ART'S-WAY MANUFACTURING CO., INC.
2007
STOCK OPTION PLAN
 
(1)  
NAME.

 
The name of this Plan is the Art's-Way Manufacturing Co., Inc. 2007 Stock Option
Plan.
 
(2)  
DEFINITIONS.

 
For the purposes of the Plan, the following terms shall be defined as set forth
below:

        (a) "Affiliate" means any partnership, corporation, firm, joint venture,
association, trust, limited liability company, unincorporated organization or
other entity (other than a Subsidiary) that, directly or indirectly through one
or more intermediaries, is controlled by the Company, where the term "controlled
by" means the possession, direct or indirect, of the power to cause the
direction of the management and policies of such entity, whether through the
ownership of voting interests or voting securities, as the case may be, by
contract or otherwise.         (b) "Board" means the board of directors of the
Company.         (c) "Cause" as applied to any Officer or Employee means: (i)
the conviction of such individual for the commission of any felony; (ii) the
commission by such individual of any crime involving moral turpitude (e.g.,
larceny, embezzlement) which results in harm to the business, reputation,
prospects or financial condition of the Company, any Subsidiary or Affiliate; or
(iii) a disciplinary discharge pursuant to the terms of the Company's management
handbooks or policies as in effect at the time.         (d) "Chairman" means the
individual appointed by the Board to serve as the chairman of the Committee.    
    (e) “Code” means the Internal Revenue Code of 1986, as amended from time to
time and the Treasury regulations promulgated thereunder.

 

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        (f) "Committee" means the committee appointed by the Board to administer
the Plan as provided in Section 4(a).         (g) "Common Stock" means the
Common Stock, $0.01 par value per share, of the Company or any security of the
Company identified by the Committee as having been issued in substitution or
ex-change therefor or in lieu thereof.         (h) "Company" means Art's-Way
Manufacturing Co., Inc., a Delaware corporation.         (i) "Employee" means an
individual employed by the Company or a Subsidiary whose wages are subject to
the withholding of federal income tax under Section 3401 of the Code.        
(j)  "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute.         (k)  "Fair Market Value" of a
Share as of a specified date means the average of the highest and lowest market
prices of a Share on the principal market or exchange on which the Common Stock
is then traded, or, if no trading of Common Stock is reported for that day, the
next preceding day on which trading was reported. In the event the Common Stock
is not publicly traded, the Fair Market Value of a Share shall be determined by
the good faith judgment of the Board of Directors.         (l) "Incentive Stock
Option" (otherwise designated as an "ISO") means any stock option granted
pursuant to the Plan that is intended to be and is specifically designated as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.        
(m) "Non-qualified Stock Option" (otherwise designated as a "NQSO") means any
stock option granted pursuant to the provisions of the Plan that is not an ISO.
        (n) "Officer" means an individual elected or appointed by the Board or
by the board of directors of a Subsidiary or chosen in such other manner as may
be prescribed by the Bylaws of the Company or a Subsidiary, as the case may be,
to serve as such.         (o)
"Option" means an ISO or a NQSO granted under the Plan.
        (p)
"Participant" means an individual who is granted an Option under the Plan.
        (q) "Plan" means this 2007 Stock Option Plan.         (r) "Rule 16b-3"
means Rule 16b-3 promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor or replacement rule adopted by the Securities and
Exchange Commission.

 

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        (s) "Share" means one share of Common Stock, adjusted in accordance with
Section 10(b) of the Plan, if applicable.         (t) "Stock Option Agreement"
means the written agreement between the Company and the Participant that
contains the terms and conditions pertaining to an Option.         (u)
"Subsidiary" means any corporation of which the Company, directly or indirectly,
is the beneficial owner of fifty percent (50%) or more of the total voting power
of all classes of its stock having voting power and which qualifies as a
subsidiary corporation pursuant to Section 424(f) of the Code.         (v) "Ten
Percent Stockholder" means a Participant who prior to the grant of an ISO owned,
directly or indirectly within the meaning of Section 424(d) of the Code, ten
percent (10%) or more of the total combined voting power of all classes of stock
of the Company, any Subsidiary or any parent of the Company (as defined in
Section 425(e) of the Code).      

(3)  
PURPOSE.

