UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

	OR

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

For the Fiscal Year Ended		Commission File Number
August 31, 2002		0-18859


	SONIC CORP.
	(Exact Name of Registrant as Specified in Its Charter)


Delaware		73-1371046
(State of Incorporation)		(I.R.S. Employer Identification No.)
101 Park Avenue
Oklahoma City, Oklahoma		73102
(Address of Principal Executive Offices)		(Zip Code)

Registrant's Telephone Number, Including Area Code: (405) 280-7654

Securities Registered Pursuant to Section 12(b) of the Exchange Act:

None

Securities Registered Pursuant to Section 12(g) of the Exchange Act:

Common Stock, Par Value $.01
Rights to Purchase Series A Junior Preferred Stock, Par Value $.01

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

Indicate by check mark if this Form 10-K does not contain and, to the best of the Registrant’s knowledge, the Registrant’s definitive proxy statement or information statement incorporated by reference in Part III of this Form 10-K will not contain a disclosure of delinquent filers pursuant to Item 405 of Regulation S-K. YES X . No .

As of November 1, 2002, the aggregate market value of the 37,467,299 shares of common stock of the Company held by non-affiliates of the Company equaled approximately $892.5 million, based on the closing sales price for the common stock as reported for that date. As of November 1, 2002, the Registrant had 39,125,625 shares of common stock issued and outstanding (excluding 9,364,820 shares of common stock held as treasury stock).

Documents Incorporated by Reference

Part III of this report incorporates by reference certain portions of the definitive proxy statement which the Registrant will file with the Securities and Exchange Commission in connection with the Company’s annual meeting of stockholders following the fiscal year ended August 31, 2002.

FORM 10-K OF SONIC CORP.


PART I

Item 1.	Business	1

Item 2.	Properties	9

Item 3.	Legal Proceedings	10

Item 4.	Submission of Matters to a Vote of Security Holders	10

Item 4A.	Executive Officers of the Company	10

PART II

Item 5.	Market for the Company's Common Stock and Related Stockholder Matters	11

Item 6.	Selected Financial Data	12

Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	21


Item 8.	Financial Statements and Supplementary Data	21

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	21

PART III

Item 10.	Directors and Executive Officers of the Registrant	21

Item 11.	Executive Compensation	22

Item 12.	Security Ownership of Certain Beneficial Owners and Management	22

Item 13.	Certain Relationships and Related Transactions	22

Item 14.	Controls and Procedures	22

PART IV

Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	22

FORM
10-K

SONIC CORP.

PART I

Item 1. Business

General

Sonic Corp. (the “Company”) operates and franchises the largest chain of drive-in restaurants in the United States. As of August 31, 2002, the Company had 2,533 restaurants in operation, consisting of 452 Company-owned restaurants and 2,081 franchised restaurants, principally in the southern two-thirds of the United States. At a typical Sonic restaurant, a customer drives into one of 24 to 36 covered drive-in spaces, orders through an intercom speaker system, and has the food delivered by a carhop within an average of four minutes.

The Sonic drive-in restaurant chain began in the early 1950’s. The Company has two operating subsidiaries, Sonic Industries Inc. and Sonic Restaurants, Inc. Sonic Industries Inc. serves as the franchisor of the Sonic restaurant chain, as well as the administrative services center for the Company. Sonic Restaurants, Inc. develops and operates the Company-owned restaurants. References in this report to the “Company” and “Sonic” are references to Sonic Corp. and its subsidiaries and predecessors, unless the context indicates otherwise.

The Sonic drive-in restaurant chain began in the early 1950’s. The Company was incorporated in the State of Delaware in 1990, in connection with its 1991 public offering of consumer stock. The Company’s objective is to maintain its position as, or to become, a leading operator in terms of the number of quick-service restaurants within each of its core and developing markets. The Company has developed and is implementing a strategy designed to build the Sonic brand and to continue to achieve high levels of customer satisfaction and repeat business. The key elements of that strategy are: (1) a unique drive-in concept focusing on a menu of quality made-to-order and signature food items; (2) a commitment to customer service featuring the quick delivery of food by carhops; (3) the expansion of Company-owned and franchised restaurants within the Company’s core and developing markets; (4) an owner/operator philosophy, in which managers have an equity interest in their restaurant, thereby providing an incentive for managers to operate restaurants profitably and efficiently; and (5) a commitment to support the Sonic system.

The Sonic drive-in restaurant chain was begun in the early 1950's by the Company's predecessors. The Company was incorporated in the State of Delaware in 1990 in connection with its 1991 public offering of common stock. The Company’s principal executive offices are located at 101 Park Avenue, Oklahoma City, Oklahoma 73102. The Company’s telephone number is (405) 280-7654.

Sonic restaurants offer made-to-order hamburgers and other sandwiches and feature Sonic signature items, such as extra-long cheese coneys, hand-battered onion rings, tater tots, specialty soft drinks including cherry limeades and slushes, and frozen desserts. In addition, the Company’s restaurants offer certain other items during limited-time promotions.

Sonic began offering a breakfast menu in certain test markets in October 1999. The breakfast menu is currently offered in markets comprising approximately 49% of all Sonic restaurants. The Company plans to continue the expansion of the number of restaurants offering the breakfast menu to all Sonic restaurants over the next few years. Those restaurants serving a breakfast menu are open beginning no later than 7 a.m. and serve the full menu all day. Items on the breakfast menu include sausage, ham, or bacon with egg and cheese Toaster _® sandwiches, sausage and egg burritos, and specialty breakfast drinks.

Restaurant Locations

As of August 31, 2002, the Company owned or franchised 2,533 drive-in restaurants, which are located in 30 states, principally in the southern two-thirds of the United States, and in Mexico. The Company defines its core markets as those television markets where the penetration of Sonic restaurants (as measured by population per restaurant, advertising levels, and share of restaurant spending) has reached a certain level of market maturity established by management. All other television markets where restaurants are located are referred to as developing markets. A market may be located where it extends into more than one state. The Company’s core markets contain approximately 74% of all Sonic restaurants as of August 31, 2002. Developing markets are located in the states indicated below and Mexico. Many states have both core markets and developing markets. Based on the relative composition of core and developing markets within a state, the Company classifies a state as either a core or developing market state. The Company now has two restaurants in Mexico and a development agreement providing for seven additional restaurants to be opened in Mexico in the next three years. The following table sets forth the number of Company-owned and franchised restaurants by core and developing markets as of August 31, 2002:

Core
Arkansas	24	133	157
Kansas	35	90	125
Louisiana	18	111	129
Mississippi	0	110	110
Missouri	46	127	173
New Mexico	0	65	65
Oklahoma	65	163	228
Tennessee	38	145	183
Texas	124	584	708

Total	350	1,528	1,878

Developing
Alabama	28	61	89
Arizona	0	73	73
California	0	15	15
Colorado	6	48	54
Florida	13	21	34
Georgia	7	71	78
Idaho	0	5	5
Illinois	4	26	30
Indiana	4	14	18
Iowa	0	9	9
Kentucky	19	38	57
Nebraska	2	15	17
Nevada	0	15	15
North Carolina	0	58	58
Ohio	0	5	5
Oregon	0	1	1
South Carolina	0	52	52
Utah	4	12	16
Virginia	14	9	23
West Virginia	1	1	2
Wyoming	0	2	2
Mexico	0	2	2
Total	102	553	655

Total System	452	2,081	2,533

Expansion

During fiscal year 2002, the Company opened 40 Company-owned restaurants and its franchisees opened 142 restaurants. During fiscal year 2003, the Company plans to open approximately 35 to 40 Company-owned restaurants and anticipates that its franchisees will open approximately 150 to 160 restaurants. That expansion plan involves the opening of new restaurants by franchisees under existing area development agreements, single-store development by existing franchisees, and development by new franchisees. The Company believes that its existing core and developing markets offer a significant growth opportunity for both Company-owned and franchised restaurant expansion. The ability of the Company and its franchisees to open the anticipated number of Sonic drive-in restaurants during fiscal year 2003 necessarily will depend on various factors. Those factors include (among others) the availability of suitable sites, the negotiation of acceptable lease or purchase terms for new locations, local permitting and regulatory compliance, the financial resources of the Company and its franchisees, and the general economic and business conditions to be faced in fiscal year 2003.

The Company’s expansion strategy for Company-owned restaurants involves two principal components: (1) the building-out of existing core markets and (2) the further penetration of developing markets. In addition, the Company may consider the acquisition of other similar concepts for conversion to Sonic restaurants.

Restaurant Design and Construction

General . The typical Sonic drive-in restaurant consists of a kitchen housed in a one-story building flanked by two canopy-covered rows of 24 to 36 parking spaces, with each space having its own intercom speaker system and menu board. In addition, since 1995, the Company has incorporated a drive-through service and patio seating area in most new restaurants. A few Sonic restaurants provide an indoor seating area and a few restaurants are located in non-traditional areas such as shopping mall food courts and convenience stores.

Retrofit Program . In fiscal year 1997, the Company began implementing a remodeling program to retrofit all Sonic drive-in restaurants. The retrofit included new signage, new menu and speaker housings, and significant trade dress modifications to the exterior of each restaurant’s building. The Company implemented the program on a market-by-market basis and as of August 31, 2002, all markets and 98% of the Sonic chain featured the new retrofit signage and trade dress style.

Marketing

The Company has designed its marketing program to differentiate Sonic drive-in restaurants from its competitors by emphasizing five key areas of customer satisfaction: (1) the personal manner of service by carhops, (2) made-to-order menu items, (3) speed of service, (4) quality, and (5) value. The marketing plan includes monthly promotions for use throughout the Sonic chain. The Company supports those promotions with television, radio commercials, point-of-sale materials, and other media as appropriate. Those promotions generally center on products which highlight signature menu items of Sonic drive-in restaurants.

Each year the Company and its advertising agency (with involvement of the Sonic Franchise Advisory Council) develop a marketing plan. The Company requires the formation of advertising cooperatives among restaurant owners to pool and direct advertising expenditures in local markets. Under each of the Company’s license agreements, the franchisee must contribute a minimum percentage of the franchisee’s gross revenues to a national media production fund and spend an additional minimum percentage of gross revenues on local advertising, either directly or through the Company-required participation in advertising cooperatives. Depending on the type of license agreement, the minimum percentages of gross revenues contributed by franchisees for local advertising cooperative funds range from 1.125% to 3.25% and, for the Sonic Advertising Fund (the national fund administered by the Company), the franchisees contribute a range of 0.375% to 0.75% of gross revenues. The members of each local advertising cooperative may elect and frequently do elect to have the cooperative’s member drive-ins contribute more than the minimum percentage of gross revenues to the advertising cooperative’s funds. In 1999, Sonic restaurant owners approved the establishment of a System Marketing Fund which became effective January 1, 2000. The purpose of this fund is to complement local advertising efforts in attracting customers to Sonic restaurants by promoting the message of the Sonic brand to an expanded audience. The primary focus of the fund is to purchase advertising on

national cable and broadcast networks and other national media and sponsorship opportunities. The System Marketing Fund is funded by 0.5% of each franchisee’s gross revenues, which amount is redistributed from the franchisee’s local advertising fund contribution.

For fiscal year 2002, franchisees participating in cooperatives contributed an average of 3.76% of gross revenues to Sonic advertising cooperatives, exceeding the required 1.125% to 3.25% under most license agreements in effect during that period. As of August 31, 2002, 2,444 Sonic restaurants (96% of the chain) participated in advertising cooperatives. The Company estimates that the total amount spent on media (principally television) exceeded $90 million for fiscal year 2002 and expects media expenditures to exceed $100 million for fiscal year 2003.

Purchasing

The Company negotiates with suppliers for its primary food products (hamburger patties, dairy products, hot dogs, french fries, tater tots, cooking oil, fountain syrup, and other products) and packaging supplies to ensure adequate quantities of food and supplies and to obtain competitive prices. The Company seeks competitive bids from suppliers on many of its food products. The Company approves suppliers of those products and requires them to adhere to product specifications established by the Company. Suppliers manufacture several key products for the Company under private label and sell them to authorized distributors for resale to Company-owned and franchised restaurants. Sonic restaurants purchase a majority of their food and beverage products from authorized local or national distributors.

The Company requires its Company-owned and franchised restaurants to purchase from approved distribution centers. By purchasing as a group, the Company has achieved cost savings, improved food quality and consistency, and helped decrease the volatility of food and supply costs for Sonic restaurants. For fiscal year 2002, the average cost of food and packaging for a Sonic restaurant, as reported to the Company by its franchisees, equaled approximately 27.5% of net revenues. The Company believes that negotiating and purchasing food as a system has allowed Sonic restaurants to avoid menu price increases that otherwise might have occurred. The reduction in the number of food and paper product distributors to the Sonic chain over the past few years has improved the ability of the Company to negotiate more advantageous purchasing terms and to maintain more uniform products.

Food Safety and Quality Assurance

To ensure the consistent delivery of safe, high-quality food, Sonic created a food safety and quality assurance program. Sonic’s food safety program promotes the quality and safety of all products and procedures utilized by all Sonic restaurants, and provides certain requirements that must be adhered to by all suppliers, distributors, and restaurants. The Company also has a comprehensive, restaurant-based food safety program called Sonic Safe. Sonic Safe is a risk-based system that utilizes Hazard Analysis & Critical Control Points (HACCP) principles for managing food safety and quality. The Company’s food safety system includes employee training, supplier product testing, drive-in food safety auditing by independent third parties, and other detailed components that monitor the safety and quality of the products and procedures of the Company at every stage of the food preparation and production cycle. Employee training in food safety is covered under the Company’s franchisee training program, referred to as the STAR Training Program. This program includes specific training information and requirements for every station in the drive-in. The Company also provides training in ServSafe, the most recognized food safety training certification in the restaurant industry.

General Operations

Management Information Systems . The Company utilizes point-of-sale equipment in each of its Company-owned and franchised restaurants. Certain financial and other information is polled on a daily basis from most Company-owned restaurants. The Company is developing software and hardware enhancements to its management information systems to facilitate communication and the exchange of information among the corporate office and Company-owned and franchised restaurants.

Reporting . The license agreement requires all Sonic restaurants to submit a profit and loss statement on or before the 20 ^th of each month. All company-owned stores and approximately 580 or 28.2% of franchise stores submit their data electronically. Sonic expects to add more stores to electronic reporting which will reduce resources needed for manual processing of store level data.

Hours of Operation . Sonic restaurants typically operate seven days a week. The restaurants participating in the breakfast program (approximately 49% of all Sonic restaurants) are generally open no later than 7:00 a.m. and close at 11:00 p.m. All other restaurants are typically open from 10:00 a.m. to 11:00 p.m.

Company Operations

Restaurant Personnel . A typical Company-owned restaurant is operated by a manager, two to four assistant managers, and approximately 25 hourly employees, many of whom work part-time. The manager has responsibility for the day-to-day operations of the restaurant. Each supervisor has the responsibility of overseeing an average of four to seven Company-owned restaurants. The Company also employs 15 Directors of Operations who oversee an average of five to six supervisors within their respective regions and three regional vice presidents who report to vice presidents. The Directors report to either a regional vice president or a vice president. The Company employs a Senior Vice President of Operations based in Oklahoma City who oversees the operations of all Company-owned restaurants.

Ownership Program . The Sonic restaurant philosophy stresses an ownership relationship with supervisors and managers. As part of the ownership program, either a limited liability company or a general partnership is formed to own and operate each individual Company-owned restaurant. The Company owns a majority interest, typically at least 60%, in each of these limited liability companies and partnerships. Generally, the supervisors and managers own a minority interest in the limited liability company or partnership. The Company believes that its ownership structure provides a substantial incentive for restaurant supervisors and managers to operate their restaurants profitably and efficiently.

The Company records the interests of supervisors and managers as “minority interest in earnings of restaurants” under costs and expenses on its financial statements. The Company estimates that the average percentage interest of a supervisor was 16% and the average percentage interest of a manager in a restaurant was 18% in fiscal year 2002. Each restaurant distributes its available cash flow to its supervisors and managers and to the Company on a monthly basis pursuant to the terms of the operating agreement or partnership agreement for that restaurant. The Company has the right to purchase the minority interest of the supervisor or manager in the restaurant. Typically, the amounts of the buy-in and the buy-out are based on the restaurant’s sales during the preceding 12 months.

Each restaurant usually purchases equipment with funds borrowed from the Company at competitive rates. In most cases, the Company alone owns or leases the land and building and guarantees any third-party lease entered into for the site.

Company-owned Restaurant Data . The following table provides certain financial information relating to Company-owned restaurants and the number of Company-owned restaurants opened and closed during the past five fiscal years.

	2002			2001			2000			1999			1998
Average Sales per Company-owned
Restaurant (in thousands)	$	791		$	772		$	747		$	702		$	663
Number of Company-owned Restaurants:
Total Open at Beginning of Year		393			312			296			292			256
Newly-Opened and Re-Opened		40			34			24			37			50
Purchased from Franchisees*		25			50			2			4			—
Sold to Franchisees*		(5	)		(2	)		(6	)		(36	)		(14	)
Closed		(1	)		(1	)		(4	)		(1	)		—

Total Open at Year End		452			393			312			296			292

*The relatively large number of stores sold to franchisees in fiscal years 1998 and 1999 and purchased from franchisees in fiscal years 2001 and 2002 represent transactions where a majority of restaurants in a certain market were sold to or purchased

from a multi-unit franchisee group. In all such instances where the Company purchased restaurants, the selling multi-unit franchisee groups continued to own and operate multiple franchised Sonic restaurants.

Franchise Program

General . During its more than 45 years in operation, the Sonic system has produced a large number of successful multi-unit franchisee groups. Those franchisees continue to develop new restaurants in their franchise territories either through area development agreements or single site development. The Company considers its franchisees a vital part of its continued growth and believes its relationship with its franchisees is good.

As of August 31, 2002, the Company had 2,081 franchised restaurants operating in 30 states and Mexico, and the Company had entered into area development agreements which contemplate the opening of 152 additional restaurants during fiscal year 2003. However, the Company cannot give any assurance that its franchisees will achieve that number of new restaurants for fiscal year 2003. During fiscal year 2002, the Company’s franchisees opened 85 Sonic drive-in restaurants pursuant to existing area development agreements.

Franchise Agreements . Each Sonic restaurant, including each Company-owned restaurant, operates under a franchise agreement that provides for payments to the Company of an initial franchise fee and a royalty fee based on a graduated percentage of the gross revenues of the restaurant. The Company’s current license agreement provides for a franchise fee of $30,000 and an ascending royalty rate beginning at 1% of gross revenues and increasing to 5% as the level of gross revenues increases. Approximately 99% of all Sonic restaurants opening in fiscal year 2003 are expected to open under the current license agreement. Pursuant to the terms of existing area development agreements, the remaining 1% of all Sonic restaurants opening in fiscal year 2003 will open under a former version of the license agreement, which provides for a franchise fee of $15,000 and an ascending royalty rate beginning at 1% of gross revenues and increasing to 4% as the level of gross revenues increases. All license agreements to be issued to restaurants opening in fiscal year 2003 provide for a term of 20 years, with one 10-year renewal option. The Company has the right to terminate any franchise agreement for a variety of reasons, including a franchisee’s failure to make payments when due or failure to adhere to the policies and standards of the Company. Many state franchise laws limit the ability of the Company to terminate or refuse to renew a franchise.

As of August 31, 2002, 30% of all Sonic restaurants were subject to the 1% to 5% graduated royalty rate, 53% were subject to the 1% to 4% graduated royalty rate, and 17% were subject to a former version of the license agreement (which is no longer being issued) providing for a 1% to 3% graduated royalty rate. For fiscal year 2002, the Company’s average royalty rate equaled 3.27%. Beginning in fiscal year 2003 and continuing through fiscal year 2010, a total of 218 franchised restaurants currently operating under the license agreement providing for the 1% to 3% graduated royalty will have their royalty rates increase to the 1% to 4% graduated royalty rate. The license agreements for the remaining 130 restaurants which are subject to the 1% to 3% graduated royalty rate will expire beginning in fiscal year 2003 and continuing through fiscal year 2010. Restaurants currently operating under those expiring license agreements will either cease operations or renew their licenses pursuant to the terms of the then current license agreement. The Company expects that such automatic increase of royalty rates under certain existing license agreements and the renewals of the other expiring license agreements will contribute to an increase in the Company’s royalty revenues.

Area Development Agreements . The Company uses area development agreements to facilitate the planned expansion of the Sonic drive-in restaurant chain through multiple unit development. While many existing franchisees continue to expand on a single restaurant basis, approximately 60% of the new franchised restaurants opened during fiscal year 2002 occurred as a result of then-existing area development agreements. Each area development agreement gives a developer the exclusive right to construct, own and operate Sonic restaurants within a defined area. In exchange, each developer agrees to open a minimum number of Sonic restaurants in the area within a prescribed time period. If the developer does not meet the minimum opening requirements, the Company has the right to terminate the area development agreement and grant a new area development agreement to other franchisees for the area previously covered by the terminated area development agreement.

During fiscal year 2002, the Company entered into 34 new area development agreements calling for the opening of 161 Sonic drive-in restaurants during the next six years. As of August 31, 2002, the Company had a total of 130 area development agreements in effect, calling for the development of 575 additional Sonic drive-in restaurants

during the next six years. Of the 138 restaurants scheduled to open during fiscal year 2002 under area development agreements in place at the beginning of that fiscal year, 85 or 62% opened during the period.

Realization by the Company of the expected benefits under various existing and future area development agreements currently depends and will continue to depend upon the ability of the developers to open the minimum number of restaurants within the time periods required by the agreements. The financial resources of the developers, as well as their experience in managing quick-service restaurant franchises, represent critical factors in the success of area development agreements. Although the Company grants area development agreements only to those developers whom the Company believes possess those qualities, the Company cannot give any assurances that the future performance by developers will result in the opening of the minimum number of restaurants contemplated by the area development agreements or reach the compliance rate the Company has previously experienced.

Franchised Restaurant Development . The Company assists each franchisee in selecting sites and developing restaurants. Each franchisee has responsibility for selecting the franchisee’s restaurant location, but must obtain Company approval of each restaurant design and each location based on accessibility and visibility of the site and targeted demographic factors, including population density, income, age and traffic. The Company provides its franchisees with the physical specifications for the typical Sonic drive-in restaurants.

Franchisee Financing . Other than the agreements described below, the Company does not generally provide financing to franchisees or guarantee loans to franchisees made by third parties.

The Company entered into agreements with various lenders and an agreement with GE Capital Franchise Finance Corporation (“GEC”), pursuant to which GEC made loans to existing Sonic franchisees who met certain underwriting criteria set by GEC. Under the terms of the agreement with GEC, the Company provided a guaranty of 10% of the outstanding balance of a loan from GEC to the Sonic franchisee. The portion of loans made by GEC to Sonic franchisees that are guaranteed by the Company total $5.0 million as of August 31, 2002. The Company ceased guaranteeing loans made under the program during fiscal year 2002 and has not been required to make any payments under its agreement with GEC.

Franchisee Training . Each franchisee must have at least one individual working full time at the Sonic drive-in restaurant who has completed the Sonic Management Development Program before opening or operating the Sonic drive-in restaurant. The program consists of 12 weeks of on-the-job training and one week of classroom development. The program emphasizes food safety, quality food preparation, quick service, cleanliness of restaurants, management techniques and consistency of service. Furthermore, the Company’s management teams receive training in ServSafe, the most recognized food safety training certification in the restaurant industry.

Franchisee Support . In addition to training, advertising and food purchasing as a system, and marketing programs, the Company provides various other services to its franchisees. Those services include: (1) assistance with quality control through area field representatives, to ensure that each franchisee consistently delivers high quality food and service; (2) support of new franchisees with guidance and training in the opening of their first three Sonic restaurants; (3) assistance in selecting sites for new restaurants using demographic data and studies of traffic patterns; (4) and one-stop shopping for all equipment needed to open a new restaurant through N. Wasserstrom & Sons, Inc. in Columbus, Ohio, and Concept Services, Inc. in Austin, Texas. The Company’s field services organization consists of 15 field service consultants, 11 field marketing representatives, and four new franchise consultants, all with responsibility for defined geographic areas. The field service consultants provide operational services and support for the Company’s franchisees, while the field marketing representatives assist the franchisees with the development of co-op and local market promotional activities. New franchise consultants support the successful integration of new franchisees into the Sonic system from training through the first months following the opening of each of the franchisee’s first three Sonic restaurants. The Company also has six real estate directors who assist the franchisees with the identification of trade areas for new restaurants, the franchisees’ selection of sites for their restaurants, and the approval of those sites. Six other field representatives provide a variety of other services to franchisees.

Franchise Operations . The Company and its franchisees operate all restaurants in accordance with uniform operating standards and specifications. These standards pertain to the quality and preparation of menu items, selection of menu items, maintenance and cleanliness of premises, and employee responsibilities. The Company develops all standards and specifications with input from franchisees, and they are applied on a system-wide basis.

Each franchisee has full discretion to determine the prices charged to its customers.

