual Report on Form 10-K.  Segment information for total assets and capital expenditures is not presented as such information is not used in measuring segment performance or allocating resources between segments.

The following table presents the revenues and income from operations for each reportable segment, along with reconciliation to reported revenue, income from operations and income before income taxes:

	Three months ended				Nine months ended
	May 31,				May 31,
	2013		2012		2013		2012
Revenues:
Company Drive-Ins	$	108,445	$	110,070	$	285,607	$	294,037
Franchise Operations		36,922		37,857		95,273		95,436
Unallocated revenues		1,267		1,500		2,903		3,317
Total revenues	$	146,634	$	149,427	$	383,783	$	392,790
Income from operations:
Company Drive-Ins	$	18,389	$	18,670	$	39,673	$	38,764
Franchise Operations		36,922		37,857		95,273		95,436
Unallocated income		1,409		1,651		3,256		3,930
Unallocated expenses:
Selling, general and administrative		(16,943)		(16,951)		(48,540)		(48,452)
Depreciation and amortization		(9,783)		(10,288)		(30,447)		(31,264)
Provision for impairment of long-lived assets		-		(203)		-		(376)
Income from operations		29,994		30,736		59,215		58,038
Net interest expense		(7,017)		(7,662)		(22,323)		(23,330)
Income before income taxes	$	22,977	$	23,074	$	36,892	$	34,708

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Other Operating Income

9 Months Ended

May 31, 2013

Other Operating Income [Abstract]

Other Operating Income

7.Other Operating Income

During the second quarter of fiscal year 2013, a franchisee exercised an option to acquire land and buildings leased or subleased from the Company relating to previously refranchised drive-ins.  In December 2012, at the time of the sale, these assets had a carrying value of $38.4 million.  The Company received $29.7 million in cash at closing and will receive the remaining $8.7 million (plus interest) over 24 months through the combination of a note receivable and a direct financing lease.  In conjunction with the sale and the assignment of third party leases, the Company removed its escalating lease liability related to the sold properties.  This resulted in a gain of $1.0 million, which is reflected in “Other operating income, net” on the Condensed Consolidated Statements of Income.  For fiscal year 2012, lease revenue, net of sublease payments, related to these assets was approximately $4.8 million.  The Company’s debt covenants require the application of certain asset disposition proceeds as note prepayments, after a $5 million annual exclusion, if the proceeds are not reinvested in eligible assets within a twelve-month period.  During the second quarter of fiscal year 2013, the Company prepaid $20.0 million of debt which was applied toward the prepayment requirements noted above.  See note 9 – Debt for additional information.  In addition, during the second quarter of fiscal year 2013, the Company recorded a charge of $0.8 million in “Other operating income, net” related to a straight-line lease adjustment and franchise rights that should have been expensed in prior years.  Management of the Company evaluated the impact of these adjustments and concluded the effect was immaterial to the current and prior-year financial statements.

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Earnings Per Share

9 Months Ended

May 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share

2.Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

	Three months ended				Nine months ended
	May 31,				May 31,
	2013		2012			2013		2012
Numerator:
Net income	$	14,793	$	14,407		$	24,503	$	21,583
Denominator:
Weighted average common shares outstanding– basic		56,005		59,936			56,492		60,736
Effect of dilutive employee stock options and
unvested restricted stock units		840		25			626		31
Weighted average common shares – diluted		56,845		59,961			57,118		60,767
Net income per common share – basic	$	0.26	$	0.24		$	0.43	$	0.36
Net income per common share – diluted	$	0.26	$	0.24		$	0.43	$	0.36
Anti-dilutive securities excluded(1)		3,327		7,382			3,877		7,269
—————————

(1) Anti-dilutive securities consist of stock options and unvested restricted stock units that were not included in the computation of diluted earnings per share because either the exercise price of the options was greater than the average market price of the common stock or the total assumed proceeds under the treasury stock method resulted in negative incremental shares and thus the inclusion would have been anti-dilutive.

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Fair Value Of Financial Instruments (Narrative) (Details) (USD $) In Millions, unless otherwise specified	May 31, 2013	Aug. 31, 2012
Fair Value Of Financial Instruments [Abstract]
Fixed Rate Notes, fair value	$ 474.9	$ 510.8
Fixed rate notes, carrying value, including accrued interest	$ 450.9	$ 482.0

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Earnings Per Share (Tables)

9 Months Ended

May 31, 2013

Earnings Per Share [Abstract]

Computation Of Basic And Diluted Earnings Per Share

	Three months ended				Nine months ended
	May 31,				May 31,
	2013		2012			2013		2012
Numerator:
Net income	$	14,793	$	14,407		$	24,503	$	21,583
Denominator:
Weighted average common shares outstanding– basic		56,005		59,936			56,492		60,736
Effect of dilutive employee stock options and
unvested restricted stock units		840		25			626		31
Weighted average common shares – diluted		56,845		59,961			57,118		60,767
Net income per common share – basic	$	0.26	$	0.24		$	0.43	$	0.36
Net income per common share – diluted	$	0.26	$	0.24		$	0.43	$	0.36
Anti-dilutive securities excluded(1)		3,327		7,382			3,877		7,269
—————————

(1) Anti-dilutive securities consist of stock options and unvested restricted stock units that were not included in the computation of diluted earnings per share because either the exercise price of the options was greater than the average market price of the common stock or the total assumed proceeds under the treasury stock method resulted in negative incremental shares and thus the inclusion would have been anti-dilutive.