 
The purpose of the Plan is to enable the Company to provide incentives, which
are linked directly to increases in stockholder value, to certain key personnel
in order that they will be encouraged to promote the financial success and
progress of the Company.

   
(4)  
ADMINISTRATION.

 

  (a) Composition of the Committee.          
The Plan shall be administered by a Committee appointed by the Board, consisting
of not less than two "Non-Employee Directors" (as such term is defined in Rule
16b-3), to be a director who is not currently an officer or otherwise employed
by the Company, or a parent or Subsidiary of the Company; does not receive
compensation directly or indirectly from the Company or a Subsidiary for
services rendered as a consultant or in any capacity other than as a director,
(except for an amount less than $60,000); does not possess an interest in any
other transaction for which disclosure would be required pursuant to Item 404(a)
of Regulation S-K; and is not engaged in a business relationship for which
disclosure would be required pursuant to Item 404(b) of Regulation S-K. In the
event the Company is, at any time unable to qualify a Committee of two or more
Non-Employee Directors, the Plan shall be administered by the Board. Subject to
the provisions of the first sentence of this Section 4(a), the Board may from
time to time remove members from, or add members to, the Committee. Vacancies on
the Committee, however caused, shall be filled by the Board. The Board shall
appoint one of the members of the Committee as Chairman.
     

 

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  (b) Actions by the Committee.           The Committee shall hold meetings at
such times and places as it may determine. Acts approved by a majority of the
members of the Committee present at a meeting at which a quorum is present, or
acts reduced to or approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee.         (c) Powers of the
Committee.           Subject to the express terms and conditions hereof, the
Committee shall have the authority to administer the Plan in its sole and
absolute discretion. To this end, the Committee is authorized to construe and
interpret the Plan and to make all other determinations necessary or advisable
for the administration of the Plan, including, but not limited to, the authority
to determine the eligible individuals who shall be granted Options, the number
of Options to be granted, the vesting period, if any, for all Options granted
hereunder, the date on which any Option becomes first exercisable, the number of
Shares subject to each Option, the exercise price for the Shares subject to each
Option, and, whether the Option to be granted is an ISO or a NQSO. Any
determination, decision or action of the Committee in connection with the
construction, interpretation, administration or application of the Plan shall be
final, conclusive and binding upon all Participants and any person validly
claiming under or through a Participant.      

 

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  (d) Liability of Committee Members.           No member of the Board or the
Committee will be liable for any action or determination made in good faith by
the Board or the Committee with respect to the Plan or any grant or exercise of
an Option thereunder.         (e)
Option Accounts.
          The Committee shall maintain a journal in which a separate account for
each Participant shall be established. Whenever an Option is granted to or
exercised by a Participant, the Participant's account shall be appropriately
credited or debited. Appropriate adjustment shall also be made in the journal
with respect to each account in the event of an adjustment pursuant to Section
10(b) of the Plan.

 
(5)  
EFFECTIVE DATE AND TERM OF THE
PLAN.                                                                              

 

  (a) Effective Date of the Plan.           The Plan was adopted by the Board
and became effective on January 25, 2007, subject to approval by the
stockholders of the Company at a meeting duly called and held within twelve
months following such date.

        (b) Term of Plan.           No Option shall be granted pursuant to the
Plan on or after January 25, 2017, but Options theretofore granted may extend
beyond that date.      

 
(6)  
TYPE OF OPTIONS AND SHARES SUBJECT TO THE PLAN.
   

Options granted under the Plan may be either ISOs or NQSOs. Each Stock Option
Agreement shall specify whether the Option covered thereby is an ISO or a NQSO.

The maximum aggregate number of Shares that may be issued under the Plan is
______ Shares. Up to and including all ______ Shares reserved for issuance under
the Plan may be designated as ISOs. The limitation on the number of Shares which
may be subject to Options under the Plan shall be subject to adjustment as
provided in Section 10(b) of the Plan.

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If any Option granted under the Plan expires or is terminated for any reason,
any Shares as to which the Option has not been exercised shall again be
available for purchase under Options subsequently granted. At all times during
the term of the Plan, the Company shall reserve and keep available for issuance
such number of Shares as the Company is obligated to issue upon the exercise of
all then outstanding Options.

   
(7)  
SOURCE OF SHARES ISSUED UNDER THE PLAN.
   

Common Stock issued under the Plan shall be authorized and unissued Shares
and/or Treasury Shares. No fractional Shares shall be issued under the Plan.

