<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Sonic Corp.
-----------
(Name of Registrant as Specified In Its Charter)
______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held January 30, 2001
[LOGO]
SONIC CORP.
101 Park Avenue
Oklahoma City, Oklahoma 73102
To the Stockholders of Sonic Corp.
The annual meeting of the stockholders of Sonic Corp. (the "Company") will
take place in Meeting Room 5 of the Myriad Convention Center, One Myriad
Gardens, Oklahoma City, Oklahoma, on Tuesday, January 30, 2001, at 1:30 p.m.,
for the purpose of considering and acting upon the following matters:
(1) The election of five nominees to the Board of Directors.
(2) The approval and ratification of the 2001 Sonic Corp. Stock
Option Plan.
(3) The approval and ratification of the 2001 Sonic Corp. Directors'
Stock Option Plan.
(4) The approval and ratification of the selection of independent
auditors.
(5) Any other business which properly may come before the meeting or
any adjournment of the meeting.
The Board of Directors has fixed the close of business on December 1, 2000,
as the record date for the determination of the holders of the Company's voting
common stock entitled to receive notice of the annual meeting and to vote at the
meeting.
To ensure the presence of a quorum at the annual meeting, please sign and
promptly return the enclosed proxy card in the accompanying self-addressed
envelope, which requires no postage if mailed in the United States.
By order of the Board of Directors,
/s/ Ronald L. Matlock
-----------------------------------
Ronald L. Matlock, Secretary
Oklahoma City, Oklahoma
December 20, 2000
<PAGE>
PROXY STATEMENT
FOR THE ANNUAL MEETING OF THE STOCKHOLDERS OF
SONIC CORP.
To Be Held Tuesday, January 30, 2001
SOLICITATION OF PROXIES
Solicitation
Sonic Corp. (the "Company") is furnishing this proxy statement to the
stockholders of the Company to solicit their proxies for use at the annual
meeting of stockholders to take place on Tuesday, January 30, 2001, and at any
adjournment of the meeting. The Company also may use the services of the
Company's directors, officers and employees to solicit proxies personally or by
telephone. The Company regularly retains the services of Corporate
Communications, Inc., 523 Third Avenue South, Nashville, Tennessee, to assist
with the Company's investor relations and other stockholder communications
issues. Corporate Communications, Inc. may assist in the solicitation of the
proxies and will not receive any additional compensation for those services.
The Company will bear all of the costs of preparing, printing, assembling and
mailing this proxy statement and the proxy card and all of the costs of the
solicitation of the proxies.
Reimbursement of Nominees
The Company will reimburse any bank, broker-dealer, or other custodian,
nominee or fiduciary for its reasonable expenses incurred in completing the
mailing of proxy materials to the beneficial owners of the Company's voting
common stock.
Revocation of Proxy
Any proxy given pursuant to this solicitation may be revoked by the
shareholder at any time prior to the voting of the proxy by giving written
notice to Ronald L. Matlock, Secretary of the Company. The persons named on the
proxy card will vote the proxies at the annual meeting, if received in time and
not revoked.
Mailing of Proxy Statement and Proxy Card
The Company has had this proxy statement and the proxy card mailed to its
stockholders on or about December 20, 2000.
Stockholder Proposals
In order for the Company to include a stockholder proposal in the proxy
materials for the next annual meeting of stockholders, a stockholder must
deliver the proposal to the Secretary of the Company no later than August 16,
2001.
VOTING RIGHTS AND PROCEDURE
All share numbers reflect the Company's three-for-two stock split
implemented as a share dividend effective November 30, 2000 to shareholders of
record on November 24, 2000.
Only the record holders of shares of the voting common stock of the Company
as of the close of business on December 1, 2000, will have the right to vote at
the annual meeting. As of the close of business on that date, the Company had
26,400,786 shares of common stock issued and outstanding (excluding 4,953,309
shares of common stock held as treasury stock). Each stockholder of record will
have one vote for each share of common stock of the Company that the stockholder
owned as of the record date. All shares of common stock may vote on all matters
coming before the annual meeting, and a majority of all of the outstanding
shares of common stock of the Company entitled to vote at the meeting,
represented in person or by proxy, will constitute a quorum for the meeting. The
Company will treat all abstentions and nominee non-votes as present or
represented at the meeting for the purposes of determining whether a quorum
exists for the meeting.
<PAGE>
ELECTION OF DIRECTORS
General
The Company's bylaws provide that the Board of Directors by resolution from
time to time may fix the number of directors that shall constitute the whole
Board of Directors. On November 14, 2000, the Board of Directors increased the
number of director positions from nine to ten. The certificate of incorporation
and bylaws of the Company provide for the division of the Board of Directors
into three classes, each class consisting (as nearly as possible) of one-third
of the whole. The term of office of one class of directors expires each year,
with each class of directors being elected for a term of three years and until
the stockholders elect their qualified successors.
The Board presently consists of seven directors, with three director
positions being vacant, including the newly authorized position. The term of one
vacant director position expires this year, one expires in 2003, and the term of
the newly authorized position expires in 2003. The Board of Directors proposes
the election of five directors. Two of the nominees, J. Clifford Hudson and
Robert M. Rosenberg, are current directors whose terms expire this year, and if
reelected, their terms will expire in 2004. One nominee, Federico F. Pena, is
being nominated to fill the vacancy in the director position that expires this
year and if elected, his term will expire in 2004. Margaret M. Blair, another
nominee, is being nominated to fill the vacant director position that expires in
2003. Pattye L. Moore is being nominated to fill the newly authorized director
position that expires in 2003. Messrs. Hudson, Rosenberg, and Pena, if elected,
will each hold office for a term of three years and Dr. Blair and Ms. Moore, if
elected, will each hold office for a term of two years. All nominees will hold
office until the stockholders elect his or her qualified successor. If any
nominee becomes unable or unwilling to accept the election or to serve as a
director (an event which the Board of Directors does not anticipate), the person
or persons named in the proxy will vote for the election of the person or
persons recommended by the Board of Directors.
Unless the context indicates otherwise, the term "Company," when used in
this proxy statement, refers to Sonic Corp. and its subsidiaries.
Nominees
The following table sets forth the name, principal occupation, age, year in
which the individual first became a director, and year in which the director's
term will expire (if elected) for each nominee for election as a director at the
annual meeting of stockholders.
<TABLE>
<CAPTION>
Name and First Became Term
Principal Occupation a Director Expires Age
-------------------- ------------ ------- ---
<S> <C> <C> <C>
J. Clifford Hudson/1/ August 1993 2004 46
Robert M. Rosenberg/2/ April 1993 2004 62
Federico F. Pena/3/ Nominee 2004 53
Margaret M. Blair/4/ Nominee 2003 50
Pattye L. Moore/5/ Nominee 2003 42
</TABLE>
The Board of Directors recommends a vote "For" the election of each of the
five nominees as a director.
Proxies cannot be voted for more than five nominees.
____________________
/1/ Mr. 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 since August 1993. Mr. Hudson 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
2
<PAGE>
and Chief Financial Officer of the Company. Since October 1994, Mr. Hudson has
served as Chairman of the Board of the Securities Investor Protection
Corporation, the federally-chartered organization which serves as the insurer of
customer accounts with brokerage firms.
/2/ Mr. Rosenberg served as President and Chief Executive Officer of Allied
Domecq Retailing USA ("Allied") from May 1993 until his retirement in August
1998. Allied is the parent of Dunkin' Donuts, Inc. and Baskin-Robbins, Inc.
Mr. Rosenberg served as President and Chief Executive Officer of Dunkin' Donuts,
Inc. from 1963 until May 1993, and he served as President and Chief Executive
Officer of Baskin-Robbins, Inc. from December 1992 until May 1993. Mr.
Rosenberg currently serves as an honorary director of the National Restaurant
Association, as well as a trustee of the educational foundation of the
International Franchise Association ("IFA"). Mr. Rosenberg is a past president
of the IFA.
/3/ Mr. Pena has served as a Managing Director of Vestar Capital Partners
since January 2000. He served as a Senior Advisor of Vestar Capital Partners
from August 1998 until January 2000. Mr. Pena served as the U.S. Secretary of
Energy from March 1997 through June 1998 and as the U.S. Secretary of
Transportation from January 1993 through January 1997. He served as the mayor
of the city and county of Denver, Colorado from 1983 through 1992 and in the
Colorado House of Representatives from 1979 until 1983. Mr. Pena currently
serves on the Board of Trustees of Marsico Investment Fund, a registered
investment company. He holds J.D. and B.A. degrees, both from the University
of Texas at Austin.
/4/ Dr. Blair has served as a Non-resident Senior Fellow of the Economic
Studies Program at the Brookings Institution, a Visiting Professor at Georgetown
University Law Center, and as the Research Director of the Sloan-GULC Project on
Business Institutions since January 2000. She served as a Senior Fellow of the
Economic Studies Program at the Brookings Institution from January 1995 until
January 2000. Dr. Blair is a member of the World Economic Forum of the
Corporate Performance Council, co-director of the Project on Understanding
Intangible Sources of Value at the Brookings Institution, a member of the
Advisory Board of the Woodstock Theological Center Seminar in Business Ethics,
and a member of the MIT Task Force on Reconstructing America's Labor Market
Institutions. She received Ph.D., M. Phil., and M.A. degrees from Yale
University and a B.A degree from the University of Oklahoma.
/5/ Ms. Moore has served as Executive Vice President of the Company since
January 2000. 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. She holds a
B.A. degree from the University of Oklahoma.
Other Directors
The following table sets forth the name, principal occupation, age, year in
which the individual first became a director, and year in which the director's
term will expire for each director who will continue as a director after the
annual meeting of stockholders.
<TABLE>
<CAPTION>
Name and First Became Term
Principal Occupation a Director Expires Age
-------------------- ---------- ------- ---
<S> <C> <C> <C>
Kenneth L. Keymer/1/ January 1999 2002 52
Leonard Lieberman/2/ December 1988 2003 72
H.E. "Gene" Rainbolt/3/ January 1996 2002 71
Frank E. Richardson/4/ March 1991 2003 61
E. Dean Werries/5/ March 1991 2002 71
</TABLE>
/1/ Kenneth L. Keymer has served as the President and Chief Operating
Officer of the Company since January 2000. He served as Executive Vice President
and as Chief Operating Officer of the Company from January 1998 until January
2000. He has served as President and a director of Sonic Industries Inc., the
Company's franchise operations
3
<PAGE>
subsidiary, since August 1996. From June 1994 to August 1996, Mr. Keymer served
as Executive Vice President of Perkins Family Restaurants, in Memphis,
Tennessee. From March 1993 to June 1994, Mr. Keymer served as Senior Vice
President of Operations for the then Chicago-based Boston Chicken, Inc.
/2/ Mr. Lieberman served as the Chief Executive Officer and a director of
Supermarkets General Corporation from 1983 to 1987. From 1987 to the present,
Mr. Lieberman has devoted his time to private investments. From January through
April 1991, Mr. Lieberman served as Chairman, President and Chief Executive
Officer of Outlet Communications, Inc. Mr. Lieberman serves as a director of
Russell Stanley Corporation. Mr. Lieberman is also a member of the Management
Committee of Consolidated Container Company, LLC.
/3/ Mr. Rainbolt has served as Chairman of the Board of BancFirst Corp. of
Oklahoma City, Oklahoma, since 1989. From 1985 to 1989, Mr. Rainbolt served as
Chairman of the Board of Directors of United Community Corp., a bank holding
company in Oklahoma City, Oklahoma, and a predecessor of BancFirst Corp. From
1974 to 1985, he served as Chairman of the Board of Federal National Bank of
Shawnee, Oklahoma.
/4/ Mr. Richardson has served as Chairman of F. E. Richardson & Co., Inc.
of New York City, a firm specializing in acquisitions of and investments in
growth companies, since June 1995. Since 1997, Mr. Richardson has served as
Chairman of Enterprise NewsMedia, Inc., which owns newspapers in Brockton,
Quincy, and Plymouth, Massachusetts. From 1986 to June 1995, Mr. Richardson
served as President of Wesray Capital Corporation, a firm which also specialized
in acquisitions of and investments in growth companies.
/5/ Mr. Werries served as non-executive Chairman of the Board of the
Company from April 1995 until January 2000. From 1988 through October 1993, he
served as the Chief Executive Officer of Fleming Companies, Inc. ("Fleming"), a
wholesale food distribution company, and served as Chairman of the Board of
Directors of Fleming from 1989 through April 1994. Mr. Werries is a past
Chairman of the Food Marketing Institute in Washington, D.C.
Chairman Emeritus of the Board of Directors
Troy N. Smith, Sr., founder of the Company, has served as Chairman Emeritus
of the Board of Directors since May 1991. As Chairman Emeritus, Mr. Smith has
the right to attend and participate on a non-voting basis at all meetings of the
Board of Directors and receives the same director fees as the other non-
management directors.
Committees and Meetings of the Board of Directors
The Company has a Nominating Committee, an Audit Committee, a Compensation
Committee, and a Stock Plan Committee.
Nominating Committee. The Nominating Committee's function consists of
nominating individuals to serve as directors of the Company. On November 14,
2000, the Nominating Committee met and nominated the five individuals named
above for election as directors at the annual meeting of stockholders. The
members of the Nominating Committee consist of all of the directors of the
Company. E. Dean Werries is the Chairman of the Nominating Committee. The
Nominating Committee held one meeting during the Company's last fiscal year. The
Nominating Committee will consider nominees recommended by the Company's
stockholders. In order to recommend a nominee for the next annual meeting,
stockholders must deliver the recommendation in writing to the Company on or
before August 16, 2001, addressed to the attention of Ronald L. Matlock,
Secretary of the Company, and must provide the full name, address, and business
history of the recommended nominee.
Audit Committee. Information regarding the functions performed by the Audit
Committee and the number of meetings held during the fiscal year is set forth in
the "Report of Audit Committee" included in this proxy statement. The members of
the Audit Committee are H. E. Rainbolt (Chairman), Robert M. Rosenberg, and E.
Dean Werries. W. Scott McLain, Senior Vice President and Chief Financial Officer
of the Company, serves as a non-voting, ex-officio member of the committee. On
April 25, 2000, the Board of Directors of the Company adopted a written charter
for the Audit Committee, a copy of which is attached to this proxy statement as
Appendix A.
