Unassociated Document


     

    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.


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	(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.


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	(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.

            
	 	 	 


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	(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.
	 	 	 


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	(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.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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.


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	(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;

                

              


      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	(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;


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	 	 
	 	 	
                (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.

              
	 	 	 


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	 	 	 
	 	 	
                (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.
	 	 	 


        

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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.
	 	 	 
	 	 	 


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    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.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	(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.

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	(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