   
(8)  
ELIGIBILITY.
   

The individuals eligible for the grant of Options under the Plan shall be: (i)
all Officers and Employees; and (ii) such individuals determined by the
Committee to be rendering substantial services as a consultant or independent
contractor to the Company or any Subsidiary or Affiliate of the Company, as the
Committee shall determine from time to time in its sole and absolute discretion;
provided, however, that only Employees of the Company or any Subsidiary shall be
eligible to receive ISOs. Any Participant shall be eligible to be granted more
than one Option hereunder.

   
(9)  
OPTIONS.
   

        (a) Grant of Options.           Subject to any applicable requirements
of the Code and any regulations issued thereunder, the date of the grant of an
Option shall be the date on which the Committee determines to grant the Option.
        (b) Exercise Price of ISOs.           The exercise price of each Share
subject to an ISO shall not be less than the Fair Market Value of a Share on the
date of grant of the ISO, except that in the case of a grant of an ISO to a
Participant who at the time such ISO was granted was a Ten Percent Stockholder,
the exercise price shall not be less than 110% of the Fair Market Value of a
Share on the date of the grant of the ISO.

 

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        (c) Exercise Price of NQSOs.           The exercise price of each Share
subject to a NQSO shall be determined by the Committee at the time of grant but
will not be less than eighty-five percent (85%) of the Fair Market Value of a
Share on the date of grant.         (d) Exercise Period.           Each Option
granted pursuant to this Plan shall vest and become first exercisable as
determined by the Committee.         (e) Terms and Conditions.           All
Options granted pursuant to the Plan shall be evidenced by a Stock Option
Agreement (which need not be the same for each Participant or Option), approved
by the Committee which shall be subject to the following express terms and
conditions and the other terms and conditions as are set forth in this Section
9, and to such other terms and conditions as shall be determined by the
Committee in its sole and absolute discretion which are not inconsistent with
the terms of the Plan:      

   
(i) the failure of an Option to vest for any reason whatsoever shall cause the
Option to expire and be of no further force or effect;

(ii) unless terminated earlier pursuant to Sections 9(i) or 11, the term of any
Option granted under the Plan shall be ten years from the date of grant;
provided, however, that no ISO granted to a Ten Percent Stockholder shall have a
term of more than five years from the date of grant;

(iii) in the case of an ISO, the aggregate Fair Market Value (determined as of
the time the ISO is granted) of Shares exercisable for the first time by a
Participant during any calendar year (under the Plan and any other incentive
stock option plans of the Company, any Subsidiary or any parent of the Company
(as defined in Section 424(e) of the Code) shall not exceed $100,000;

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    (i) Options shall not be transferable by the Participant otherwise than by
will or by the laws of descent and distribution, and shall be exercisable during
the lifetime of the Participant only by him or by his guardian or legal
representative;

(v) no Option or interest therein may be transferred, assigned, pledged or
hypothecated by the Participant during his lifetime whether by operation of law
or otherwise, or be made subject to execution, attachment or similar process;
and

(vi) payment for the Shares to be received upon exercise of an Option may be
made in cash, in Shares (determined with reference to their Fair Market Value on
the date of exercise) or any combination thereof.

 

        (f) Exercise.

 

          (i) The holder of an Option may exercise the same by filing with the
Corporate Secretary of the Company and the Chairman a written election, in such
form as the Committee may determine, specifying the number of Shares with
respect to which such Option is being exercised, and accompanied by payment in
full of the exercise price for such Shares. Notwithstanding the foregoing, the
Committee may specify a reasonable minimum number of Shares that may be
purchased on any exercise of an Option, provided that such minimum number will
not prevent the holder from exercising the Option with respect to the full
number of Shares as to which the Option is then exercisable.

The holder of an Option may surrender Common Stock owned by the holder in lieu
of or in addition to cash to exercise the Option. Common Stock surrendered shall
be valued as follows:

          (A) If traded on a securities exchange or on the Nasdaq NMS, the value
shall be deemed to be the average of the closing prices of the Common Stock on
such exchange during the thirty calendar day period ending three (3) calendar
days prior to the exercise date;

 

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(B) If actively traded over-the-counter, the value shall be deemed to be the
average of the closing bid or sale prices (whichever is applicable) during the
thirty calendar day period ending three (3) calendar days prior to the exercise
date; and

(C) If there is no active public market, the value shall be the fair market
value thereof, as determined by the Board of Directors in the good faith
exercise of its reasonable business judgment.
     