4
<PAGE>
Compensation Committee. The Compensation Committee's functions include
reviewing and making recommendations to the Board of Directors concerning the
base salary, annual incentive bonus awards, and other compensation awards to the
executive officers of the Company. The members of the Compensation Committee are
Leonard Lieberman (Chairman), Frank E. Richardson, and J. Clifford Hudson. The
Compensation Committee held two meetings during the Company's last fiscal year.
Stock Plan Committee. The Stock Plan Committee's functions include
administering the Company's various stock option, stock incentive, and stock
purchase plans. The members of the Stock Plan Committee are Leonard Lieberman
(Chairman), Frank E. Richardson, and E. Dean Werries. The Stock Plan Committee
held four meetings during the Company's last fiscal year.
Meetings of the Board of Directors. The Board of Directors of the Company
held six meetings during the Company's last fiscal year. During that period, no
director attended fewer than 75% of the aggregate number of meetings of the
Board of Directors and of all committees on which he served.
Executive Compensation
Summary Compensation Table. The following table sets forth the compensation
paid for the last three fiscal years to the Company's chief executive officer
and the Company's four other most highly compensated executive officers for all
services rendered in all capacities to the Company and its subsidiaries.
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
--------------------------------------------------------------------------------------------------------------------------
All
Other Annual Securities Other
Name and Compen- Underlying Compen-
Principal Position Year Salary($) Bonus($)/1/ sation($)/2/ Stock Options(#) sation($)/3/
------------------ ---- --------- ------------ ------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
J. Clifford Hudson 2000 383,333 214,583 -- 32,144 5,902
Chairman of the Board and 1999 341,667 191,517 -- 27,570 5,600
Chief Executive Officer 1998 308,333 175,095 -- 34,013 5,437
Kenneth L. Keymer 2000 283,333 160,417 -- 46,608 6,202
President and 1999 241,667 136,500 -- 19,694 6,025
Chief Operating Officer 1998 213,333 118,775 -- 57,298 10,206
Pattye L. Moore 2000 233,334 133,333 -- 38,840 6,202
Executive Vice President 1999 191,667 78,482 -- 14,180 5,965
1998 166,667 67,929 -- 16,484 5,467
Ronald L. Matlock 2000 180,000 71,833 -- 13,381 5,830
Senior Vice President, 1999 166,667 67,178 -- 12,053 5,810
General Counsel and 1998 155,467 61,899 -- 15,071 8,173
Secretary
W. Scott McLain 2000 173,333 69,667 -- 13,019 4,353
Senior Vice President and 1999 153,334 62,785 -- 11,343 4,184
Chief Financial Officer 1998 135,266 53,572 -- 13,187 5,473
</TABLE>
5
<PAGE>
/1/ The amounts include incentive bonus awards granted pursuant to the
incentive bonus program described under "Report on Executive Compensation," as
well as a holiday bonus equal to one-half month's base salary.
/2/ The amount of other annual compensation did not exceed the lesser of
$50,000 or 10% of the annual salary and bonus reported for the named individual.
/3/ The amounts include the Company's matching contribution to the
Company's defined contribution plan and premiums for life insurance paid on
behalf of the named individuals. During the last fiscal year, the Company made
matching contributions to the Company's 401(k) defined contribution plan in the
amount of $4,500 for Mr. Hudson, $4,800 for Mr. Keymer, $4,800 for Ms. Moore,
$4,586 for Mr. Matlock, and $3,150 for Mr. McLain. During the last fiscal year,
the Company paid life insurance premiums in the amount of $1,402 for Mr. Hudson,
$1,402 for Mr. Keymer, $1,402 for Ms. Moore, $1,244 for Mr. Matlock, and $1,203
for Mr. McLain.
Stock Option Table. The following table sets forth information regarding
the stock options granted during the last fiscal year to the Company's chief
executive officer and the other executive officers named above.
<TABLE>
<CAPTION>
Number of
Securities Percent of Total
Underlying Options Granted Exercise Potential Realizable Value at
Options to Employees in Price Expiration Assumed Annual Rates of Price
Name Granted(#)/1/ Fiscal Year ($/Sh) Date Appreciation for Option Term/2/
--------------------------------------------------------------------------------------------------------------------------
5% ($) 10% ($)
-----------------------------------
<S> <C> <C> <C> <C> <C> <C>
J. Clifford Hudson 32,144 5.83% $19.27 4/25/2010 $389,567 $987,239
Kenneth L. Keymer 22,501 4.08% 21.17 1/19/2010 299,525 759,055
24,107 4.37% 19.27 4/25/2010 292,163 740,399
Pattye L. Moore 18,750 3.40% 21.17 1/19/2010 249,593 632,518
20,090 3.64% 19.27 4/25/2010 243,479 617,024
Ronald L. Matlock 13,381 2.42% 19.27 4/25/2010 162,170 410,970
W. Scott McLain 13,019 2.36% 19.27 4/25/2010 157,783 399,853
</TABLE>
____________________
/1/ Each option becomes exercisable with regard to one-third of the shares
of common stock underlying the option on each of the three anniversary dates of
the grant of the option.
/2/ The assumed annual rates of 5% and 10% would result in the Company's
common stock price increasing during the 10-year term of the option from the
$19.27 per share exercise price to $31.39 and $49.98, respectively, and from the
$21.17 per share exercise price to $34.48 and $54.90, respectively.
6
<PAGE>
Option Exercises and Year End Value Table. The following table sets forth
information regarding stock options exercised during the last fiscal year by the
Company's chief executive officer and the other individuals named above and the
value of unexercised stock options as of the end of the last fiscal year.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Options as of Fiscal Year In-the-Money Options as of
Acquired on Value End Exercisable/ Fiscal Year End
Name Exercise (#) Realized ($) Unexercisable (#) Exercisable/ Unexercisable ($)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J. Clifford Hudson 0 0 398,288 $5,460,933
61,864 214,662
Kenneth L. Keymer 0 0 137,856 1,552,341
78,840 280,151
Pattye L. Moore 15,000 $214,050 177,952 2,445,605
53,789 129,952
Ronald L. Matlock 0 0 87,875 1,087,857
26,439 92,601
W. Scott McLain 0 0 81,792 967,660
24,976 85,751
</TABLE>
Compensation of Directors. During the last fiscal year, the Company
compensated the non-management directors for their services in the amount of
$10,000 per year, plus $2,000 for every meeting of the Board of Directors
attended. The Company also paid Mr. Werries $2,500 a month for his services as
Chairman of the Board of Directors from September 1999 through January 2000. The
Company did not pay any additional fees to directors for serving on its standing
committees. The Company does not compensate directors who also serve as an
officer or employee of the Company or its subsidiaries for their services as a
director. The 1991 Sonic Corp. Directors' Stock Option Plan (as amended in
January 1999), provides for the grant of 10-year, non-qualified stock options to
purchase 22,500 shares of common stock of the Company to each non-management
director of the Company upon the individual's initial election as a director,
and provides for the annual grant of 10-year, non-qualified stock options to
purchase 3,000 shares of common stock of the Company to each non-management
director of the Company beginning with the first year of the director's second
three-year term and continuing annually for so long as the individual serves on
the Board. Prior to the 1999 amendment, the plan provided that 33,750 options
would be granted to each non-management director of the Company upon the
individual's initial election as a director, and did not provide for any
additional grants of options to a director during his term. The exercise price
of the stock options equals the market value of the common stock at the date of
the grant, and the stock options become exercisable with regard to one-third of
the shares of common stock underlying the option on each of the first three
anniversary dates of the grant of the stock option. In January 2000, the Company
granted options to purchase 3,000 shares of common stock at $21.1667 to Messrs.
Lieberman, Rainbolt, Richardson, Rosenberg and Werries.
Termination and Change in Control Arrangements. The Company has employment
contracts with J. Clifford Hudson, its Chairman of the Board and Chief Executive
Officer, and the other senior executive officers. Mr. Hudson's contract, which
expires in August 2001 (and which automatically extends each year for one
additional year to maintain successive terms of two years unless specifically
terminated or not renewed by the Company), provides that, if the Company
terminates Mr. Hudson's employment other than for cause or fails to renew his
contract, he will receive his base compensation for a 24-month period after
termination (at an annualized base of $400,000 as of August 31, 2000). Mr.
Hudson's contract defines "cause" as (1) the willful and intentional failure
substantially to perform his duties (other than because of physical or mental
incapacity), (2) the commission of an illegal act in connection with his
employment, or (3) the commission of any act which falls outside the ordinary
course of his responsibilities and which exposes the Company to a significant
level of undue liability. A determination of "cause" requires the affirmative
vote of at least two-thirds of all members of the Board of Directors. The
contracts for Messrs. Keymer and Matlock and for Ms. Moore
7
<PAGE>
expire in August 2001. The contract for W. Scott McLain expires in January 2001.
The contracts for all senior executive officers (except J. Clifford Hudson)
automatically renew for successive one-year terms unless specifically terminated
or not renewed by the Company. Those contracts provide for 12 months' salary
upon termination of employment other than for cause. The contracts for all of
the foregoing officers contain the same definition of "cause" as Mr. Hudson's
contract.
The contracts for all of the foregoing officers also provide that, upon a
change in control of the Company, if the Company terminates the officer's
employment other than for cause or violates any term of the contract, the
Company must pay the officer a lump sum equal to a specified multiple of the
officer's then current salary, not to exceed the maximum payable without a loss
of the deduction under Section 280(g) of the Internal Revenue Code. The
specified multiple equals two times the amount of their annual salary for all of
the officers of the Company, except for Mr. Hudson (who would receive three
times his annual salary). The same lump sum provision applies if the officer
should resign for "good reason," which includes (without limitation) the
occurrence without the officer's consent after a change in control of the
Company of (1) the assignment to the officer of duties inconsistent with the
officer's office with the Company, (2) a change in the officer's title or office
with the Company, or (3) a reduction in the officer's salary. The officers'
contracts generally define a "change in control" to include any consolidation or
merger of the Company in which the Company does not continue or survive or
pursuant to which the shares of capital stock of the Company convert into cash,
securities or other property; any sale, lease, exchange or transfer of all or
substantially all of the assets of the Company; the acquisition of 50% or more
of the outstanding capital stock of the Company by any person; or, a change in
the make-up of the Board of Directors of the Company during any period of two
consecutive years, pursuant to which individuals who at the beginning of the
period made up the entire Board of Directors of the Company cease for any reason
to constitute a majority of the Board of Directors, unless at least two-thirds
of the directors then and still in office approved the nomination of the new
directors.
Other than the foregoing agreements, the Company has no compensatory plan
or arrangement with respect to its executive officers which would result from
the resignation, retirement or termination of any executive officer's employment
with the Company, from a change in control of the Company, or from a change in
an executive officer's responsibilities following a change in control of the
Company.
Compensation Committee Interlocks and Insider Participation. Leonard
Lieberman, Frank E. Richardson, and J. Clifford Hudson served on the Company's
Compensation Committee during the last fiscal year. Other than Mr. Hudson, who
serves as the Company's Chairman of the Board and Chief Executive Officer, no
person who served on the Compensation Committee during the last fiscal year had
any relationship with the Company requiring disclosure under this heading.
REPORT ON EXECUTIVE COMPENSATION
The following joint report of the Compensation Committee and Stock Plan
Committee of the Board of Directors describes the committees' compensation
policies with regard to the Company's executive officers for the last fiscal
year, including the specific relationship of corporate performance to executive
compensation. The report also discusses the committees' bases for the chief
executive officer's compensation for the last fiscal year, including the factors
and criteria upon which the committees based that compensation. As described
above under "Committees and Meetings of the Board of Directors," the
Compensation Committee's functions include reviewing and making recommendations
to the Board of Directors concerning the base salary, annual incentive bonus
awards, and other compensation awards to the Company's chief executive officer
and other executive officers of the Company. The Stock Plan Committee's
functions include the administration of the Company's employee stock option plan
and the granting of stock options under that plan and the administration of the
Company's employee stock incentive plan and the granting of stock under that
plan.
The following report shall not constitute a document deemed incorporated by
reference by any general statement incorporating this proxy statement by
reference into any filing under the Securities Act 1933 or under the Securities
Exchange Act 1934, except to the extent the Company specifically incorporates
the information by reference, and the report shall not constitute information
otherwise deemed filed under either of those acts.
8
<PAGE>
Independent Compensation Consultant Report
The Company for several years has retained an independent compensation
consultant to advise the Company on the structure and competitiveness of the
Company's executive compensation program and to recommend programs appropriate
for the Company in the areas of salary, annual incentive programs, long-term
incentives, and benefits and employment contract provisions. In conducting its
initial review, the consultant interviewed the senior executive officers of the
Company, as well as the members of the Compensation Committee; identified a peer
group of 11 comparable multi-outlet restaurant companies; and analyzed the cash
compensation, stock option and long-term incentive programs, and employment
contract provisions available in that peer group according to available proxy
statement information, as well as compensation data from other published
surveys. Since the initial review, the Company has obtained annual updates of
the review and report to the Company. The results of the original and updated
reviews showed and continue to show that the total compensation of the Company's
executive officers falls below the average level of total compensation of the
peer group executive officers. The Company and the Compensation Committee
intend to continue to work with the consultant to develop appropriate changes to
the Company's executive compensation program.
Compensation Policy and Overall Objectives
In order to attract, retain, and motivate superior executive talent, the
Compensation Committee seeks to maintain compensation programs competitive with
those provided by leading companies in the multi-unit restaurant business with
similar size and business focus as the Company. The committee has adopted a
compensation strategy to provide: (1) base salaries which are competitive but
not above industry averages, (2) average or above-average total annual cash
opportunities, through incentives based on operating results, (3) above-average
long-term incentives based on stock appreciation, and (4) other benefits for
executives which are competitive but not above industry norms.
The primary components of the Company's executive compensation package
consist of base salary, annual incentive bonus awards, stock option awards, and
restricted stock awards. In connection with making decisions with respect to
executive compensation, the Compensation Committee will take into account as one
of the factors which it considers, the provisions of Section 162(m) of the
Internal Revenue Code which limits the deductibility by the Company of certain
categories of compensation in excess of $1,000,000 paid to certain executive
officers. It may, however, determine to authorize compensation arrangements
that exceed the $1,000,000 deductibility cap imposed by Section 162(m). No
executive officer's total compensation for the fiscal year ending August 31,
2000 exceeded the $1,000,000 deductibility cap.