Franchise Advisory Council . The Company has established a Franchise Advisory Council which provides advice, counsel, and input to the Company on important issues impacting the business, such as marketing and promotions, operations, purchasing, building design, human resources, technology, and new products. The Franchise Advisory Council currently consists of 16 members selected by the Company. Eight executive committee members are selected at large. The remaining eight members are regional members who represent three defined regions of the country and serve two-year terms.

Franchised Restaurant Data . The following table provides certain financial information relating to franchised restaurants and the number of franchised restaurants opened, purchased from or sold to the Company, and closed during the Company’s last five fiscal years.

	2002			2001			2000			1999			1998
Average Sales Per Franchised
Restaurant (in thousands)	$	935		$	899		$	872		$	842		$	775
Number of Franchised Restaurants
Total Open at Beginning of Year		1,966			1,863			1,715			1,555			1,424
New Restaurants		142			157			150			139			120
Sold to the Company*		(25	)		(50	)		(2	)		(4	)		—
Purchased from the Company*		5			2			6			36			14
Closed and Terminated,
Net of Re-openings		(7	)		(6	)		(6	)		(11	)		(3	)

Total Open at Year End		2,081			1,966			1,863			1,715			1,555

* The relatively large number of stores purchased from the Company in fiscal years 1998 and 1999 and sold to the Company in fiscal years 2001 and 2002 represent transactions where a majority of restaurants in a certain market were sold to or purchased from a multi-unit franchisee group. In all such instances where the Company purchased restaurants, the selling multi-unit franchisee groups continued to own and operate multiple franchised Sonic restaurants.

Competition

The Company competes in the quick-service restaurant industry, a highly competitive industry in terms of price, service, restaurant location, and food quality, and an industry often affected by changes in consumer trends, economic conditions, demographics, traffic patterns, and concerns about the nutritional content of quick-service foods. The Company competes on the basis of speed and quality of service, method of food preparation (made-to-order), food quality and variety, signature food items, and monthly promotions. The quality of service, featuring Sonic carhops, constitutes one of the Company’s primary marketable points of difference with the competition. There are many well-established competitors with substantially greater financial and other resources. These competitors include a large number of national, regional and local food services, including quick service restaurants and casual dining restaurants. A significant change in pricing or other marketing strategies by one or more of those competitors could have an adverse impact on the Company’s sales, earnings, and growth. In selling franchises, the Company also competes with many franchisors of fast-food and other restaurants and other business opportunities.

Seasonality

The Company’s results during its second fiscal quarter (the months of December, January and February) generally are lower than other quarters because of the climate of the locations of a number of Company-owned and franchised restaurants.

Employees

As of August 31, 2002, the Company had 282 full-time employees. No collective bargaining agreement covers any of its employees. The Company believes that it has good labor relations with its employees. Company-

owned restaurants (operated as separate partnerships or limited liability companies) employed approximately 12,750 full-time and part-time employees as of August 31, 2002, none of whom constitute employees of the Company.

Trademarks and Service Marks

The Company owns numerous trademarks and service marks. The Company has registered many of those marks, including the “Sonic” logo and trademark, with the United States Patent and Trademark Office. The Company believes that its trademarks and service marks have significant value and play an important role in its marketing efforts.

Government Regulation

The Company must comply with regulations adopted by the Federal Trade Commission (the “FTC”) and with several state laws that regulate the offer and sale of franchises. The Company also must comply with a number of state laws that regulate certain substantive aspects of the franchisor-franchisee relationship. The FTC’s Trade Regulation Rule on Franchising (the “FTC Rule”) requires that the Company furnish prospective franchisees with a franchise offering circular containing information prescribed by the FTC Rule.

State laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states. Those laws regulate the franchise relationship, for example, by requiring the franchisor to deal with its franchisees in good faith, by prohibiting interference with the right of free association among franchisees, by regulating discrimination among franchisees with regard to charges, royalties, or fees, and by restricting the development of other restaurants within certain prescribed distances from existing franchised restaurants. Those laws also restrict a franchisor’s rights with regard to the termination of a franchise agreement (for example, by requiring “good cause” to exist as a basis for the termination), by requiring the franchisor to give advance notice and the opportunity to cure the default to the franchisee, and by requiring the franchisor to repurchase the franchisee’s inventory or provide other compensation upon termination. To date, those laws have not precluded the Company from seeking franchisees in any given area and have not had a significant effect on the Company’s operations.

Each Sonic restaurant must comply with regulations adopted by federal agencies and with licensing and other regulations enforced by state and local health, sanitation, safety, fire, and other departments. Difficulties or failures in obtaining the required licenses or approvals can delay and sometimes prevent the opening of a new restaurant.

Sonic restaurants must comply with federal and state environmental regulations, but those regulations have not had a material effect on their operations. More stringent and varied requirements of local governmental bodies with respect to zoning, land use, and environmental factors can delay and sometimes prevent development of new restaurants in particular locations.

The owners of Sonic restaurants must comply with laws and regulations governing labor and employment issues, such as minimum wages, overtime, and other working conditions. Many of the food service personnel in Sonic restaurants receive compensation at rates related to the federal minimum wage and, accordingly, increases in the minimum wage will increase labor costs at those locations.

Item 2. Properties

Of the 452 Company-owned restaurants operating as of August 31, 2002, the Company operated 171 of them on property leased from third parties and 281 of them on property owned by the Company. The leases expire on dates ranging from 2003 to 2022, with the majority of the leases providing for renewal options. All leases provide for specified monthly rental payments, and some of the leases call for additional rentals based on sales volume. All leases require the Company to maintain the property and pay the cost of insurance and taxes.

The Company’s corporate headquarters is located in approximately 68,500 square feet of leased office space in Oklahoma City, Oklahoma. The lease for that property expires in November 2003. The Company has entered into a 15 year lease to occupy approximately 78,000 square feet of office space in a new building being constructed in the Bricktown district of downtown Oklahoma City. The new lease is scheduled to commence in November 2003 and has two five-year renewal options. The Company also leases approximately 10,000 square feet of warehouse space in Oklahoma City, Oklahoma. The lease for the warehouse space expires in December 2003.

Item 3. Legal Proceedings

The Company is involved in various legal proceedings and has certain unresolved claims pending. The ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time. Management believes that all claims currently pending are either adequately covered by insurance or would not have a material adverse effect on the Company’s business or financial condition.

Item 4. Submission of Matters to a Vote of Security Holders

The Company did not submit any matter during the fourth quarter of the Company’s last fiscal year to a vote of the Company’s stockholders, through the solicitation of proxies or otherwise.

Item 4A. Executive Officers of the Company

Identification of Executive Officers

The following table identifies the executive officers of the Company.

Name	Age	Position	Officer Since

J. Clifford Hudson	48	Chairman of the Board of Directors and Chief Executive Officer	June 1985

Pattye L. Moore	44	President and Director	June 1992

Ronald L. Matlock	51	Senior Vice President, General Counsel and Secretary	April 1996

W. Scott McLain	40	Senior Vice President and Chief Financial Officer	April 1996

Frank B. Young, Jr.	51	Senior Vice President of Operations of Sonic Restaurants, Inc.	October 1994

Stephen C. Vaughan	36	Vice President of Planning and Analysis and Treasurer	January 1996

Terry D. Harryman	37	Controller	January 1999

Business Experience

The following sets forth the business experience of the executive officers of the Company for at least the past five years.

J. Clifford Hudson has served as the Company’s Chairman of the Board and Chief Executive Officer since January 2000. He served as President and Chief Executive Officer of the Company from April 1995 until January 2000 and has served as a director of the Company since August 1993. He served as President and Chief Operating Officer of the Company from August 1994 until April 1995, and he served as Executive Vice President and Chief Operating Officer from August 1993 until August 1994. From August 1992 until August 1993, Mr. Hudson served as Senior Vice President and Chief Financial Officer of the Company. From October 1994 until February 2001, Mr. Hudson served as Chairman of the Board of Securities Investor Protection Corporation, the federally-chartered organization which serves as the insurer of customer accounts with brokerage firms.

Pattye L. Moore has served as President and Director of the Company since January 2001. Ms. Pattye Moore served as Executive Vice President of the Company from January 2000 until January 2001. Ms. Moore served as Senior Vice President of Marketing and Brand Development of the Company from August 1996 until January 2000. From August 1995 until August 1996, Ms. Moore served as Senior Vice President of Marketing and Brand Development for Sonic Industries Inc. and served as Vice President of Marketing of Sonic Industries Inc. from June 1992 to August 1995. Ms. Moore serves as a director of ONEOK, Inc., a publicly-held company engaged in several aspects of the energy business.

Ronald L. Matlock has served as Senior Vice President, General Counsel and Secretary of the Company since January 2000. Mr. Matlock served as Vice President, General Counsel and Secretary of the Company from April 1996 until January 2000. Mr. Matlock has also served as a director of Sonic Restaurants, Inc. and as a director of Sonic Industries Inc. since April 1996. Prior to joining the Company, Mr. Matlock practiced law from January 1995 to April 1996 with the Matlock Law Firm in Oklahoma City, Oklahoma, concentrating in corporate, securities and franchise law.

W. Scott McLain has served as Senior Vice President and Chief Financial Officer of the Company since January 2000. Mr. McLain served as Vice President of Finance and Chief Financial Officer of the Company from August 1997 until January 2000. From August 1997 until August 1999 he also served as Treasurer of the Company. From April 1996 to August 1997, he served as Vice President of Finance and Treasurer of the Company. From August 1993 until joining the Company, Mr. McLain served as Treasurer of Stevens International, Inc. in Fort Worth, Texas. From April 1991 to August 1993, Mr. McLain served as a Manager at Price Waterhouse in Dallas, Texas.

Frank B. Young, Jr. has served as Senior Vice President of Operations of Sonic Restaurants, Inc. since January 2000, and has also served as a director of Sonic Restaurants, Inc. since January 2000. Mr. Young served as Vice President of Operations of Sonic Restaurants, Inc. from October 1994 to January 2000. From April 1989 until joining the Company, Mr. Young served as the President and sole shareholder of Wendco, Inc. of Madison, Wisconsin, a business consulting firm, and was a franchisee of Wendy’s International, Inc.

Stephen C. Vaughan has served as Vice President of Planning and Analysis of the Company since January 1999 and has served as Treasurer since November 2001. He also served as a Vice President of the Company from August 1997 until January 1999, and as Controller of the Company from January 1996 until January 1999.

Terry D. Harryman has served as Controller of the Company since January 1999. From October 1996 until January 1999, Mr. Harryman served as Director of Tax of the Company. From January 1998 until January 1999, Mr. Harryman also served as Assistant Treasurer of the Company. Mr. Harryman served as Assistant Treasurer of Sonic Industries Inc. and Sonic Restaurants, Inc. from October 1996 until January 2002.

PART II

Item 5. Market for the Company’s Common Stock and Related Stockholder Matters

Market Information

The Company’s common stock trades on the Nasdaq National Market (“Nasdaq”) under the symbol “SONC.” The following table sets forth the high and low closing bids for the Company’s common stock during each fiscal quarter within the two most recent fiscal years as reported on Nasdaq. Share amounts set forth below and elsewhere in this report have been adjusted to reflect the results of the November 2000 and February 2002 three-for-two stock splits.

Quarter Ended	High		Low		Quarter Ended	High		Low
November 30, 2001	$	23.493	$	17.513	November 30, 2000	$	17.750	$	13.833
February 28, 2002	$	25.280	$	25.090	February 28, 2001	$	17.792	$	14.209
May 31, 2002	$	30.210	$	24.950	May 31, 2001	$	19.233	$	15.292
August 31, 2002	$	31.940	$	23.400	August 31, 2001	$	21.267	$	17.067

Stockholders

As of November 1, 2002, the Company had 445 record holders of its common stock.

Dividends

The Company did not pay any cash dividends on its common stock during its two most recent fiscal years and does not intend to pay any dividends in the foreseeable future.

Securities

The following table sets forth information about the Company’s equity compensation plans as of August 31, 2002.

Equity Compensation Plan Information

	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan category	(a)	(b)	(c)
Equity compensation plans
approved by
security holders	4,183,197	$ 12.33	1,957,390
Equity compensation plans
not approved by
security holders	-0-	-0-	-0-

Item 6. Selected Financial Data

The following table sets forth selected financial data regarding the financial condition and operating results of the Company. One should read the following information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” below, and the Company’s Consolidated Financial Statements included elsewhere in this report.

Selected Financial Data
(In thousands, except per share data)

	Year ended August 31,
	2002			2001			2000			1999			1998
Income Statement Data:
Company-owned restaurant sales	$	330,707		$	267,463		$	224,880		$	210,419		$	182,011
Franchised restaurants:
Franchise royalties		61,392			54,220			47,595			40,859			32,391
Franchise fees		4,020			4,408			3,717			3,468			2,564
Other		4,043			4,547			3,864			2,861			2,141

Total revenues		400,162			330,638			280,056			257,607			219,107

Cost of restaurant sales		242,193			195,338			163,570			155,521			135,806
Selling, general and administrative		33,444			30,602			27,894			25,543			22,250
Depreciation and amortization		26,078			23,855			20,287			18,464			14,790
Minority interest in earnings of restaurants		14,864			12,444			10,173			8,623			7,904
Provision for impairment of long-lived assets		1,261			792			951			1,519			285
Special provision for litigation settlement		—			—			—			—			2,700

Total expenses		317,840			263,031			222,875			209,670			183,735

Income from operations		82,322			67,607			57,181			47,937			35,372
Net interest expense		6,319			5,525			5,186			4,278			2,750

Income before income taxes and cumulative
effect of change in accounting	$	76,003		$	62,082		$	51,995		$	43,659		$	32,622

Income before cumulative effect of
change in accounting	$	47,692		$	38,956		$	32,627		$	27,396		$	20,470
Cumulative effect of change in accounting,
net of taxes and minority interest		—			—			—			—			681

Net income	$	47,692		$	38,956		$	32,627		$	27,396		$	19,789


Income per share before cumulative
effect of change in accounting (1):
Basic	$	1.19		$	0.98		$	0.81		$	0.65		$	0.47
Diluted	$	1.13		$	0.93		$	0.78		$	0.63		$	0.46

Balance Sheet Data:
Working capital (deficit)	$	(12,942	)	$	(3,335	)	$	(6,371	)	$	(7,743	)	$	(7,292	)
Property, equipment and capital leases, net		305,286			273,198			222,318			207,890			188,065
Total assets		405,356			358,000			278,371			256,677			233,180
Obligations under capital leases
(including current portion)		12,938			13,688			7,299			8,048			8,379
Long-term debt (including current portion)		109,375			109,168			83,881			72,400			61,518
Stockholders' equity		230,670			200,719			155,263			149,755			132,011

(1) Adjusted for a 3-for-2 stock split in 2002, 2000 and 1998

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This annual report contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements represent the Company’s expectations or belief concerning future events, including the following: any statements regarding future sales or expenses, any statements regarding the continuation of historical trends, and any statements regarding the sufficiency of the Company’s working capital and cash generated from operating and financing activities for the Company’s future liquidity and capital resources needs. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” and similar expressions are intended to identify forward-looking statements. The Company cautions that those statements are further qualified by important economic and competitive factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, risks of the restaurant industry, including a highly competitive industry and the impact of changes in consumer spending patterns, consumer tastes, local, regional and national economic conditions, weather, demographic trends, traffic patterns, employee availability and cost increases. In addition, the opening and success of new restaurants will depend on various factors, including the availability of suitable sites for new restaurants, the negotiation of acceptable lease or purchase terms for new locations, permitting and regulatory compliance, the ability of the Company to manage the anticipated expansion and hire and train personnel, the financial viability of the Company’s franchisees, particularly multi-unit operators, and general economic and business conditions. Accordingly, such forward-looking statements do not purport to be predictions of future events or circumstances and may not be realized.

Results of Operations

The Company derives its revenues primarily from Company-owned restaurant sales and royalty payments from franchisees. The Company also receives revenues from initial franchise fees, area development fees, and the selling and leasing of signs and real estate. In addition, the Company owns and receives income from a minority interest in a few franchised restaurants. Costs of Company-owned restaurant sales and minority interest in earnings of restaurants relate directly to Company-owned restaurant sales. Other expenses, such as depreciation, amortization, and general and administrative expenses, relate to both Company-owned restaurant operations, as well as the Company’s franchising operations. The Company’s revenues and expenses are directly affected by the number and sales volumes of Company-owned restaurants. The Company’s revenues and, to a lesser extent, expenses are also affected by the number and sales volumes of franchised restaurants. Initial franchise fees and franchise royalties are directly affected by the number of franchised restaurant openings.

The following table sets forth the percentage relationship to total revenues, unless otherwise indicated, of certain items included in the Company’s statements of income. The table also sets forth certain restaurant data for the periods indicated.

Percentage Results of Operations and Restaurant Data
($ in thousands)

	Year ended August 31,
	2002			2001			2000
INCOME STATEMENT DATA:
Revenues:
Company-owned restaurant sales		82.7	%		80.9	%		80.3	%
Franchised restaurants:
Franchise royalties		15.3			16.4			17.0
Franchise fees		1.0			1.3			1.3
Other		1.0			1.4			1.4

		100.0	%		100.0	%		100.0	%

Costs and expenses:
Company-owned restaurants (1)		73.2	%		73.0	%		72.7	%
Selling, general and administrative		8.4			9.3			10.0
Depreciation and amortization		6.5			7.2			7.2
Minority interest in earnings of restaurants (1)		4.5			4.7			4.5
Provision for impairment of long-lived assets		0.3			0.2			0.3
Income from operations		20.6			20.4			20.4
Net interest expense		1.6			1.7			1.9
Net income		11.9			11.8			11.7


RESTAURANT OPERATING DATA:
Company-owned restaurants:
Core markets		350			300			234
Developing markets		102			93			78

All markets (2)		452			393			312
Franchised restaurants (2)		2,081			1,966			1,863

Total		2,533			2,359			2,175


System-wide sales	$	2,205,269		$	1,971,477		$	1,778,828
Percentage increase (3)		11.9	%		10.8	%		12.0	%

Average sales per restaurant:
Company-owned	$	791		$	772		$	747
Franchise		935			899			872
System-wide		906			874			853

Change in comparable restaurant sales (4):
Company-owned restaurants:
Core markets (5)		2.6	%		2.4	%		2.9	%
Developing markets (5)		-2.1			-0.5			0.6
All markets		1.7			1.8			2.4
Franchise		3.2			1.8			3.2
System-wide		3.0			1.8			3.0

(1)

As a percentage of Company-owned restaurant sales.

(2)

Number of restaurants open at end of year.

(3)

Represents percentage increase from the comparable period in the prior year.

(4)

Represents percentage change for restaurants open in both the reported and prior years.

(5)

The calculation of the percentage change of Company-owned restaurants by core and developing markets is based on a television market determination rather than the state determination reflected in the number of Company-owned restaurants by core and developing markets set forth above in this table and on page 2.

Comparison of Fiscal Year 2002 to Fiscal Year 2001. Total revenues increased 21.0% to $400.2 million during fiscal year 2002 from $330.6 million in fiscal year 2001. Company-owned restaurant sales increased 23.6% to $330.7 million during fiscal year 2002 from $267.5 million in fiscal year 2001. Of the $63.2 million increase, $58.9 million was due to the net addition of 140 Company-owned restaurants since the beginning of fiscal year 2001 ($61.4 million from the addition of 74 newly constructed restaurants and 75 acquired restaurants since the beginning of fiscal year 2001 less $2.5 million from nine stores sold or closed during the same period). Average sales increases of approximately 1.7% by stores open the full reporting periods of fiscal year 2002 and 2001 accounted for $4.3 million of the increase.

Franchise royalties increased 13.2% to $61.4 million during fiscal year 2002, compared to $54.2 million in fiscal year 2001. Of the $7.2 million increase, approximately $3.9 million was attributable to franchise same-store sales growth of 3.2% combined with an increase in the effective royalty rate from 3.18% in fiscal year 2001 to 3.27% in fiscal year 2002. Each of the Company’s license agreements contains an ascending royalty rate feature whereby the royalty rate increases as sales volumes increase. The balance of the increase resulted from an increase in the number of franchise restaurants operating in fiscal year 2002 compared to fiscal year 2001. Franchise fees decreased 8.8% as 142 franchise drive-ins opened during fiscal year 2002 as compared to 157 in fiscal year 2001. However, the average franchise fee increased as a greater percentage of stores opened under the newest form of license agreement, which has a higher franchise fee and royalty rate.

The Company expects total revenue growth during fiscal year 2003 of approximately 15% based on targeted same-store sales growth of 1% to 3% as well as the addition of approximately 190 to 200 new drive-ins (35 to 40 Company-owned and 150 to 160 franchise). The Company anticipates that the continued benefit of the ascending royalty rate and new franchise store openings will result in $7.0 million to $8.0 million in incremental franchise royalties and an increase of approximately seven to ten basis points in the average royalty rate.

Restaurant cost of operations, as a percentage of Company-owned restaurant sales, was 73.2% during fiscal year 2002 compared to 73.0% in fiscal year 2001. Food and packaging costs, as a percentage of Company-owned restaurant sales, remained flat as lower than expected beef costs and a moderation in dairy costs were offset by slightly increased discounting from standard menu prices. Payroll and employee benefits, as a percentage of Company-owned restaurant sales, increased 40 basis points as a result of an increase in average wage rates, increased investment in store-level labor as a part of the Company’s commitment to outstanding customer service, and an increase in training and store-level management for the rollout of the breakfast program. Other operating expenses, as a percentage of Company-owned restaurant sales, decreased 13 basis points primarily as a result of the leverage of higher sales volumes and improvements in utility costs. Minority interest in earnings of restaurants decreased, as a percentage of Company-owned restaurant sales, to 4.5% during fiscal year 2002, compared to 4.7% in fiscal year 2001 as a result of the decline in overall restaurant-level margins. Most of the managers and supervisors of Company-owned restaurants own a minority interest in the restaurants, and a substantial portion of their compensation flows through the minority interest in earnings of restaurants.

Looking forward, the Company expects restaurant cost of operations to remain flat or increase slightly, as a percentage of Company-owned restaurant sales, during fiscal year 2003 as the leverage of operating at higher volumes and a favorable food cost environment is anticipated to mostly offset the continued investment in store-level labor and rising workers’ compensation insurance rates. The Company continues to look for ways to strengthen its partnership program so that a larger percentage of managers’ and supervisors’ compensation is derived from the partnership program. However, since the Company expects store-level margins to remain flat or deteriorate slightly, minority interest in earnings of restaurants is expected to remain flat or decline slightly as a percentage of Company-owned restaurant sales.

Selling, general and administrative expenses decreased, as a percentage of total revenues, to 8.4% during fiscal year 2002, compared with 9.3% in fiscal year 2001 as a result of the leverage of operating at higher sales volumes. The Company expects selling, general and administrative expenses to grow by 8% to 10% in fiscal year 2003 while continuing to decline as a percentage of total revenues. A significant portion of the Company’s future revenue growth will be attributable to Company-owned restaurants. Company-owned restaurants require a lower level of selling, general and administrative expenses, as a percentage of revenues, than the Company’s franchising operations since most expenses of Company-owned restaurant operations are reflected in restaurant cost of operations and minority interest in restaurant operations.

Depreciation and amortization expense increased 9.3% to $26.1 million during fiscal year 2002 compared to 17.6% in fiscal year 2001 while declining as a percentage of revenue to 6.5% as compared to 7.2% the prior year. The increase in depreciation resulted primarily from new drive-in development and store acquisitions in the third fiscal quarter of 2002. The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” effective September 1, 2001 which resulted in a reduction in amortization expense of $2.2 million during fiscal year 2002 as compared to fiscal year 2001, excluding any related tax effects. See Note 1 of Notes to Consolidated Financial Statements for a discussion of the new Accounting Statement. Management expects depreciation and amortization to grow by approximately 12% to 14% during fiscal year 2003 and to continue to decline as a percentage of total revenues.

During fiscal year 2002, two drive-ins in developing markets became impaired under the guidelines of FAS 121 – “Accounting for the Impairment of Long-Lived Assets,” and estimates were revised on three stores which were previously impaired under FAS 121. As a result, a provision for impairment of long-lived assets of $1.3 million was recorded for the drive-in’s carrying cost in excess of its estimated fair value. During fiscal year 2001, two drive-ins became impaired under FAS 121 resulting in an impairment of $0.8 million. The Company continues to perform quarterly analyses of certain underperforming restaurants. It is reasonably possible that the estimate of future cash flows associated with these restaurants may change in the near future resulting in the need to write-down assets associated with one or more of these restaurants to fair value.

Income from operations increased 21.8% to $82.3 million during fiscal year 2002 from $67.6 million in fiscal year 2001 due primarily to the growth in revenues and other matters discussed above.

Net interest expense during fiscal year 2002 increased 14.4% to $6.3 million from $5.5 million in fiscal year 2001. This increase was the result of additional borrowings to fund share repurchases of $26.0 million and capital expenditures of $71.1 million, including $20.5 million for acquisitions. The Company expects interest expense to increase slightly in fiscal year 2003, excluding the impact of potential acquisitions and share repurchases.