          (i) The Option holder may elect in writing delivered to the Company as
provided above to receive, without payment of additional consideration, shares
of Common Stock equal to the value of the Option or any portion of the Option by
the surrender of the Option or such portion to the Company at its principal
office. Thereupon, the Company shall issue to the Option holder such number of
fully paid and nonassessable shares of Common Stock as is computed using the
following formula:      

    X = Y (A-B)
           A
     

 

    where X = the number of shares to be issued to such Option holder pursuant
to this subsection 9(f)(ii) .

Y = the number of shares covered by the Options in respect of which the net
issue election is made pursuant to this subsection 9(f)(ii).

A = the fair market value of one share of Common stock, as determined in good
faith by the Board of Directors of the Company in accordance with the provisions
of subsection 9(f)(i), at the time the net issue election is made pursuant to
this subsection 9(f)(ii).

B = the Exercise Price in effect under the Option at the time the net issue
election is made pursuant to this subsection 9(f)(ii) .

The Board of Directors of the Company shall promptly respond in writing to an
inquiry by an Option holder as to the fair market value of one share of Common
Stock.
     

 

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(iii) Partial Exercise. On any partial exercise, the Company shall promptly
issue and deliver to the Option holder a new Option or Options of like tenor in
the name of that Option holder providing for the right to purchase that number
of shares as to which the Option has not been exercised.
     

      (g) Withholding Taxes.           Prior to issuance of the Shares upon
exercise of an Option, the Participant shall pay or make adequate provision for
the payment of any federal, state, local or foreign withholding obligations of
the Company or any Subsidiary or Affiliate of the Company, if applicable. In the
event a Participant shall fail to make adequate provision for the payment of
such obligations, the Company shall have the right to issue a stock certificate
for an amount of Shares equal to the difference obtained by subtracting: (i) the
number of Shares, rounded up for any fraction to the next whole number, that
have a Fair Market Value (as of the date of exercise) equal to such amount as is
sufficient to satisfy applicable federal, state or local withholding
obligations; from (ii) the number of Shares attributable to that portion of the
Option so exercised. The Company shall promptly remit, or cause to be remitted,
to the appropriate taxing authorities the amount so withheld. In such cases,
although the stock certificate delivered to the Participant will be for a net
number of Shares, such Participant shall be considered, for tax purposes, to
have received the number of Shares equal to the full number of Shares to which
the Option had been exercised.         (h) Termination of Options.          
Options granted under the Plan shall be subject to the following events of
termination:

   
(i) in the event the employment of a Participant who is an Officer or Employee
is terminated for Cause, all unexercised Options held by such Participant on the
date of such termination of employment (whether or not vested) will expire
immediately; and
          (ii) in the event a Participant is no longer an Officer or Employee
other than for the reasons set forth in Sections 9(i)(i) or 9(i)(ii), all
Options which remain unvested at the time the Participant is no longer a
Director, Officer or Employee, as the case may be, shall expire immediately, and
all Options which have vested prior to such time shall expire twelve months
thereafter unless by their terms they expire sooner.      

 

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10. ANTI-DILUTION PROVISIONS.

If any of the following events shall occur at any time or from time to time
during the effective period of this Plan, the following adjustments shall be
made in the Exercise Price of the Option, as appropriate, with the exceptions
hereinafter provided.

        (a) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price in
effect immediately prior to such subdivision shall be proportionately reduced
and the number of shares purchasable pursuant to the Option shall be
proportionately increased; and conversely, in case the Common Stock of the
Company shall be combined into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately increased
and the number of shares purchasable pursuant to the Option shall be
proportionately reduced.         (b) If the Company shall declare a dividend on
its Common Stock payable in stock or other securities of the Company or of any
other corporation, or in property or otherwise than in cash, to holders of
record of Common Stock as of a date prior to the date of exercise of an Option,
the holder of such Option shall, in addition to the Common Stock to which such
holder would otherwise be entitled upon such exercise, the number of shares of
stock or other securities or property which such holder would have been entitled
to receive if such holder had been of such Common Stock on such record date.    
    (c) In case of any capital reorganization or reclassification of the Common
Stock of the Company, or the consolidation or merger of the Company with or into
another corporation, or any sale of all or substantially all of the Company's
property or assets, or any liquidation of the Company, the holder of an Option
upon the exercise hereof on or before the record date for determination of
stockholders entitled pursuant to the Option, shall receive, in lieu of any
shares of Common Stock of the Company, the proportionate share of all stock,
securities or other property issued, paid or delivered for or on all of the
Common Stock of the Company as is allocable to the shares of Common Stock then
called for by the Option.            