Discussion of Compensation Components
Base Salary. In reviewing each executive officer's base salary, the
Compensation Committee takes into consideration the executive officer's
responsibilities and performance, salaries for comparable positions at other
companies, and fairness issues relating to pay for other Company executives. In
making salary recommendations or decisions, the committee exercises its
discretion and judgment based on those factors. The committee does not apply any
specific formula to determine the weight of each factor.
Incentive Bonus Awards. The Company has adopted an incentive bonus plan,
which covers all of the Company's executive officers, as well as other mid-level
management personnel. Under the plan, the Compensation Committee measures the
performance of the Company against an annual business plan prepared by
management and reviewed and approved by the Board of Directors. Achievement of
the earnings per share target set forth in the annual business plan may result
in the payment of incentive payments equal to a percentage of the base salary of
the covered officer (50% for Messrs. Hudson and Keymer and Ms. Moore, and 35%
for Messrs. Matlock and McLain). Under the plan, the committee may award up to
50% of the incentive payments if the Company achieves 85% of the annual business
plan and may award up to 100% of the incentive payments as the percentage of
earnings per share achieved increases from 85% to 100%. The plan also allows the
committee to increase the incentive payments ratably to the extent the Company
exceeds the earnings per share target. The committee has the discretion whether
and in what amounts to award any incentive bonuses.
9
<PAGE>
Stock Option Grants. The 1991 Sonic Corp. Stock Option Plan is a stock-
based incentive compensation plan under which employees selected by the Stock
Plan Committee may receive awards in the form of stock options. Under that plan,
employees at the director-level and above may receive an annual grant of stock
options to purchase a number of shares of common stock computed by (1) dividing
the employee's annual salary and bonus by the current market price of the common
stock and (2) multiplying that amount by a factor ranging from zero to two.
Also, under the plan, certain management and supervisory employees may receive
an annual grant of stock options to purchase an equal number of shares of common
stock, as may be designated by the Stock Plan Committee from time to time. The
Stock Plan Committee grants special stock option awards to new members of
management whose position with the Company qualifies them for participation in
the plan and for existing members of management who may have received a
promotion.
Stock Incentive Plan. In November 1995, the Stock Plan Committee adopted
and the Board of Directors approved the Stock Incentive Plan. Under that plan,
the Company may issue up to 270,000 shares of common stock of the Company to key
employees selected for participation in the plan by the Stock Plan Committee,
which administers the plan. Participants in the Stock Incentive Plan receive
awards of shares of restricted common stock (the "Restricted Stock"), subject to
not vesting if the Company fails to achieve certain annual performance criteria.
As the Company achieves the performance criteria, the portion of the award tied
to the criteria will vest. Until the Restricted Stock vests, an escrow agent
will hold the Restricted Stock. However, the participant will have the right to
vote the Restricted Stock and receive any dividends on the stock. If the Company
does not achieve the performance criteria, the portion of the award tied to that
criteria will not vest and the right to receive dividends and to vote that
portion of the Restricted Stock will terminate. Upon vesting, all restrictions
on the vested portion will terminate and the participant will have the right to
receive certificates representing the shares of vested Restricted Stock. There
are no Restricted Stock grants currently outstanding.
Compensation of Chief Executive Officer
Mr. Hudson has served as the Company's Chairman of the Board since January
2000 and as its Chief Executive Officer since April 11, 1995. On April 25, 2000,
the Compensation Committee met and set Mr. Hudson's annual compensation at
$400,000. The committee considered the results of the most recent update of the
Company's independent compensation consultant regarding the range of
compensation for the chief executive officers of the Company's competitive peer
group and set Mr. Hudson's level of compensation below the average of that
group. On April 25, 2000, the Stock Plan Committee granted Mr. Hudson options to
purchase 32,144 shares of common stock, consistent with the standard formula
described above. Effective October 20, 2000, the Compensation Committee approved
the award of 100% of Mr. Hudson's potential incentive bonus for the fiscal year
ended August 31, 2000, pursuant to the terms of the Company's incentive bonus
plan, which percentage is consistent with the percentages approved for the other
executive officers of the Company, after taking into account the performance of
the Company for that year.
Respectfully submitted,
The Compensation Committee The Stock Plan Committee
/s/ Leonard Lieberman, Chairman /s/ Leonard Lieberman, Chairman
/s/ J. Clifford Hudson /s/ Frank E. Richardson
/s/ Frank E. Richardson /s/ E. Dean Werries
10
<PAGE>
REPORT OF AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed the audited financial statements included in the Annual
Report of the Company for the fiscal year ended August 31, 2000 with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Audit Committee under generally accepted auditing standards. In
addition, the Audit Committee has discussed with the independent auditors the
auditors' independence from management and the Company including the matters in
the written disclosures required by the Independence Standards Board, a board
jointly developed by the American Institute of Certified Public Accountants and
the Securities and Exchange Commission to establish and improve auditor
independence standards.
The Audit Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Audit
Committee meets with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting. The Audit Committee held six meetings during
fiscal year 2000.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board approved) that
the audited financial statements be included in the Annual Report on Form 10-K
for the year ended August 31, 2000 for filing with the Securities and Exchange
Commission. The Audit Committee and the Board have also recommended, subject to
shareholder approval, the selection of the Company's independent auditors.
Respectfully submitted,
The Audit Committee
/s/ H.E. Rainbolt, Chairman
/s/ Robert M. Rosenberg
/s/ E. Dean Werries
11
<PAGE>
Performance Graph
The following graph compares the cumulative total return on the Company's
common stock with the cumulative total returns on two published indices - the
Total Return Index for The Nasdaq Stock Market (U.S. Companies) ("Nasdaq U.S.
Stocks") and the Index for Nasdaq Retail Trade Stocks ("Nasdaq Retail Stocks").
The graph assumes a $100 investment on August 31, 1995, in the Company's common
stock and in the stocks comprising the two identified indices. "Cumulative
total return" means the appreciation in stock price, plus dividends paid,
assuming the reinvestment of all dividends.
The following graph shall not constitute a document deemed incorporated by
reference by any general statement incorporating this proxy statement by
reference into any filing under the Securities Act 1933 or under the Securities
Exchange Act 1934, except to the extent the Company specifically incorporates
the information by reference, and the graph shall not constitute information
otherwise deemed filed under either of those acts.
SONIC CORP
<TABLE>
<CAPTION>
Cumulative Total Return
----------------------------------------------------
8/31/95 8/31/96 8/31/97 8/31/98 8/31/99 8/31/00
<S> <C> <C> <C> <C> <C> <C>
SONIC CORPORATION 100.00 114.63 107.93 116.62 224.09 238.72
NASDAQ STOCK MARKET (U.S.) 100.00 112.79 157.36 148.70 276.25 421.80
NASDAQ RETAIL TRADE 100.00 116.19 130.92 113.21 136.60 105.36
</TABLE>
Security Ownership of Certain Beneficial Owners and Management
Certain Beneficial Owners. The following table shows the total number and
percentage of the outstanding shares of the Company's voting common stock
beneficially owned as of December 31, 1999, with respect to each person
(including any "group" as used in Section 13(d)(3) of the Securities Exchange
Act 1934, as amended) the Company knows to have beneficial ownership of more
than 5% of the Company's common stock. The Company
12
<PAGE>
computed the percentage ownership amounts in accordance with the provisions of
Rule 13d-3(d), which includes as beneficially owned all shares of common stock
which the person or group has the right to acquire within the next 60 days.
Unless indicated otherwise, each stockholder holds sole voting and investment
power with regard to the shares of common stock.
<TABLE>
<CAPTION>
Number
Beneficial Owner of Shares Percent/1/
--------------- ---------- ----------
<S> <C> <C>
FMR Corp./2/ 3,075,525 11.0%
82 Devonshire Street
Boston, Massachusetts 02109
T. Rowe Price Associates, Inc./3/ 2,816,400 10.4%
100 E. Pratt Street
Baltimore, Maryland 21202
Massachusetts Financial Services Company/4/ 2,409,693 8.8%
500 Boylston Street
Boston, Massachusetts 02116
Delaware Management Holdings, Inc./5/ 1,835,648 6.7%
One Commerce Square
2005 Market Street
Philadelphia, Pennsylvania 19103
AMVESCAP PLC/6/
11 Devonshire Square 1,392,075 5.1%
London, EC2M 4 YR
England
</TABLE>
____________________
/1/ Based on the number of outstanding shares of common stock on December
31, 1999.
/2/ Reflects shares beneficially owned as of December 31, 1999, according
to a statement on Schedule 13G filed by FMR Corp. ("FMR") with the SEC on
February 14, 2000, which provides that these shares represented (a) 2,898,750
shares beneficially owned by Fidelity Management & Research Company ("Fidelity),
a wholly-owned subsidiary of FMR, as a result of its role as an investment
adviser to various investment companies, and (b) 176,775 shares beneficially
owned by Fidelity Management Trust Company ("Fidelity Management"), another
wholly-owned subsidiary of FMR, as a result of its role as an investment manager
for certain institutional accounts. Of the 2,898,750 shares beneficially owned
by Fidelity, 2,887,500 shares are owned by Fidelity Low-Priced Stock Fund.
Edward C. Johnson 3rd, Chairman of FMR, and FMR each has sole dispositive power
of the 2,898,750 shares. The voting power of the 2,898,750 shares is held by the
Board of Trustees of the investment companies of which Fidelity is the
investment advisor. Of the 176,775 shares beneficially owned by Fidelity
Management, Edward C. Johnson 3rd and FMR each has sole dispositive power and
sole power to vote such shares. Fidelity and Fidelity Management have the same
address as FMR.
/3/ Reflects shares beneficially owned as of December 31, 1999, according
to a statement on Schedule 13G filed by T. Rowe Price Associates, Inc. ("Price
Associates") with the SEC on June 8, 2000, which provides that Price Associates
beneficially owns such shares as a result of its role as an investment adviser
to T. Rowe Price New Horizons Fund, Inc. ("Price Fund") and various other
individual and institutional investors. Price Fund has sole voting power with
regard to 2,025,000 shares. Price Associates has sole voting power for 372,150
shares and sole dispositive power of all 2,816,400 shares. For purposes of the
reporting requirements of the Securities Exchange Act 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price Associates
expressly disclaims that it is the beneficial owner of such securities. Price
Fund has the same address as Price Associates.
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<PAGE>
/4/ Reflects shares beneficially owned as of December 31, 1999, according
to a statement on Schedule 13G filed by Massachusetts Financial Services Company
("MFS") with the SEC on February 11, 2000, which provides that MFS has sole
dispositive power with respect to all of such shares and the sole power to vote
2,137,368 of such shares.
/5/ Reflects shares beneficially owned as of December 31, 1999, according
to a statement on Schedule 13G filed by Delaware Management Holdings, Inc.
("Delaware Holdings") with the SEC on February 10, 2000, which provides that
Delaware Holdings has sole voting power with respect to 1,786,200 shares, shared
voting power with respect to 44,508 shares and sole dispositive power over all
1,835,648 shares. Delaware Management Business Trust ("Delaware Trust") has sole
voting power with respect to 1,786,200 shares, shared voting power with respect
to 9,600 shares and sole dispositive power over 1,795,800 shares. Delaware
Holdings is the parent company of Delaware Trust.
/6/ Reflects shares beneficially owned as of December 31, 1999, according
to a statement on Schedule 13G filed by AMVESCAP PLC ("AMVESCAP") with the SEC
on February 4, 2000, which provides that AMVESCAP and its affiliates, AVZ, Inc.,
AIM Management Group, Inc., Amvescap Group Services, Inc., INVESCO, Inc.,
INVESCO North American Holdings, Inc., INVESCO Capital Management, Inc., INVESCO
Funds Group, Inc., INVESCO Management & Research, Inc., INVESCO Realty Advisers,
Inc., and INVESCO (NY) Asset Management, Inc., shared voting and dispositive
power of these shares.
Management. The following table sets forth information obtained from the
directors and executive officers of the Company as to their beneficial ownership
of the Company's voting common stock as of October 31, 2000. The Company
computed the percentage ownership amounts in accordance with the provisions of
Rule 13d-3(d), which rule includes as beneficially owned all shares of common
stock which the person or group has the right to acquire pursuant to stock
options exercisable within the next 60 days ("Currently Exercisable Options").
Unless indicated otherwise, each stockholder holds sole voting and investment
power with regard to the shares of common stock.
<TABLE>
<CAPTION>
Number of
Number of Currently Exercisable
Beneficial Owner Shares Options Percent/1/
---------------- ------------------- ------------------------- -------------
<S> <C> <C> <C>
J. Clifford Hudson/2/ 553,950 398,286 3.56%
Kenneth L. Keymer 3,375 137,856 /3/
Pattye L. Moore/4/ 1,238 177,950 /3/
Ronald L. Matlock/5/ 1,935 87,875 /3/
W. Scott McLain/6/ 378 81,791 /3/
Leonard Lieberman 830 39,750 /3/
H. E. Rainbolt 35,250 34,751 /3/
Frank E. Richardson 717,126 39,750 2.86%
Robert M. Rosenberg 69,750 37,751 /3/
E. Dean Werries 40,050 10,500 /3/
Directors and executive officers 1,436,693 1,592,909 10.75%
as a group (25 persons)/7/
</TABLE>
____________________
/1/ Pursuant to Rule 13(d)(3), the Company includes the shares of common
stock underlying the Currently Exercisable Options as outstanding for the
purposes of computing the percentage ownership of the person or group holding
those options but not for the purposes of computing the percentage ownership of
any other person.
/2/ The amount shown includes (a) 231,951 shares of common stock held by
Mr. Hudson in trust for himself, (b) 289,611 shares of common stock held by Mr.
Hudson's wife in trust for herself (of which Mr. Hudson disclaims beneficial
ownership), and (c) 32,388 shares of common stock held by Mr. Hudson in trust
for his two children (of which Mr. Hudson disclaims beneficial ownership).
/3/ The amount represents less than 1% of the Company's outstanding shares
of common stock.
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<PAGE>
/4/ The amount shown includes 900 shares of common stock held for Ms.
Moore in the Company's 401(k) plan.
/5/ All of such shares are held for Mr. Matlock in the Company's 401(k)
plan.