Provision for income taxes reflects an effective federal and state tax rate of 37.25% for fiscal year 2002 and 2001. Net income increased 22.4% to $47.7 million in fiscal year 2002 compared to $39.0 million in fiscal year 2001. Diluted earnings per share increased to $1.13 per share during fiscal year 2002, compared to $0.93 per share in fiscal year 2001, for an increase of 21.5%. The Company expects diluted earnings per share to grow by 18% to 20% during fiscal year 2003.

Comparison of Fiscal Year 2001 to Fiscal Year 2000 . Total revenues increased 18.1% to $330.6 million during fiscal year 2001 from $280.1 million in fiscal year 2000. Company-owned restaurant sales increased 18.9% to $267.5 million in fiscal year 2001 from $224.9 million in fiscal year 2000. Of the $42.6 million increase in Company-owned restaurant sales, $39.3 million was due to the net addition of 97 Company-owned restaurants since the beginning of fiscal 2000 ($42.1 million from the addition of 58 newly constructed restaurants and 52 acquired restaurants since the beginning of fiscal year 2000 less $2.8 million from 13 stores sold or closed during the same period). Average sales increases of approximately 1.8% by stores open throughout the full reporting periods of fiscal year 2001 and 2000 accounted for $3.3 million of the increase.

Franchise royalties increased 13.9% to $54.2 million in fiscal year 2001, compared to $47.6 million in fiscal year 2000. Of the $6.6 million increase, approximately $3.4 million was attributable to additional franchise restaurants in operation and an increase in royalty rates caused by the conversion of some of the Company’s older license agreements to newer agreements, and the automatic royalty rate step-up feature contained in many of the Company’s older license agreements. The balance of the increase resulted from franchise same-store sales growth of 1.8% in fiscal year 2001. Each of the Company’s license agreements contains an ascending royalty rate feature whereby the royalty rate increases as sales volumes increase. As a result of this feature and the majority of new stores opening under the most current form of license agreement, which contains higher rates, as well as the conversion and automatic step-up features described above, the Company’s average royalty rate grew to 3.18% during fiscal 2001 from 3.06% during fiscal 2000. One hundred fifty-seven franchise drive-ins opened in fiscal year 2001 compared to 150 in fiscal year 2000, resulting in an 18.6% increase in franchise fee revenues.

Restaurant cost of operations, as a percentage of Company-owned restaurant sales, was 73.0% in fiscal year 2001, compared to 72.7% in fiscal year 2000. Food and packaging costs decreased 10 basis points, as a percentage of Company-owned restaurant sales, primarily as a result of a lower rate of discounting from standard menu pricing, which combined with lower unit costs for potatoes and pork to more than offset higher beef, dairy and packaging costs. Payroll and employee benefits, as a percentage of Company-owned restaurant sales, increased 50 basis points from fiscal year 2000 as a result of several factors including an increase in the average wage rate, additional labor related to the Company’s effort to expand its business in under-penetrated day parts, including an expanded breakfast program, as well as incremental training hours associated with an ongoing Quality Assurance initiative. Other operating expenses decreased 10 basis points due to the leveraging of fixed costs over higher volumes and a lower rate of discounting. Minority interest in earnings of restaurants increased 22.3% to $12.4 million in fiscal year 2001, compared to $10.2 million in fiscal year 2000.

Selling, general and administrative expenses, as a percentage of total revenues, decreased to 9.3% in fiscal year 2001, compared with 10.0% in fiscal year 2000. Depreciation and amortization expense increased 17.6% to $23.9 million in fiscal year 2001 resulting primarily from store acquisitions and new drive-in development as well as store equipment and technology upgrades.

During fiscal year 2001, two drive-ins became impaired under the guidelines of FAS 121, “Accounting for the Impairment of Long-Lived Assets.” As a result, a provision for impairment of $0.8 million was recorded for the drive-ins’ carrying cost in excess of the present value of estimated future cash flows. Two drive-ins also became impaired under the guidelines of FAS 121 in fiscal year 2000, resulting in an impairment of $1.0 million.

Income from operations increased 18.2% to $67.6 million in fiscal year 2001 from $57.2 million in fiscal year 2000.

Net interest expense in fiscal year 2001 increased 6.5% to $5.5 million from $5.2 million in fiscal year 2000. This increase was the result of additional borrowings to fund share repurchases of $2.1 million and capital expenditures of $90.1 million including $29.1 million for acquisitions.

Provision for income taxes reflects an effective federal and state tax rate of 37.25% for fiscal year 2001 and 2000. Net income increased 19.4% to $39.0 million in fiscal year 2001 compared to $32.6 million in fiscal year 2000. Diluted earnings per share increased to $1.40 per share in fiscal year 2001, compared to $1.17 per share in fiscal year 2000, for an increase of 19.7%.

Liquidity and Sources of Capital

Net cash provided by operating activities increased $17.8 million or 27.1% in fiscal year 2002 as compared to the same period in fiscal year 2001, primarily as the result of the increase in operating profit before depreciation and amortization and the provision for deferred income taxes.

The Company opened 40 newly-constructed restaurants and acquired a net of 20 existing restaurants from franchisees in fiscal year 2002. The Company funded total capital additions for fiscal year 2002 of $71.1 million, which included the cost of newly-opened restaurants, new equipment for existing restaurants, retrofits of existing restaurants, restaurants under construction, acquired restaurants, and other capital expenditures, from cash generated by operating activities and through borrowings under the Company’s line of credit. During fiscal year 2002, the Company purchased the real estate for 46 of the 65 newly-constructed and acquired restaurants. The Company expects to own the land and building for most of its future newly-constructed restaurants.

The Company’s board of directors expanded the stock repurchase program during fiscal year 2002, increasing the funds authorized for the repurchase of the Company’s common stock from $74.6 million to $130.3 million and extended the term of the program to December 31, 2003. The Company repurchased approximately 1.2 million shares of common stock at an aggregate cost of $26.0 million during the year, leaving approximately $49.3 million available under the share repurchase program as of the end of the fiscal year. As of August 31, 2002, the Company’s total cash balance of $9.0 million reflected the impact of the cash generated from operating activities, borrowing activity, and capital expenditures mentioned above.

The Company has an agreement with a group of banks which provides the Company with an $80.0 million line of credit expiring in July of 2004. The Company plans to use the line of credit to finance the opening of newly-constructed restaurants, acquisitions of existing restaurants, purchases of the Company’s common stock, retirement of senior notes and for other general corporate purposes. As of August 31, 2002, the Company’s outstanding borrowings under the line of credit were $29.0 million, at an effective borrowing rate of 3.9%, as well as $0.2 million in outstanding letters of credit. The amount available under the line of credit as of August 31, 2002, was $50.8 million. See Note 9 of the Notes to Consolidated Financial Statements for additional information regarding the Company’s long-term debt.

The Company plans capital expenditures of $60 to $70 million in fiscal year 2003, excluding potential acquisitions and share repurchases. These capital expenditures primarily relate to the development of additional Company-owned restaurants, stall additions, relocations of older restaurants, store equipment upgrades, and enhancements to existing financial and operating information systems, including refinement of a point-of-sale system. The Company expects to fund these capital expenditures through borrowings under its existing line of credit and cash flow from operations. The Company expects to generate free cash flow, after capital expenditures of $20 million to $25 million during fiscal 2003. The Company has long-term debt maturing in fiscal years 2003, 2004 and 2005 of $20.1 million, $30.1 million and $34.6 million respectively. The Company expects to refinance amounts maturing in 2003 under the senior unsecured notes with its line of credit and plans to extend the line of credit under existing renewal options and to increase the amount available as needed. The Company believes that existing cash and funds generated from operations, as well as borrowings under the line of credit, will meet the Company’s needs for the foreseeable future.

Impact of Inflation

Though increases in labor, food or other operating costs could adversely affect the Company’s operations, management does not believe that inflation has had a material effect on income during the past several years.

Seasonality

The Company does not expect seasonality to affect its operations in a materially adverse manner. The Company’s results during its second fiscal quarter (the months of December, January and February) generally are lower than other quarters because of the climate of the locations of a number of Company-owned and franchised restaurants.

Critical Accounting Policies and Estimates

The Consolidated Financial Statements and Notes to Consolidated Financial Statements contain information that is pertinent to management’s discussion and analysis. The preparation of financial statements in conformity with generally accepted accounting principles requires management to use its judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. These assumptions and estimates could have a material affect on the Company’s Financial Statements. The Company evaluates its assumptions and estimates on an ongoing basis based on historical experience and various other factors that are believed to be relevant under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

The Company annually reviews its financial reporting and disclosure practices and accounting policies to ensure that its financial reporting and disclosures provide accurate and transparent information relative to the current economic and business environment. The Company believes that of its significant accounting policies (see Note 1 of Notes to Consolidated Financial Statements), the following policies involve a higher degree of risk, judgment and/or complexity.

Impairment of Long-Lived Assets. The Company reviews each restaurant for impairment when events or circumstances indicate it might be impaired. The Company tests for impairment using historical cash flows and other relevant facts and circumstances as the primary basis for its estimates of future cash flows. This process requires the use of estimates and assumptions, which are subject to a high degree of judgment. In addition, at least

annually the Company assesses the recoverability of goodwill and other intangible assets related to its brand and its restaurants. These impairment tests require the Company to estimate fair values of its brand and its restaurants by making assumptions regarding future cash flows and other factors. If these assumptions change in the future, the Company may be required to record impairment charges for these assets.

Ownership Program/Allowance for Uncollectible Notes and Accounts Receivable. The Company’s restaurant philosophy stresses an ownership relationship with supervisors and drive-in managers. Most supervisors and managers of Company-owned restaurants own an equity interest in the restaurant, which is financed by the Company. These notes are typically financed for a term of five years, bear interest at market rates, and are secured by the partner’s equity interest. The Company evaluates whether the partner notes are collectible and makes estimates of bad debts based on the restaurant’s financial performance and collection history with individual partners. If an individual restaurant’s performance declines, the probability of default by the partners is increased.

The investments made by managers and supervisors in each partnership or limited liability company are accounted for as minority interests in the financial statements. The ownership agreements contain provisions for buying-out partners upon termination. The amount of the investment made by a partner and the amount of the buy-out are based on a number of factors, primarily upon the drive-in’s financial performance for the preceding 12 months. In no case, does the buy-out amount exceed fair market value. Such payments are accounted for under the purchase method of accounting.

The Company collects royalties from franchisees and provides for estimated losses for receivables that are not likely to be collected. General allowances for uncollectible receivables are estimated based on historical trends. Although the Company has a good relationship with its franchisees and collection rates are currently high, if average sales or the financial health of franchisees were to deteriorate, the Company may have to increase reserves against collection of franchise revenues.

Contingency Reserves. From time to time, the Company is involved in various legal proceedings and has certain unresolved claims pending involving taxing authorities, franchisees, suppliers, employees and competitors. The Company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as estimate potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each issue. In addition, the Company’s estimate of probable losses may change in the future due to new developments or changes in approach such as a change in settlement strategy in dealing with these matters. The Company believes that all claims currently pending are either adequately covered by insurance or would not have a material adverse effect on the Company’s business or financial condition.

Advertising. Under the Company’s license agreements, each drive-in, either company-owned or franchise, must contribute a minimum percentage of revenues to a national media production fund (Sonic Advertising Fund) and spend an additional minimum percentage of gross revenues on local advertising, either directly or through Company-required participation in advertising cooperatives. A portion of the local advertising contributions is redistributed to a System Marketing Fund, which purchases advertising on national cable and broadcast networks and other national media and sponsorship opportunities. (See further description under Item 1, Marketing.)

As stated in the terms of existing license agreements, these funds do not constitute assets of the Company and the Company acts with limited agency in the administration of these funds. Accordingly, neither the revenues and expenses nor the assets and liabilities of the advertising cooperatives, the Sonic Advertising Fund, or the System Marketing Fund are included in the Company’s consolidated financial statements. However, all advertising contributions by Company-owned restaurants are recorded as an expense in the Company’s financial statements.

Revenue Recognition Related to Franchise Fees and Royalties. Initial franchise fees are nonrefundable and are recognized in income when all material services or conditions relating to the sale of the franchise have been substantially performed or satisfied by the Company. Area development fees are nonrefundable and are recognized in income on a pro-rata basis when the conditions for revenue recognition under the individual development agreements are met. Both initial franchise fees and area development fees are generally recognized upon the opening of a franchise drive-in or upon termination of the agreement between the company and the franchisee.

The Company’s franchisees are required under the provisions of the license agreements to pay the Company royalties each month based on a percentage of actual net royalty sales. However, the royalty payments and supporting financial statements are not due until the 20 ^th of the following month. As a result, the Company accrues royalty revenue in the month earned based on estimates of franchise store sales. These estimates are based on actual sales at Company-owned stores and projections of average unit volume growth at franchise stores.

Income Taxes. The Company provides for income taxes based on its estimate of federal and state tax liability. In making this estimate, the Company considers the impact of legislative and judicial developments. As these developments evolve, the Company will update its estimate which could result in an adjustment to the tax rate.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in interest rates on debt and notes receivable, as well as changes in commodity prices.

The Company’s exposure to interest rate risk currently consists of its Senior Notes, outstanding line of credit, and notes receivable. The Senior Notes bear interest at fixed rates which average 6.8%. The aggregate balance outstanding under the Senior Notes as of August 31, 2002 was $80.0 million. Should interest rates increase or decrease, the estimated fair value of these notes would decrease or increase, respectively. As of August 31, 2002, the estimated fair value of the Senior Notes exceeded the carrying amount by approximately $4.2 million. The line of credit bears interest at a rate benchmarked to U.S. and European short-term interest rates. The balance outstanding under the line of credit was $29.0 million as of August 31, 2002. The Company has made certain loans to its store operating partners and franchisees totaling $11.3 million as of August 31, 2002. The interest rates on these notes are generally between 10% and 11%. The Company believes the fair market value of these notes approximates their carrying amount. The impact on the Company’s results of operations of a one-point interest rate change on the outstanding balances under the line of credit as of the end of fiscal year 2002 would be approximately $0.3 million.

The Company and its franchisees purchase certain commodities such as beef, potatoes, chicken and dairy products. These commodities are generally purchased based upon market prices established with vendors. These purchase arrangements may contain contractual features that limit the price paid by establishing price floors or caps; however, the Company has not made any long-term commitments to purchase any minimum quantities under these arrangements. The Company does not use financial instruments to hedge commodity prices because these purchase agreements help control the ultimate cost and any commodity price aberrations are generally short term in nature.

This market risk discussion contains forward-looking statements. Actual results may differ materially from this discussion based upon general market conditions and changes in financial markets.

Item 8. Financial Statements and Supplementary Data

The Company has included the financial statements and supplementary financial information required by this item immediately following Part IV of this report and hereby incorporates by reference the relevant portions of those statements and information into this Item 8.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

No disagreements between the Company and its accountants have occurred within the 24-month period prior to the date of the Company’s most recent financial statements.

PART III

Item 10. Directors and Executive Officers of the Registrant

Information regarding the Company’s executive officers is set forth under Item 4A of Part I of this report. The other information required by this item is incorporated by reference from the definitive proxy statement which the

Company must file with the Securities and Exchange Commission in connection with the Company’s annual meeting of stockholders to be held January 28, 2003 (the “Proxy Statement”) under the captions “Election of Directors” and “Section 16 Compliance.”

Item 11. Executive Compensation

The information required by this item is incorporated by reference from the Proxy Statement under the caption “Executive Compensation.”

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is incorporated by reference from the Proxy Statement under the caption “Security Ownership of Certain Beneficial Owners and Management.”

Item 13. Certain Relationships and Related Transactions

The information required by this item is incorporated by reference from the Proxy Statement under the caption “Certain Relationships and Related Transactions.”

Item 14. Controls and Procedures

Within the 90 days prior to the date of 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 the 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). Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

Financial Statements

The following consolidated financial statements of the Company appear immediately following this Item 15:

		Pages
Report of Independent Auditors		F-1
Consolidated Balance Sheets at August 31, 2002 and 2001		F-2
Consolidated Statements of Income for each of the three years
in the period ended August 31, 2002		F-4
Consolidated Statements of Stockholders' Equity for each of the three years
in the period ended August 31, 2002		F-5
Consolidated Statements of Cash Flows for each of the three years
in the period ended August 31, 2002		F-6
Notes to Consolidated Financial Statements		F-8

Financial Statement Schedules

The Company has included the following schedule immediately following this Item 15:

		Page
Schedule II-Valuation and Qualifying Accounts		F-28

The Company has omitted all other schedules because the conditions requiring their filing do not exist or because the required information appears in the Company’s Consolidated Financial Statements, including the notes to those statements.

Exhibits

The Company has filed the exhibits listed below with this report. The Company has marked all employment contracts and compensatory plans or arrangements with an asterisk (*).

3.01.

Certificate of Incorporation of the Company, which the Company hereby incorporates by reference from Exhibit 3.1 to the Company’s Form S-1 Registration Statement No. 33-37158.

3.02.

Bylaws of the Company, which the Company hereby incorporates by reference from Exhibit 3.2 to the Company’s Form S-1 Registration Statement No. 33-37158.

3.03.

Certificate of Designations of Series A Junior Preferred Stock, which the Company hereby incorporates by reference from Exhibit 99.1 to the Company’s Form 8-K filed on June 17, 1997.

3.04.

Rights Agreement, which the Company hereby incorporates by reference from Exhibit 99.1 to the Company’s Form 8-K filed on June 17, 1997.

3.05.

Certificate of Amendment of Certificate of Incorporation of the Company, March 4, 1996, which the Company hereby incorporates by reference from Exhibit 3.05 to the Company’s Form 10-K for the fiscal year ended August 31, 2000.

3.06.

Certificate of Amendment of Certificate of Incorporation of the Company, January 22, 2002.

4.01.

Specimen Certificate for Common Stock, which the Company hereby incorporates by reference from Exhibit 4.01 to the Company’s Form 10-K for the fiscal year ended August 31, 1999.

4.02.

Specimen Certificate for Rights, which the Company hereby incorporates by reference from Exhibit 99.1 to the Company’s Form 8-K filed on June 17, 1997.

10.01.

Form of Sonic Industries Inc. License Agreement (the Number 4 License Agreement), which the Company hereby incorporates by reference from Exhibit 10.1 to the Company’s Form S-1 Registration Statement No. 33-37158.

10.02.

Form of Sonic Industries Inc. License Agreement (the Number 5 License Agreement), which the Company hereby incorporates by reference from Exhibit 10.2 to the Company’s Form S-1 Registration Statement No. 33-37158.

10.03.

Form of Sonic Industries Inc. License Agreement (the Number 4.2 License Agreement and Number 5.1 License Agreement), which the Company hereby incorporates by reference from Exhibit 10.03 to the Company’s Form 10-K for the fiscal year ended August 31, 1994.

10.04.

Form of Sonic Industries Inc. License Agreement (the Number 6 License Agreement), which the Company hereby incorporates by reference from Exhibit 10.04 to the Company’s Form 10-K for the fiscal year ended August 31, 1994.

10.05.

Form of Sonic Industries Inc. License Agreement (the Number 6A License Agreement), which the Company hereby incorporates by reference from Exhibit 10.05 to the Company’s Form 10-K for the fiscal year ended August 31, 1998.

10.06.

Form of Sonic Industries Inc. License Agreement (the Number 5.2 License Agreement), which the Company hereby incorporates by reference from Exhibit 10.06 to the Company’s Form 10-K for the fiscal year ended August 31, 1998.

10.07.

Form of Sonic Industries Inc. Area Development Agreement, which the Company hereby incorporates by reference from Exhibit 10.05 to the Company’s Form 10-K for the fiscal year ended August 31, 1995.

10.08.

Form of Sonic Industries Inc. Sign Lease Agreement, which the Company hereby incorporates by reference from Exhibit 10.4 to the Company’s Form S-1 Registration Statement No. 33-37158.

10.09.

Form of General Partnership Agreement, Limited Liability Company Operating Agreement, Partnership Master Agreement, and Limited Liability Company Master Agreement, which the Company hereby incorporates by reference from Exhibit 10.07 to the Company’s Form 10-K for the fiscal year ended August 31, 1997.

10.10.

1991 Sonic Corp. Stock Option Plan, which the Company hereby incorporates by reference from Exhibit 10.5 to the Company’s Form S-1 Registration Statement No. 33-37158.*

10.11.

1991 Sonic Corp. Stock Purchase Plan, which the Company hereby incorporates by reference from Exhibit 10.6 to the Company’s Form S-1 Registration Statement No. 33-37158.*

10.12.

1991 Sonic Corp. Directors’ Stock Option Plan, which the Company hereby incorporates by reference from Exhibit 10.08 to the Company’s Form 10-K for the fiscal year ended August 31, 1991.*

10.13.

Sonic Corp. Savings and Profit Sharing Plan, which the Company hereby incorporates by reference from Exhibit 10.8 to the Company’s Form S-1 Registration Statement No. 33-37158.*

10.14.

Net Revenue Incentive Plan, which the Company hereby incorporates by reference from Exhibit 10.19 to the Company’s Form S-1 Registration Statement No. 33-37158.*

10.15.

Form of Indemnification Agreement for Directors, which the Company hereby incorporates by reference from Exhibit 10.7 to the Company’s Form S-1 Registration Statement No. 33-37158.*

10.16.

Form of Indemnification Agreement for Officers, which the Company hereby incorporates by reference from Exhibit 10.14 to the Company’s Form 10-K for the fiscal year ended August 31, 1995.*

10.17.

Sonic Corp. 1995 Stock Incentive Plan, which the Company hereby incorporates by reference from Exhibit 10.15 to the Company’s Form 10-K for the fiscal year ended August 31, 1996.*

10.18.

Employment Agreement with J. Clifford Hudson dated August 20, 1996.*

10.19.

Employment Agreement with Pattye L. Moore dated August 20, 1996.*

10.20.

Employment Agreement with Ronald L. Matlock dated August 20, 1996.*

10.21.

Employment Agreement with W. Scott McLain dated January 27, 1998.*

10.22.

Employment Agreement with Frank B. Young, Jr. dated January 19, 2000.*

10.23.

Employment Agreement with Stephen C. Vaughan dated August 20, 1996.*

10.24.

Employment Agreement with Terry D. Harryman dated January 19, 2000.*

10.25.

Loan Agreement with Texas Commerce Bank National Association dated July 31, 1995, which the Company hereby incorporates by reference from Exhibit 10.26 to the Company’s Form 10-K for the fiscal year ended August 31, 1995.

10.26.

First Amendment to Loan Agreement with Texas Commerce Bank National Association, which the Company hereby incorporates by reference from Exhibit 10.18 to the Company’s Form 10-K for the fiscal year ended August 31, 1996.

10.27.

Second Amendment to Loan Agreement with Texas Commerce Bank National Association, which the Company hereby incorporates by reference from Exhibit 10.19 to the Company’s Form 10-K for the fiscal year ended August 31, 1996.

10.28.

Third Amendment to Loan Agreement with Texas Commerce Bank National Association, which the Company hereby incorporates by reference from Exhibit 10.01 to the Company’s Form 10-Q for the fiscal quarter ended May 31, 1997.

10.29.

Fourth Amendment to the Loan Agreement with Chase Bank of Texas, N.A. (formerly known as Texas Commerce Bank National Association), which the Company hereby incorporates by reference from Exhibit 10.21 to the Company’s 10-Q for the fiscal quarter ended May 31, 1998.

10.30.

Fifth Amendment to the Loan Agreement with Chase Bank of Texas, N.A. (formerly known as Texas Commerce Bank National Association), which the Company hereby incorporates by reference from Exhibit 10.22 to the Company’s 10-Q for the fiscal quarter ended May 31, 1998.

10.31.

Sixth Amendment to the Loan Agreement with Chase Bank of Texas, N.A. (formerly known as Texas Commerce Bank National Association), which the Company hereby incorporates by reference from Exhibit 10.25 to the Company’s Form 10-K for the fiscal year ended August 31, 1999.

10.32.

Seventh Amendment to the Loan Agreement with Chase Bank of Texas, N.A. (formerly known as Texas Commerce Bank National Association), which the Company hereby incorporates by reference from Exhibit 10.29 to the Company’s Form 10-K for the fiscal year ended August 31, 2000.

10.33.

Eighth Amendment to the Loan Agreement with Bank of America, N.A. (as successor agent to The Chase Manhattan Bank, formerly known as Chase Bank of Texas, N.A.), which the Company hereby incorporates by reference from Exhibit 10.27 to the Company’s Form 10-K for the fiscal year ended August 31, 2001.

10.34.

Ninth Amendment to the Loan Agreement with Bank of America, N.A., which the Company hereby incorporates by reference from Exhibit 10.28 to the Company’s Form 10-K for the fiscal year ended August 31, 2001.

10.35.

Note Purchase Agreement dated April 1, 1998, which the Company hereby incorporates by reference from Exhibit 10.23 to the Company’s 10-Q for the fiscal quarter ended May 31, 1998.