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11. RECAPITALIZATION.

        (a) Corporate Flexibility.          
The existence of the Plan and the Options granted hereunder shall not affect or
restrict in any way the right or power of the Board or the stockholders of the
Company, in their sole and absolute discretion, to make, authorize or consummate
any adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or consolidation of the
Company, any issue of bonds, debentures, Common Stock, preferred or prior
preference stock ahead of or affecting the Company's capital stock or the rights
thereof, the dissolution or liquidation of the Company or any sale or transfer
of all or any part of its assets or business, or any other grant of rights,
issuance of securities, transaction, corporate act or proceeding and
notwithstanding the fact that any such activity, proceeding, action, transaction
or other event may have, or be expected to have, an impact (whether positive or
negative) on the value of any Option.
        (b) Adjustments Upon Changes in Capitalization.           Except as
otherwise provided in Section 11 and subject to any required action by the
stockholders of the Company, in the event of any change in capitalization
affecting the Common Stock of the Company, such as a stock dividend, stock split
or recapitalization, the Committee, in its sole and absolute discretion, may
make proportionate adjustments with respect to: (i) the aggregate number of
Shares available for issuance under the Plan; (ii) the number of Shares
available for any individual award; (iii) the number and exercise price of
Shares subject to outstanding Options; provided, however, that the number of
Shares subject to any Option shall always be a whole number; and (iv) such other
matters as shall be appropriate in light of the circumstances.      

12. CHANGE OF CONTROL.

In the event of a Change of Control (as defined below), unless otherwise
determined by the Committee at the time of grant or by amendment (with the
holder's consent) of such grant, those Options that would have vested within one
year of the effective time of any such Change of Control shall vest immediately
as of such effective time, while those Options that would have vested later than
one year after the effective time of any such Change of Control shall expire as
of such effective time. The Committee in its discretion may make provisions for
the assumption of outstanding Options, or the substitution for outstanding
Options of new incentive awards covering the stock of a successor corporation or
a parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices so as to prevent dilution or enlargement of
rights.

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A "Change of Control" will be deemed to occur on the date any of the following
events occur:

        (a) any person or persons acting together which would constitute a
"group" for purpose of Section 13(d) of the Exchange Act (other than the
Company, any Subsidiary and any entity beneficially owned by any of the
foregoing) beneficially own (as defined in Rule 13d-3 under the Exchange Act)
without Board approval, directly or indirectly, at least 50% of the total voting
power of the Company entitled to vote generally in the election of the Board;  
      (b) the stockholders of the Company approve (i) a plan of complete
liquidation of the Company, or (ii) an agreement providing for the merger or
consolidation of the Company (A) in which the Company is not the continuing or
surviving corporation (other than consolidation or merger with a wholly-owned
subsidiary of the Company in which all Shares outstanding immediately prior to
the effectiveness thereof are changed into or exchanged for the same
consideration) or (B) pursuant to which the Shares are converted into cash,
securities or other property, except a consolidation or merger of the Company in
which the holders of the Shares immediately prior to the consolidation or merger
have, directly or indirectly, at least a majority of the common stock of the
continuing or surviving corporation immediately after such consolidation or
merger or in which the Board immediately prior to the merger or consolidation
would, immediately after the merger or consolidation, constitute a majority of
the board of directors of the continuing or surviving corporation; or        
(c) the stockholders of the Company approve an agreement (or agreements)
providing for the sale or other disposition (in one transaction or a series of
transactions) of all or substantially all of the assets of the Company.      

13. SECURITIES LAW REQUIREMENTS.

No Shares shall be issued under the Plan unless and until: (i) the Company and
the Participant have taken all actions required to register the Shares under the
Securities Act of 1933, as amended, or perfect an exemption from the
registration requirements thereof; (ii) any applicable requirement of Nasdaq or
any stock exchange on which the Common Stock is listed has been satisfied; and
(iii) any other applicable provision of state or Federal law has been satisfied.
The Company shall be under no obligation to register the Shares under the
Securities Act of 1933, as amended, or to effect compliance with the
registration or qualification requirements of any state securities laws.