/6/ All of such shares are held for Mr. McLain in the Company's 401(k)
plan.
/7/ The amount includes (a) 6,378 shares of common stock held for certain
executive officers in the Company's 401(k) plan and (b) 6,177 shares of common
stock held for certain executive officers in the Company's employee stock
purchase plan.
Changes in Control. The Company knows of no arrangements (including the
pledge by any person of securities of the Company), the operation of which may
result at a subsequent date in a change in control of the Company.
Certain Relationships and Related Transactions
The Company leases two parcels of real estate, upon which it operates two
Company-owned restaurants, from Plains Realty Corp. ("Plains"), a corporation
owned in part by J. Clifford Hudson, Chairman of the Board of Directors and
Chief Executive Officer of the Company. The Company is leasing both parcels
pursuant to leases entered into in 1988 and 1989. Both leases expire in January
2009. During the last fiscal year, the Company paid Plains a total of $115,402
in rent pursuant to those two leases. The Company believes that the terms and
conditions of the leases are no less favorable than those it could have obtained
from third parties in arm's length transactions.
H. E. Rainbolt, a director of the Company, is Chairman of the Board and a
principal stockholder of BancFirst Corp., the holding company of BancFirst of
Oklahoma City ("BancFirst"). BancFirst is a participant in the Company's $60
million revolving line of credit. During the last fiscal year, the largest
amount outstanding under that line of credit was approximately $46.5 million, in
which BancFirst participated in approximately $5.8 million.
Section 16 Compliance
Based upon a review of the original and amended Forms 3 and 4 furnished to
the Company during its last fiscal year, the Company does not know of any person
who failed to file on a timely basis any reports required by Section 16(a) of
the Securities Exchange Act 1934, as amended.
ADOPTION OF 2001 SONIC CORP. STOCK OPTION PLANS
The 1991 Sonic Corp. Stock Option Plan and the 1991 Sonic Corp. Directors'
Stock Option Plan are expiring after ten years as required by the Internal
Revenue Code (collectively, the "1991 Plans"). The 2001 Sonic Corp. Stock
Option Plan and the 2001 Sonic Corp. Directors' Stock Option Plan (collectively,
the "2001 Plans") are proposed to replace the 1991 Plans. As discussed in more
detail below, the options authorized for issuance pursuant to the 1991 Plans
that have not been granted will be canceled upon approval of the 2001 Plans and
effectively reauthorized under the 2001 Plans. Towers Perrin, the Company's
independent compensation consultant, has reviewed the proposed number of shares
for the 2001 Plans and confirmed that the total shares being authorized for the
2001 Plans, when combined with the options that will remain outstanding under
the 1991 Plans, will place the total number of shares of common stock reserved
for issuance pursuant to all Plans at approximately 5.46 million, representing
20.67% of the Company's common shares outstanding (26.4 million as of December
1, 2000), which is below the Company's peer group of companies which have an
average of 22.35% similarly reserved for issuance.
15
<PAGE>
Adoption of 2001 Sonic Corp. Stock Option Plan
General
On November 14, 2000, the Board of Directors approved the 2001 Sonic Corp.
Stock Option Plan (the "2001 Stock Option Plan") to replace the 1991 Sonic Corp.
Stock Option Plan (the "1991 Stock Option Plan"). The Company will cease
granting options under the 1991 Stock Option Plan upon the adoption of the 2001
Stock Option Plan. Options previously granted under the 1991 Stock Option Plan
that were outstanding on November 14, 2000 will continue to be outstanding after
such date and will be exercisable in accordance with their original terms under
that plan. The purpose of the 2001 Stock Option Plan is to enable the Company
to continue to attract and retain the services of eligible employees and to
provide them with increased motivation and incentive to exert their best efforts
on behalf of the Company by increasing their personal stake in the Company.
Under the 2001 Stock Option Plan, 1,800,000 shares of common stock of the
Company will be authorized for issuance. This represents a net increase of
approximately 900,000 shares in the total number of options available for
issuance to employees, because approximately 900,000 shares authorized under the
1991 Stock Option Plan, but not outstanding, will be canceled upon the approval
of the 2001 Stock Option Plan. The following description of the material
features of the 2001 Stock Option Plan is a summary and is qualified in its
entirety by reference to the 2001 Stock Option Plan attached hereto as Appendix
B.
Because the Board of Directors views the operation of the 2001 Stock Option
Plan to be in the best interests of the Company, the Board of Directors is
requesting that the stockholders approve and ratify the 2001 Stock Option Plan.
Summary of the Plan
-------------------
Administration. The Stock Plan Committee, which consists of not less than
three directors of the Company, will administer the plan. The Stock Plan
Committee has sole and final authority to interpret the provisions of the plan
and the terms of any option issued under it and to promulgate and interpret the
rules and regulations relating to the plan and options which it deems necessary
or desirable. Members of the Stock Plan Committee will not receive any
additional compensation for their services in connection with their
administration of the 2001 Stock Option Plan.
Eligibility and Participation. The plan provides for the granting of
options to qualified employees of the Company and its subsidiaries.
Forms of Options. The Stock Plan Committee has discretion under the plan
to grant incentive stock options ("ISOs") and non-qualified stock options
("NQSOs") to purchase the Company's common stock. ISOs may be granted only to
employees.
Terms and Conditions of Options. An option agreement, in the form adopted
by the Stock Plan Committee, evidences each option granted under the 2001 Stock
Option Plan and sets forth the terms and conditions governing the options.
Grant Date. The date of the grant of an option will be the date the
Stock Plan Committee makes the determination to grant the option, unless
otherwise specified by the Stock Plan Committee.
Number of Shares. The Stock Plan Committee determines the number of
shares of common stock covered by each stock option granted under the plan.
Exercise of Options. The holder may exercise an option by the
delivery to the Company of a written notice signed by the holder, which
specifies the number of shares of common stock as to which the holder is
exercising the option and the date of the proposed exercise. The holder
may pay for the shares purchased upon exercise of an option by either: (i)
cash, (ii) certified or cashier's check, (iii) shares of common stock of
16
<PAGE>
equivalent value owned by the holder for at least six months, (iv) a
combination of cash and shares of common stock, (v) "cashless exercise" as
set forth in the plan, or (vi) any combination of the foregoing.
Exercise Price of the Options. The exercise price of an option will
equal the fair market value of the Company's common stock on the date of
the grant of the option.
Vesting and Termination of the Options. Unless the Stock Plan
Committee specifies otherwise, each option granted under the plan becomes
exercisable with regard to one-third of the shares of common stock
underlying the option on each of the first three anniversary dates of the
grant of the option. Upon the termination of employment with the Company,
other than for reasons of retirement, disability, or death, an option
holder must exercise any vested, unexercised option during the thirty-day
period following his or her termination date. The options granted under
the plan become fully exercisable upon an option holder's termination of
employment with the Company by reason of retirement, disability, or death
and upon the date of a change in control of the Company. A change in
control of the Company takes place for the purposes of the plan if any one
or more of the following events occur:
(1) Any person acquires direct or indirect beneficial ownership
of 25% or more of the combined voting power of the Company's then
outstanding securities.
(2) Any person acquires direct or indirect beneficial ownership
of 10% or more of the combined voting power of the Company's then
outstanding securities and, during the two-year period beginning at
that time, persons who at the beginning of the period made up the
Board of Directors cease for any reason to constitute at least a
majority of the Board of Directors.
(3) The Company's stockholders approve an agreement to merge or
consolidate the Company with another corporation and, during the
period beginning six months before the approval and ending two years
after the approval, persons who at the beginning of the period made up
the Board of Directors cease for any reason to constitute at least a
majority of the Board of Directors.
(4) During any two-year period, persons who at the date on which
the period begins made up a majority of the Board of Directors cease
to constitute at least a majority of the Board of Directors, as a
result of one or more contested elections for positions on such Board.
Expiration of Options. An option granted under the Stock Option Plan
expires 10 years after the date of its grant, unless terminated earlier as
described above.
Rights as a Stockholder. No option recipient under the plan will have any
rights with respect to common stock underlying any option until a certificate is
issued to him or her evidencing such common stock.
Non-transferability of an Option. The recipient of an option granted under
the 2001 Stock Option Plan does not have the right to transfer such option,
except by will or the laws of descent and distribution, and except for transfers
during the life of the recipient to, or for the benefit of certain family
members (a "permitted transferee"), as approved by the committee. Only the
recipient of an option or a permitted transferee may exercise the option during
the lifetime of the recipient.
Adjustments upon Changes in Capitalization. Unless the Stock Plan
Committee determines otherwise, the number and class of shares available under
the plan or any outstanding options will be adjusted as necessary to prevent the
dilution or enlargement of rights upon certain changes in the capitalization of
the Company.
17
<PAGE>
Amendment or Termination. Subject to any stockholder approval that may be
required, the Stock Plan Committee, at any time, may amend, suspend, or
terminate the plan in any respect. However, no amendment, suspension, or
termination of the plan can materially, adversely alter or impair the rights of
an option holder in any option previously made under the plan without such
holder's approval. No amendment or modification which (1) materially increases
the benefits accruing to the option holders, (2) increases the number of shares
of common stock authorized by the plan except as set forth in the plan, or (3)
modifies the requirements as to eligibility for participation under the plan
will become effective without stockholder approval. The plan will continue for
10 years after the original date of its adoption.
Anti-takeover Effect
The provisions of the 2001 Stock Option Plan which make certain options
immediately exercisable upon a change in control of the Company may have an
anti-takeover effect and may constitute a factor in delaying, deferring or
preventing a tender offer or takeover attempt that a stockholder otherwise might
consider in the stockholder's best interest, including attempts that might
result in a premium over the market price for the shares of common stock held by
the stockholder. Management of the Company believes, however, that the benefits
of the plan more than outweigh the anti-takeover effect, if any, of the plan.
Required Vote
The adoption of the 2001 Stock Option Plan requires approval by the
affirmative vote of the holders of a majority of the Company's outstanding
shares of common stock present in person or by proxy and voting at the meeting.
If the stockholders do not vote a sufficient number of shares of common stock in
favor of the plan, the plan will not take effect, and the plan and all options
then outstanding thereunder will terminate automatically and be of no force and
effect.
The Board of Directors recommends a vote "For" the approval and
ratification of the adoption of the 2001 Stock Option Plan.
Adoption of 2001 Sonic Corp. Directors' Stock Option Plan
General
On November 14, 2000, the Board of Directors approved the 2001 Sonic Corp.
Directors' Stock Option Plan (the "2001 Directors' Stock Option Plan"), to
replace the 1991 Sonic Corp. Directors' Stock Option Plan (the "1991 Directors'
Stock Option Plan"). The Company will cease granting options under the 1991
Directors' Stock Option Plan upon the adoption of the 2001 Directors' Stock
Option Plan. Options previously granted under the 1991 Directors' Stock Option
Plan that were outstanding on November 14, 2000 will continue to be outstanding
after such date and will be exercisable in accordance with their original terms
under that plan.
The purpose of the 2001 Directors' Stock Option Plan is to attract and
retain the services of members of the Board and to provide them with increased
motivation and incentive to exert their best efforts on behalf of the Company by
enlarging their personal stake in the Company. In order to serve its intended
purpose, and to provide increased motivation for a director to serve additional
terms, the plan provides for options to be granted upon initial election to the
Board, and for additional options to be granted annually during a director's
tenure of service on the Board beginning with the first year of the director's
second term on the Board.
Under the 2001 Directors' Stock Option Plan, 300,000 shares of common stock
of the Company will be authorized for issuance. This represents a net increase
of approximately 125,000 shares in the total number of shares available for
issuance to directors, because approximately 175,000 shares authorized under the
terms of the 1991 Directors' Stock Option Plan, but not outstanding, will be
canceled upon the approval of the 2001 Directors' Stock Option Plan. The
following description of the material features of the 2001 Directors' Stock
Option Plan is a summary and is qualified in its entirety by reference to the
2001 Directors' Stock Option Plan attached hereto as Appendix C.
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<PAGE>
Because the Board of Directors views the operation of the 2001 Directors'
Stock Option Plan to be in the best interests of the Company, the Board of
Directors is requesting that the stockholders approve and ratify the 2001
Directors' Stock Option Plan.
Summary of the Plan
Administration. The Stock Plan Committee, which consists of not less than
three directors of the Company, will administer the 2001 Directors' Stock Option
Plan. The Stock Plan Committee has sole and final authority to interpret the
provisions of the 2001 Directors' Stock Option Plan and the terms of any option
issued under it and to promulgate and interpret the rules and regulations
relating to the 2001 Directors' Stock Option Plan and options which it deems
necessary or desirable. Members of the Stock Plan Committee do not receive any
additional compensation for their services in connection with their
administration of the 2001 Directors' Stock Option Plan.
Eligibility and Participation. The 2001 Directors' Stock Option Plan
provides for the granting of non-qualified stock options ("Non-Qualified
Options") to each non-employee director of the Company.
Terms and Conditions of Options. An option agreement, in the form adopted
by the Stock Plan Committee, evidences each option granted under the 2001
Directors' Stock Option Plan and sets forth the terms and conditions governing
the option.
Number of Shares. The plan provides that each director is granted an
option to purchase 22,500 shares of common stock upon the director's initial
election to the Board. The plan also provides for the annual grant of options
to the director to purchase 3,000 shares beginning with the first year of the
director's second three-year term on the Board and continuing for each
additional year of service by the director on the Board. The options will be
granted each year on the date of the annual meeting of shareholders of the
Company. The price per share at which shares may be purchased pursuant to any
option granted under the plan will be the fair market value of a share on the
date of grant of the option.
Exercise of the Options. The holder may exercise an option by the delivery
to the Company of a written notice signed by the holder, which specifies the
number of shares of common stock as to which the holder is exercising the option
and the date of the proposed exercise. The holder may pay for the shares
purchased upon exercise of an option by either: (i) cash, (ii) certified or
cashier's check, (iii) shares of common stock of equivalent value owned by the
holder for at least six months, (iv) a combination of cash and shares of common
stock, (v) "cashless exercise" as set forth in the plan, or (vi) any combination
of the foregoing.
Rights as a Stockholder. The holder of an option under the 2001 Directors'
Stock Option Plan will not have any rights with respect to the shares of common
stock underlying the option until a certificate is issued to him or her,
evidencing such shares.