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Fair Value Of Financial Instruments

9 Months Ended

May 31, 2013

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

10.Fair Value of Financial Instruments

The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties.  The Company has no financial liabilities that are required to be measured at fair value on a recurring basis.

The Company categorizes its assets and liabilities recorded at fair value based upon the following fair value hierarchy established by the Financial Accounting Standards Board:

•Level 1 valuations use quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.  An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

•Level 2 valuations use inputs other than actively quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 2 inputs include:  (a) quoted prices for similar assets or liabilities in active markets, (b) quoted prices for identical or similar assets or liabilities in markets that are not active, (c) inputs other than quoted prices that are observable for the asset or liability such as interest rates and yield curves observable at commonly quoted intervals and (d) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3 valuations use unobservable inputs for the asset or liability.  Unobservable inputs are used to the extent observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The table below sets forth our fair value hierarchy for financial assets measured at fair value on a recurring basis (in thousands):

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
May 31, 2013
Assets:
Cash equivalents	$	19,976	$	-	$	-	$	19,976
Restricted cash (current)		8,899		-		-		8,899
Restricted cash (noncurrent)		7,760		-		-		7,760
Total	$	36,635	$	-	$	-	$	36,635
August 31, 2012
Assets:
Cash equivalents	$	7,784	$	-	$	-	$	7,784
Restricted cash (current)		10,200		-		-		10,200
Restricted cash (noncurrent)		7,903		-		-		7,903
Total	$	25,887	$	-	$	-	$	25,887

:

At May 31, 2013, the fair value of the Company’s 2011 Fixed Rate Notes was estimated at $474.9 million versus a carrying value of $450.9 million, including accrued interest.  At August 31, 2012, the fair value of the 2011 Fixed Rate Notes was estimated at $510.8 million versus a carrying value of $482.0 million, including accrued interest.  The fair value of the 2011 Fixed Rate Notes is estimated using Level 2 inputs from market information available for public debt transactions for companies with ratings that are similar to the Company’s ratings and from information gathered from brokers who trade in the Company’s notes.

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Fair Value Of Financial Instruments (Tables)

9 Months Ended

May 31, 2013

Fair Value Of Financial Instruments [Abstract]

Financial Assets Measured At Fair Value On A Recurring Basis

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
May 31, 2013
Assets:
Cash equivalents	$	19,976	$	-	$	-	$	19,976
Restricted cash (current)		8,899		-		-		8,899
Restricted cash (noncurrent)		7,760		-		-		7,760
Total	$	36,635	$	-	$	-	$	36,635
August 31, 2012
Assets:
Cash equivalents	$	7,784	$	-	$	-	$	7,784
Restricted cash (current)		10,200		-		-		10,200
Restricted cash (noncurrent)		7,903		-		-		7,903
Total	$	25,887	$	-	$	-	$	25,887

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Income Taxes (Tables)

9 Months Ended

May 31, 2013

Income Taxes [Abstract]

Schedule Of Provision (Benefit) For Income Taxes And Effective Income Tax Rate

	Three months ended						Nine months ended
	May 31,						May 31,
	2013			2012			2013			2012
Provision for income taxes	$	8,184		$	8,667		$	12,389		$	13,125
Effective income tax rate		35.6	%		37.6	%		33.6	%		37.8	%

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Document And Entity Information	9 Months Ended
	May 31, 2013	Jun. 26, 2013
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	May 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Entity Registrant Name	SONIC CORP.
Entity Central Index Key	0000868611
Current Fiscal Year End Date	--08-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		55,885,737

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Accounts And Notes Receivable (Tables)

9 Months Ended

May 31, 2013

Accounts And Notes Receivable [Abstract]

Schedule Of Accounts And Notes Receivable

	May 31,		August 31,
	2013		2012
Current Accounts and Notes Receivable:
Royalties and other trade receivables	$	17,664	$	17,030
Notes receivable from franchisees		4,656		1,304
Notes receivable from advertising funds		7,825		4,825
Other		4,436		6,109
Accounts and notes receivable, gross		34,581		29,268
Allowance for doubtful accounts and notes receivable		(2,102)		(2,195)
Accounts and notes receivable, net	$	32,479	$	27,073
Noncurrent Notes Receivable:
Notes receivable from franchisees	$	5,926	$	5,286
Notes receivable from advertising funds		6,495		7,152
Allowance for doubtful notes receivable		(808)		(797)
Notes receivable, net	$	11,613	$	11,641