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14. AMENDMENT AND TERMINATION. (a) 

        (a)
Modifications to the Plan.
          The Board may, insofar as permitted by law, from time to time, with
respect to any Shares at the time not subject to Options, suspend or terminate
the Plan or revise or amend the Plan in any respect whatsoever. However, unless
the Board specifically otherwise provides, any revision or amendment that would
cause the Plan to fail to comply with Rule 16b-3, Section 422 or 162(m) of the
Code or any other requirement of applicable law or regulation if such amendment
were not approved by the stockholders of the Company shall not be effective
unless and until such approval is obtained.         (b) Rights of Participant.  
        No amendment, suspension or termination of the Plan that would adversely
affect the right of any Participant with respect to an Option previously granted
under the Plan will be effective without the written consent of the affected
Participant.

15. MISCELLANEOUS.

        (a) Stockholders' Rights.

No Participant and no beneficiary or other person claiming under or through such
Participant shall acquire any rights as a stockholder of the Company by virtue
of such Participant having been granted an Option under the Plan. No Participant
and no beneficiary or other person claiming under or through such Participant
will have any right, title or interest in or to any Shares, allocated or
reserved under the Plan or subject to any Option except as to Shares, if any,
that have been issued or transferred to such Participant. No adjustment shall be
made for dividends or distributions or other rights for which the record date is
prior to the date of exercise of an Option, except as may be provided in the
Stock Option Agreement.

 

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        (b) Other Compensation Arrangements.

Nothing contained in the Plan shall prevent the Board from adopting other
compensation arrangements, subject to stockholder approval if such approval is
required. Such other arrangements may be either generally applicable or
applicable only in specific cases.
        (c) Treatment of Proceeds.

Proceeds realized from the exercise of Options under the Plan shall constitute
general funds of the Company.
        (d) Costs of the Plan.

The costs and expenses of administering the Plan shall be borne by the Company.
        (e) No Right to Continue Employment or Services.

Nothing contained in the Plan or in any instrument executed pursuant to the Plan
will confer upon any Participant any right to continue to render services to the
Company, a Subsidiary or Affiliate; to continue as an Officer or Employee; or
affect the right of the Company, a Subsidiary, the Board, the board of directors
of a Subsidiary, the stockholders of the Company or a Subsidiary, as applicable,
to terminate the office or employment, as the case may be, of any Participant at
any time with or without Cause or with or without any other cause, reason or
justification. The term "Cause" as defined herein is included solely for the
purposes of the Plan and is not, and shall not be deemed to be: (i) a
restriction on the right of the Company or a Subsidiary, as the case may be, to
terminate any Officer or Employee for any reason whatsoever; or (ii) a part of
the employment relationship (whether oral or written, express or implied) of any
such individual.
        (f)
Severability.

The provisions of the Plan shall be deemed severable and the validity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.

 

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        (g) Binding Effect of Plan.

The Plan shall inure to the benefit of the Company, its successors and assigns.
        (h) No Waiver of Breach.

No waiver by any party hereto at any time of any breach by another party hereto
of, or compliance with, any condition or provision of the Plan to be performed
by such other party shall be deemed a waiver of the same, any similar or any
dissimilar provisions of conditions at the same or at any prior or subsequent
time.
        (i)
Governing Law.
 
The Plan and all actions taken thereunder shall be enforced, governed and
construed by and interpreted under the laws of the State of Delaware applicable
to contracts made and to be performed wholly within such State without giving
effect to the principles of conflict of laws thereof.
        (j) Headings.           The headings contained in the Plan are for
reference purposes only and shall not affect in any way the meaning or
interpretation of the Plan.      

16. EXECUTION.
 
To record the adoption of the Plan to read as set forth herein, the Company has
caused the Plan to be signed by its Chairman and attested by its Secretary on
___________, 2007.

                ART'S-WAY MANUFACTURING CO., INC.           /s/ J. Ward
McConnell, Jr.     
J. Ward McConnell, Jr., Chairman

ATTEST:

      Carrie L. Majeski
Secretary