Exercise Price of the Options. The exercise price of an option will equal
the fair market value of the Company's common stock on the date of the grant of
the option.
Vesting and Termination of the Options. Unless the Stock Plan Committee
specifies otherwise, each option granted under the plan becomes exercisable with
regard to one-third of the shares of common stock underlying the option on each
of the first three anniversary dates of the grant of the option. If the holder
of an option granted under the plan ceases to be a director of the Company,
other than for reasons of retirement, disability or death, he or she must
exercise any vested, unexercised option during the thirty-day period following
his or her cessation of service. The options granted under the plan become
fully exercisable upon a director's retirement from the Board, disability, or
death and upon the date of a change in control of the Company, which definition
is the same as that provided in the 2001 Stock Option Plan.
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<PAGE>
Expiration of Options. An option granted under the 2001 Directors' Stock
Option Plan expires 10 years after the date of its grant, unless terminated
earlier as described above.
Non-transferability of the Options. The recipient of an option granted
under the 2001 Directors' Stock Option Plan does not have the right to transfer
the option, except by will or the laws of descent and distribution, and except
for transfers during the life of the recipient to, or for the benefit of certain
family members (a "permitted transferee"), as approved by the Committee. Only
the recipient of an option or a permitted transferee may exercise the option
during the lifetime of the recipient.
Adjustments upon Changes in Capitalization. Unless the Committee
determines otherwise, the number and class of shares available under the plan or
any outstanding options will be adjusted as necessary to prevent the dilution or
enlargement of rights upon certain changes in the capitalization of the Company.
Amendment or Termination. Subject to any stockholder approval that may be
required, the Stock Plan Committee, at any time, may amend, suspend, or
terminate the plan in any respect. However, no amendment, suspension or
termination of the plan can materially, adversely alter or impair the rights of
an option holder in any option previously made without the option holder's
approval. No amendment or modification which (1) materially increases the
benefits accruing to the option holders, (2) increases the number of shares of
common stock authorized by the plan, or (3) modifies the requirements as to
eligibility for participation under the plan will become effective without
stockholder approval. The plan will continue for 10 years after the original
date of its adoption.
Anti-takeover Effect
The provisions of the 2001 Directors' Stock Option Plan which make certain
options immediately exercisable upon a change in control of the Company may have
an anti-takeover effect and may constitute a factor in delaying, deferring or
preventing a tender offer or takeover attempt that a stockholder otherwise might
consider in the stockholder's best interest, including attempts that might
result in a premium over the market price for the shares of common stock held by
the stockholder. Management of the Company believes, however, that the benefits
of the plan more than outweigh the anti-takeover effect, if any, of the plan.
Required Vote
The adoption of the 2001 Directors' Stock Option Plan requires approval by
the affirmative vote of the holders of a majority of the Company's outstanding
shares of common stock present in person or by proxy and voting at the meeting.
If the stockholders do not vote a sufficient number of shares of common stock in
favor of the plan, the plan will not take effect, and the plan and all options
then outstanding thereunder will terminate automatically and be of no force and
effect.
The Board of Directors recommends a vote "For" the approval and
ratification of the 2001 Directors' Stock Option Plan.
Federal Tax Aspects of Options Under 2001 Plans
The following material provides only a brief summary of the federal income
tax aspects for the options under the 2001 Stock Option Plan and 2001 Directors'
Stock Option Plan, based on the tax laws in effect as of the mailing date of
this proxy statement. The summary is not exhaustive and does not describe a
number of special tax rules, including the alternative minimum tax and various
elections which may apply under certain circumstances.
Taxable Income upon Grant. An employee will not recognize federal taxable
income upon the grant of any option under the 2001 Stock Option Plan and a
director will not recognize federal taxable income upon the grant of any option
under the 2001 Directors' Stock Option Plan.
Incentive Stock Options. A holder who is an employee and exercises an ISO
will not recognize any taxable income at the time of exercise, nor will the
Company receive a deduction. However, the difference between the
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<PAGE>
exercise price and the fair market value of the shares of common stock on the
exercise date constitutes a tax preference item for purposes of determining a
participant's alternative minimum tax. A disposition of the purchased shares
after the expiration of the required holding periods will subject the holder to
taxation at long-term capital gains rates in the year of disposition in an
amount determined under the Internal Revenue Code and the Company will not have
the right to a deduction for federal income tax purposes. A disposition of the
purchased shares prior to the expiration of the applicable holding periods will
subject the holder to taxation at ordinary income rates in the year of
disposition in an amount determined under the Internal Revenue Code and the
Company generally will have the right to a corresponding deduction.
Non-Qualified Stock Options. A holder who is an employee or non-employee
director and exercises an option will recognize ordinary income in the year the
holder exercises the option equal to the amount by which the fair market value
of the purchased shares of common stock exceeds the exercise price, and the
Company generally will have the right to a corresponding deduction for federal
income tax purposes.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, based on the recommendation of the Audit Committee,
has re-appointed the firm of Ernst & Young LLP, independent auditors, as the
Company's auditors for the fiscal year ending August 31, 2001, subject to the
approval and ratification by the stockholders. Ernst & Young LLP has served as
the Company's auditors since 1984. The Company expects one or more
representatives of Ernst & Young LLP to attend the annual meeting in order to
respond to any appropriate questions.
The Board of Directors recommends a vote "For" the approval and
ratification of the re-appointment of Ernst & Young LLP.
OTHER MATTERS
The Board of Directors knows of no other matters which may come before the
annual meeting. If any other business properly comes before the meeting, the
persons named in the proxy will vote with respect to that matter in accordance
with their best judgment.
ANNUAL REPORT ON FORM 10-K
The Company will provide, without charge, to each stockholder solicited to
vote at the annual meeting, on the written request of the stockholder, a copy of
the Company's Annual Report on Form 10-K for the year ended August 31, 2000,
including the financial statements and schedules, as filed with the Securities
and Exchange Commission. Each written request must set forth a good faith
representation that as of the record date, the person making the request was a
beneficial owner of the Company's common stock entitled to vote at the annual
meeting. Stockholders should direct the written request to the Company to Ronald
L. Matlock, Secretary, 101 Park Avenue, Oklahoma City, Oklahoma 73102.
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<PAGE>
Appendix A
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Audit Committee Charter
-----------------------
Organization
This charter governs the operations of the Audit Committee (the "Committee") of
the Board of Directors of Sonic Corp. (the "Company"). The Committee shall
review the adequacy of the charter at least annually and obtain the approval of
the board of directors. The Committee shall be appointed by the board of
directors and shall comprise at least three directors, each of whom shall be
considered independent if they have no relationship to the company that may
interfere with the exercise of their independence from management and the
Company. All Committee members shall be financially literate, and at least one
member shall have accounting or related financial management expertise.
Statement of Policy
The Committee shall provide assistance to the directors in fulfilling their
oversight responsibility to the shareholders, potential shareholders, and
investment community relating to the Company's financial statements and the
financial reporting process, the systems of internal accounting and financial
controls, the internal audit function and the annual independent audit of the
Company's financial statements. In so doing, it is the responsibility of the
Committee to maintain free and open communication between the Committee, the
independent auditors, the internal auditors, and management of the Company. In
discharging its oversight role, the Committee is empowered to investigate any
matter brought to its attention with full access to all books, records,
facilities, and personnel of the Company and the power to retain outside
counsel, or other experts for this purpose.
Responsibilities and Processes
The primary responsibility of the audit Committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. The Committee in carrying out its
responsibilities believes its policies and procedures should remain flexible, in
order to best react to changing conditions and circumstances. The Committee
should take the appropriate actions to set the overall corporate "tone" for
quality financial reporting, sound business risk practices, and ethical
behavior.
The following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the Committee may supplement them as
appropriate.
. The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable
to the Board of Directors and the Committee, as representatives of the
Company's shareholders. The Committee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, replace the independent
auditors. The Committee shall discuss with the auditors their independence
from management and the Company and the matters included in the written
disclosures required by the Independence Standards Board. Annually, the
Committee shall review and recommend to the board the selection of the
Company's independent auditors, subject to shareholders' approval.
. The Committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits including
the adequacy of staffing and compensation. Also, the Committee shall discuss
with management, the internal auditors, and the independent auditors the
adequacy and effectiveness of the accounting and financial controls,
including the Company's system to monitor and manage business risk, and legal
and ethical compliance programs. Further, the Committee shall meet separately
with the internal auditors and the independent auditors, with and without
management present, to discuss the results of their examinations.
. The Committee shall review and discuss the interim financial statements with
management and the independent auditors prior to the filing of the Company's
Quarterly Report on Form 10-Q. Also, the Committee shall discuss the results
of the quarterly review and any other matters required to be communicated to
the Committee by the independent auditors under generally accepted auditing
standards. The Chairman of the Committee, or his designee from the Committee,
may represent the entire Committee for the purposes of this review.
<PAGE>
. The Committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form
10-K, including their judgment about the quality, not just acceptability, of
accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements. Also, the Committee
shall discuss the results of the annual audit and any other matters required
to be communicated to the Committee by the independent auditors under
generally accepted auditing standards.
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Appendix B
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2001 Sonic Corp. Stock Option Plan
I. Purpose. The purposes of the Plan are to enable the Company to attract and
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retain the services of quality employees and provide them with increased
motivation and incentive to exert their best efforts on behalf of the Company by
enlarging their personal stake in the Company.
II. Definitions and Rules of Construction.
-------------------------------------
A. Definitions. As used in the Plan, the following definitions apply to
-----------
the terms indicated below:
"Administrator" means the individual or individuals to whom the committee
delegates authority under the Plan in accordance with Section IV.C.
"Beneficiary" means the person designated in writing by the Participant to
exercise or to receive an Option or payments or other amounts in respect thereof
in the event of the Participant's death or, if no such person has been
designated in writing by the Participant prior to the date of death, the
Participant's estate. No Beneficiary designation under the Plan shall be
effective unless it is in writing and is received by the Company prior to the
date of death of the applicable Participant.
"Board" means the Board of Directors of the Company.
"Change in Control" means the occurrence of any of the following:
(1) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), an "Acquiring Person")
becomes the "beneficial owner" (as such term is defined in Rule 13d-3
promulgated under the Exchange Act, a "Beneficial Owner"), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities;
(2) an Acquiring Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding securities and, during
the two-year period commencing at the time such Acquiring Person becomes the
Beneficial Owner of such securities, individuals who at the beginning of such
period constitute the Board cease for any reason to constitute at least a
majority thereof;
(3) the Company's stockholders approve the agreement to merge or
consolidate the Company with another corporation (other than a corporation 50%
or more of which is controlled by, or is under common control with, the Company)
and, during the period commencing six months before such approval and ending two
years after such approval, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at least a majority
thereof; and
(4) during any two-year period, individuals who at the date on which the
period commences constitute a majority of the Board cease to constitute a
majority thereof as a result of one or more contested elections for positions on
such Board.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the committee appointed by the Board from time to time to
administer the Plan pursuant to Section IV.
<PAGE>
"Common Stock" means the common stock of the Company, par value $0.01 per
share, now or hereafter owned by the Company as treasury stock or authorized,
but unissued, shares of the Company's common stock, subject to adjustment as
provided in the Plan.
"Company" means Sonic Corp., a Delaware corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Fair Market Value" of a Share on a given day means, if Shares are listed
on an established stock exchange, the highest closing sales price of a Share as
reported on such stock exchange or exchanges; or if not so reported, the final
price, as reported on the National Association of Securities Dealers Automated
Quotation System, as determined by the Committee. If the price of a Share shall
not be so quoted, the Fair Market Value shall be determined by the Committee
taking into account all relevant facts and circumstances.
"Incentive Stock Option" or "ISO" means an Option that qualifies as an
incentive stock option within the meaning of Section 422 of the Code and which
is identified as an Incentive Stock Option in the Option Agreement by which it
is evidenced.
"Nonqualified Stock Option" or "NQSO" means an Option that is not an
Incentive Stock Option and which is identified as a Nonqualified Stock Option in
the Option Agreement by which it is evidenced.
"Option" or "Options" means a right to purchase Shares under the terms and
conditions of the Plan as evidenced by an option certificate in such form not
inconsistent with the Plan, as the Committee may adopt for general use or for
specific cases from time to time.
"Option Agreement" means an instrument or agreement evidencing an Option
granted hereunder, in written or electronic form, which may, but need not be
executed or acknowledged by the recipient thereof.
"Participant" means an employee eligible to participate in the Plan under
Section V hereof, to whom an Option is granted under the Plan.
"Plan" means the 2001 Sonic Corp. Stock Incentive Plan, including any
amendments thereto.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Share" or "Shares" means shares of the Company's Common Stock.
"Subsidiary" means any corporation, now or hereafter existent, in which the
Company owns, directly or indirectly, stock comprising fifty percent or more of
the total combined voting power of all classes of stock of such corporation.
B. Construction. As used herein, the masculine includes the feminine, the
------------
plural includes the singular, and the singular includes the plural. Unless
otherwise indicated, references herein to sections are to sections of the Plan.
III. Plan Adoption and Term.
----------------------
A. Adoption. The Plan shall become effective upon its adoption by the
--------
Board and Options may be issued upon such adoption and from time to time
thereafter; provided that the Plan shall be submitted to the Company's
shareholders for their approval at the next annual meeting of shareholders, and
provided further that the approval of the Company's shareholders shall be
obtained within twelve months of the date of adoption of the Plan. If the Plan
is not approved at the annual meeting by the affirmative vote of a majority of
all shares entitled to vote upon the matter, then the Plan and all Options then
outstanding hereunder shall forthwith automatically terminate and be of no force
and effect.
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<PAGE>
B. Term. Subject to the provisions hereinafter contained relating to
----
amendment or discontinuance, the Plan shall continue in effect for ten years
from the date of its adoption by the Board. No Option may be granted hereunder
after such ten-year period.
IV. Administration of the Plan.
--------------------------
A. Committee Members. The Plan shall be administered by the Committee,
-----------------
consisting of not less than three persons, who shall be directors of the
Company, and who shall be appointed by the Board to serve at the pleasure of the
Board; provided, however, that at least two of such directors shall be (1) non-
employee directors as such term is defined in Rule 16b-3 of the Exchange Act or
any successor thereto and (2) to the extent the Company determines that payment
with respect to any Option is intended to be fully deductible by the Company
without regard to Section 162(m) of the Code, outside directors within the
meaning of Section 162(m) of the Code.