10.36.

Form of 6.652% Senior Notes, Series A, due April 1, 2003, which the Company hereby incorporates by reference from Exhibit 10.24 to the Company’s 10-Q for the fiscal quarter ended May 31, 1998.

10.37.

Form of 6.759% Senior Notes, Series B, due April 1, 2003, which the Company hereby incorporates by reference from Exhibit 10.24 to the Company’s 10-Q for the fiscal quarter ended May 31, 1998.

10.38.

2001 Sonic Corp. Stock Option Plan, which the Company hereby incorporates by reference from Exhibit No. 10.32 to the Company’s Form 10-K for the fiscal year ended August 31, 2001.

10.39.

2001 Sonic Corp. Directors’ Stock Option Plan, which the Company hereby incorporates by reference from Exhibit No. 10.33 to the Company’s Form 10-K for the fiscal year ended August 31, 2001.

10.40.

Note Purchase Agreement dated August 10, 2001, which the Company hereby incorporates by reference from Exhibit No. 10.34 to the Company’s Form 10-K for the fiscal year ended August 31, 2001.

10.41.

Form of 6.58% Senior Notes, Series A, due August 10, 2008, which the Company hereby incorporates by reference from Exhibit No. 10.35 to the Company’s Form 10-K for the fiscal year ended August 31, 2001.

10.42.

Form of 6.87% Senior Notes, Series B, due August 10, 2011, which the Company hereby incorporates by reference from Exhibit No. 10.36 to the Company’s Form 10-K for the fiscal year ended August 31, 2001.

21.01.

Subsidiaries of the Company, which the Company hereby incorporates by reference from Exhibit No. 21.01 to the Company’s Form 10-K for the fiscal year ended August 31, 2001.

23.01.

Consent of Independent Auditors.

99.1.

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

99.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

Reports on Form 8-K

The Company filed a report on Form 8-K on June 7, 2002, reporting its change of independent auditors.

Report of Independent Auditors

The Board of Directors and Stockholders
Sonic Corp.

We have audited the accompanying consolidated balance sheets of Sonic Corp. as of August 31, 2002 and 2001, and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended August 31, 2002. Our audits also included the financial statement schedule listed in Item 14. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Sonic Corp. at August 31, 2002 and 2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended August 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.


		ERNST & YOUNG LLP
Oklahoma City, Oklahoma October 11, 2002

F-1

Sonic Corp.

Consolidated Balance Sheets

	August 31,
	2002		2001
	(In Thousands)

Assets
Current assets:
Cash and cash equivalents	$	8,951	$	6,971
Accounts and notes receivable, net		13,755		12,142
Net investment in direct financing leases		802		683
Inventories		2,274		2,030
Deferred income taxes		481		388
Prepaid expenses		3,710		1,315

Total current assets		29,973		23,529

Notes receivable, net		8,529		7,375

Net investment in direct financing leases		7,137		7,148

Property, equipment and capital leases, net		305,286		273,198

Goodwill, net		46,826		38,850

Trademarks, trade names and other intangibles, net		6,755		6,980

Other assets, net		850		920

Total assets	$	405,356	$	358,000

F-2

Sonic Corp.

Consolidated Balance Sheets (continued)

	August 31,
	2002			2001
	(In Thousands)
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,799		$	8,052
Deposits from franchisees		1,015			1,020
Accrued liabilities		34,029			18,380
Long-term debt and obligations under capital leases due within one year		1,072			1,083

Total current liabilities		42,915			28,535

Obligations under capital leases due after one year		11,991			12,801
Long-term debt due after one year		109,250			108,972
Other noncurrent liabilities		5,807			5,238
Deferred income taxes		4,723			1,735
Commitments and contingencies (Notes 6, 7, 14, and 15)

Stockholders’ equity:
Preferred stock, par value $.01; 1,000,000 shares authorized;
none outstanding		—			—
Common stock, par value $.01; 100,000,000 shares authorized;
shares issued 48,477,652 in 2002 and 31,913,898 in 2001		485			319
Paid-in capital		86,563			78,427
Retained earnings		236,126			188,434

		323,174			267,180
Treasury stock, at cost; 8,736,701 shares in 2002 and
5,029,345 shares in 2001		(92,504	)		(66,461	)

Total stockholders’ equity		230,670			200,719

Total liabilities and stockholders’ equity	$	405,356		$	358,000

See accompanying notes.

F-3

Sonic Corp.

Consolidated Statements of Income

	Year ended August 31,
	2002			2001			2000
	(In Thousands, Except Per Share Data)
Revenues:
Company-owned restaurant sales	$	330,707		$	267,463		$	224,880
Franchised restaurants:
Franchise royalties		61,392			54,220			47,595
Franchise fees		4,020			4,408			3,717
Other		4,043			4,547			3,864

		400,162			330,638			280,056
Costs and expenses:
Company-owned restaurants:
Food and packaging		85,838			69,609			58,778
Payroll and other employee benefits		95,085			75,822			62,576
Other operating expenses		61,270			49,907			42,216

		242,193			195,338			163,570

Selling, general and administrative		33,444			30,602			27,894
Depreciation and amortization		26,078			23,855			20,287
Minority interest in earnings of restaurants		14,864			12,444			10,173
Provision for impairment of long-lived assets and other		1,261			792			951

		317,840			263,031			222,875

Income from operations		82,322			67,607			57,181

Interest expense		7,406			6,628			6,234
Interest income		(1,087	)		(1,103	)		(1,048	)

Net interest expense		6,319			5,525			5,186

Income before income taxes		76,003			62,082			51,995
Provision for income taxes		28,311			23,126			19,368

Net income	$	47,692		$	38,956		$	32,627


Basic income per share	$	1.19		$	0.98		$	0.81


Diluted income per share	$	1.13		$	0.93		$	0.78

See accompanying notes.

F-4

Sonic Corp.

Consolidated Statements of Stockholders’ Equity

	Common Stock									Treasury Stock
	Shares		Amount		Paid-in Capital			Retained Earnings		Shares		Amount
	(In Thousands)

Balance at August 31, 1999		20,746	$	207	$	67,212		$	116,851		2,164	$	(34,515	)

Exercise of common stock options		137		2		1,911			—		—		—
Tax benefit related to exercise of
employee stock options		—		—		767			—		—		—
Purchase of treasury stock		—		—		—			—		1,138		(29,799	)
Three-for-two stock split		10,442		104		(104	)		—		1,651		—
Net income		—		—		—			32,627		—		—

Balance at August 31, 2000		31,325		313		69,786			149,478		4,953		(64,314	)

Exercise of common stock options		589		6		5,827			—		—		—
Tax benefit related to exercise of
employee stock options		—		—		2,814			—		—		—
Purchase of treasury stock		—		—		—			—		76		(2,147	)
Net income		—		—		—			38,956		—		—

Balance at August 31, 2001		31,914		319		78,427			188,434		5,029		(66,461	)

Exercise of common stock options		512		5		4,823			—		—		—
Tax benefit related to exercise of
employee stock options		—		—		3,474			—		—		—
Purchase of treasury stock		—		—		—			—		1,033		(26,043	)
Three-for-two stock split		16,052		161		(161	)		—		2,675		—
Net income		—		—		—			47,692		—		—

Balance at August 31, 2002		48,478	$	485	$	86,563		$	236,126		8,737	$	(92,504	)

See accompanying notes.

F-5

Sonic Corp.

Consolidated Statements of Cash Flows

	Year ended August 31,
	2002			2001			2000
	(In Thousands)
Cash flows from operating activities
Net income	$	47,692		$	38,956		$	32,627
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation		25,531			21,186			18,369
Amortization		547			2,669			1,918
(Gains) losses on dispositions of assets		(179	)		(936	)		63
Amortization of franchise and development fees		(4,020	)		(4,408	)		(3,705	)
Franchise and development fees collected		4,116			4,702			3,930
Provision (benefit) for deferred income taxes		2,895			(1,471	)		881
Provision for impairment of long-lived assets		1,261			792			951
Tax benefit related to exercise of employee stock options		3,474			2,814			767
Other		380			212			(19	)
(Increase) decrease in operating assets:
Accounts and notes receivable		(1,152	)		(1,228	)		(2,245	)
Inventories and prepaid expenses		(2,530	)		(308	)		(690	)
Increase (decrease) in operating liabilities:
Accounts payable		(1,235	)		590			2,342
Accrued and other liabilities		6,703			2,129			1,420

Total adjustments		35,791			26,743			23,982

Net cash provided by operating activities		83,483			65,699			56,609

Cash flows from investing activities
Purchases of property and equipment		(50,572	)		(61,499	)		(35,151	)
Acquisition of businesses, net of cash received		(20,505	)		(29,120	)		—
Investments in direct financing leases		(893	)		(862	)		(2,713	)
Collections on direct financing leases		810			850			1,353
Proceeds from dispositions of assets		4,072			2,911			933
Increase in intangibles and other assets		(1,234	)		(2,183	)		(2,036	)

Net cash used in investing activities		(68,322	)		(89,903	)		(37,614	)

F-6

Sonic Corp.

Consolidated Statements of Cash Flows (continued)

	Year ended August 31,
	2002			2001			2000
	(In Thousands)
Cash flows from financing activities
Proceeds from long-term borrowings	$	115,275		$	238,685		$	124,155
Payments on long-term debt		(115,083	)		(213,929	)		(112,674	)
Purchases of treasury stock		(17,137	)		(1,843	)		(29,799	)
Payments on capital lease obligations		(887	)		(744	)		(725	)
Exercises of stock options		4,651			5,529			1,913

Net cash provided by (used in) financing activities		(13,181	)		27,698			(17,130	)


Net increase in cash and cash equivalents		1,980			3,494			1,865

Cash and cash equivalents at beginning of the year		6,971			3,477			1,612

Cash and cash equivalents at end of the year	$	8,951		$	6,971		$	3,477


Supplemental cash flow information
Cash paid during the year for:
Interest (net of amounts capitalized of $433,
$732 and $316, respectively)	$	7,641		$	6,339		$	6,147
Income taxes (net of refunds)		19,190			22,203			18,649
Additions to capital lease obligations		137			7,346			294
Accounts and notes receivable and decrease in capital lease
obligations from property and equipment sales		1,650			945			1,742
Obligation to acquire treasury stock		8,729			—			—
Stock options exercised by stock swap		177			304			—

See accompanying notes.

F-7

Sonic Corp.

Notes to Consolidated Financial Statements

August 31, 2002, 2001 and 2000

(In Thousands, Except Share Data)

1. Summary of Significant Accounting Policies

Operations

Sonic Corp. (the “Company”) operates and franchises a chain of quick-service drive-in restaurants in the United States. It derives its revenues primarily from Company-owned restaurant sales and royalty fees from franchisees. The Company also leases signs and real estate, and owns a minority interest in several franchised restaurants. The Company grants credit to its operating partners and its franchisees, all of whom are in the restaurant business. Substantially all of the notes receivable and direct financing leases are collateralized by real estate or equipment.

On April 1, 2001, the Company acquired 35 existing franchise restaurants located in the Tulsa, Oklahoma market from a franchisee and other minority investors. The acquisitions were accounted for under the purchase method of accounting, with the results of operations of these restaurants included with that of the Company’s commencing April 1, 2001. The Company’s cash acquisition cost, prior to post-closing adjustments, of approximately $21.9 million consisted of the drive-ins’ operating assets ($0.2 million), equipment ($4.4 million) and goodwill ($17.3 million, which is expected to be fully deductible for tax purposes). The Company also entered into long-term real estate leases on each of these drive-in restaurants, which have future minimum rental payments aggregating $1.8 million annually over the next 15 years ($5.1 million of which was recorded as capital leases related to the buildings). The Company funded this acquisition through operating cash flows and borrowings under its existing $80.0 million bank line of credit.

On April 1, 2002, the Company acquired 23 existing franchise restaurants located in the Wichita, Kansas market from a franchisee and other minority investors. The acquisitions were accounted for under the purchase method of accounting, with the results of operations of these restaurants included with that of the Company’s commencing April 1, 2002. The Company’s cash acquisition cost, prior to post-closing adjustments, of approximately $19.4 million consisted of real estate ($10.7 million), equipment ($1.7 million) and goodwill ($7.0 million, which is expected to be fully deductible for tax purposes). The Company funded this acquisition through operating cash flows and borrowings under its existing $80.0 million bank line of credit.

Principles of Consolidation

The accompanying financial statements include the accounts of the Company, its wholly-owned subsidiaries and its majority-owned, Company-operated restaurants, organized as general partnerships and limited liability companies. All significant intercompany accounts and transactions have been eliminated.

Certain amounts have been reclassified in the consolidated balance sheets to conform to the fiscal year 2002 presentation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported and contingent assets and liabilities disclosed in the financial statements and accompanying notes. Actual results may differ from those estimates, and such differences may be material to the financial statements.

Inventories

Inventories consist principally of food and supplies which are carried at the lower of cost (first-in, first-out basis) or market.

F-8

Property, Equipment and Capital Leases

Property and equipment are recorded at cost, and leased assets under capital leases are recorded at the present value of future minimum lease payments. Depreciation of property and equipment and capital leases are computed by the straight-line method over the estimated useful lives or initial terms of the leases, respectively, and are combined for presentation in the financial statements.

Accounting for Long-Lived Assets

The Company reviews long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which generally represents the individual restaurant. The Company’s primary test for an indicator of potential impairment is operating losses. If an indication of impairment is determined to be present, the Company estimates the future cash flows expected to be generated from the use of the asset and its eventual disposal. If the sum of undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. The fair value of the asset is measured by either calculating the present value of estimated future cash flows using a discount rate equivalent to the rate of return the Company expects to achieve from its investment in newly-constructed restaurants or appraisals.

Assets held for disposal are carried at the lower of depreciated cost or fair value less cost to sell. Fair values are estimated based upon appraisals or independent assessments of the assets’ estimated sales values. During the period in which assets are being held for disposal, depreciation and amortization of such assets are not recognized.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires that an impairment loss be recognized only if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and that the measurement of any impairment loss be the difference between the carrying amount and the fair value of the asset. The Company adopted the Statement effective September 1, 2002, which did not result in a material impact on its consolidated financial position or results of operation.

Goodwill and Other Intangible Assets

The Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” effective September 1, 2001. Statement No. 142 eliminates the amortization for goodwill and other intangible assets with indefinite lives. Intangible assets with lives restricted by contractual, legal, or other means will continue to be amortized over their useful lives. Goodwill and other intangible assets not subject to amortization are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. SFAS No. 142 requires a two-step process for testing impairment. First, the fair value of each reporting unit is compared to its carrying value to determine whether an indication of impairment exists. If an impairment is indicated, then the fair value of the reporting unit’s goodwill is determined by allocating the unit’s fair value to its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The amount of impairment for goodwill and other intangible assets is measured as the excess of its carrying value over its fair value. No such impairment losses were recorded upon the initial adoption of SFAS No. 142. Prior to the adoption of SFAS No. 142, goodwill was being amortized on a straight-line basis over periods not exceeding 40 years.

The Company’s intangible assets subject to amortization under SFAS No. 142 consist primarily of acquired franchise agreements, franchise fees, and other intangibles. Amortization expense is calculated using the straight-line method over the expected period of benefit, not exceeding 15 years. The Company’s trademarks and trade

F-9

names were deemed to have indefinite useful lives and are not subject to amortization. See Note 5 for additional disclosures related to goodwill and other intangibles.

Franchise Fees and Royalties

Initial franchise fees are nonrefundable and are recognized in income when all material services or conditions relating to the sale of the franchise have been substantially performed or satisfied by the Company. Area development fees are nonrefundable and are recognized in income on a pro rata basis when the conditions for revenue recognition under the individual development agreements are met. Both initial franchise fees and area development fees are generally recognized upon the opening of a franchise drive-in or upon termination of the agreement between the Company and the franchisee.

The Company’s franchisees are required under the provisions of the license agreements to pay the Company royalties each month based on a percentage of actual net royalty sales. However, the royalty payments and supporting financial statements are not due until the 20th of the following month. As a result, the Company accrues royalty revenue in the month earned based on estimates of franchise store sales. These estimates are based on actual sales at Company-owned stores and projections of average unit volume growth at franchise stores.

Advertising Costs

Costs incurred in connection with advertising and promotion of the Company’s products are expensed as incurred. Such costs amounted to $16,544, $13,283, and $11,531 for fiscal years 2002, 2001 and 2000, respectively.

Under the Company’s license agreements, each drive-in, either Company-owned or franchise, must contribute a minimum percentage of revenues to a national media production fund (Sonic Advertising Fund) and spend an additional minimum percentage of gross revenues on local advertising, either directly or through Company-required participation in advertising cooperatives. A portion of the local advertising contributions is redistributed to a System Marketing Fund, which purchases advertising on national cable and broadcast networks and other national media and sponsorship opportunities. As stated in the terms of existing license agreements, these funds do not constitute assets of the Company and the Company acts with limited agency in the administration of these funds. Accordingly, neither the revenues and expenses nor the assets and liabilities of the advertising cooperatives, the Sonic Advertising Fund, or the System Marketing Fund are included in the Company’s consolidated financial statements. However, all advertising contributions by Company-owned restaurants are recorded as expense on the Company’s financial statements.

Cash Equivalents

Cash equivalents consist of highly liquid investments with a maturity of three months or less from date of purchase.

F-10

2. Net Income Per Share

The following table sets forth the computation of basic and diluted earnings per share for the years ended August 31:

	2002		2001		2000

Numerator:
Net income	$	47,692	$	38,956	$	32,627

Denominator:
Weighted average shares outstanding - basic		40,155,522		39,848,519		40,396,452
Effect of dilutive employee stock options		2,051,227		1,883,269		1,548,203

Weighted average shares - diluted		42,206,749		41,731,788		41,944,655

Net income per share - basic	$	1.19	$	0.98	$	0.81

Net income per share - diluted	$	1.13	$	0.93	$	0.78

Anti-dilutive employee stock options excluded		104,806		14,630		452,457

See Note 12 for information regarding shares available for grant under the 2001 Sonic Corp. Stock Option Plan and the 2001 Sonic Corp. Directors' Stock Option Plan.

3. Impairment of Long-Lived Assets

As of August 31, 2002 and 2001, the Company had identified certain underperforming restaurants whose operating results indicated that certain assets of these restaurants might be impaired. The buildings and improvements of these restaurants had combined carrying amounts of $1,990 and $3,956 respectively. During fiscal years 2002 and 2001, the Company performed quarterly analyses of these and other restaurants which had incurred operating losses. As a result of these analyses, the Company determined that certain restaurants with then-existing carrying amounts of $1,139 and $971, respectively, were impaired and wrote them down by $970 and $792, respectively, to their fair values. In addition, estimates were revised on three stores which were previously impaired under FAS 121 resulting in additional provisions totaling $291 in fiscal year 2002. Management’s estimate of undiscounted future cash flows indicates that the remaining carrying amounts as of August 31, 2002 are expected to be recovered. However, it is reasonably possible that the estimate of cash flows may change in the near future resulting in the need to write-down one or more of the identified assets to fair value.

F-11

4. Accounts and Notes Receivable

Accounts and notes receivable consist of the following at August 31, 2002 and 2001:

	2002		2001
Royalties and other trade receivables	$	7,701	$	7,187
Notes receivable – current		2,290		1,797
Other		5,252		4,039

		15,243		13,023
Less allowance for doubtful accounts and notes receivable		1,488		881

	$	13,755	$	12,142



Notes receivable – noncurrent	$	9,034	$	7,761
Less allowance for doubtful notes receivable		505		386

	$	8,529	$	7,375

Most supervisors and managers of Company-owned restaurants own an equity interest in the restaurant, which is financed by the Company. These notes are typically financed for a term of five years, bear interest at market rates, and are secured by the partner’s equity interest. The Company evaluates whether the partner notes are collectible and makes estimates of bad debts based on the restaurant’s financial performance and collection history with individual partners.

As of August 31, 2002 and 2001, notes receivable from one franchisee totaled $3,420 and $3,725 respectively. The underlying restaurant assets collateralize these notes.

5. Goodwill, Intangibles and Other Assets

The gross carrying amount of franchise agreements, franchise fees and other intangibles subject to amortization was $2,749 and $2,827 at August 31, 2002 and 2001, respectively. Accumulated amortization related to these intangible assets was $2,038 and $1,891 at August 31, 2002 and 2001, respectively. The carrying amount of trademarks and trade names not subject to amortization was $6,044 at August 31, 2002 and 2001.

F-12

The following tables disclose what reported net income would have been for fiscal years ending August 31, 2002 and 2001 exclusive of amortization expense (including any related tax effects) recognized in those periods related to goodwill and intangible assets that are no longer being amortized. Similarly adjusted per-share amounts have also been presented.

	2002		2001		2000
Reported net income	$	47,692	$	38,956	$	32,627
Add back: Goodwill amortization		—		1,266		732
Add back: Trademarks and trade names amortization		—		139		139

Adjusted net income	$	47,692	$	40,361	$	33,498

Net income per share - basic:
Reported net income	$	1.19	$	0.98	$	0.81
Goodwill amortization		—		0.03		0.02
Trademarks and trade names amortization		—		—		—

Adjusted net income	$	1.19	$	1.01	$	0.83

Net income per share - diluted:
Reported net income	$	1.13	$	0.93	$	0.78
Goodwill amortization		—		0.03		0.02
Trademarks and trade names amortization		—		—		—

Adjusted net income	$	1.13	$	0.96	$	0.80

Aggregate amortization expense related to intangible assets was $319 and $288 in fiscal years 2002 and 2001, respectively. Estimated amortization expense for the next five fiscal years beginning with fiscal year 2003 is as follows:

For the year ending August 31, 2003		$289
For the year ending August 31, 2004		$278
For the year ending August 31, 2005		$202
For the year ending August 31, 2006		$193
For the year ending August 31, 2007		$209

F-13

The changes in the carrying amount of goodwill for fiscal years ending August 31, 2002 and 2001 were as follows:

	2002			2001
Balance as of September 1,	$	38,850		$	16,227
Goodwill acquired during the year		8,174			24,666
Impairment losses		—			—
Amortization of goodwill prior to adoption of SFAS 142		—			(2,018	)
Goodwill disposed of related to the sale of restaurants		(198	)		(25	)

Balance as of August 31,	$	46,826		$	38,850

6. Leases

Description of Leasing Arrangements

The Company’s leasing operations consist principally of leasing certain land, buildings and equipment (including signs) and subleasing certain buildings to franchise operators. The land and building portions of these leases are classified as operating leases and expire over the next 15 years. The equipment portions of these leases are classified principally as direct financing leases and expire principally over the next 10 years. These leases include provisions for contingent rentals which may be received on the basis of a percentage of sales in excess of stipulated amounts. Income is not recognized on contingent rentals until sales exceed the stipulated amounts. Some leases contain escalation clauses over the lives of the leases. Most of the leases contain one to four renewal options at the end of the initial term for periods of five years. These options enable the Company to retain use of properties in desirable operating areas.

Certain Company-owned restaurants lease land and buildings from third parties. These leases, which expire over the next nineteen years, include provisions for contingent rentals which may be paid on the basis of a percentage of sales in excess of stipulated amounts. The land portions of these leases are classified as operating leases and the buildings portions are classified as capital leases.

Direct Financing Leases

Components of net investment in direct financing leases are as follows at August 31, 2002 and 2001:

	2002		2001
Minimum lease payments receivable	$	12,390	$	12,656
Less unearned income		4,451		4,825

Net investment in direct financing leases		7,939		7,831
Less amount due within one year		802		683

Amount due after one year	$	7,137	$	7,148

Initial direct costs incurred in the negotiations and consummations of direct financing lease transactions have not been material. Accordingly, no portion of unearned income has been recognized to offset those costs.

F-14

Future minimum rental payments receivable as of August 31, 2002 are as follows:

	Operating		Direct Financing
Year ending August 31:
2003	$	1,243	$	1,854
2004		1,157		1,825
2005		615		1,795
2006		595		1,782
2007		576		1,733
Thereafter		3,815		3,401

		8,001		12,390
Less unearned income		—		4,451

	$	8,001	$	7,939

Capital Leases

Components of obligations under capital leases are as follows at August 31, 2002 and 2001:

	2002		2001
Total minimum lease payments	$	21,393	$	23,321
Less amount representing interest averaging 9.4% in 2002 and 10% in 2001		8,455		9,633

Present value of net minimum lease payments		12,938		13,688
Less amount due within one year		947		887

Amount due after one year	$	11,991	$	12,801

F-15

Maturities of these obligations under capital leases and future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of August 31, 2002 are as follows:

	Operating		Capital
Year ending August 31:
2003	$	6,307	$	2,112
2004		6,642		2,119
2005		6,582		1,963
2006		6,578		1,896
2007		6,364		1,714
Thereafter		52,803		11,589

		85,276		21,393
Less unearned income		—		8,455

	$	85,276	$	12,938

Total rent expense for all operating leases and capital leases consists of the following for the years ended August 31:

	2002			2001			2000
Operating leases:
Minimum rentals	$	6,574		$	5,012		$	3,810
Contingent rentals		145			147			146
Sublease rentals		(407	)		(414	)		(412	)
Capital leases:
Contingent rentals		684			412			262

	$	6,996		$	5,157		$	3,806

The aggregate future minimum rentals receivable under noncancelable subleases of operating leases as of August 31, 2002 was $1,452.

