CHANGE
IN TERMS AGREEMENT

    


    
      	
              Principal

              $3,316,002.37

            	
              Loan Date

              05-01-2008

            	
              Maturity

              05-01-2013

            	
              Loan No

              81289

            	
              Call/Coll

            	
              Account

              0000128524-01

            	
              Officer

              322

            	
              Initials

            
	
              References
      in the boxes above are for Lender’s use only and do not limit the
      applicability of this document to any particular loan or
      item.  Any item above containing “* * *” has been omitted due to
      text length limitations.

            


    

    


    
      
        	
                Borrower:

              	
                ART’S-WAY
      MANUFACTURING CO., INC. 

                (TIN:
      42-0920725)

                5556
      HIGHWAY 9 WEST, PO BOX 288

                ARMSTRONG,
      IA  50514

                 

              	
                Lender:

              	
                WEST
      BANK

                MAIN
      BANK

                1601
      22ND STREET

                WEST
      DES MOINES, IA 50265

                (515)
      222-2300

                 

              


      

    

    


    
      	
              Principal Amount:  $1,316,002.37

            	
              Interest Rate:  5.750%

            	
              Date of Agreement:  May 1, 2008

            


    

     

    DESCRIPTION OF EXISTING
INDEBTEDNESS.  LOAN #81289 IN THE ORIGINAL AMOUNT OF
$1,330,000.00 DATED 10/09/07 WITH A MATURITY DATE OF 05/01/17.

     

    DESCRIPTION OF
COLLATERAL.  UNLIMITED SECURED GUARANTEES OF ARTS-WAY
SCIENTIFIC, INC, AND ARTS-WAY VESSELS, INC.; SECURITY AGREEMENTS DATED 04/25/03
AND 04/20/07; REAL ESTATE MORTGAGES DATED 04/25/03, 10/09/07, AND
11/30/07.

     

    DESCRIPTION OF CHANGE IN
TERMS.  MODIFY MATURITY DATE, INTEREST RATE AND
PAYMENTS.

     

    PROMISE
TO PAY.  ART’S-WAY MANUFACTURING CO., INC.  (“Borrower”)
promises to pay to WEST BANK (“Lender”), or order, in lawful money of the United
States of America, the principal amount of One Million Three Hundred Sixteen
Thousand Two & 37/100 Dollars ($1,316,002.37), together with interest at the
rate of 5.750% per annum on the unpaid principal balance from May 1, 2008, until
paid in full.  The interest rate may change under the terms and
conditions of the “INTEREST AFTER DEFAULT” section.

     

    PAYMENT.  Borrower
will pay this loan in 59 regular payments of $11,000.00 each and one irregular
last payment estimated at $1,007,294.07.  Borrower’s first payment is
due June 1, 2008, and all subsequent payments are due on the same day of each
month after that.  Borrower’s final payment will be due on May 1,
2013, and will be for all principal and all accrued interest not yet
paid.  Payments include principal and interest.  Unless
otherwise agreed or required by applicable law, payments will be applied first
to any accrued unpaid interest; then to principal; then to any unpaid collection
costs; and then to any late charges.  Interest on this loan is
computed on a 365/360 simple interest basis; that is, by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding.  Borrower will pay Lender at Lender’s address shown
above or at such other place as Lender may designate in writing.

     

    MAXIMUM INTEREST
RATE.  Under no circumstances will the interest rate on this
loan exceed (except for any higher default rate shown below) the lesser of
7.500% per annum or the maximum rate allowed by applicable law.