B. Committee Authority.
-------------------
(1) General. Except as otherwise expressly provided in the Plan, the
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Committee shall have sole and final authority to interpret the provisions of the
Plan and the terms of any Option or Option Agreement issued thereunder and to
promulgate and interpret such rules and regulations as it may deem necessary or
desirable for the administration of the Plan. All determinations by the
Committee shall be final and binding on all persons having an interest in any
Option under the Plan. The Committee shall report to the Board the names of
those granted Options and the terms and conditions of each Option granted by it.
The Committee may correct any defect in the Plan or any Option in the manner and
to the extent it shall deem expedient to carry the Plan into effect and shall be
the sole and final judge of such expediency.
(2) Specific Duties. The Committee shall have full power and authority:
---------------
(a) to select Participants;
(b) to grant Options in accordance with the Plan;
(c) to determine the number of shares of Common Stock subject to each
Option or the cash amount payable in connection with an Option;
(d) to determine the terms and conditions of each Option, including,
without limitation, those related to vesting, forfeiture, payment and
exercisability, and the effect of a Participant's termination of employment
with the Company;
(e) to specify and approve the provisions of the Option Agreements
delivered to Participants in connection with their Options;
(f) to construe and interpret any Option Agreement delivered under
the Plan;
(g) to amend the terms and conditions of an Option after the granting
thereof or to authorize the grant of a new Option in substitution therefor,
provided that such action is in a manner that is not, without the consent
of the Participant, prejudicial to the rights of such Participant in such
Option;
(h) to prescribe, amend and rescind rules and procedures relating to
the Plan;
(i) subject to the provisions of the Plan and subject to such
additional limitations and restrictions as the Committee may impose, to
delegate to one or more officers of the Company some or all of its
authority under the Plan;
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<PAGE>
(j) to employ such legal counsel, independent auditors and
consultants as it deems desirable for the administration of the Plan and to
rely upon any opinion or computation received therefrom; and
(k) to make all other determinations and to formulate such procedures
as may be necessary or advisable for the administration of the Plan.
C. Delegation of Authority. The Committee may, but need not, from time to
-----------------------
time delegate some or all of its authority under the Plan to an Administrator
consisting of one or more officers of the Company, one or more members of the
Committee or one or more members of the Board; provided, however, that the
Committee may not delegate its responsibility (i) to grant Options to
individuals who are subject to Section 16 of the Exchange Act, (ii) to grant
Options which are intended to constitute "qualified performance-based
compensation" under Section 162(m) of the Code or (iii) to amend or terminate
the Plan in accordance with Section XIV. Any delegation hereunder shall be
subject to the restrictions and limits that the Committee specifies at the time
of such delegation or thereafter. Nothing in the Plan shall be construed as
obligating the Committee to delegate authority to an Administrator, and the
Committee may at any time rescind the authority delegated to an Administrator
appointed hereunder or appoint a new Administrator. At all times, the
Administrator appointed under this Section IV.C. shall serve in such capacity at
the pleasure of the Committee. Any action undertaken by the Administrator in
accordance with the Committee's delegation of authority shall have the same
force and effect as if undertaken directly by the Committee, and any reference
in the Plan to the Committee shall, to the extent consistent with the terms and
limitations of such delegation, be deemed to include a reference to the
Administrator.
D. Committee Indemnification. No member of the Committee shall be liable
-------------------------
for any action taken or omitted or any determination made by him in good faith
relating to the Plan, and the Company shall indemnify and hold harmless each
member of the Committee and each other director or employee of the Company to
whom any duty or power relating to the administration or interpretation of the
Plan has been delegated against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Committee) arising out of any act or omission in connection with the Plan,
unless arising out of such person's own fraud or bad faith.
V. Eligibility. The employees of the Company and its Subsidiaries, who, in the
-----------
opinion of the Committee, have a capacity for contributing in a substantial
measure based upon their job position to the success of the Company and its
Subsidiaries, shall be eligible to participate in the Plan.
VI. Stock Subject to the Plan. Subject to adjustment as provided in Section XII
-------------------------
hereof, Options may be issued pursuant to the Plan with respect to a number of
Shares that, in the aggregate, does not exceed 1,800,000 shares. Options shall
be issued at the discretion of the Committee; provided, however, that, during
any calendar year, a Participant may not be granted Options under the Plan for
more than 5% of the total Shares authorized under the Plan. If, prior to the
termination of the Plan, an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased Shares subject thereto
shall again be available for the purposes of the Plan.
VII. Options.
-------
A. Type. Options shall constitute the sole form of award under the Plan.
----
All Options granted under the Plan shall be clearly identified either as
Incentive Stock Options ("ISO") or as Nonqualified Stock Options ("NQSO"). The
terms and conditions of each Option shall be determined by the Committee
(subject to the other provisions of this Plan) and shall be set forth in the
applicable Option Agreement.
B. ISO Limitations.
---------------
(1) Employees Only. ISOs shall only be granted to employees of the
--------------
Company.
(2) Fair Market Value. The aggregate Fair Market Value of Shares with
-----------------
respect to which ISOs granted under the Plan are exercisable for the first time
by a Participant during any calendar year under the Plan and any other stock
option plan of the Company (and its parent and subsidiary corporations as those
terms are used in Section 422 of the Code) shall not exceed $100,000, which
limit shall be applied by taking Options into account in the order in which
4
<PAGE>
they are granted. Such Fair Market Value shall be determined as of the date on
which each such ISO is granted. To the extent that the aggregate Fair Market
Value of Shares with respect to such ISO exceeds $100,000, such ISO shall be
treated as a NQSO, but all other terms and provisions of such ISO shall remain
unchanged.
(3) Ten Percent Ownership. No Options intended to qualify as ISOs shall
---------------------
be granted under the Plan to any employee who, before or after the grant or
exercise of any Option, owns or would own, directly or indirectly, more than ten
percent of the total combined voting power of all classes of stock of the
Company or any Subsidiary, unless (a) the price for such ISO is at least 110% of
the Fair Market Value of the Shares on the date of such grant and (b) such ISO
is not exercisable after the expiration of five years from the date on which the
ISO is granted.
C. Grant Date. The date of grant of an Option shall be the date on which
----------
the Committee makes the determination to grant such Option, unless otherwise
specified by the Committee. The certificate representing the Option will be
delivered to Participant with a copy of this Plan within a reasonable time after
the granting of the Option.
D. Option Price. The price per share at which Shares may be purchased
------------
pursuant to any Option granted under the Plan shall be not less than 100% of the
Fair Market Value of a Share on the date the Option is granted.
E. Duration of Options. No Option granted hereunder shall be exercisable
-------------------
after the expiration of ten years from the date such Option is granted;
provided, however, that all Options shall be subject to earlier termination as
provided elsewhere in the Plan and modification by the Committee, pursuant to
Section III.B.
F. Conditions Relating to Exercise of Options.
------------------------------------------
(1) Exercise. (a) Unless otherwise provided by the Committee in the
--------
Option Agreement, the following percentage of Options (rounded up to the
nearest whole number of Options) granted to Participants shall become
exercisable on the following anniversaries of the date of the grant:
Anniversary of
Date of Grant Percentage
-------------------- -------------------
First 33 1/3
Second 33 1/3
Third 33 1/3
Notwithstanding the foregoing, the Committee may, in its sole
discretion, accelerate the date on which any Option granted under the Plan,
and outstanding at such time, shall become exercisable.
(b) Once exercisable, an Option may be exercised at any time prior to
its expiration, cancellation or termination as provided in the Plan.
Partial exercise is permitted from time to time, provided that no partial
exercise of an Option shall be for a number of Shares having a purchase
price of less than $1,000 or for a fractional number of Shares.
(2) Notice. An Option shall be exercised by the delivery to the Company of
------
a written notice signed by the Participant, which specifies the number of Shares
with respect to which the Option is being exercised and the date of the proposed
exercise. Such notice shall be delivered to the Company's principal office, to
the attention of its Secretary, no less than three business days in advance of
the date of the proposed exercise and shall be accompanied by the applicable
option certificate evidencing the Option. A Participant may withdraw such notice
at any time prior to the close of business on the proposed date of exercise, in
which case the option certificate evidencing the Option shall be returned to
him.
(3) Payment. Payment for Shares purchased upon exercise of an Option shall
-------
be made at the time of exercise either (a) in cash, (b) by certified check or
bank cashier's check, (c) in Shares owned by the Participant and valued at their
Fair Market Value on the date of exercise provided such Shares have been held
for at least six months by the Participant, (d) partly in Shares with the
balance in cash or by certified check or bank cashier's check, (e) pursuant to a
broker-assisted "cashless exercise" arrangement, or (f) by any combination of
the foregoing, in each such case to the extent permitted by applicable law. Any
payment in Shares shall be effected by their delivery to the Secretary of the
Company, endorsed in blank or accompanied by stock powers executed in blank.
(4) Certificates. Certificates for Shares purchased upon exercise of
------------
Options shall be issued and delivered as soon as practicable following the date
the Option is exercised. Certificates for Shares purchased upon exercise of
Options shall be issued in the name of the Participant.
(5) Buyout. The Committee may at any time offer to buy out, for a payment
------
in cash or Common Stock (including restricted stock), an Option previously
granted, based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
G. Termination of Employment.
-------------------------
(1) Retirement. In the event of termination of a Participant's employment
----------
by reason of such Participant's retirement (in accordance with an applicable
retirement plan, in the case of an employee), any outstanding Option held by
such Participant shall be or immediately become fully exercisable as to the
total number of Shares subject thereto (whether or not exercisable to that
extent prior to such date) and shall remain so exercisable but only for a period
of three months after commencement of such retirement, at the end of which time
it shall terminate (unless such Option expires earlier by its terms).
(2) Disability. In the event of termination of a Participant's employment
----------
by reason of such Participant's disability within the meaning of Section
22(e)(3) of the Code, any outstanding Option held by such Participant shall be,
or immediately become, fully exercisable as to the total number of Shares
subject thereto (whether or not exercisable to
5
<PAGE>
that extent prior to such date) and shall remain so exercisable, but only for a
period of one year after such date, at the end of which time it shall terminate
(unless such Option expires earlier by its terms).
(3) Death. In the event of the death of any Participant (including death
-----
during an approved leave of absence or following a Participant's retirement or
disability), any Option then held by such Participant which shall not have
lapsed or terminated prior to his death shall be, or immediately become, fully
exercisable by the Beneficiary of the Participant, as to the total number of
Shares subject thereto (whether or not exercisable to that extent at the time of
death) and shall remain so exercisable but only for a period of one year after
death, at the end of which time it shall terminate (unless such Option expires
earlier by its terms).
(4) Other Reasons. In the event of the termination of the Participant's
-------------
employment otherwise than as described in Sections VII.G(1), (2) and (3), any
outstanding Option held by such Participant may be exercised during the thirty
day period following the date of termination to the extent such Option was
vested and not already exercised as of the date of termination. The Committee
shall have discretion to determine (a) if an authorized leave of absence, or
absence in military or government service, shall constitute termination of
employment for purposes of the Plan, (b) whether a Participant has ceased to be
employed by the Company or any Subsidiary, as appropriate, and (c) the effective
date on which such employment terminated.
VIII. No Employment Rights. Nothing contained in the Plan or any Option shall
--------------------
confer upon any Participant any right with respect to the continuation of his
employment by the Company or interfere in any way with the right of the
Company's shareholders or the Board, subject to the terms of any separate
employment agreement to the contrary, at any time, to terminate such tenure or
employment or to increase or decrease the compensation of the Participant from
the rate in existence at the time of the grant of an Option.
IX. Rights of a Shareowner and Nontransferability of Options.
--------------------------------------------------------
A. No Rights. No person shall have any rights with respect to any
---------
Shares covered by or relating to any grant hereunder of an Option until the date
of issuance of a certificate to him evidencing such Shares. Except as otherwise
expressly provided in the Plan, no adjustment to any Option shall be made for
dividends or other rights for which the record date occurs prior to the date
such certificate is issued.
B. Nontransferability. Unless the Committee determines otherwise, no
------------------
Option or amount payable under, or interest in, the Plan shall be transferable
by a Participant except by will or the laws of descent and distribution or
otherwise be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge; provided, however, that the Committee
may, in its discretion and subject to such terms and conditions as it shall
specify, permit the transfer of an Option that is an NQSO for no consideration
to a Participant's family members or to one or more trusts or partnerships
established in whole or in part for the benefit of one or more of such family
members (collectively, "Permitted Transferees"); and provided further that this
sentence shall not preclude a Participant from designating a Beneficiary to
receive the Participant's outstanding NQSO following the death of the
Participant. Any NQSO transferred to a Permitted Transferee shall be further
transferable only by will or the laws of descent and distribution or, for no
consideration, to another Permitted Transferee of the Participant. During the
lifetime of the Participant, an Option shall be exercisable only by the
Participant or by a Permitted Transferee to whom a NQSO has been transferred in
accordance with this Section IX.B.
X. Registration. Notwithstanding any other provision in the Plan, no Option
------------
may be exercised unless and until the Shares to be issued upon the exercise
thereof have been registered under the Securities Act and applicable state
securities laws, or are, in the opinion of counsel to the Company, exempt from
such registration. Prior to the occurrence of a Change in Control, the Company
shall not be under any obligation to register under applicable federal or state
securities laws any Shares to be issued upon the exercise of an Option granted
hereunder, or to comply with an appropriate exemption from registration under
such laws in order to permit the exercise of an Option and the issuance and sale
of the Shares subject to such Option. If the Company chooses to comply with
such an exemption from registration, the Shares issued under the Plan may, at
the direction of the Committee, bear an appropriate restrictive legend
restricting the transfer or pledge of the Shares represented thereby, and the
Committee may also give appropriate stop-transfer instructions to the transfer
agent to the Company. On or after the occurrence of a Change in Control, the
Company shall be under an obligation to register under applicable federal or
state securities law any Shares to be issued upon the exercise of an Option
granted hereunder, or to comply with an appropriate exemption from registration
under rules and regulations promulgated by the Securities and Exchange
Commission in order to permit the exercise of an Option and the issuance and
sale of the Shares subject to such Option.