F-16

7. Property, Equipment and Capital Leases

Property, equipment and capital leases consist of the following at August 31, 2002 and 2001:

	Estimated Useful Life	2002		2001
Home office:
Land and leasehold improvements	Life of lease	$	1,697	$	1,545
Computer and other equipment	2 - 5 yrs		24,662		24,727
Restaurants, including those leased to others:
Land			94,148		81,522
Buildings	15 - 25 yrs		168,055		142,395
Equipment	5 - 7 yrs		101,788		88,145

Property and equipment, at cost			390,350		338,334
Less accumulated depreciation			96,107		77,124

Property and equipment, net			294,243		261,210

Leased restaurant buildings and equipment under
capital leases, including those held for sublease	Life of lease		16,449		16,540
Less accumulated amortization			5,406		4,552

Capital leases, net			11,043		11,988

Property, equipment and capital leases, net		$	305,286	$	273,198

Land, buildings and equipment with a carrying amount of $26,238 at August 31, 2002 were leased under operating leases to franchisees or other parties. The accumulated depreciation related to these buildings and equipment was $3,962 at August 31, 2002. As of August 31, 2002, the Company had restaurants under construction with costs to complete which aggregated $9,308.

F-17

8. Accrued Liabilities

Accrued liabilities consist of the following at August 31, 2002 and 2001:

	2002		2001
Wages and other employee benefits	$	5,003	$	4,022
Taxes, other than income taxes		7,752		6,030
Income taxes payable		5,061		1,210
Accrued interest		1,618		1,852
Obligation to acquire treasury stock		8,729		—
Other		5,866		5,266

	$	34,029	$	18,380

9. Long-Term Debt

Long-term debt consists of the following at August 31, 2002 and 2001:

	2002		2001
Senior unsecured notes (A)	$	50,000	$	50,000
Borrowings under line of credit (B)		29,000		28,600
Senior unsecured notes (C)		30,000		30,000
Other		375		568

		109,375		109,168
Less long-term debt due within one year		125		196

Long-term debt due after one year	$	109,250	$	108,972

(A)

The Company has $50,000 of senior unsecured notes with $20,000 of Series A notes maturing in April 2003 and $30,000 of Series B notes maturing in April 2005. The Company has the intent and ability to refinance the $20,000 of Series A notes maturing in 2003 and has classified that amount as long-term debt as of August 31, 2002 on the consolidated balance sheet. The Company expects to refinance amounts maturing in fiscal year 2003 with its line of credit. Interest is payable semi-annually and accrues at 6.65% for the Series A notes and 6.76% for the Series B notes. The related agreement requires, among other things, the Company to maintain equity of a specified amount, maintain ratios of debt to total capital and fixed charge coverage and limits additional borrowings.

F-18

(B)

The Company has an agreement with a group of banks which provides for an $80,000 line of credit, including a $2,000 sub-limit for letters of credit, expiring in July 2004. The agreement allows for annual renewal options, subject to approval by the banks. The Company plans to use the line of credit to finance the opening of newly-constructed restaurants, acquisitions of existing restaurants, purchases of the Company's common stock, retirement of senior notes and for general corporate purposes. Borrowings under the line of credit are unsecured and bear interest at a specified bank’s prime rate or, at the Company’s option, LIBOR plus 0.50% to 1.25%. In addition, the Company pays an annual commitment fee ranging from .125% to .25% on the unused portion of the line of credit. As of August 31, 2002, the Company’s effective borrowing rate was 3.9%. As of August 31, 2002 there were $266 in letters of credit outstanding under the line of credit. The agreement requires, among other things, the Company to maintain equity of a specified amount, maintain ratios of debt to EBITDA and fixed charge coverage and limits additional borrowings and acquisitions of businesses.

(C)

The Company has $30,000 of senior unsecured notes with $5,000 of Series A notes maturing in August 2008 and $25,000 of Series B notes maturing in August 2011. Interest is payable semi-annually and accrues at 6.58% for the Series A notes and 6.87% for the Series B notes. Required annual prepayments amount to $1,000 from August 2004 to August 2007 on the Series A notes and $3,571 from August 2005 to August 2010 on the Series B notes. The related agreement requires, among other things, the Company to maintain equity of a specified amount, and maintain ratios of debt to equity and fixed charge coverage.

Maturities of long-term debt for each of the five years after August 31, 2002 are $125 in 2003, $50,086 in 2004, $34,624 in 2005, $4,590 in 2006, and $4,592 in 2007 and $15,358 thereafter.

10. Other Noncurrent Liabilities

Other noncurrent liabilities consist of the following at August 31, 2002 and 2001:

	2002		2001
Minority interest in consolidated restaurants	$	2,836	$	3,000
Deferred area development fees		1,162		1,061
Other		1,809		1,177

	$	5,807	$	5,238

F-19

11. Income Taxes

The components of the provision for income taxes consists of the following for the years ended August 31:

	2002		2001			2000
Current:
Federal	$	23,690	$	22,696		$	17,182
State		1,726		1,901			1,305

		25,416		24,597			18,487

Deferred:
Federal		2,517		(1,279	)		766
State		378		(192	)		115

		2,895		(1,471	)		881

Provision for income taxes	$	28,311	$	23,126		$	19,368

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate due to the following for the years ended August 31:

	2002		2001		2000
Amount computed by applying a tax rate of 35%	$	26,601	$	21,729	$	18,198
State income taxes (net of federal income tax benefit)		1,368		1,110		923
Other		342		287		247

Provision for income taxes	$	28,311	$	23,126	$	19,368

F-20

Deferred tax assets and liabilities consist of the following at August 31, 2002 and 2001:

	2002			2001
Current deferred tax assets (liabilities):
Allowance for doubtful accounts and notes receivable	$	116		$	133
Property, equipment and capital leases		162			118
Accrued litigation costs		206			139
Other		(3	)		(2	)

Current deferred tax assets, net	$	481		$	388

Noncurrent deferred tax assets (liabilities):
Net investment in direct financing leases including differences related to
capitalization and amortization	$	(2,426	)	$	(2,047	)
Investment in partnerships, including differences in capitalization and
depreciation related to direct financing leases and different year ends
for financial and tax reporting purposes		(3,008	)		497
State net operating losses		2,567			1,967
Property, equipment and capital leases		(936	)		(391	)
Allowance for doubtful accounts and notes receivable		194			148
Deferred income from affiliated franchise fees		897			—
Accrued liabilities		223			—
Intangibles and other assets		45			(25	)
Other		288			83

		(2,156	)		232
Valuation allowance		(2,567	)		(1,967	)

Noncurrent deferred tax liabilities, net	$	(4,723	)	$	(1,735	)


Deferred tax assets and (liabilities):
Deferred tax assets (net of valuation allowance)	$	1,987		$	1,072
Deferred tax liabilities		(6,229	)		(2,419	)

Net deferred tax liabilities	$	(4,242	)	$	(1,347	)

State net operating loss carryforwards expire generally beginning in 2010. Management does not believe the Company will be able to realize the state net operating loss carryforwards and therefore has provided a valuation allowance as of August 31, 2002 and 2001.

F-21

12. Stockholders’ Equity

On November 14, 2000, the Company’s board of directors authorized a three-for-two stock split in the form of a stock dividend. A total of 15,662,417 shares of common stock were issued on November 30, 2000 in connection with the split. The stated par value of each share was not changed from $.01. An aggregate amount equal to the par value of the common stock issued of $104 was reclassified from paid-in capital to common stock.

On January 17, 2002, the Company’s board of directors authorized a three-for-two stock split in the form of a stock dividend. A total of 16,051,750 shares of common stock were issued on February 8, 2002 in connection with the split, and an aggregate amount equal to the par value of the common stock issued of $161 was reclassified from paid-in capital to common stock. In addition, shareholders approved an increase in common stock authorized from 40,000,000 to 100,000,000 shares. The stated par value of each share was not changed from $.01

All references in the accompanying consolidated financial statements to weighted average numbers of shares outstanding, per share amounts and Stock Purchase Plan and Stock Options share data have been adjusted to reflect the stock splits on a retroactive basis.

Stock Purchase Plan

The Company has an employee stock purchase plan for all full-time regular employees. Employees are eligible to purchase shares of common stock each year through a payroll deduction not in excess of the lesser of 10% of compensation or $25. The aggregate amount of stock that employees may purchase under this plan is limited to 506,250 shares. The purchase price will be between 85% and 100% of the stock’s fair market value and will be determined by the Company’s board of directors.

Stock Options

In January 2001 the stockholders of the Company adopted the 2001 Sonic Corp. Stock Option Plan (the “2001 Employee Plan”) and the 2001 Sonic Corp. Directors’ Stock Option Plan (the “2001 Directors’ Plan”). (The 2001 Employee Plan and the 2001 Directors’ Plan are referred to collectively as the “2001 Plans.”) The 2001 Plans were adopted to replace the 1991 Sonic Corp. Stock Option Plan and the 1991 Sonic Corp. Directors’ Stock Option Plan (collectively, the “1991 Plans”), because the 1991 Plans were expiring after ten years as required by the Internal Revenue Code. Options previously granted under the 1991 Plans continue to be outstanding after the adoption of the 2001 Plans and are exercisable in accordance with the original terms of the applicable 1991 Plan.

Under the 2001 Employee Plan, the Company is authorized to grant options to purchase up to 2,700,000 shares of the Company’s common stock to employees of the Company and its subsidiaries. Under the 2001 Directors’ Plan, the Company is authorized to grant options to purchase up to 450,000 shares of the Company’s common stock to the Company’s outside directors. At August 31, 2002, 1,619,890 shares were available for grant under the 2001 Employee Plan and 337,500 shares were available for grant under the 2001 Director’s Plan. The exercise price of the options to be granted is equal to the fair market value of the Company’s common stock on the date of grant. Unless otherwise provided by the Company’s Stock Plan Committee, options under both plans become exercisable ratably over a three-year period or immediately upon change in control of the Company, as defined by the plans. All options expire at the earlier of 30 days after termination of employment or 10 years after the date of grant.

The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations in accounting for its stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, “Accounting for Stock-Based Compensation,” requires the use of option valuation models that were not developed for use in valuing such stock options. Under APB 25, because the exercise price of the Company’s stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

Pro forma information regarding net income and net income per share is required by Statement 123, which also requires that the information be determined as if the Company has accounted for its stock options granted subsequent to August 31, 1995 under the fair value method of that Statement. The fair value for these options was

F-22

estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for fiscal years 2002, 2001, and 2000 respectively: risk-free interest rates of 4.4%, 5.0%, and 6.6%; a dividend yield of 0%; volatility factors of the expected market price of the Company’s common stock of 46.3%, 48.5%, and 45.7%; and a weighted average expected life of the options of 5.3, 5.2, and 4.5 years.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The Company’s pro forma information was as follows for the years ended August 31:

			2002			2001			2000
Pro forma net income			$	45,087		$	37,197		$	29,912
Pro forma net income per share-diluted			$	1.07		$	0.89		$	0.71

A summary of the Company’s stock option activity (adjusted for the stock splits), and related information was as follows for the years ended August 31:

	2002					2001					2000
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding – beginning of year		4,418,910		$	10.00		4,666,239		$	8.24		4,172,574		$	7.13
Granted		538,853			27.35		825,720			17.13		850,221			13.18
Exercised		(606,641	)		7.95		(883,769	)		6.60		(307,728	)		6.22
Forfeited		(167,925	)		14.95		(189,280	)		13.62		(48,828	)		12.23

Outstanding – end of year		4,183,197		$	12.33		4,418,910		$	10.00		4,666,239		$	8.24

Exercisable at end of year		2,986,886		$	8.85		2,917,661		$	7.41		3,065,510		$	6.18

Weighted average fair value of
options granted during the year	$	12.94				$	8.45				$	6.11

F-23

A summary of the Company’s options was as follows as of August 31, 2002:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number of Options		Weighted Average Remaining Contractual Life (Yrs.)		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
$3.36 to $5.33		977,477		2.80	$	4.75		977,477	$	4.75
$5.70 to $9.56		896,896		4.67		7.37		896,896		7.37
$10.97 to $12.89		895,808		7.08		12.51		739,231		12.45
$13.58 to $20.99		944,184		8.43		16.80		373,282		15.99
$24.20 to $29.31		468,832		9.64		28.26		—		—

$3.36 to $29.31		4,183,197		6.16	$	12.33		2,986,886	$	8.85

Stockholder Rights Plan

The Company has a stockholder rights plan which is designed to deter coercive takeover tactics and to prevent a potential acquirer from gaining control of the Company without offering a fair price to all of the Company’s stockholders.

The plan provided for the issuance of one common stock purchase right for each outstanding share of the Company’s common stock. Each right initially entitles stockholders to buy one unit of a share of preferred stock for $85. The rights will be exercisable only if a person or group acquires beneficial ownership of 15% or more of the Company’s common stock or commences a tender or exchange offer upon consummation of which such person or group would beneficially own 15% or more of the Company’s common stock. At August 31, 2002, 50,000 shares of preferred stock have been reserved for issuance upon exercise of these rights.

If any person becomes the beneficial owner of 15% or more of the Company’s common stock, other than pursuant to a tender or exchange offer for all outstanding shares of the Company approved by a majority of the independent directors not affiliated with a 15%-or-more stockholder, then each right not owned by a 15%-or-more stockholder or related parties will then entitle its holder to purchase, at the right’s then current exercise price, shares of the Company’s common stock having a value of twice the right’s then current exercise price. In addition, if, after any person has become a 15%-or-more stockholder, the Company is involved in a merger or other business combination transaction with another person in which the Company does not survive or in which its common stock is changed or exchanged, or sells 50% or more of its assets or earning power to another person, each right will entitle its holder to purchase, at the right’s then current exercise price, shares of common stock of such other person having a value of twice the right’s then current exercise price. Unless a triggering event occurs, the rights will not trade separately from the common stock.

The Company will generally be entitled to redeem the rights at $0.01 per right at any time until 10 days (subject to extension) following a public announcement that a 15% position has been acquired. The rights expire on June 16, 2007.

F-24

13. Net Revenue Incentive Plan

The Company has a Net Revenue Incentive Plan (the “Incentive Plan”), as amended, which applies to certain members of management and is at all times discretionary with the Company’s board of directors. If certain predetermined earnings goals are met, the Incentive Plan provides that a predetermined percentage of the employee’s salary may be paid in the form of a bonus. The Company recognized as expense incentive bonuses of $2,264, $1,876, and $1,606 during fiscal years 2002, 2001 and 2000, respectively.

14. Employment Agreements

The Company has employment contracts with its Chairman and Chief Executive Officer and several members of its senior management. These contracts provide for use of Company automobiles or related allowances, medical, life and disability insurance, annual base salaries, as well as an incentive bonus. These contracts also contain provisions for payments in the event of the termination of employment and provide for payments aggregating $5,734 at August 31, 2002 due to loss of employment in the event of a change in control (as defined in the contracts).

15. Contingencies

The Company is involved in various legal proceedings and has certain unresolved claims pending. The Company’s ultimate liability, if any, for the aggregate amounts claimed cannot be determined at this time. Management believes that all claims currently pending are either adequately covered by insurance or would not have a material adverse effect on the Company’s business or financial condition.

The Company has entered into agreements with several lenders pursuant to which such lenders may make loans to qualified franchisees. Under the terms of these agreements, the Company provides certain guarantees of a portion of the outstanding balances of the loans to franchisees. In addition, the Company has other repurchase obligations related to a franchisee’s restaurant development loans. At August 31, 2002 these guarantees and repurchase obligations totaled $5,796, none of which were in default.

F-25

16. Selected Quarterly Financial Data (Unaudited)

	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Full Year
	2002		2001		2002		2001		2002		2001		2002		2001		2002		2001
Income statement data:
Company-owned
restaurant sales	$	71,721	$	55,562	$	67,355	$	50,618	$	92,280	$	75,270	$	99,351	$	86,013	$	330,707	$	267,463
Other		15,608		15,462		14,221		12,571		19,011		16,369		20,615		18,773		69,455		63,175

Total revenues		87,329		71,024		81,576		63,189		111,291		91,639		119,966		104,786		400,162		330,638

Company-owned
restaurants operating
expenses		54,022		42,178		51,835		38,580		64,972		52,938		71,364		61,642		242,193		195,338
Selling, general and
administrative		7,658		6,813		7,786		7,092		8,729		8,109		9,271		8,588		33,444		30,602
Other		8,853		7,264		9,119		7,398		12,321		10,756		11,910		11,673		42,203		37,091

Total expenses		70,533		56,255		68,740		53,070		86,022		71,803		92,545		81,903		317,840		263,031

Income from operations		16,796		14,769		12,836		10,119		25,269		19,836		27,421		22,883		82,322		67,607
Interest expense, net		1,569		1,219		1,517		1,321		1,536		1,540		1,697		1,445		6,319		5,525

Income before income taxes		15,227		13,550		11,319		8,798		23,733		18,296		25,724		21,438		76,003		62,082
Provision for income taxes		5,672		5,047		4,216		3,278		8,841		6,815		9,582		7,986		28,311		23,126

Net income	$	9,555	$	8,503	$	7,103	$	5,520	$	14,892	$	11,481	$	16,142	$	13,452	$	47,692	$	38,956

Net income per share:
Basic	$	.24	$	.21	$	.18	$	.14	$	.37	$	.29	$	.40	$	.34	$	1.19	$	.98
Diluted	$	.23	$	.21	$	.17	$	.13	$	.35	$	.27	$	.38	$	.32	$	1.13	$	.93
Weighted average
shares outstanding:
Basic		39,990		39,576		40,022		39,706		40,298		39,925		40,312		40,187		40,156		39,849
Diluted		41,920		41,399		42,126		41,566		42,430		41,784		42,351		42,178		42,207		41,732

F-26

17. Fair Values of Financial Instruments

The following discussion of fair values is not indicative of the overall fair value of the Company’s consolidated balance sheet since the provisions of SFAS No. 107, “Disclosures About Fair Value of Financial Instruments,” do not apply to all assets, including intangibles.

The following methods and assumptions were used by the Company in estimating its fair values of financial instruments:

Cash and cash equivalents— Carrying value approximates fair value due to the short duration to maturity.

Notes receivable— For variable rate loans with no significant change in credit risk since the loan origination, fair values approximate carrying amounts. Fair values for fixed rate loans are estimated using discounted cash flow analysis, using interest rates which would currently be offered for loans with similar terms to borrowers of similar credit quality and/or the same remaining maturities.

As of August 31, 2002 and 2001, carrying values approximate their estimated fair values.

Borrowed funds— Fair values for fixed rate borrowings are estimated using a discounted cash flow analysis that applies interest rates currently being offered on borrowings of similar amounts and terms to those currently outstanding. Carrying values for variable rate borrowings approximate their fair values.

The carrying amounts, including accrued interest, and estimated fair values of the Company’s fixed rate borrowings at August 31, 2002 were $81,513 and $85,697, respectively, and at August 31, 2001 were $81,513 and $81,049, respectively.

18. Subsequent Events

Subsequent to August 31, 2002, the Company, through numerous transactions, has acquired $17.6 million of treasury stock.

F-27

Sonic Corp.

Schedule II – Valuation and Qualifying Accounts

Description	Balance at Beginning of Year		Additions Charged to Costs and Expenses		Amounts Written Off Against the Allowance		(Transfer) Recoveries		Balance at End of Year
		(In Thousands)
Allowance for doubtful accounts
and notes receivable
Year ended:
August 31, 2002	$	1,267	$	999	$	273	$	—	$	1,993
August 31, 2001	$	712	$	767	$	212	$	—	$	1,267
August 31, 2000	$	280	$	430	$	8	$	10	$	712

Accrued carrying costs for restaurant
closings and disposals
Year ended:
August 31, 2002	$	675	$	793	$	522	$	—	$	946
August 31, 2001	$	818	$	88	$	231	$	—	$	675
August 31, 2000	$	747	$	367	$	296	$	—	$	818

F-28

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Company has caused the undersigned, duly-authorized, to sign this report on its behalf on this 26 ^th day of November, 2002.

		Sonic Corp.
		By:		/s/ J. Clifford Hudson J. Clifford Hudson Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the undersigned have signed this report on behalf of the Company, in the capacities and as of the dates indicated.

Signature	Title	Date

/s/ J. Clifford Hudson J. Clifford Hudson, Principal Executive Officer	Chairman of the Board of Directors and Chief Executive Officer	November 26, 2002
/s/ W. Scott McLain W. Scott McLain, Principal Financial Officer	Senior Vice President and Chief Financial Officer	November 26, 2002
/s/ Terry D. Harryman Terry D. Harryman, Principal Accounting Officer	Controller	November 26, 2002
/s/ Pattye L. Moore Pattye L. Moore	President and Director	November 26, 2002
/s/ Margaret M. Blair Margaret M. Blair	Director	November 26, 2002
/s/ Leonard Lieberman Leonard Lieberman	Director	November 26, 2002
/s/ Federico F. Peña Federico F. Peña	Director	November 26, 2002
/s/ H.E. Rainbolt H.E. Rainbolt	Director	November 26, 2002
/s/ Frank E. Richardson Frank E. Richardson	Director	November 26, 2002
/s/ Robert M. Rosenberg Robert M. Rosenberg	Director	November 26, 2002
/s/ E. Dean Werries E. Dean Werries	Director	November 26, 2002

CERTIFICATION

I,	J. Clifford Hudson, certify that:

1.	I have reviewed this annual report on Form 10-K of Sonic Corp.;

Based on my knowledge, this annual 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 annual report;

3.	Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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-14 and 15d-14) for the registrant and have:

a)	designed such disclosure controls and procedures 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 annual report is being prepared;

b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

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

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 26, 2002

		/s/ J. Clifford Hudson
		J. Clifford Hudson
		Chief Executive Officer

CERTIFICATION

I,	W. Scott McLain, certify that:

1.	I have reviewed this annual report on Form 10-K of Sonic Corp.;

3.	Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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-14 and 15d-14) for the registrant and have:

a)	designed such disclosure controls and procedures 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 annual report is being prepared;

b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and

c)	presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

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

a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: November 26, 2002

		/s/ W. Scott McLain
		W. Scott McLain
		Chief Financial Officer

EXHIBIT INDEX

Exhibit Number and Description


3.06.		Certificate of Amendment of Certificate of Incorporation of the Company, January 22, 2002.
10.18.		Employment Agreement with J. Clifford Hudson dated August 20, 1996.
10.19.		Employment Agreement with Pattye L. Moore dated August 20, 1996.
10.20.		Employment Agreement with Ronald L. Matlock dated August 20, 1996.
10.21.		Employment Agreement with W. Scott McLain dated January 27, 1998.
10.22.		Employment Agreement with Frank B. Young, Jr. dated January 19, 2000.
10.23.		Employment Agreement with Stephen C. Vaughan dated August 20, 1996.
10.24.		Employment Agreement with Terry D. Harryman dated January 19, 2000.
23.01.		Consent of Independent Auditors.
99.1.		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
99.2.		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

Exhibit 3.06

STATE OF DELAWARE
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION

Sonic Corp., a Delaware corporation (the “Corporation”), hereby certifies as follows:

1. At a meeting of the board of directors of the Corporation held on November 13, 2001, the directors duly adopted a resolution setting forth a proposed amendment to the certificate of incorporation of the Corporation, declaring the amendment as advisable, and directing that the amendment be submitted to the stockholders of the Corporation to consider the approval of the amendment at the next annual meeting of the stockholders. The resolution setting forth the proposed amendment appears as follows:

Whereas, the directors deem it in the best interests of the Corporation to increase the authorized common stock of the Corporation to 100 million shares.

Resolved further, that the directors hereby authorize and direct the officers of the Corporation, and each of them, to submit the following resolution at the next annual meeting of the stockholders of the Corporation for their consideration:

Resolved, that the stockholders approve the amendment of the first portion of Article Fourth of the Certificate of Incorporation as follows:

From:

“FOURTH: The total number of shares which the Corporation shall have the authority to issue shall be forty-one million (41,000,000) shares, of which forty million (40,000,000) shall be shares of common stock, par value $.01 per share, and one million (1,000,000) shall be shares of preferred stock, par value $.01 per share . . .”

To:

“FOURTH: The total number of shares which the Corporation shall have the authority to issue shall be one hundred one million (101,000,000) shares, of which one hundred million (100,000,000) shall be shares of common stock, par value $.01 per share, and one million (1,000,000) shall be shares of preferred stock, par value $.01 per share . . .”

Resolved further, that the directors authorize and direct the officers of the Corporation, and each of them, to take all other actions necessary and appropriate to effect the foregoing resolutions, including (without

limitation) the inclusion of the foregoing proposal in the proxy statement for the next annual meeting of stockholders and, upon the stockholders’ approval of the amendment, the execution and filing of an appropriate certificate of amendment with the Delaware Secretary of State, together with any required filing fees.

