H O N I N D U S T R I E S I n c . a n d S U B S I D I A R I E S In May 1997, the Company registered 400,000 shares of its common  stock under its 1997 Equity Plan for Non-Employee Directors. This  plan permits the Company to issue to its non-employee directors  options to purchase shares of Company common stock, restricted  stock of the Company, and awards of Company stock. The plan also  permits non-employee directors to elect to receive all or a portion of  their annual retainers and other compensation in the form of shares of  Company common stock. During 2003, 2002, and 2001, 10,922;  11,958; and 8,662 shares of Company common stock were issued  under the plan, respectively. Cash dividends declared and paid per share for each year are: (In dollars) 2003 2002  2001  Common shares  $ .52 $ .50  $ .48 During 2002, shareholders approved the 2002 Members’ Stock  Purchase Plan. Under the new plan, 800,000 shares of common stock  were registered for issuance to participating members. Beginning on  June 30, 2002, rights to purchase stock are granted on a quarterly  basis to all members who have one year of employment eligibility and  work a minimum of 20 hours a week. The price of the stock purchased  under the plan is 85% of the closing price on the applicable purchase  date. No member may purchase stock under the plan in an amount  which exceeds the lesser of 20% of his/her gross earnings or a maxi- mum fair value of $25,000 in any calendar year. During 2003, 79,237  shares of common stock were issued under the plan at an average  price of $29.25. During 2002, 47,419 shares of common stock were  issued under the plan at an average price of $22.58. An additional  673,344 shares were available for issuance under the plan at  January 3, 2004. This plan replaced the 1994 Members’ Stock Purchase  Plan. Under this plan, during 2002 and 2001, 43,388 shares at an aver- age price of $23.63 and 85,385 shares at an average price of $20.51  were issued, respectively. The Company has a shareholders’ rights plan which will  expire August 20, 2008. The plan becomes operative if certain events  occur involving the acquisition of 20% or more of the Company’s common  stock by any person or group in a transaction not approved by the  Company’s Board of Directors. Upon the occurrence of such an event,  each right entitles its holder to purchase an amount of common stock of  the Company with a market value of $400 for $200, unless the Board  authorizes the rights be redeemed. The rights may be redeemed for $0.01  per right at any time before the rights become exercisable. In certain  instances, the right to purchase applies to the capital stock of the acquirer  instead of the common stock of the Company. The Company has reserved  preferred shares necessary for issuance should the rights be exercised. The Company has entered into change in control employ- ment agreements with corporate officers and certain other key  employees. According to the agreements, a change in control occurs  when a third person or entity becomes the beneficial owner of 20% or  more of the Company’s common stock or when more than one-third of  the Company’s Board of Directors is composed of persons not recom- mended by at least three-fourths of the incumbent Board of Directors.  Upon a change in control, a key employee is deemed to have a two-year  employment with the Company, and all his or her benefits are vested  under Company plans. If, at any time within two years of the change in  control, his or her position, salary, bonus, place of work, or Company- provided benefits are modified, or employment is terminated by the  Company for any reason other than cause or by the key employee for good  reason, as such terms are defined in the agreement, then the key employee  is entitled to receive a severance payment equal to two times annual salary  and the average of the prior two years’ bonuses. Under the Company’s 1995 Stock-Based Compensation Plan, as amended  and restated effective November 10, 2000, the Company may award  options to purchase shares of the Company’s common stock and grant  other stock awards to executives, managers, and key personnel. The Plan  is administered by the Human Resources and Compensation Committee  of the Board of Directors. Restricted stock awarded under the plan is  expensed ratably over the vesting period of the awards. Stock options  awarded to employees under the Plan must be at exercise prices equal to  or exceeding the fair market value of the Company’s common stock on  the date of grant. Stock options are generally subject to four-year cliff  vesting and must be exercised within 10 years from the date of grant. The weighted-average fair value of options granted during  2003, 2002, and 2001, estimated on the date of grant using the  Black-Scholes option-pricing model, was $10.74, $11.74, and $9.70,  respectively. The fair value of 2003, 2002, and 2001 options granted  is estimated on the date of grant using the following assumptions:  dividend yield of 1.2% to 2.1%, expected volatility of 34.9% to 38.4%,  risk-free interest rate of 4.2% to 5.4%, and an expected life of 10 to 12  years, depending on grant date. The status of the Company’s stock option plans is summa- rized in the following table: 50 Stock-Based Compensation