6
<PAGE>
XI. Adjustment upon Changes in Capital Stock. Notwithstanding any other
----------------------------------------
provisions of the Plan, unless the Committee determines otherwise in its sole
discretion, the number and class of shares available under the Plan or any
outstanding Options shall be adjusted as necessary to prevent dilution or
enlargement of rights, including adjustments in the event of changes in the
number of shares of outstanding Common Stock by reason of stock dividends,
split-ups, recapitalizations, mergers, consolidations, combinations or exchanges
of shares, separations, reorganizations, liquidations or any similar corporate
action or proceeding.
XII. Change in Control. Notwithstanding anything in the Plan to the contrary,
-----------------
upon the occurrence of a Change in Control, any Option granted under the Plan
and outstanding at such time shall become 100% vested and immediately
exercisable for Common Stock effective as of the date of such Change in Control.
Should the Options be assumed by the surviving or acquiring corporation at the
time of the Change in Control, such Options shall continue to be exercisable
following the Change in Control until their expiration or termination as
provided in the Plan, with such adjustments to exercise price and number and
kind of securities as the Committee shall equitably determine to preserve the
value of such Options. Alternatively, in the event of a Change in Control, the
Committee in its discretion may provide that all Options shall be cashed out at
their Fair Market Value, as determined above.
XIII. Withholding Taxes.
-----------------
A. Withholding Generally. The Company shall have the right to withhold
---------------------
or require the recipient to remit to the Company an amount sufficient to satisfy
federal, state, or local withholding tax requirements arising in connection with
the grant, exercise or settlement of any award under the Plan prior to the
delivery of any certificate or certificates for Shares or other amounts
hereunder.
B. Stock Withholding. When a Participant incurs tax liability in
-----------------
connection with the exercise or vesting of any Option, which tax liability is
subject to tax withholding under applicable tax laws, the withholding tax
obligation shall be satisfied, at the discretion of the Company, by the
withholding of cash or the withholding from the Shares otherwise to be
delivered, of the number of Shares having a Fair Market Value equal to the
amount required to be withheld under applicable law, determined on the date that
the amount of tax to be withheld is to be determined; provided, however, that
the Company shall not withhold Shares (1) upon exercise or vesting of any Option
in an amount which exceeds the minimum statutory withholding rates for federal,
state and local tax purposes, including payroll taxes or (2) if such withholding
is not permitted under local laws. All elections by a Participant to have
Shares withheld for this purpose shall be made in accordance with procedures
established by the Committee from time to time.
XIV. Amendment of the Plan.
---------------------
A. General Rule. Subject to any approval of the shareholders of the
------------
Company that may be required (or, in the opinion of the Committee, appropriate)
under law, the Committee may at any time amend, suspend or terminate the Plan.
No amendment, suspension or termination of the Plan shall materially and
adversely alter or impair the rights of a Participant in any Option previously
made under the Plan without the consent of the holder thereof.
B. Shareholder Approval Required. No amendment to or modification of
-----------------------------
the Plan which: (i) materially increases the benefits accruing to Participants,
except as provided in Sections VI and XIV hereof; (ii) increases the number of
Shares that may be issued under the Plan, except for events described in Section
XI; or (iii) modifies the requirements as to eligibility for participation under
the Plan shall be effective without shareholder approval.
XV. General Provisions.
------------------
A. No Entitlements. It is expressly understood that the Plan grants
---------------
powers to the Committee but does not require their exercise; nor shall any
person, by reason of the adoption of the Plan, be deemed to be entitled to the
grant of any Option; nor shall any rights be deemed to accrue under the Plan
except as Options may be granted hereunder.
B. Compliance with Law. Any person exercising an Option or transferring
-------------------
or receiving Shares shall comply with all regulations and requirements of any
governmental authority having jurisdiction over the issuance,
7
<PAGE>
transfer, or sale of capital stock of the Company, and as a condition to
receiving any Shares, shall execute all such instruments as the Company in its
sole discretion may deem necessary or advisable.
C. Governing Law. All rights hereunder shall be governed by and
-------------
construed in accordance with the laws of Oklahoma.
D. Expenses. All expenses of the Plan, including the cost of maintaining
--------
records, shall be borne by the
Company.
E. Notices. Notices required or permitted to be made under the Plan
-------
shall be sufficiently made if sent by registered or certified mail addressed (a)
to the Participant at the Participant's address as set forth in the books and
records of the Company or (b) to the Company or the Committee at the principal
office of the Company.
F. Consent to Plan. By accepting any Option or other benefit under the
---------------
Plan, each Participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of, and
consent to, any action taken under the Plan by the Company, the Board or the
Committee.
8
<PAGE>
Appendix C
----------
2001 Sonic Corp. Directors' Stock Option Plan
I. Purpose. The purposes of the Plan are to enable the Company to attract and
-------
retain the services of members of the Board and provide them with increased
motivation and incentive to exert their best efforts on behalf of the Company by
enlarging their personal stake in the Company.
II. Definitions and Rules of Construction.
-------------------------------------
A. Definition. As used in the Plan, the following definitions apply to
----------
the terms indicated below:
"Administrator" means the individual or individuals to whom the committee
delegates authority under the Plan in accordance with Section IV.C.
"Beneficiary" means the person designated in writing by the Participant to
exercise or to receive an Option in the event of the Participant's death or, if
no such person has been designated in writing by the Participant prior to the
date of death, the Participant's estate. No Beneficiary designation under the
Plan shall be effective unless it is in writing and is received by the Company
prior to the date of death of the applicable Participant.
"Board" means the Board of Directors of the Company.
"Change in Control" means the occurrence of any of the following:
(1) any "person" (as such term is used in sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), an "Acquiring
Person") becomes the "beneficial owner" (as such term is defined in Rule
13d-3 promulgated under the Exchange Act, a "Beneficial Owner"), directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities;
(2) an Acquiring Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding securities and, during
the two-year period commencing at the time such Acquiring Person becomes the
majority thereof;
(3) the Company's shareholders approve an agreement to merge or
consolidate the Company with another corporation (other than a corporation
50% or more of which is controlled by, or is under common control with, the
Company) and, during the period commencing six months before such approval
and ending two years after such approval, individuals who at the beginning
of such period constitute the Board cease for any reason to constitute at
least a majority thereof; and
(4) during any two year period, individuals who at the date on which the
period commences constitute a majority of the Board cease to constitute a
majority thereof as a result of one or more contested elections for positions on
such Board.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the committee appointed by the Board from time to time to
administer the Plan pursuant to Section IV hereof.
<PAGE>
"Common Stock" means the common stock of the Company, par value $0.01 per
share, now or hereafter owned by the Company as treasury stock or authorized,
but unissued, shares of the Company's common stock, subject to adjustment as
provided in the Plan.
"Company" means Sonic Corp., a Delaware corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time.
"Fair Market Value" of a Share on a given day means, if Shares are listed
on an established stock exchange or exchanges, the highest closing sales price
of a Share as reported on such stock exchange; or if not so reported, the final
price, as reported on the National Association of Securities Dealers Automated
Quotation System, as determined by the Committee. If the price of a Share shall
not be so quoted the Fair Market Value shall be determined by the Committee
taking into account all relevant facts and circumstances.
"Option" means a right to purchase Shares pursuant to an option that is not
an incentive stock option within the meaning of Section 422 of the Code under
the terms and conditions of the Plan as evidenced by an Option Agreement in such
form not inconsistent with the Plan, as the Committee may adopt for general use
or for specific cases from time to time.
"Option Agreement" means an instrument or agreement evidencing an Option
granted hereunder, in written or electronic form, which may, but need not be
executed or acknowledged by the recipient thereof.
"Participant" means a director who is not an employee of the Company or a
Subsidiary, eligible to participate in the Plan under Section V hereof, to whom
an Option is granted under the Plan.
"Plan" means the 2001 Sonic Corp. Directors' Stock Option Plan, including
any amendments to the Plan.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Share" or "Shares" means shares of the Company's Common Stock.
"Subsidiary" means any corporation, now or hereafter existent, in which the
Company owns, directly or indirectly, stock comprising fifty percent or more of
the total combined voting power of all classes of stock of such corporation.
B. Construction. As used herein, the masculine includes the feminine, the
------------
plural includes the singular, and the singular includes the plural.
III. Plan Adoption and Term.
----------------------
A. Adoption. The Plan shall become effective upon its adoption by the
--------
Board, and Options may be issued upon such adoption and from time to time
thereafter; provided, that the Plan shall be submitted to the Company's
shareholders for their approval at the next annual meeting of shareholders, and
provided further, that the approval of the Company's shareholders shall be
obtained within twelve months of the date of adoption of the Plan. If the Plan
is not approved at the annual meeting by the affirmative vote of a majority of
all shares entitled to vote upon the matter, then the Plan and all Options then
outstanding hereunder shall forthwith automatically terminate and be of no force
and effect.
B. Term. Subject to the provisions hereinafter contained relating to
----
amendment or discontinuance, the Plan shall continue in effect for ten years
from the date of its adoption by the Board. No Option may be granted hereunder
after such ten-year period.
2
<PAGE>
IV. Administration of the Plan.
--------------------------
A. Committee Members. The Plan shall be administered by the Committee,
-----------------
consisting of not less than three persons, who shall be directors of the
Company, and who shall be appointed by the Board to serve at the pleasure of the
Board; provided, however, that at least two of such directors shall be non-
employee directors as such term is defined in Rule 16b-3 of the Exchange Act or
any successor thereto.
Committee Authority.
B. Committee Authority.
-------------------
(1) General. Except as otherwise expressly provided in the Plan, the
-------
Committee shall have sole and final authority to interpret the provisions of the
Plan and the terms of any Option or Option Agreement issued under it and to
promulgate and interpret such rules and regulations as it may deem necessary or
desirable for the administration of the Plan. All determinations by the
Committee shall be final and binding on all persons having an interest in any
Option under the Plan. The Committee shall report to the Board the names of
those granted Options and the terms and conditions of each Option granted by it.
The Committee may correct any defect in the Plan or any Option in the manner and
to the extent it shall deem expedient to carry the Plan into effect and shall be
the sole and final judge of such expediency.
(2) Specific Duties. The Committee shall have full power and authority:
---------------
(a) to select Participants;
(b) to grant Options in accordance with the Plan;
(c) to determine the number of shares of Common Stock subject to each
Option;
(d) to determine the terms and conditions of each Option, including,
without limitation, those related to vesting, forfeiture, payment and
exercisability, and the effect of a Participant's cessation of service with
the Company;
(e) to specify and approve the provisions of the Option Agreements
delivered to Participants in connection with their Options;
(f) to construe and interpret any Option Agreement delivered under
the Plan;
(g) to amend the terms and conditions of an Option after the granting
thereof or to authorize the grant of a new Option in substitution therefor,
provided that such action is in a manner that is not, without the consent
of the Participant, prejudicial to the rights of such Participant in such
Option;
(h) to prescribe, amend and rescind rules and procedures relating to
the Plan;
(i) subject to the provisions of the Plan and subject to such
additional limitations and restrictions as the Committee may impose, to
delegate to one or more officers of the Company some or all of its
authority under the Plan;
(j) to employ such legal counsel, independent auditors and
consultants as it deems desirable for the administration of the Plan and to
rely upon any opinion or computation received therefrom; and
(k) to make all other determinations and to formulate such procedures
as may be necessary or advisable for the administration of the Plan.
3
<PAGE>
C. Delegation of Authority. The Committee may, but need not, from time
-----------------------
to time delegate some or all of its authority under the Plan to an Administrator
consisting of one or more officers of the Company, one or more members of the
Committee or one or more members of the Board; provided, however, that the
Committee may not delegate its responsibility (i) to grant Options to
individuals who are subject to Section 16 of the Exchange Act, (ii) or to amend
or terminate the Plan in accordance with Section XIV. Any delegation hereunder
shall be subject to the restrictions and limits that the Committee specifies at
the time of such delegation or thereafter. Nothing in the Plan shall be
construed as obligating the Committee to delegate authority to an Administrator,
and the Committee may at any time rescind the authority delegated to an
Administrator appointed hereunder or appoint a new Administrator. At all times,
the Administrator appointed under this Section IV.C. shall serve in such
capacity at the pleasure of the Committee. Any action undertaken by the
Administrator in accordance with the Committee's delegation of authority shall
have the same force and effect as if undertaken directly by the Committee, and
any reference in the Plan to the Committee shall, to the extent consistent with
the terms and limitations of such delegation, be deemed to include a reference
to the Administrator.
D. Committee Indemnification. No member of the Committee shall be liable
-------------------------
for any action taken or omitted or any determination made by him in good faith
relating to the Plan, and the Company shall indemnify and hold harmless each
member of the Committee and each other director or employee of the Company to
whom any duty or power relating to the administration or interpretation of the
Plan has been delegated against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Committee) arising out of any act or omission in connection with the Plan,
unless arising out of such person's own fraud or bad faith.
V. Eligibility. Each director of the Company, who is not an employee of the
-----------
Company or any of its Subsidiaries, in office as of the effective date of the
Plan or as of any date thereafter (prior to the expiration or termination of the
Plan), shall be eligible to participate in the Plan.
VI. Stock Subject to the Plan. Subject to adjustment as provided in Section XI
-------------------------
hereof, Options may be issued pursuant to the Plan with respect to a number of
Shares that, in the aggregate, does not exceed 300,000 shares. If, prior to the
termination of the Plan, an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased Shares subject thereto
shall again be available for the purposes of the Plan.
VII. Options.
-------
A. Terms and Conditions. The terms and conditions of each Option shall
--------------------
be set forth in applicable Option Agreement and are described as follows:
B. Amount of Options. Each Participant shall be granted an Option to
-----------------
purchase 15,000 Shares upon the Participant's initial election to the Board.
Beginning with the first year of the Participant's second three-year term on the
Board and continuing for each additional year of service by the Participant on
the Board, the Participant will be granted an Option to purchase an additional
2,000 shares.
C. Grant Date. The Options shall be granted each year on the date of the
----------
annual meeting of shareholders of the Company (the "Date of Grant").
D. Option Price. The price per share at which Shares may be purchased
------------
pursuant to any Option granted under the Plan shall be the Fair Market Value of
a Share on the Date of Grant of the Option.
E. Duration of Options. No Option granted hereunder shall be exercisable
-------------------
after the expiration of ten years from the Date of Grant; provided, however,
that all Options shall be subject to earlier termination as provided elsewhere
in the Plan.