2. Thereafter, the Corporation duly called and held an annual meeting of the stockholders of the Corporation on January 17, 2002, pursuant to written notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the number of shares of common stock required by statute voted in favor of the amendment.

3. The Corporation duly adopted the amendment in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

4. The capital of the Corporation shall not be reduced under or by reason of said amendment.

In witness whereof, the Corporation has caused its chief executive officer, J. Clifford Hudson, to sign this certificate as of the 17 ^th day of January, 2002.


	By:	/s/ J. Clifford Hudson
		J. Clifford Hudson, Chief Executive Officer

Exhibit 10.18

EMPLOYMENT AGREEMENT

This Agreement is entered into effective as of the 20 ^th day of August, 1996, by and between Sonic Corp. (the "Corporation"), a Delaware corporation, and J. Clifford Hudson (the "Employee").

RECITALS

Whereas, the Employee is currently serving as the President and Chief Executive Officer of the Corporation and is an integral part of its management; and

Whereas, the Employee and the Corporation acknowledge that they previously entered into an Employment Agreement dated January 11, 1995, which is hereby canceled and superseded in its entirety by this Agreement; and

Whereas, the Corporation’s Board of Directors (the “Board”) has determined that it is appropriate to reinforce and encourage the continued attention and dedication of certain key members of the Corporation’s management, including Employee, to their assigned duties without distraction and potentially disturbing circumstances arising from the possibility of a Change in Control (herein defined) of the Corporation; and

Whereas, the Corporation desires to continue the services of Employee, whose experience, knowledge and abilities with respect to the business and affairs of the Corporation are extremely valuable to the Corporation; and

Whereas, the Board on the 20 ^th day of August, 1996, ratified and approved this Agreement; and

Whereas, the parties hereto desire to enter into this Agreement setting forth the terms and conditions of the continued employment relationship of the Corporation and Employee.

Now, therefore, it is agreed as follows:

ARTICLE I
Term Of Employment

1.1 Term of Employment . The Corporation shall employ Employee for a period of two years from the date hereof (the "Initial Term").

1.2 Extension of Initial Term . Upon each anniversary date of this Agreement, this Agreement shall be extended automatically for an additional one year period to maintain successive terms of two years each, unless either the Corporation or the Employee gives contrary written notice to the other not later than the anniversary date.

1.3 Termination of Agreement and Employment . The Corporation may terminate this Agreement and the Employee’s employment at any time effective upon written notice to the Employee. The Corporation, in its sole discretion, may terminate this Agreement without terminating the employment of the Employee. The Employee may terminate this Agreement and the Employee’s employment only after at least 30 days’ written notice to the Corporation, unless otherwise agreed by the Corporation.

ARTICLE II
Duties of the Employee

Employee shall serve as the President and Chief Executive Officer of the Corporation. Employee shall do and perform all services, acts, or things necessary or advisable to manage and conduct the business of the Corporation consistent with such position subject to such policies and procedures as may be established by the Board.

ARTICLE III
Compensation

3.1 Salary . For Employee’s services to the Corporation as the President and Chief Executive Officer, Employee shall be paid a salary at the annual rate of $250,000.00 (herein referred to as “Salary”), payable in twenty-four equal installments on the first and fifteenth day of each month. On the first day of each calendar year during the term of this Agreement with the Corporation, Employee shall be eligible for an increase in Salary based on an evaluation of Employee’s performance during the past year with the Corporation. During the term of this Agreement, the Salary of the Employee shall not be decreased at any time from the Salary then in effect unless agreed to in writing by the Employee.

3.2 Bonus . The Employee shall be entitled to participate in an equitable manner with other officers of the Corporation in discretionary cash bonuses as authorized by the Board.

ARTICLE IV
Employee Benefits

4.1 Use of Automobile . The Corporation shall provide Employee, at the option of Employee, with either the use of a full-size, luxury vehicle for business and personal use or a cash car allowance of $1,000.00 per month. The Corporation shall pay all expenses of operating, maintaining and repairing the automobile and shall procure and maintain automobile liability insurance in respect thereof, with such coverage insuring each Employee for bodily injury and property damage.

4.2 Medical, Life and Disability Insurance Benefits . The Corporation shall provide Employee with medical, life and disability insurance benefits in accordance with the established benefit policies of the Corporation.

4.3 Working Facilities . Employee shall be provided adequate office space, secretarial assistance, and such other facilities and services suitable to Employee’s position and adequate for the performance of Employee’s duties.

4.4 Business Expenses . Employee shall be authorized to incur reasonable expenses for promoting the business of the Corporation, including expenses for entertainment, travel, and similar items. The Corporation shall reimburse Employee for all such expenses upon the presentation by Employee, from time to time, of an itemized account of such expenditures.

4.5 Vacations . Employee shall be entitled to an annual paid vacation commensurate with the Corporation’s established vacation policy for officers. The timing of paid vacations shall be scheduled in a reasonable manner by the Employee.

4.6 Disability . Upon disability (as defined herein) of the Employee, the Employee shall be entitled to receive an amount equal to 50% of Employee’s Salary (in addition to any disability insurance benefits received pursuant to Section 4.2 herein), such amount being paid semi-monthly in twelve equal installments.

4.7 Term Life Insurance . The Corporation shall purchase term life insurance on the life of the Employee having a face value of four times the Employee’s Salary (to be changed as salary adjustments are made) or the face value of life insurance that can be purchased based upon the Employee’s health history with the Corporation paying the standard premium rate for term insurance under its then current insurance program at the Employee’s age and assuming good health, whichever amount is lesser; provided further that, such insurance can be obtained by the Corporation in a manner which meets the requirements for deductibility by the Corporation under Section 79 of the Internal Revenue Code of 1986, or as hereafter amended.

4.8 Compensation Defined . Compensation shall be defined as all monetary compensation and all benefits described in Articles III and IV hereunder (as adjusted during the term hereof).

ARTICLE V
Termination

5.1 Death . Employee's employment hereunder shall be terminated upon the Employee's death.

5.2 Disability . The Corporation may terminate Employee’s employment hereunder in the event Employee is disabled and such disability continues for more than 180 days. Disability shall be defined as the inability of Employee to render the services required of him, with or without a reasonable accommodation, under this Agreement as a result of physical or mental incapacity.

5.3 Cause .

not illegal) which is not in the ordinary course of the Employee's responsibilities and exposes the Corporation to a significant level of undue liability. For purposes of this paragraph, no act or failure to act on Employee's part shall be considered to have met either of the preceding tests unless done or omitted to be done by Employee not in good faith without a reasonable belief that Employee’s action or omission was in the best interest of the Corporation.

(b) Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for cause unless and until there shall have been delivered to Employee a copy of a resolution, duly adopted by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting held within 30 days of such termination (after reasonable notice to Employee and an opportunity for Employee to be heard by members of the Board) confirming that Employee was guilty of the conduct set forth in this Section 5.3.

5.4 Compensation Upon Termination for Cause or Upon Resignation By Employee . Except as otherwise set forth in Section 5.7 hereof, if Employee’s employment shall be terminated for Cause or if Employee shall resign Employee’s position with the Corporation, the Corporation shall pay Employee’s Compensation only through the last day of Employee’s employment by the Corporation. The Corporation shall then have no further obligation to Employee under this Agreement.

5.5 Compensation Upon Termination Other Than For Cause Or Disability . Except as otherwise set forth in Section 5.7 hereof, if the Company shall terminate Employee’s employment other than for Cause or Disability, the Company shall continue to be obligated to pay Employee’s Salary for a period of two years, beginning on the date of termination, but shall not be obligated to provide any other benefits described in Articles III and IV hereof, except to the extent required by law.

5.6 Compensation Upon Non-Renewal of Agreement. Except as otherwise set forth in Section 5.7 hereof, if the Company shall give notice to Employee in accordance with Section 1.2 hereof that this Agreement will not be renewed but Employee’s employment is not terminated, the Company shall continue to be obligated to pay Employee’s Compensation for a period of two years beginning on the date notice of non-renewal is given.

5.7 Termination of Employee or Resignation by Employee for Good Reason . If at any time within the first twelve months subsequent to a Change in Control, the Employee’s employment with the Corporation is terminated other than as provided for in Section 5.1, 5.2 or 5.3 hereof, or the Corporation violates any provision of this Agreement or Employee shall resign Employee’s employment for Good Reason (as defined herein), the Corporation shall be obligated to pay to Employee a lump sum payment upon the effective date of such termination or resignation or breach (as determined in Employee’s sole discretion), in an amount equal to one and one-half times the Employee’s compensation payable under paragraph 5.5 above, but in no event to exceed an amount equal to $1.00 less than three (3) times the mean average annual compensation paid to Employee by the Corporation and any of its subsidiaries during the five calendar years ending before the date on which the Change in Control occurred (or if Employee was not employed for that entire five year period, then the mean average annual compensation paid to employee during such

shorter period, with the Employee’s compensation annualized for any calendar year during which the employee was not employed for the entire calendar year); provided, however, that if the lump-sum severance payment under this Section 5.7, either alone or together with any other payments or compensation which Employee has a right to receive from the Corporation, would constitute a “parachute payment” (as defined in Section 280G (or any equivalent term defined in any successor or equivalent provision) of the Internal Revenue Code of 1986, as amended (the “Code”)), then such lump-sum severance payment shall be reduced to the largest amount as will result in no portion of the lump-sum severance payment under this Section 5.7 being subject to the excise tax imposed by Section 4999 (or any successor or equivalent provision) of the Code. For the purpose of this Section 5.7, the Employee’s annual compensation from the Corporation and its subsidiaries for a given year shall equal Employee’s compensation as reflected on Employee’s Form W-2 for that year (unless the Employee was not employed for the entire calendar year, in which case Employee’s Form W-2 compensation for such year shall be annualized). The determination of any reduction in lump-sum severance payment under this Section 5.7 pursuant to the foregoing provision shall be conclusive and binding on the Corporation. Notwithstanding any other provision of this Section 5.7, Employee may elect to have the lump sum severance payment hereunder paid in equal monthly installments over a period not to exceed 12 consecutive months.

“Good Reason” shall mean any of the following which occur during the term of this Agreement without Employee’s express written consent:

In the Event of a Change in Control:

(a) the assignment to Employee of duties inconsistent with Employee’s position, office, duties, responsibilities and status with the Corporation immediately prior to a Change in Control; or, a change in Employee’s titles or offices as in effect immediately prior to a Change in Control; or, any removal of Employee from or any failure to reelect Employee to any such position or office, except in connection with the termination of Employee’s employment by the Corporation for Disability or Cause or as a result of Employee’s death or by Employee other than for Good Reason as set forth in this Section 5.7(a); or

(b) a reduction by the Corporation in Employee’s Salary as in effect as of the date of this Agreement or as the same may be increased from time-to-time during the term of this Agreement or the Corporation’s failure to increase (within twelve months of the Employee’s last increase in Salary) Employee’s Salary after a Change in Control in an amount which at least equals, on a percentage basis, the highest percentage increase in salary for all officers of the Corporation or any parent or affiliated company effected in the preceding twelve months; or

that, if one or more of such benefits varies from those in effect immediately prior to such Change in Control, is in Employee’s sole judgment substantially comparable in all material respects to such fringe benefits taken as a whole; or

(d) relocation of the Corporation’s principal executive offices to a location outside of Oklahoma City, Oklahoma, or Employee’s relocation to any place other than the location at which Employee performed Employee’s duties prior to a Change in Control, except for required travel by Employee on the Corporation’s business to an extent substantially consistent with Employee’s business travel obligations at the time of the Change in Control; or

(e) any failure by the Corporation to provide Employee with the same number of paid vacation days to which Employee is entitled at the time of the Change in Control; or

(f) the failure of a successor to the Corporation to assume the obligation of this Agreement as set forth in Section 7.1 herein.

5.8. Change in Control . For the purposes of this Agreement, the phrase “change in control” shall mean any of the following events:

(a) Any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation’s capital stock would convert into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation’s capital stock immediately prior to the merger have the same proportionate ownership of capital stock of the surviving corporation immediately after the merger;

(b) Any sale, lease, exchange or other transfer (whether in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation;

(c) The stockholders of the Corporation approve any plan or proposal for the liquidation or dissolution of the Corporation;

(d) Any person (as used in Section 13(d) and 14(d)(2) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the beneficial owner (within the meaning of Rule 13D-3 under the Exchange Act) of 50% or more of the Corporation’s outstanding capital stock;

new director received the approval of the Board of Directors by a vote of at least two-thirds of the directors then and still in office and who served as directors at the beginning of the period; or

(f) The Corporation becomes a subsidiary of any other corporation.

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

6.1 Mitigation . The Employee shall not have any obligation to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise. However, all payments required under the terms of this Agreement shall cease 30 days after the acceptance by the Employee of employment by another employer; provided that, this limitation shall not apply to payments due under paragraph 5.7, above.

6.2 Other Contractual Rights . The provisions of this Agreement, and any payment provided for hereunder shall not reduce any amount otherwise payable, or in any way diminish Employee’s existing rights, or rights which would accrue solely as a result of passage of time under any employee benefit plan or other contract, plan or arrangement of which Employee is a beneficiary or in which Employee participates.

ARTICLE VII
Successors to the Corporation

7.1 Assumption . The Corporation will require any successor or assignee (whether direct or indirect, by purchase, merger, consolidation or otherwise) of all or substantially all of the business and/or assets of the Corporation, by agreement in form and substance reasonably satisfactory to Employee, to expressly, absolutely and unconditionally assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession or assignment had taken place. Any failure by the Corporation to obtain such agreement prior to the effectiveness of any such succession or assignment shall be a material breach of this Agreement.

7.2 Employee’s Successors and Assigns . This Agreement shall inure to the benefit of and be enforceable by Employee’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee should die while any amounts are still payable to Employee hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee’s devisee, legatee or other designee or, if there is no such designee, to Employee’s estate.

ARTICLE VIII
Restrictions on Employee

8.1 Confidential Information . During the term of the Employee’s employment and for a period of twelve months thereafter, the Employee shall not divulge or make accessible to any party any Confidential Information, as defined below, of the Corporation or any of its subsidiaries, except to the extent authorized in writing by the Corporation or otherwise required by law. The phrase “Confidential Information” shall mean the unique, proprietary and confidential information of the Corporation and its subsidiaries, consisting of: (1) confidential financial information regarding the Corporation or its subsidiaries, (2) confidential recipes for food products; (3) confidential and copyrighted plans and specifications for interior and exterior signs, designs, layouts and color schemes; (4) confidential methods, techniques, formats, systems, specifications, procedures, information, trade secrets, sales and marketing programs; (5) knowledge and experience regarding the operation and franchising of Sonic drive-in restaurants; (6) the identities and locations of Sonic’s franchisees, Sonic drive-in restaurants, and suppliers to Sonic’s franchisees and drive-in restaurants; (7) knowledge, financial information, and other information regarding the development of franchised and company-store restaurants; (8) knowledge, financial information, and other information regarding potential acquisitions and dispositions; and (9) any other confidential business information of the Corporation or any of its subsidiaries. The Employee shall give the Corporation written notice of any circumstances in which Employee has actual notice of any access, possession or use of the Confidential Information not authorized by this Agreement.

8.2 Restrictive Covenant . During the term of Employee’s employment, the Employee shall not engage in or have any interest, directly or indirectly, in any business competing with the business being conducted by the Corporation or any of its subsidiaries, without the Corporation’s prior written consent. For the six month period immediately following the termination of Employee’s employment, the Employee shall not engage in or have any interest, directly or indirectly, in any fast food restaurant business that has a menu similar to that of a Sonic drive-in restaurant (such as hamburgers, hot dogs, onion rings and similar items customarily sold by Sonic drive-in restaurants), or which has an appearance similar to that of a Sonic drive-in restaurant (such as color pattern, use of canopies, use of speakers and menu housings for ordering food, or other items that are customarily used by a Sonic drive-in restaurant), and which operates such restaurants within a three mile radius of any Sonic drive-in restaurant.

ARTICLE IX
Miscellaneous

9.1 Indemnification . To the full extent permitted by law, the Board shall authorize the payment of expenses incurred by or shall satisfy judgments or fines rendered or levied against Employee in any action brought by a third-party against Employee (whether or not the Corporation is joined as a party defendant) to impose any liability or penalty on Employee for any act alleged to have been committed by Employee while employed by the Corporation unless Employee was acting with gross negligence or willful misconduct. Payments authorized hereunder shall include amounts paid and expenses incurred in settling any such action or threatened action.

9.2 Resolution of Disputes . The following provisions shall apply to any controversy between the Employee and the Corporation and its subsidiaries and the Employee (including any director, officer, employee, agent or affiliate of the Corporation and its subsidiaries) whether or not relating to this Agreement.

(a) Arbitration . The parties shall resolve all controversies by final and binding arbitration in accordance with the Rules for Commercial Arbitration (the “Rules”) of the American Arbitration Association in effect at the time of the execution of this Agreement and pursuant to the following additional provisions:

(1) Applicable Law . The Federal Arbitration Act (the "Federal Act"), as supplemented by the Oklahoma Arbitration Act (to the extent not inconsistent with the Federal Act), shall apply to the arbitration and all procedural matters relating to the arbitration.

(2) Selection of Arbitrators . The parties shall select one arbitrator within 10 days after the filing of a demand and submission in accordance with the Rules. If the parties fail to agree on an arbitrator within that 10-day period or fail to agree to an extension of that period, the arbitration shall take place before an arbitrator selected in accordance with the Rules.

(3) Location of Arbitration . The arbitration shall take place in Oklahoma City, Oklahoma, and the arbitrator shall issue any award at the place of arbitration. The arbitrator may conduct hearings and meetings at any other place agreeable to the parties or, upon the motion of a party, determined by the arbitrator as necessary to obtain significant testimony or evidence.

(4) Discovery . The arbitrator shall have the power to authorize all forms of discovery (including depositions, interrogatories and document production) upon the showing of (a) a specific need for the discovery, (b) that the discovery likely will lead to material evidence needed to resolve the controversy, and (c) that the scope, timing and cost of the discovery is not excessive.

(5) Authority of Arbitrator . The arbitrator shall not have the power (a) to alter, modify, amend, add to, or subtract from any term or provision of this Agreement; (b) to rule upon or grant any extension, renewal or continuance of this Agreement; or (c) to grant interim injunctive relief prior to the award.

(6) Enforcement of Award . The prevailing party shall have the right to enter the award of the arbitrator in any court having jurisdiction over one or more of the parties or their assets. The parties specifically waive any right they may have to apply to any court for relief from the provisions of this Agreement or from any decision of the arbitrator made prior to the award.

(b) Attorneys’ Fees and Costs . The prevailing party to the arbitration shall have the right to an award of its reasonable attorneys’ fees and costs (including the cost of the arbitrator) incurred after the filing of the demand and submission. If the Corporation or any of its subsidiaries prevails, the award shall include an amount for that portion of the administrative overhead reasonably allocable to the time devoted by the in-house legal staff of the Corporation or any subsidiary.

(c) Excluded Controversies . At the election of the Corporation or its subsidiaries, the provisions of this Section 9.2 shall not apply to any controversies relating to the enforcement of the covenant not to compete or the use and protection of the trademarks, service marks, tradenames, copyrights, patents, confidential information and trade secrets of the Corporation or its subsidiaries, including (without limitation) the right of the Corporation or its subsidiaries to apply to any court of competent jurisdiction for appropriate injunctive relief for the infringement of the rights of the Corporation or its subsidiaries.

(d) Other Rights . The provisions of this Section 9.2 shall not prevent the Corporation, its subsidiaries, or the Employee from exercising any of their rights under this agreement, any other agreement, or under the common law, including (without limitation) the right to terminate any agreement between the parties or to end or change the party’s legal relationship.

9.3 Entire Agreement . This Agreement constitutes the entire agreement of the parties with regard to the subject matter of this Agreement and replaces and supersedes all other written and oral agreements and statements of the parties relating to the subject matter of this Agreement.

9.4 Notices . Any notices required or permitted to be given under this Agreement shall be sufficient if in writing and sent by mail to Employee’s residence, in the case of Employee, or to its principal office, in the case of the Corporation.

9.5 Waiver of Breach . The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any party.

9.6 Amendment . No amendment or modification of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto.

9.7 Validity . This Agreement, having been executed and delivered in the State of Oklahoma, its validity, interpretation, performance and enforcement will be governed by the laws of that state.

9.8 Section Headings . Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

9.9 Counterpart Execution . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.

9.10 Exclusivity . Specific arrangements referred to in this Agreement are not intended to exclude Employee’s participation in any other benefits available to executive personnel generally or to preclude other compensation or benefits as may be authorized by the Board from time to time.

9.11 Partial Invalidity . If any provision in this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way.

In witness whereof, the Corporation has caused this Agreement to be executed and its seal affixed hereto by its officers thereunto duly authorized; and the Employee has executed this Agreement, as of the day and year first above written.

The Corporation:		Sonic Corp.

	By:	/s/ Lewis B. Kilbourne
		Lewis B. Kilbourne, Senior Vice President
Attest:

/s/ Ronald L. Matlock
Ronald L. Matlock, Secretary


The Employee:		/s/ J. Clifford Hudson
		J. Clifford Hudson

Exhibit 10.19

EMPLOYMENT AGREEMENT

This Agreement is entered into effective as of the 20 ^th day of August, 1996, by and between Sonic Corp. (the "Corporation"), a Delaware corporation, and Pattye L. Moore (the "Employee").

RECITALS

Whereas, the Employee is currently serving as the Senior Vice President of Marketing and Brand Devolopment of the Corporation and is an integral part of its management; and

Whereas, the Employee and the Corporation acknowledge that they previously entered into an Employment Agreement dated August 25, 1993 which is hereby canceled and superseded in its entirety by this Agreement; and

Whereas, the Board on the 20 ^th day of August, 1996, ratified and approved this Agreement; and

Whereas, the parties hereto desire to enter into this Agreement setting forth the terms and conditions of the continued employment relationship of the Corporation and Employee.

Now, therefore, it is agreed as follows:

ARTICLE I
Term of Employment

1.1 Term of Employment . The Corporation shall employ Employee for a period of one year from the date hereof (the "Initial Term").

1.2 Extension of Initial Term . Upon each annual anniversary date of this Agreement, this Agreement shall be extended automatically for successive terms of one year each, unless either the Corporation or the Employee gives contrary written notice to the other not later than the annual anniversary date.

terminating the employment of the Employee. The Employee may terminate this Agreement and the Employee’s employment only after at least 30 days’ written notice to the Corporation, unless otherwise agreed by the Corporation.

ARTICLE II
Duties of the Employee

Employee shall serve as the Senior Vice President of Marketing and Brand Development of the Corporation. Employee shall do and perform all services, acts, or things necessary or advisable to manage and conduct the business of the Corporation consistent with such position subject to such policies and procedures as may be established by the Board.

ARTICLE III
Compensation

3.1 Salary . For Employee’s services to the Corporation as the Senior Vice President of Marketing and Brand Development, Employee shall be paid a salary at the annual rate of $120,000.00 (herein referred to as “Salary”), payable in twenty-four equal installments on the first and fifteenth day of each month. On the first day of each calendar year during the term of this Agreement with the Corporation, Employee shall be eligible for an increase in Salary based on an evaluation of Employee’s performance during the past year with the Corporation. During the term of this Agreement, the Salary of the Employee shall not be decreased at any time from the Salary then in effect unless agreed to in writing by the Employee.

3.2 Bonus . The Employee shall be entitled to participate in an equitable manner with other officers of the Corporation in discretionary cash bonuses as authorized by the Board.

ARTICLE IV
Employee Benefits

4.1 Use of Automobile . The Corporation shall provide Employee, at the option of Employee, with either the use of a Chrysler LHS for business and personal use (or a different make automobile with a comparable initial retail value) or a cash car allowance of $850.00 per month. The Corporation shall pay all expenses of operating, maintaining and repairing the automobile and shall procure and maintain automobile liability insurance in respect thereof, with such coverage insuring each Employee for bodily injury and property damage.

4.8 Compensation Defined . Compensation shall be defined as all monetary compensation and all benefits described in Articles III and IV hereunder (as adjusted during the term hereof).

ARTICLE V
Termination

5.1 Death . Employee's employment hereunder shall be terminated upon the Employee's death.

5.3 Cause .

5.5 Compensation Upon Termination Other Than For Cause Or Disability . Except as otherwise set forth in Section 5.7 hereof, if the Company shall terminate Employee’s employment other than for Cause or Disability, the Company shall continue to be obligated to pay Employee’s Salary for a period of one year, beginning on the date of termination, but shall not be obligated to provide any other benefits described in Articles III and IV hereof, except to the extent required by law.

5.6 Compensation Upon Non-Renewal of Agreement. Except as otherwise set forth in Section 5.7 hereof, if the Company shall give notice to Employee in accordance with Section 1.2 hereof that this Agreement will not be renewed but Employee’s employment is not terminated, the Company shall continue to be obligated to pay Employee’s Compensation for a period of one year beginning on the date notice of non-renewal is given.

5.7 Termination of Employee or Resignation by Employee for Good Reason . If at any time within the first twelve months subsequent to a Change in Control, the Employee’s employment with the Corporation is terminated other than as provided for in Section 5.1, 5.2 or 5.3 hereof, or the Corporation violates any provision of this Agreement or Employee shall resign Employee’s employment for Good Reason (as defined herein), the Corporation shall be obligated to pay to Employee a lump sum payment upon the effective date of such termination or resignation or breach (as determined in Employee’s sole discretion), in an amount equal to two times the Employee’s compensation payable under paragraph 5.5 above, but in no event to exceed an amount equal to $1.00 less than three (3) times the mean average annual compensation paid to Employee by the Corporation and any of its subsidiaries during the five calendar years ending before the date on which the Change in Control occurred (or if Employee was not employed for that entire five year period, then the mean average annual compensation paid to employee during such shorter period,

with the Employee’s compensation annualized for any calendar year during which the employee was not employed for the entire calendar year); provided, however, that if the lump-sum severance payment under this Section 5.7, either alone or together with any other payments or compensation which Employee has a right to receive from the Corporation, would constitute a “parachute payment” (as defined in Section 280G (or any equivalent term defined in any successor or equivalent provision) of the Internal Revenue Code of 1986, as amended (the “Code”)), then such lump-sum severance payment shall be reduced to the largest amount as will result in no portion of the lump-sum severance payment under this Section 5.7 being subject to the excise tax imposed by Section 4999 (or any successor or equivalent provision) of the Code. For the purpose of this Section 5.7, the Employee’s annual compensation from the Corporation and its subsidiaries for a given year shall equal Employee’s compensation as reflected on Employee’s Form W-2 for that year (unless the Employee was not employed for the entire calendar year, in which case Employee’s Form W-2 compensation for such year shall be annualized). The determination of any reduction in lump-sum severance payment under this Section 5.7 pursuant to the foregoing provision shall be conclusive and binding on the Corporation. Notwithstanding any other provision of this Section 5.7, Employee may elect to have the lump sum severance payment hereunder paid in equal monthly installments over a period not to exceed 12 consecutive months.

“Good Reason” shall mean any of the following which occur during the term of this Agreement without Employee’s express written consent:

In the Event of a Change in Control:

(e) any failure by the Corporation to provide Employee with the same number of paid vacation days to which Employee is entitled at the time of the Change in Control; or

(f) the failure of a successor to the Corporation to assume the obligation of this Agreement as set forth in Section 7.1 herein.

5.8. Change in Control . For the purposes of this Agreement, the phrase “change in control” shall mean any of the following events:

(b) Any sale, lease, exchange or other transfer (whether in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation;

(c) The stockholders of the Corporation approve any plan or proposal for the liquidation or dissolution of the Corporation;

new director received the approval of the Board of Directors by a vote of at least two-thirds of the directors then and still in office and who served as directors at the beginning of the period; or

(f) The Corporation becomes a subsidiary of any other corporation.

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

(6) Enforcement of Award . The prevailing party shall have the right to enter the award of the arbitrator in any court having

jurisdiction over one or more of the parties or their assets. The parties specifically waive any right they may have to apply to any court for relief from the provisions of this Agreement or from any decision of the arbitrator made prior to the award.

9.5 Waiver of Breach . The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any party.

9.6 Amendment . No amendment or modification of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto.

9.7 Validity . This Agreement, having been executed and delivered in the State of Oklahoma, its validity, interpretation, performance and enforcement will be governed by the laws of that state.

9.8 Section Headings . Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

The Corporation:		Sonic Corp.

	By:	/s/ J. Clifford Hudson
		J. Clifford Hudson, President
Attest:

/s/ Ronald L. Matlock
Ronald L. Matlock, Secretary


The Employee:		/s/ Pattye Moore
		Pattye L. Moore

Exhibit 10.20

EMPLOYMENT AGREEMENT

This Agreement is entered into effective as of the 20 ^th day of August, 1996, by and between Sonic Corp. (the "Corporation"), a Delaware corporation, and Ronald L. Matlock (the "Employee").

RECITALS

Whereas, the Employee is currently serving as the Vice President, Secretary and General Counsel of the Corporation and is an integral part of its management; and

Whereas, the Board on the 20 ^th day of August, 1996, ratified and approved this Agreement; and

Whereas, the parties hereto desire to enter into this Agreement setting forth the terms and conditions of the continued employment relationship of the Corporation and Employee.

Now, therefore, it is agreed as follows:

ARTICLE I
Term of Employment

1.1 Term of Employment . The Corporation shall employ Employee for a period of one year from the date hereof (the "Initial Term").

the Employee’s employment only after at least 30 days’ written notice to the Corporation, unless otherwise agreed by the Corporation.

ARTICLE II
Duties of the Employee

Employee shall serve as the Vice President, Secretary and General Counsel of the Corporation. Employee shall do and perform all services, acts, or things necessary or advisable to manage and conduct the business of the Corporation consistent with such position subject to such policies and procedures as may be established by the Board.

ARTICLE III
Compensation

3.1 Salary . For Employee’s services to the Corporation as the Vice President, Secretary and General Counsel, Employee shall be paid a salary at the annual rate of $140,000.00 (herein referred to as “Salary”), payable in twenty-four equal installments on the first and fifteenth day of each month. On the first day of each calendar year during the term of this Agreement with the Corporation, Employee shall be eligible for an increase in Salary based on an evaluation of Employee’s performance during the past year with the Corporation. During the term of this Agreement, the Salary of the Employee shall not be decreased at any time from the Salary then in effect unless agreed to in writing by the Employee.

3.2 Bonus . The Employee shall be entitled to participate in an equitable manner with other officers of the Corporation in discretionary cash bonuses as authorized by the Board.

ARTICLE IV
Employee Benefits

4.1 Use of Automobile . The Corporation shall provide Employee, at the option of Employee, with either the use of a Chevrolet Suburban for business and personal use (or a different make automobile with a comparable initial retail value) or a cash car allowance of $850.00 per month. The Corporation shall pay all expenses of operating, maintaining and repairing the automobile and shall procure and maintain automobile liability insurance in respect thereof, with such coverage insuring each Employee for bodily injury and property damage.

4.8 Compensation Defined . Compensation shall be defined as all monetary compensation and all benefits described in Articles III and IV hereunder (as adjusted during the term hereof).

ARTICLE V
Termination

5.1 Death . Employee's employment hereunder shall be terminated upon the Employee's death.

5.3 Cause .

5.5 Compensation Upon Termination Other Than For Cause Or Disability . Except as otherwise set forth in Section 5.7 hereof, if the Company shall terminate Employee’s employment other than for Cause or Disability, the Company shall continue to be obligated to pay Employee’s Salary for a period of one year, beginning on the date of termination, but shall not be obligated to provide any other benefits described in Articles III and IV hereof, except to the extent required by law.

5.6 Compensation Upon Non-Renewal of Agreement. Except as otherwise set forth in Section 5.7 hereof, if the Company shall give notice to Employee in accordance with Section 1.2 hereof that this Agreement will not be renewed but Employee’s employment is not terminated, the Company shall continue to be obligated to pay Employee’s Compensation for a period of one year beginning on the date notice of non-renewal is given.

5.7 Termination of Employee or Resignation by Employee for Good Reason . If at any time within the first twelve months subsequent to a Change in Control, the Employee’s employment with the Corporation is terminated other than as provided for in Section 5.1, 5.2 or 5.3 hereof, or the Corporation violates any provision of this Agreement or Employee shall resign Employee’s employment for Good Reason (as defined herein), the Corporation shall be obligated to pay to Employee a lump sum payment upon the effective date of such termination or resignation or breach (as determined in Employee’s sole discretion), in an amount equal to two times the Employee’s compensation payable under paragraph 5.5 above, but in no event to exceed an amount equal to $1.00 less than three (3) times the mean average annual compensation paid to Employee by the Corporation and any of its subsidiaries during the five calendar years ending before the date on which the Change in Control occurred (or if Employee was not employed for that entire five year period, then the mean average annual compensation paid to employee during such shorter period,

“Good Reason” shall mean any of the following which occur during the term of this Agreement without Employee’s express written consent:

In the Event of a Change in Control:

(e) any failure by the Corporation to provide Employee with the same number of paid vacation days to which Employee is entitled at the time of the Change in Control; or

(f) the failure of a successor to the Corporation to assume the obligation of this Agreement as set forth in Section 7.1 herein.

5.8. Change in Control . For the purposes of this Agreement, the phrase “change in control” shall mean any of the following events:

(b) Any sale, lease, exchange or other transfer (whether in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation;

(c) The stockholders of the Corporation approve any plan or proposal for the liquidation or dissolution of the Corporation;

new director received the approval of the Board of Directors by a vote of at least two-thirds of the directors then and still in office and who served as directors at the beginning of the period; or

(f) The Corporation becomes a subsidiary of any other corporation.

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

(6) Enforcement of Award . The prevailing party shall have the right to enter the award of the arbitrator in any court having

9.5 Waiver of Breach . The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any party.

9.6 Amendment . No amendment or modification of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto.

9.7 Validity . This Agreement, having been executed and delivered in the State of Oklahoma, its validity, interpretation, performance and enforcement will be governed by the laws of that state.

9.8 Section Headings . Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

The Corporation:		Sonic Corp.

	By:	/s/ J. Clifford Hudson
		J. Clifford Hudson, President
Attest:

/s/ William H. Dyke
William H. Dyke, Assistant Secretary


The Employee:		/s/ Ronald L. Matlock
		Ronald L. Matlock

Exhibit 10.21

EMPLOYMENT AGREEMENT

This Agreement is entered into effective as of the 27 ^th day of January, 1998, by and between Sonic Corp. (the "Corporation"), a Delaware corporation, and W. Scott McLain (the "Employee").

RECITALS

Whereas, the Employee is currently serving as the Chief Financial Officer, Vice President of Finance and Treasurer of the Corporation and is an integral part of its management; and

Whereas, the Employee and the Corporation acknowledge that they previously entered into an Employment Agreement dated August 20, 1996, which is hereby canceled and superseded in its entirety by this Agreement; and

Whereas, the Board on the 27 ^th day of January, 1998, ratified and approved this Agreement; and

Whereas, the parties hereto desire to enter into this Agreement setting forth the terms and conditions of the continued employment relationship of the Corporation and Employee.

Now, therefore, it is agreed as follows:

ARTICLE I
Term of Employment

1.1 Term of Employment . The Corporation shall employ Employee for a period of one year from the date hereof (the "Initial Term").

ARTICLE II
Duties of the Employee

Employee shall serve as the Chief Financial Officer, Vice President of Finance and Treasurer of the Corporation. Employee shall do and perform all services, acts, or things necessary or advisable to manage and conduct the business of the Corporation consistent with such position subject to such policies and procedures as may be established by the Board.

ARTICLE III
Compensation

3.1 Salary . For Employee’s services to the Corporation as the Chief Financial Officer, Vice President of Finance and Treasurer, Employee shall be paid a salary at the annual rate of $140,000.00 (herein referred to as “Salary”), payable in twenty-four equal installments on the first and fifteenth day of each month. On the first day of each calendar year during the term of this Agreement with the Corporation, Employee shall be eligible for an increase in Salary based on an evaluation of Employee’s performance during the past year with the Corporation. During the term of this Agreement, the Salary of the Employee shall not be decreased at any time from the Salary then in effect unless agreed to in writing by the Employee.

3.2 Bonus . The Employee shall be entitled to participate in an equitable manner with other officers of the Corporation in discretionary cash bonuses as authorized by the Board.

ARTICLE IV
Employee Benefits

4.1 Use of Automobile . The Corporation shall provide Employee, with either the use of an automobile for business and personal use or a cash car allowance in accordance with the established company car policy of the Corporation. The Corporation shall pay all expenses of operating, maintaining and repairing the automobile and shall procure and maintain automobile liability insurance in respect thereof, with such coverage insuring each Employee for bodily injury and property damage.

4.8 Compensation Defined . Compensation shall be defined as all monetary compensation and all benefits described in Articles III and IV hereunder (as adjusted during the term hereof).

ARTICLE V
Termination

5.1 Death . Employee's employment hereunder shall be terminated upon the Employee's death.

5.3 Cause .

(a) The Corporation may terminate Employee's employment hereunder for cause. For the purpose of this Agreement, “Cause” shall mean (i) the willful and intentional failure by Employee to substantially perform Employee’s duties hereunder, other than any failure resulting from Employee's incapacity due to physical or mental incapacity, or (ii) commission by Employee, in connection with Employee’s employment by the Corporation, of an illegal act or any act (though not illegal) which is not in the ordinary course of the Employee's responsibilities and exposes the Corporation to a significant level of undue liability. For purposes of this paragraph, no act or failure to act on Employee's part shall be considered to have met either of the preceding tests unless done or omitted to be done by Employee not in good faith without a reasonable belief that Employee’s action or omission was in the best interest of the Corporation.

5.5 Compensation Upon Termination Other Than For Cause Or Disability . Except as otherwise set forth in Section 5.7 hereof, if the Company shall terminate Employee’s employment other than for Cause or Disability, the Company shall continue to be obligated to pay Employee’s Salary for a period of one year, beginning on the date of termination, but shall not be obligated to provide any other benefits described in Articles III and IV hereof, except to the extent required by law.

5.6 Compensation Upon Non-Renewal of Agreement. Except as otherwise set forth in Section 5.7 hereof, if the Company shall give notice to Employee in accordance with Section 1.2 hereof that this Agreement will not be renewed but Employee’s employment is not terminated, the Company shall continue to be obligated to pay Employee’s Compensation for a period of one year beginning on the date notice of non-renewal is given.

pay to Employee a lump sum payment upon the effective date of such termination or resignation or breach (as determined in Employee’s sole discretion), in an amount equal to two times the Employee’s compensation payable under paragraph 5.5 above, but in no event to exceed an amount equal to $1.00 less than three (3) times the mean average annual compensation paid to Employee by the Corporation and any of its subsidiaries during the five calendar years ending before the date on which the Change in Control occurred (or if Employee was not employed for that entire five year period, then the mean average annual compensation paid to employee during such shorter period, with the Employee’s compensation annualized for any calendar year during which the employee was not employed for the entire calendar year); provided, however, that if the lump-sum severance payment under this Section 5.7, either alone or together with any other payments or compensation which Employee has a right to receive from the Corporation, would constitute a “parachute payment” (as defined in Section 280G (or any equivalent term defined in any successor or equivalent provision) of the Internal Revenue Code of 1986, as amended (the “Code”)), then such lump-sum severance payment shall be reduced to the largest amount as will result in no portion of the lump-sum severance payment under this Section 5.7 being subject to the excise tax imposed by Section 4999 (or any successor or equivalent provision) of the Code. For the purpose of this Section 5.7, the Employee’s annual compensation from the Corporation and its subsidiaries for a given year shall equal Employee’s compensation as reflected on Employee’s Form W-2 for that year (unless the Employee was not employed for the entire calendar year, in which case Employee’s Form W-2 compensation for such year shall be annualized). The determination of any reduction in lump-sum severance payment under this Section 5.7 pursuant to the foregoing provision shall be conclusive and binding on the Corporation. Notwithstanding any other provision of this Section 5.7, Employee may elect to have the lump sum severance payment hereunder paid in equal monthly installments over a period not to exceed 12 consecutive months.

“Good Reason” shall mean any of the following which occur during the term of this Agreement without Employee’s express written consent:

In the Event of a Change in Control:

highest percentage increase in salary for all officers of the Corporation or any parent or affiliated company effected in the preceding twelve months; or

(c) the failure of the Corporation to provide Employee with the same fringe benefits (including, without limitation, life insurance plans, medical or disability plans, retirement plans, incentive plans, stock option plans, stock purchase plans, stock ownership plans, or bonus plans) that were provided to Employee immediately prior to the Change in Control, or with a package of fringe benefits that, if one or more of such benefits varies from those in effect immediately prior to such Change in Control, is in Employee’s sole judgment substantially comparable in all material respects to such fringe benefits taken as a whole; or

(e) any failure by the Corporation to provide Employee with the same number of paid vacation days to which Employee is entitled at the time of the Change in Control; or

(f) the failure of a successor to the Corporation to assume the obligation of this Agreement as set forth in Section 7.1 herein.

5.8. Change in Control . For the purposes of this Agreement, the phrase “change in control” shall mean any of the following events:

(b) Any sale, lease, exchange or other transfer (whether in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation;

(c) The stockholders of the Corporation approve any plan or proposal for the liquidation or dissolution of the Corporation;

(e) During any period of two consecutive years, individuals who at the beginning of that period constitute the entire Board of Directors of the Corporation, cease for any reason to constitute a majority of the Board of Directors unless the election or the nomination for election by the Corporation’s stockholders of each new director received the approval of the Board of Directors by a vote of at least two-thirds of the directors then and still in office and who served as directors at the beginning of the period; or

(f) The Corporation becomes a subsidiary of any other corporation.

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

to material evidence needed to resolve the controversy, and (c) that the scope, timing and cost of the discovery is not excessive.

9.5 Waiver of Breach . The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any party.

9.6 Amendment . No amendment or modification of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto.

9.7 Validity . This Agreement, having been executed and delivered in the State of Oklahoma, its validity, interpretation, performance and enforcement will be governed by the laws of that state.

9.8 Section Headings . Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

The Corporation:		Sonic Corp.

	By:	/s/ J. Clifford Hudson
		J. Clifford Hudson, President
Attest:

/s/ Ronald L. Matlock
Ronald L. Matlock, Secretary


The Employee:		/s/ W. Scott McLain
		W. Scott McLain

Exhibit 10.22

EMPLOYMENT AGREEMENT

This Agreement is entered into effective as of the 19 ^th day of January, 2000, by and between Sonic Restaurants, Inc., (the "Corporation"), a Oklahoma corporation, and Frank B. Young, Jr. (the "Employee").

RECITALS

Whereas, the Employee is currently serving as the Senior Vice President of the Corporation and is an integral part of its management; and

Whereas, the Corporation desires to continue the service of Employee, whose experience, knowledge and abilities with respect to the business and affairs of the Corporation are extremely valuable to the Corporation; and

Whereas, the Board of Directors of Sonic Corp. on the 19 ^th day of January, 2000, ratified and approved this Agreement; and

Whereas, the parties hereto desire to enter into this Agreement setting forth the terms and conditions of the continued employment relationship of the Corporation and Employee.

Now, therefore, it is agreed as follows:

ARTICLE I
Term of Employment

1.1 Term of Employment . The Corporation shall employ Employee for a period of one year from the date hereof (the "Initial Term").

the Employee’s employment only after at least 30 days’ written notice to the Corporation, unless otherwise agreed by the Corporation.

ARTICLE II
Duties of the Employee

Employee shall serve as the Senior Vice President of the Corporation. Employee shall do and perform all services, acts, or things necessary or advisable to manage and conduct the business of the Corporation consistent with such position subject to such policies and procedures as may be established by the Board.

ARTICLE III
Compensation

3.1 Salary . For Employee’s services to the Corporation as the Senior Vice President, Employee shall be paid a salary at the annual rate of $170,004 (herein referred to as “Salary”), payable in twenty-four equal installments on the fifteenth and last day of each month. On the first day of each calendar year during the term of this Agreement with the Corporation, Employee shall be eligible for an increase in Salary based on an evaluation of Employee’s performance during the past year with the Corporation. During the term of this Agreement, the Salary of the Employee shall not be decreased at any time from the Salary then in effect unless agreed to in writing by the Employee.

3.2 Bonus . The Employee shall be entitled to participate in an equitable manner with other officers of the Corporation in discretionary cash bonuses as authorized by the Board.

ARTICLE IV
Employee Benefits

4.8 Compensation Defined . Compensation shall be defined as all monetary compensation and all benefits described in Articles III and IV hereunder (as adjusted during the term hereof).

ARTICLE V
Termination

5.1 Death . Employee's employment hereunder shall be terminated upon the Employee's death.

5.3 Cause .

not illegal) which is not in the ordinary course of the Employee's responsibilities and exposes the Corporation to a significant level of undue liability. For purposes of this paragraph, no act or failure to act on Employee's part shall be considered to have met either of the preceding tests unless done or omitted to be done by Employee without a reasonable belief that Employee’s action or omission was in the best interest of the Corporation.

(b) Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for cause unless such action is ratified by the affirmative vote of not less than two-thirds of the entire membership of the Board at a meeting held within 30 days of such termination (after reasonable notice to Employee and an opportunity for Employee to be heard by members of the Board) confirming that Employee was guilty of the conduct set forth in this Section 5.3. Ratification by the board will be effective as of the original date of termination of Employee.

5.5 Compensation Upon Termination Other Than For Cause Or Disability . Except as otherwise set forth in Section 5.7 hereof, if the Company shall terminate Employee’s employment other than for Cause or Disability, the Company shall continue to be obligated to pay Employee’s Salary for a period of one year, beginning on the date of termination, but shall not be obligated to provide any other benefits described in Articles III and IV hereof, except to the extent required by law.

5.6 Compensation Upon Non-Renewal of Agreement. Except as otherwise set forth in Section 5.7 hereof, if the Company shall give notice to Employee in accordance with Section 1.2 hereof that this Agreement will not be renewed but Employee’s employment is not terminated, the Company shall continue to be obligated to pay Employee’s Compensation for a period of one year beginning on the date notice of non-renewal is given.

5.7 Termination of Employee or Resignation by Employee for Good Reason . If at any time within the first twelve months subsequent to a Change in Control, the Employee’s employment with the Corporation is terminated other than as provided for in Section 5.1, 5.2 or 5.3 hereof, or the Corporation violates any provision of this Agreement or Employee shall resign Employee’s employment for Good Reason (as defined herein), the Corporation shall be obligated to pay to Employee a lump sum payment upon the effective date of such termination or resignation or breach (as determined in Employee’s sole discretion), in an amount equal to two times the Employee’s compensation payable under paragraph 5.5 above, but in no event to exceed an amount equal to $1.00 less than three (3) times the mean average annual compensation paid to Employee by the Corporation and any of its subsidiaries during the five calendar years ending before the date on which the Change in Control occurred (or if Employee was not employed for that entire five year

period, then the mean average annual compensation paid to employee during such shorter period, with the Employee’s compensation annualized for any calendar year during which the employee was not employed for the entire calendar year); provided, however, that if the lump-sum severance payment under this Section 5.7, either alone or together with any other payments or compensation which Employee has a right to receive from the Corporation, would constitute a “parachute payment” (as defined in Section 280G (or any equivalent term defined in any successor or equivalent provision) of the Internal Revenue Code of 1986, as amended (the “Code”)), then such lump-sum severance payment shall be reduced to the largest amount as will result in no portion of the lump-sum severance payment under this Section 5.7 being subject to the excise tax imposed by Section 4999 (or any successor or equivalent provision) of the Code. For the purpose of this Section 5.7, the Employee’s annual compensation from the Corporation and its subsidiaries for a given year shall equal Employee’s compensation as reflected on Employee’s Form W-2 for that year (unless the Employee was not employed for the entire calendar year, in which case Employee’s Form W-2 compensation for such year shall be annualized). The determination of any reduction in lump-sum severance payment under this Section 5.7 pursuant to the foregoing provision shall be conclusive and binding on the Corporation. Notwithstanding any other provision of this Section 5.7, Employee may elect to have the lump sum severance payment hereunder paid in equal monthly installments over a period not to exceed 12 consecutive months.

“Good Reason” shall mean any of the following which occur during the term of this Agreement without Employee’s express written consent:

In the Event of a Change in Control:

immediately prior to the Change in Control, or with a package of fringe benefits that, if one or more of such benefits varies from those in effect immediately prior to such Change in Control, is in Employee’s sole judgment substantially comparable in all material respects to such fringe benefits taken as a whole; or

(e) any failure by the Corporation to provide Employee with the same number of paid vacation days to which Employee is entitled at the time of the Change in Control; or

(f) the failure of a successor to the Corporation to assume the obligation of this Agreement as set forth in Section 7.1 herein.

5.8. Change in Control . For the purposes of this Agreement, the phrase “change in control” shall mean any of the following events:

(a) Any consolidation or merger of the Sonic Corp. in which Sonic Corp. is not the continuing or surviving corporation or pursuant to which shares of Sonic Corp.’s capital stock would convert into cash, securities or other property, other than a merger of Sonic Corp. in which the holders of Sonic Corp.’s capital stock immediately prior to the merger have the same proportionate ownership of capital stock of the surviving corporation immediately after the merger;

(b) Any sale, lease, exchange or other transfer (whether in one transaction or a series of related transactions) of all or substantially all of the assets of Sonic Corp.

(e) During any period of two consecutive years, individuals who at the beginning of that period constitute the entire Board of Directors of Sonic Corp. cease for any reason to constitute a majority of the Board of Directors unless the election or the nomination for election by Sonic Corp.’s stockholders of each new

director received the approval of the Board of Directors by a vote of at least two-thirds of the directors then and still in office and who served as directors at the beginning of the period; or

(f) Sonic Corp. becomes a subsidiary of any other corporation.