4
<PAGE>
F. Conditions Relating to Exercise of Options.
------------------------------------------
(1) Exercise. (a) The following percentage of Options (rounded up to
--------
the nearest whole number of Options) granted to Participants shall become
exercisable on the following anniversaries of the Date of Grant:
Anniversary of
Date of Grant Percentage
-------------------- --------------
First 33 1/3
Second 33 1/3
Third 33 1/3
(b) Once exercisable, an Option may be exercised at any time prior to
its expiration, cancellation or termination as provided in the Plan.
Partial exercise is permitted from time to time, provided that no partial
exercise of an Option shall be for a number of Shares having a purchase
price of less than $1,000 or for a fractional number of Shares.
(2) Notice. An Option shall be exercised by the delivery to the Company of
------
a written notice signed by the Participant, which specifies the number of Shares
with respect to which the Option is being exercised and the date of the proposed
exercise. Such notice shall be delivered to the Company's principal office, to
the attention of its Secretary, no less than three business days in advance of
the date of the proposed exercise and shall be accompanied by the applicable
option certificate evidencing the Option. A Participant may withdraw such
notice at any time prior to the close of business on the proposed date of
exercise, in which case the option certificate evidencing the Option shall be
returned to him.
(3) Payment. Payment for Shares purchased upon exercise of an Option
-------
shall be made at the time of exercise either (a) in cash, (b) by certified check
or bank cashier's check, (c) in Shares owned by the Participant and valued at
their Fair Market Value on the date of exercise provided such Shares have been
held for at least six months by the Participant, (d) partly in Shares with the
balance in cash or by certified check or bank cashier's check, (e) pursuant to a
broker-assisted "cashless exercise" arrangement, or (f) by any combination of
the foregoing, in each such case to the extent permitted by applicable law. Any
payment in Shares shall be effected by their delivery to the Secretary of the
Company, endorsed in blank or accompanied by stock powers executed in blank.
(4) Certificates. Certificates for Shares purchased upon exercise of
------------
Options shall be issued and delivered as soon as practicable following the date
the Option is exercised. Certificates for Shares purchased upon exercise of
Options shall be issued in the name of the Participant.
(5) Buyout. The Committee may at any time offer to buy out, for a payment
------
in cash or Common Stock, an Option previously granted, based on such terms and
conditions as the Committee shall establish and communicate to the Participant
at the time that such offer is made.
G. Termination of Service.
----------------------
(1) Retirement. In the event that a Participant shall cease to be a
----------
director by reason of such Participant's retirement, any outstanding Option held
by such Participant shall be or immediately become fully exercisable as to the
total number of Shares subject thereto (whether or not exercisable to that
extent prior to such date) and shall remain so exercisable but only for a period
of three months after commencement of such retirement, at the end of which time
it shall terminate (unless such Option expires earlier by its terms).
(2) Disability. In the event that a Participant shall cease to be a
----------
director by reason of such Participant's disability within the meaning of
Section 22(e)(3) of the Code, any outstanding Option held by such Participant
shall be or immediately become fully exercisable as to the total number of
Shares subject thereto (whether or not exercisable to
5
<PAGE>
that extent prior to such date) and shall remain so exercisable but only for a
period of one year after such date, at the end of which time it shall terminate
(unless such Option expires earlier by its terms).
(3) Death. In the event that a Participant shall cease to be a director by
-----
reason of death (including death during an approved leave of absence or
following a Participant's retirement or disability), any Option then held by
such Participant which shall not have lapsed or terminated prior to his death
shall be or immediately become fully exercisable by the Beneficiary of the
Participant, as may be appropriate, as to the total number of Shares subject
thereto (whether or not exercisable to that extent at the time of death) and
shall remain so exercisable but only for a period of one year after death, at
the end of which time it shall terminate (unless such Option expires earlier by
its terms).
(4) Other Reasons. In the event that a Participant shall cease to be a
-------------
director otherwise than as described in Sections VII.G (1), (2) and (3), any
outstanding Option held by such Participant may be exercised during the thirty
day period following the date of cessation of service to the extent such Option
was vested and not already exercised as of the date of such cessation of
service.
VIII. No Election Rights. Nothing contained in the Plan or any Option shall
------------------
confer upon any Participant any right with respect to the continuation of his
tenure as a director of the Company or interfere in any way with the right of
the Company's shareholders or the Board, at any time, to terminate such tenure
or to fail to elect such Participant to the Board.
IX. Rights of a Shareowner and Nontransferability.
---------------------------------------------
A. No Rights. No person shall have any rights with respect to any Shares
---------
covered by or relating to any grant hereunder of an Option until the date a
certificate is issued to him evidencing such Shares. Except as otherwise
expressly provided in the Plan, no adjustment to any Option shall be made for
dividends or other rights for which the record date occurs prior to the date
such certificate is issued.
B. Nontransferability. Unless the Committee determines otherwise, no
------------------
Option or amount payable under, or interest in, the Plan shall be transferable
by a Participant except by will or the laws of descent and distribution or
otherwise be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge; provided, however, that the Committee
may, in its discretion and subject to such terms and conditions as it shall
specify, permit the transfer of an Option for no consideration to a
Participant's family members or to one or more trusts or partnerships
established in whole or in part for the benefit of one or more of such family
members (collectively, "Permitted Transferees"); and provided further that this
sentence shall not preclude a Participant from designating a Beneficiary to
receive the Participant's outstanding Option following the death of the
Participant. Any Option transferred to a Permitted Transferee shall be further
transferable only by will or the laws of descent and distribution or, for no
consideration, to another Permitted Transferee of the Participant. During the
lifetime of the Participant, an Option shall be exercisable only by the
Participant or by a Permitted Transferee to whom such Option has been
transferred in accordance with this Section IX.B.
X. Registration. Notwithstanding any other provision in the Plan, no Option
------------
may be exercised unless and until the Shares to be issued upon the exercise
thereof have been registered under the Securities Act and applicable state
securities laws, or are, in the opinion of counsel to the Company, exempt from
such registration. Prior to the occurrence of a Change in Control, the Company
shall not be under any obligation to register under applicable federal or state
securities laws any Shares to be issued upon the exercise of an Option granted
hereunder, or to comply with an appropriate exemption from registration under
such laws in order to permit the exercise of an Option and the issuance and sale
of the Shares subject to such Option. If the Company chooses to comply with
such an exemption from registration, the Shares issued under the Plan may, at
the direction of the Committee, bear an appropriate restrictive legend
restricting the transfer or pledge of the Shares represented thereby, and the
Committee may also give appropriate stop-transfer instructions to the transfer
agent to the Company. On or after the occurrence of a Change in Control, the
Company shall be under an obligation to register under applicable federal or
state securities law any Shares to be issued upon the exercise of an Option
granted hereunder, or to comply with an appropriate exemption from registration
under rules and regulations promulgated by the Securities and Exchange
Commission in order to permit the exercise of an Option and the issuance and
sale of the Shares subject to such Option.
6
<PAGE>
XI. Adjustment Upon Changes in Capital Stock. Notwithstanding any other
----------------------------------------
provisions of the Plan, unless the Committee determines otherwise in its sole
discretion, the number and class of Shares available under the Plan or any
outstanding Options shall be adjusted as necessary to prevent dilution or
enlargement of rights, including adjustments in the event of changes in the
number of shares of outstanding Common Stock by reason of stock dividends,
split-ups, recapitalizations, mergers, consolidations, combinations or exchanges
of shares, separations, reorganizations, liquidations or any similar corporate
action or proceeding.
XII. Change in Control. Notwithstanding anything in the Plan to the contrary,
-----------------
upon the occurrence of a Change in Control, any Option granted under the Plan
and outstanding at such time shall become 100% vested and immediately
exercisable for Common Stock in the case of Options effective as of the date of
such Change in Control. Should the Options be assumed by the surviving or
acquiring corporation at the time of the Change in Control, such Options shall
continue to be exercisable following the Change in Control until their
expiration or termination as provided in the Plan, with such adjustments to
exercise price and number and kind of securities as the Committee shall
equitably determine to preserve the value of such Options. Alternatively, in
the event of a Change in Control, the Committee in its discretion may provide
that all Options shall be cashed out at their Fair Market Value, as determined
above.
XIII. Withholding Taxes.
-----------------
A. Withholding Generally. The Company shall have the right to withhold
---------------------
or require the recipient to remit to the Company an amount sufficient to satisfy
federal, state, or local withholding tax requirements arising in connection with
the grant, exercise or settlement of any Option under the Plan prior to the
delivery of any certificate or certificates for Shares or other amounts
hereunder.
B. Stock Withholding. When a Participant incurs tax liability in
-----------------
connection with the exercise or vesting of any Option, which tax liability is
subject to tax withholding under applicable tax laws, the withholding tax
obligation shall be satisfied, at the discretion of the Company, by the
withholding of cash or the withholding from the Shares otherwise to be
delivered, of the number of Shares having a Fair Market Value equal to the
amount required to be withheld under applicable law, determined on the date that
the amount of tax to be withheld is to be determined; provided, however, that
the Company shall not withhold Shares (1) upon exercise or vesting of any Option
in an amount which exceeds the minimum statutory withholding rates for federal,
state and local tax purposes, including payroll taxes or (2) if such withholding
is not permitted under local laws. All elections by a Participant to have
Shares withheld for this purpose shall be made in accordance with procedures
established by the Committee from time to time.
XIV. Amendment of the Plan.
---------------------
A. General Rule. Subject to any approval of the shareholders of the
------------
Company that may be required (or, in the opinion of the Committee, appropriate)
under law, the Committee may at any time amend, suspend or terminate the Plan.
No amendment, suspension or termination of the Plan shall materially and
adversely alter or impair the rights of a Participant in any Option previously
made under the Plan without the consent of the holder thereof.
B. Shareholder Approval Required. No amendment to or modification of the
-----------------------------
Plan which: (i) materially increases the benefits accruing to Participants
except as provided in Section XII hereof, (ii) increases the number of Shares
that may be issued under the Plan, except for events described in Section XI; or
(iii) modifies the requirements as to eligibility for participation under the
Plan, shall be effective without shareholder approval.
XV. General Provisions.
------------------
A. No Entitlements. It is expressly understood that the Plan grants
---------------
powers to the Committee but does not require their exercise; nor shall any
person, by reason of the adoption of the Plan, be deemed to be entitled to the
grant of any Option; nor shall any rights be deemed to accrue under the Plan
except as Options may be granted hereunder.
B. Compliance with Law. Any person exercising an Option or transferring
-------------------
or receiving Shares shall comply with all regulations and requirements of any
governmental authority having jurisdiction over the issuance,
7
<PAGE>
transfer, or sale of capital stock of the Company, and as a condition to
receiving any Shares, shall execute all such instruments as the Company in its
sole discretion may deem necessary or advisable.
C. Governing Law. All rights hereunder shall be governed by and
-------------
construed in accordance with the laws of Oklahoma.
D. Expenses. All expenses of the Plan, including the cost of maintaining
--------
records, shall be borne by the Company.
E. Notices. Notices required or permitted to be made under the Plan
-------
shall be sufficiently made if sent by registered or certified mail addressed (a)
to the Participant at the Participant's address as set forth in the books and
records of the Company or (b) to the Company or the Committee at the principal
office of the Company.
F. Consent to Plan. By accepting any Option or other benefit under the
---------------
Plan, each Participant and each person claiming under or through him shall be
conclusively deemed to have indicated his acceptance and ratification of, and
consent to, any action taken under the Plan by the Company, the Board or the
Committee.
8
<PAGE>
PROXY
For the Annual Meeting of the Stockholders of
SONIC CORP.
THE BOARD OF DIRECTORS OF SONIC CORP. IS SOLICITING THIS PROXY
The undersigned hereby appoints Kenneth L. Keymer and Ronald L. Matlock,
and each of them, the undersigned's proxy, with full power of substitution, to
attend the annual meeting of the stockholders of Sonic Corp. (the "Company") on
Tuesday, January 30, 2001, at 1:30 p.m., in Meeting Room 5 of the Myriad
Convention Center, One Myriad Gardens, Oklahoma City, Oklahoma, and at any
adjournment of that meeting, and to vote the undersigned's shares of common
stock as designated below.
(1) ELECTION OF DIRECTORS
[_] FOR All Nominees Listed Below (Except as marked to the contrary below)
[_] WITHHOLD AUTHORITY to Vote for All Nominees Listed Below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike through the nominee's name below.)
J. Clifford Hudson Robert M. Rosenberg Federico F. Pena Margaret M. Blair
Pattye L. Moore
The Board of Directors recommends a vote "For" the election of all of the
above-named nominees.
(2) Approval and Ratification of the 2001 Sonic Corp. Stock Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote "For" the approval and
ratification of the adoption of the 2001 Sonic Corp. Stock Option Plan.
(3) Approval and Ratification of the 2001 Sonic Corp. Directors' Stock Option
Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote "For" the approval and
ratification of the adoption of the 2001 Sonic Corp. Directors' Stock Option
Plan.
(4) Approval and Ratification of the Selection of Independent Auditors.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote "For" the approval and
ratification of the selection of independent auditors.
<PAGE>
(5) Any other matter properly coming before the meeting, upon which the persons
named above will vote for or against, in their sole discretion, or upon
which the persons named above will abstain from voting, in their sole
discretion.
[_] To Grant Authority [_] To Withhold Authority
The persons named above will vote the shares of common stock represented by
this proxy card in accordance with the specifications made in Items 1, 2, 3 and
4. If the undersigned makes no specification, the persons named above will vote
the shares in favor of Items 1, 2, 3 and 4, and will vote the shares as if the
undersigned had granted the authority in Item 5.
Please sign exactly as your name appears below, date and return this proxy
card promptly, using the self-addressed, prepaid envelope enclosed for your
convenience. Please correct your address before returning this proxy card.
Persons signing in a fiduciary capacity should indicate that fact and give their
full title. If a corporation, please sign in the full corporate name by the
president or other authorized officer. If a partnership, please sign in the
partnership name by an authorized person. If joint tenants, both persons should
sign.
_________________________________________________
Name of Stockholder (Please Print)
_________________________________________________
New Address (Street, City, State, Zip Code)
_________________________________________________
Signature and Title
_________________________________________________
Signature and Title
_________________________________________________
Date