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

8.1 Confidential Information . During the term of the Employee’s employment and for a period of twelve months thereafter, the Employee shall not divulge or make accessible to any party any Confidential Information, as defined below, of Sonic Corp. or any of its subsidiaries, except to the extent authorized in writing by the Corporation or otherwise required by law. The phrase “Confidential Information” shall mean the unique, proprietary and confidential information of Sonic Corp. and its subsidiaries, consisting of: (1) confidential financial information regarding Sonic Corp. or its subsidiaries, (2) confidential recipes for food products; (3) confidential and copyrighted plans and specifications for interior and exterior signs, designs, layouts and color schemes; (4) confidential methods, techniques, formats, systems, specifications, procedures, information, trade secrets, sales and marketing programs; (5) knowledge and experience regarding the operation and franchising of Sonic drive-in restaurants; (6) the identities and locations of Sonic’s franchisees, Sonic drive-in restaurants, and suppliers to Sonic’s franchisees and drive-in restaurants; (7) knowledge, financial information, and other information regarding the development of franchised and company-store restaurants; (8) knowledge, financial information, and other information regarding potential acquisitions and dispositions; and (9) any other confidential business information of Sonic Corp. or any of its subsidiaries. The Employee shall give the Corporation written notice of any circumstances in which Employee has actual notice of any access, possession or use of the Confidential Information not authorized by this Agreement.

8.2 Restrictive Covenant . During the term of Employee’s employment, the Employee shall not engage in or have any interest, directly or indirectly, in any business competing with the business being conducted by Sonic Corp. or any of its subsidiaries, without the Corporation’s prior written consent. For the six month period immediately following the termination of Employee’s employment, the Employee shall not engage in or have any interest, directly or indirectly, in any fast food restaurant business that has a menu similar to that of a Sonic drive-in restaurant (such as hamburgers, hot dogs, onion rings and similar items customarily sold by Sonic drive-in restaurants), or which has an appearance similar to that of a Sonic drive-in restaurant (such as color pattern, use of canopies, use of speakers and menu housings for ordering food, or other items that are customarily used by a Sonic drive-in restaurant), and which operates such restaurants within a three mile radius of any Sonic drive-in restaurant.

ARTICLE IX
Miscellaneous

9.2 Resolution of Disputes . The following provisions shall apply to any controversy between the Employee and Sonic Corp. and its subsidiaries and the Employee (including any director, officer, employee, agent or affiliate of Sonic Corp. and its subsidiaries) whether or not relating to this Agreement.

(c) Excluded Controversies . At the election of the Corporation or its subsidiaries, the provisions of this Section 9.2 shall not apply to any controversies relating to the enforcement of the covenant not to compete or the use and protection of the trademarks, service marks, tradenames, copyrights, patents, confidential information and trade secrets of Sonic Corp. or its subsidiaries, including (without limitation) the right of the Corporation or its subsidiaries to apply to any court of competent jurisdiction for appropriate injunctive relief for the infringement of the rights of Sonic Corp. or its subsidiaries.

9.5 Waiver of Breach . The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any party.

9.6 Amendment . No amendment or modification of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto.

9.7 Validity . This Agreement, having been executed and delivered in the State of Oklahoma, its validity, interpretation, performance and enforcement will be governed by the laws of that state.

9.8 Section Headings . Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

The Corporation:		Sonic Restaurants, Inc.

	By:	/s/ W. Scott McLain
		W. Scott McLain, Vice President
Attest:

/s/ Ronald L. Matlock
Ronald L. Matlock, Secretary


The Employee:		/s/ Frank B. Young, Jr.
		Frank B. Young, Jr.

Exhibit 10.23

EMPLOYMENT AGREEMENT

This Agreement is entered into effective as of the 20 ^th day of August,1996, by and between Sonic Corp. (the "Corporation"), a Delaware corporation, and Stephen C. Vaughan (the "Employee").

RECITALS

Whereas, the Employee is currently serving as the Controller of the Corporation and is an integral part of its management; and

Whereas, the Board on the 20 ^th day of August, 1996, ratified and approved this Agreement; and

Whereas, the parties hereto desire to enter into this Agreement setting forth the terms and conditions of the continued employment relationship of the Corporation and Employee.

Now, therefore, it is agreed as follows:

ARTICLE I
Term of Employment

1.1 Term of Employment . The Corporation shall employ Employee for a period of one year from the date hereof (the "Initial Term").

the Employee’s employment only after at least 30 days’ written notice to the Corporation, unless otherwise agreed by the Corporation.

ARTICLE II
Duties of the Employee

Employee shall serve as the Controller of the Corporation. Employee shall do and perform all services, acts, or things necessary or advisable to manage and conduct the business of the Corporation consistent with such position subject to such policies and procedures as may be established by the Board.

ARTICLE III
Compensation

3.1 Salary . For Employee’s services to the Corporation as the Controller, Employee shall be paid a salary at the annual rate of $70,000.00 (herein referred to as “Salary”), payable in twenty-four equal installments on the first and fifteenth day of each month. On the first day of each calendar year during the term of this Agreement with the Corporation, Employee shall be eligible for an increase in Salary based on an evaluation of Employee’s performance during the past year with the Corporation. During the term of this Agreement, the Salary of the Employee shall not be decreased at any time from the Salary then in effect unless agreed to in writing by the Employee.

3.2 Bonus . The Employee shall be entitled to participate in an equitable manner with other officers of the Corporation in discretionary cash bonuses as authorized by the Board.

ARTICLE IV
Employee Benefits

4.1 Use of Automobile . The Corporation shall provide Employee, at the option of Employee, with either the use of a Dodge Intrepid for business and personal use (or a different make automobile with a comparable initial retail value) or a cash car allowance of $850.00 per month. The Corporation shall pay all expenses of operating, maintaining and repairing the automobile and shall procure and maintain automobile liability insurance in respect thereof, with such coverage insuring each Employee for bodily injury and property damage.

4.4 Business Expenses . Employee shall be authorized to incur reasonable expenses for promoting the business of the Corporation, including expenses for entertainment, travel, and similar

items. The Corporation shall reimburse Employee for all such expenses upon the presentation by Employee, from time to time, of an itemized account of such expenditures.

4.8 Compensation Defined . Compensation shall be defined as all monetary compensation and all benefits described in Articles III and IV hereunder (as adjusted during the term hereof).

ARTICLE V
Termination

5.1 Death . Employee's employment hereunder shall be terminated upon the Employee's death.

5.3 Cause .

failure to act on Employee's part shall be considered to have met either of the preceding tests unless done or omitted to be done by Employee not in good faith without a reasonable belief that Employee’s action or omission was in the best interest of the Corporation.

5.5 Compensation Upon Termination Other Than For Cause Or Disability . Except as otherwise set forth in Section 5.7 hereof, if the Company shall terminate Employee’s employment other than for Cause or Disability, the Company shall continue to be obligated to pay Employee’s Salary for a period of six months, beginning on the date of termination, but shall not be obligated to provide any other benefits described in Articles III and IV hereof, except to the extent required by law.

5.6 Compensation Upon Non-Renewal of Agreement. Except as otherwise set forth in Section 5.7 hereof, if the Company shall give notice to Employee in accordance with Section 1.2 hereof that this Agreement will not be renewed but Employee’s employment is not terminated, the Company shall continue to be obligated to pay Employee’s Compensation for a period of six months beginning on the date notice of non-renewal is given.

5.7 Termination of Employee or Resignation by Employee for Good Reason . If at any time within the first twelve months subsequent to a Change in Control, the Employee’s employment with the Corporation is terminated other than as provided for in Section 5.1, 5.2 or 5.3 hereof, or the Corporation violates any provision of this Agreement or Employee shall resign Employee’s employment for Good Reason (as defined herein), the Corporation shall be obligated to pay to Employee a lump sum payment upon the effective date of such termination or resignation or breach (as determined in Employee’s sole discretion), in an amount equal to two times the Employee’s compensation payable under paragraph 5.5 above, but in no event to exceed an amount equal to $1.00 less than three (3) times the mean average annual compensation paid to Employee by the Corporation and any of its subsidiaries during the five calendar years ending before the date on which the Change in Control occurred (or if Employee was not employed for that entire five year period, then the mean average annual compensation paid to employee during such shorter period, with the Employee’s compensation annualized for any calendar year during which the employee was not employed for the entire calendar year); provided, however, that if the lump-sum severance

payment under this Section 5.7, either alone or together with any other payments or compensation which Employee has a right to receive from the Corporation, would constitute a “parachute payment” (as defined in Section 280G (or any equivalent term defined in any successor or equivalent provision) of the Internal Revenue Code of 1986, as amended (the “Code”)), then such lump-sum severance payment shall be reduced to the largest amount as will result in no portion of the lump-sum severance payment under this Section 5.7 being subject to the excise tax imposed by Section 4999 (or any successor or equivalent provision) of the Code. For the purpose of this Section 5.7, the Employee’s annual compensation from the Corporation and its subsidiaries for a given year shall equal Employee’s compensation as reflected on Employee’s Form W-2 for that year (unless the Employee was not employed for the entire calendar year, in which case Employee’s Form W-2 compensation for such year shall be annualized). The determination of any reduction in lump-sum severance payment under this Section 5.7 pursuant to the foregoing provision shall be conclusive and binding on the Corporation. Notwithstanding any other provision of this Section 5.7, Employee may elect to have the lump sum severance payment hereunder paid in equal monthly installments over a period not to exceed 12 consecutive months.

“Good Reason” shall mean any of the following which occur during the term of this Agreement without Employee’s express written consent:

In the Event of a Change in Control:

such Change in Control, is in Employee’s sole judgment substantially comparable in all material respects to such fringe benefits taken as a whole; or

(e) any failure by the Corporation to provide Employee with the same number of paid vacation days to which Employee is entitled at the time of the Change in Control; or

(f) the failure of a successor to the Corporation to assume the obligation of this Agreement as set forth in Section 7.1 herein.

5.8. Change in Control . For the purposes of this Agreement, the phrase “change in control” shall mean any of the following events:

(b) Any sale, lease, exchange or other transfer (whether in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation;

(c) The stockholders of the Corporation approve any plan or proposal for the liquidation or dissolution of the Corporation;

two-thirds of the directors then and still in office and who served as directors at the beginning of the period; or

(f) The Corporation becomes a subsidiary of any other corporation.

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

9.5 Waiver of Breach . The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any party.

9.6 Amendment . No amendment or modification of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto.

9.7 Validity . This Agreement, having been executed and delivered in the State of Oklahoma, its validity, interpretation, performance and enforcement will be governed by the laws of that state.

9.8 Section Headings . Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

The Corporation:		Sonic Corp.

	By:	/s/ J. Clifford Hudson
		J. Clifford Hudson, President
Attest:

/s/ Ronald L. Matlock
Ronald L. Matlock, Secretary


The Employee:		/s/ Stephen C. Vaughan
		Stephen C. Vaughan

Exhibit 10.24

EMPLOYMENT AGREEMENT

This Agreement is entered into effective as of the 19 ^th day of January, 2000, by and between Sonic Corp. (the "Corporation"), a Delaware corporation, and Terry D. Harryman (the "Employee").

RECITALS

Whereas, the Employee is currently serving as the Controller of the Corporation and is an integral part of its management; and

Whereas, the Board on the 19 ^th day of January, 2000, ratified and approved this Agreement; and

Whereas, the parties hereto desire to enter into this Agreement setting forth the terms and conditions of the continued employment relationship of the Corporation and Employee.

Now, therefore, it is agreed as follows:

ARTICLE I
Term of Employment

1.1 Term of Employment . The Corporation shall employ Employee for a period of one year from the date hereof (the "Initial Term").

the Employee’s employment only after at least 30 days’ written notice to the Corporation, unless otherwise agreed by the Corporation.

ARTICLE II
Duties of the Employee

ARTICLE III
Compensation

3.1 Salary . For Employee’s services to the Corporation as the Controller, Employee shall be paid a salary at the annual rate of $75,000.00 (herein referred to as “Salary”), payable in twenty-four equal installments on the first and fifteenth day of each month. On the first day of each calendar year during the term of this Agreement with the Corporation, Employee shall be eligible for an increase in Salary based on an evaluation of Employee’s performance during the past year with the Corporation. During the term of this Agreement, the Salary of the Employee shall not be decreased at any time from the Salary then in effect unless agreed to in writing by the Employee.

3.2 Bonus . The Employee shall be entitled to participate in an equitable manner with other officers of the Corporation in discretionary cash bonuses as authorized by the Board.

ARTICLE IV
Employee Benefits

4.4 Business Expenses . Employee shall be authorized to incur reasonable expenses for promoting the business of the Corporation, including expenses for entertainment, travel, and similar

items. The Corporation shall reimburse Employee for all such expenses upon the presentation by Employee, from time to time, of an itemized account of such expenditures.

4.8 Compensation Defined . Compensation shall be defined as all monetary compensation and all benefits described in Articles III and IV hereunder (as adjusted during the term hereof).

ARTICLE V
Termination

5.1 Death . Employee's employment hereunder shall be terminated upon the Employee's death.

5.3 Cause .

failure to act on Employee's part shall be considered to have met either of the preceding tests unless done or omitted to be done by Employee without a reasonable belief that Employee’s action or omission was in the best interest of the Corporation.

5.5 Compensation Upon Termination Other Than For Cause Or Disability . Except as otherwise set forth in Section 5.7 hereof, if the Company shall terminate Employee’s employment other than for Cause or Disability, the Company shall continue to be obligated to pay Employee’s Salary for a period of six months, beginning on the date of termination, but shall not be obligated to provide any other benefits described in Articles III and IV hereof, except to the extent required by law.

5.6 Compensation Upon Non-Renewal of Agreement. Except as otherwise set forth in Section 5.7 hereof, if the Company shall give notice to Employee in accordance with Section 1.2 hereof that this Agreement will not be renewed but Employee’s employment is not terminated, the Company shall continue to be obligated to pay Employee’s Compensation for a period of six months beginning on the date notice of non-renewal is given.

5.7 Termination of Employee or Resignation by Employee for Good Reason . If at any time within the first twelve months subsequent to a Change in Control, the Employee’s employment with the Corporation is terminated other than as provided for in Section 5.1, 5.2 or 5.3 hereof, or the Corporation violates any provision of this Agreement or Employee shall resign Employee’s employment for Good Reason (as defined herein), the Corporation shall be obligated to pay to Employee a lump sum payment upon the effective date of such termination or resignation or breach (as determined in Employee’s sole discretion), in an amount equal to two times the Employee’s compensation payable under paragraph 5.5 above, but in no event to exceed an amount equal to $1.00 less than three (3) times the mean average annual compensation paid to Employee by the Corporation and any of its subsidiaries during the five calendar years ending before the date on which the Change in Control occurred (or if Employee was not employed for that entire five year period, then the mean average annual compensation paid to employee during such shorter period, with the Employee’s compensation annualized for any calendar year during which the employee

was not employed for the entire calendar year); provided, however, that if the lump-sum severance payment under this Section 5.7, either alone or together with any other payments or compensation which Employee has a right to receive from the Corporation, would constitute a “parachute payment” (as defined in Section 280G (or any equivalent term defined in any successor or equivalent provision) of the Internal Revenue Code of 1986, as amended (the “Code”)), then such lump-sum severance payment shall be reduced to the largest amount as will result in no portion of the lump-sum severance payment under this Section 5.7 being subject to the excise tax imposed by Section 4999 (or any successor or equivalent provision) of the Code. For the purpose of this Section 5.7, the Employee’s annual compensation from the Corporation and its subsidiaries for a given year shall equal Employee’s compensation as reflected on Employee’s Form W-2 for that year (unless the Employee was not employed for the entire calendar year, in which case Employee’s Form W-2 compensation for such year shall be annualized). The determination of any reduction in lump-sum severance payment under this Section 5.7 pursuant to the foregoing provision shall be conclusive and binding on the Corporation. Notwithstanding any other provision of this Section 5.7, Employee may elect to have the lump sum severance payment hereunder paid in equal monthly installments over a period not to exceed 12 consecutive months.

“Good Reason” shall mean any of the following which occur during the term of this Agreement without Employee’s express written consent:

In the Event of a Change in Control:

(a) the assignment to Employee of duties inconsistent with Employee's position, office, duties, responsibilities and status with the Corporation immediately prior to a Change in Control; or, a change in Employee's titles or offices as in effect immediately prior to a Change in Control; or, any removal of Employee from or any failure to reelect Employee to any such position or office, except in connection with the termination of Employee’s employment by the Corporation for Disability or Cause or as a result of Employee's death or by Employee other than for Good Reason as set forth in this Section 5.7(a); or

(b) a reduction by the Corporation in Employee's Salary as in effect as of the date of this Agreement or as the same may be increased from time-to-time during the term of this Agreement or the Corporation's failure to increase (within twelve months of the Employee's last increase in Salary) Employee's Salary after a Change in Control in an amount which at least equals, on a percentage basis, the highest percentage increase in salary for all officers of the Corporation or any parent or affiliated company effected in the preceding twelve months; or

(c) the failure of the Corporation to provide Employee with the same fringe benefits (including, without limitation, life insurance plans, medical or disability plans, retirement plans, incentive plans, stock option plans, stock purchase plans, stock ownership plans, or bonus plans) that were provided to Employee immediately prior to the Change in Control, or with a package of fringe benefits that, if one or more of such benefits varies from those in effect immediately prior to such Change in Control, is in Employee's sole judgment substantially comparable in all material respects to such fringe benefits taken as a whole; or

(d) relocation of the Corporation's principal executive offices to a location outside of Oklahoma City, Oklahoma, or Employee's relocation to any place other than the location at which Employee performed Employee’s duties prior to a Change in Control, except for required travel by Employee on the Corporation's business to an extent substantially consistent with Employee's business travel obligations at the time of the Change in Control; or

(e) any failure by the Corporation to provide Employee with the same number of paid vacation days to which Employee is entitled at the time of the Change in Control; or

(f) the failure of a successor to the Corporation to assume the obligation of this Agreement as set forth in Section 7.1 herein.

5.8. Change in Control . For the purposes of this Agreement, the phrase “change in control” shall mean any of the following events:

(b) Any sale, lease, exchange or other transfer (whether in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation;

(c) The stockholders of the Corporation approve any plan or proposal for the liquidation or dissolution of the Corporation;

(f) The Corporation becomes a subsidiary of any other corporation.

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII

Restrictions on Employee

Corporation and its subsidiaries, consisting of: (1) confidential financial information regarding the Corporation or its subsidiaries, (2) confidential recipes for food products; (3) confidential and copyrighted plans and specifications for interior and exterior signs, designs, layouts and color schemes; (4) confidential methods, techniques, formats, systems, specifications, procedures, information, trade secrets, sales and marketing programs; (5) knowledge and experience regarding the operation and franchising of Sonic drive-in restaurants; (6) the identities and locations of Sonic’s franchisees, Sonic drive-in restaurants, and suppliers to Sonic’s franchisees and drive-in restaurants; (7) knowledge, financial information, and other information regarding the development of franchised and company-store restaurants; (8) knowledge, financial information, and other information regarding potential acquisitions and dispositions; and (9) any other confidential business information of the Corporation or any of its subsidiaries. The Employee shall give the Corporation written notice of any circumstances in which Employee has actual notice of any access, possession or use of the Confidential Information not authorized by this Agreement.

ARTICLE IX
Miscellaneous

9.5 Waiver of Breach . The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by any party.

9.6 Amendment . No amendment or modification of this Agreement shall be deemed effective unless or until executed in writing by the parties hereto.

9.7 Validity . This Agreement, having been executed and delivered in the State of Oklahoma, its validity, interpretation, performance and enforcement will be governed by the laws of that state.

9.8 Section Headings . Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

The Corporation:		Sonic Corp.

	By:	/s/ Kenneth L. Keymer
		Kenneth L. Keymer, President
Attest:

/s/ Ronald L. Matlock
Ronald L. Matlock, Secretary


The Employee:		/s/ Terry D. Harryman
		Terry D. Harryman

Exhibit 23.01

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-26359) pertaining to the Sonic Corp. Savings and Profit Sharing Plan, the Registration Statement (Form 333-64890) pertaining to the 1991 Sonic Corp. Stock Option plan, 2001 Sonic Corp. Stock Option plan and 2001 Sonic Corp. Directors’ Stock Option plan, the Registration Statements (Forms S-8 No. 333-09373, No. 33-40989 and No. 33-78576) pertaining to the 1991 Sonic Corp. Stock Option Plan, the Registration Statement (Form S-8 No. 33-40988) pertaining to the 1991 Sonic Corp. Stock Purchase Plan, the Registration Statement (Form S-8 No. 33-40987) pertaining to the 1991 Sonic Corp. Directors’ Stock Option Plan and the Registration Statement (Form S-3 No. 33-95716) for the registration of 1,420,000 shares of its common stock, and the related Prospectuses of our report dated October 11, 2002, with respect to the consolidated financial statements and schedule of Sonic Corp. included in the Annual Report (Form 10-K) for the year ended August 31, 2002.

		ERNST & YOUNG LLP
Oklahoma City, Oklahoma November 21, 2002

EXHIBIT 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

The undersigned hereby certifies that to his knowledge the annual 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.

Dated November 26, 2002

	J. Clifford Hudson
	J. Clifford Hudson, Chief Executive Officer

EXHIBIT 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

Dated November 26, 2002

	/s/ W. Scott McLain
	W. Scott McLain, Chief Financial Officer

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-K

FORM 10-K OF SONIC CORP.

TABLE OF CONTENTS

FORM 10-K

SONIC CORP.

PART I

Item 1. Business

General

Menu

Restaurant Locations

Expansion

Restaurant Design and Construction

Marketing

Purchasing

Food Safety and Quality Assurance

General Operations

Company Operations

Franchise Program

Competition

Seasonality

Employees

Trademarks and Service Marks

Government Regulation

Item 2. Properties

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

Item 4A. Executive Officers of the Company

Identification of Executive Officers

Business Experience

PART II

Item 5. Market for the Company’s Common Stock and Related Stockholder Matters

Market Information

Stockholders

Dividends

Securities

Equity Compensation Plan Information

Item 6. Selected Financial Data

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Percentage Results of Operations and Restaurant Data ($ in thousands)

Liquidity and Sources of Capital

Impact of Inflation

Seasonality

Critical Accounting Policies and Estimates

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

PART III

Item 10. Directors and Executive Officers of the Registrant

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

Item 14. Controls and Procedures

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

Financial Statements

Financial Statement Schedules

Exhibits

Reports on Form 8-K

Report of Independent Auditors

SIGNATURES

EXHIBIT INDEX

EMPLOYMENT AGREEMENT

RECITALS

ARTICLE I Term Of Employment

ARTICLE II Duties of the Employee

ARTICLE III Compensation

ARTICLE IV Employee Benefits

ARTICLE V Termination

ARTICLE VI Obligation to Mitigate Damages; No Effect on Other Contractual Rights

ARTICLE VII Successors to the Corporation

ARTICLE VIII Restrictions on Employee

ARTICLE IX Miscellaneous

EMPLOYMENT AGREEMENT

RECITALS

ARTICLE I Term of Employment

ARTICLE II Duties of the Employee

ARTICLE III Compensation

ARTICLE IV Employee Benefits

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM
10-K

Percentage Results of Operations and Restaurant Data
($ in thousands)

ARTICLE I
Term Of Employment

ARTICLE II
Duties of the Employee

ARTICLE III
Compensation

ARTICLE IV
Employee Benefits

ARTICLE V
Termination

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

ARTICLE I
Term of Employment

ARTICLE II
Duties of the Employee

ARTICLE III
Compensation

ARTICLE IV
Employee Benefits

ARTICLE V
Termination

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

ARTICLE I
Term of Employment

ARTICLE II
Duties of the Employee

ARTICLE III
Compensation

ARTICLE IV
Employee Benefits

ARTICLE V
Termination

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

ARTICLE I
Term of Employment

ARTICLE II
Duties of the Employee

ARTICLE III
Compensation

ARTICLE IV
Employee Benefits

ARTICLE V
Termination

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

ARTICLE I
Term of Employment

ARTICLE II
Duties of the Employee

ARTICLE III
Compensation

ARTICLE IV
Employee Benefits

ARTICLE V
Termination

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

ARTICLE I
Term of Employment

ARTICLE II
Duties of the Employee

ARTICLE III
Compensation

ARTICLE IV
Employee Benefits

ARTICLE V
Termination

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE VIII
Restrictions on Employee

ARTICLE IX
Miscellaneous

ARTICLE I
Term of Employment

ARTICLE II
Duties of the Employee

ARTICLE III
Compensation

ARTICLE IV
Employee Benefits

ARTICLE V
Termination

ARTICLE VI
Obligation to Mitigate Damages; No Effect
on Other Contractual Rights

ARTICLE VII
Successors to the Corporation

ARTICLE IX
Miscellaneous