     

    PREPAYMENT PENALTY; MINIMUM INTEREST
CHARGE.  In any event, even upon full prepayment of this
Agreement, Borrower understands that Lender is entitled to a minimum interest charge of
$7.50.  Upon
prepayment of this Agreement, Lender is entitled to the following prepayment
penalty:  3% IF REFINANCED ELSEWHERE.  Other than
Borrower’s obligation to pay any minimum interest charge and prepayment penalty,
Borrower may pay all or a portion of the amount owed earlier than it is
due.  Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower’s obligation to continue to make payments under the
payment schedule.  Rather, early payments will reduce the principal
balance due and may result in Borrower’s making fewer
payments.  Borrower agrees not to send Lender payments marked “paid in
full”, “without recourse”, or similar language.  If Borrower sends
such a payment, Lender may accept it without losing any of Lender’s rights under
this Agreement, and Borrower will remain obligated to pay any further amount
owed to Lender.  All written communications concerning disputed
amounts, including any check or other payment instrument that indicates that the
payment constitutes “payment in full” of the amount owed or that is tendered
with other conditions or limitations or as full satisfaction of a disputed
amount must be mailed or delivered to:  WEST BANK, MAIN BANK, 1601
22ND STREET, WEST DES MOINES, IA 50265.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      
        	
                Loan
      No:  81289

              	
                CHANGE
      IN TERMS AGREEMENT

                (Continued)

              	
                Page
      2

              


      

    

    


    LATE CHARGE.  If a
payment is 11 days or more late, Borrower will be charged $15.00.

     

    INTEREST AFTER
DEFAULT.  Upon default, including failure to pay upon final
maturity, the interest rate on this loan shall be increased by 2.000 percentage
points.  However, in no event will the interest rate exceed the
maximum interest rate limitations under applicable law.

     

    DEFAULT.  Each of
the following shall constitute an Event of Default under this
Agreement:  Payment Default.  Borrower fails to make any
payment when due under the Indebtedness.

     

    Other
Defaults.  Borrower fails to comply with or to perform any
other term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.

     

    Default in Favor of Third
Parties.  Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement,
in favor of any other creditor or person that may materially affect any of
Borrower’s property or ability to perform Borrower’s obligations under this
Agreement or any of the Related Documents.

     

    False
Statements.  Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower’s behalf under this Agreement or
the Related Documents is false or misleading in any material respect, either now
or at the time made or furnished or becomes false or misleading at any time
thereafter.

     

    Insolvency.  The
dissolution or termination of Borrower’s existence as a going business, the
insolvency of Borrower, the appointment of a receiver for any part of Borrower’s
property, any assignment for the benefit of creditors, any type of creditor
workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.

     

    Creditor or Forfeiture
Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the Indebtedness.  This includes a garnishment
of any of Borrower’s accounts, including deposit accounts, with
Lender.  However, this Event of Default shall not apply if there is a
good faith dispute by Borrower as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding and if Borrower
gives Lender written notice of the creditor or forfeiture proceeding and
deposits with Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion, as being
an adequate reserve or bond for the dispute.

     

    Events Affecting
Guarantor.  Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
Indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of, or liability under,
any Guaranty of the Indebtedness evidenced by this Note.

     

    Change In
Ownership.  Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.

     

    Adverse Change.  A
material adverse change occurs in Borrower’s financial condition, or Lender
believes the prospect of payment or performance of the Indebtedness is
impaired.

     

    Insecurity.  Lender
in good faith believes itself insecure.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      
        	
                Loan
      No:  81289

              	
                CHANGE
      IN TERMS AGREEMENT

                (Continued)

              	
                Page
      3

              


      

    

     

    Cure Provisions.  If
any default, other than a default in payment is curable and if Borrower has not
been given a notice of a breach of the same provision of this Agreement within
the preceding twelve (12) months, it may be cured if Borrower, after receiving
written notice from Lender demanding cure of such default:  (1) cures
the default within twenty (20) days; or (2) if the cure requires more than
twenty (20) days, immediately initiates steps which Lender deems in Lender’s
sole discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

     

    LENDER’S
RIGHTS.  Upon default, Lender may declare the entire unpaid
principal balance under this Agreement and all accrued unpaid interest
immediately due, and then Borrower will pay that amount.

     

    ATTORNEYS’ FEES;
EXPENSES.  Lender may hire or pay someone else to help collect
this Agreement if Borrower does not pay.  Borrower will pay Lender
that amount.  This includes, subject to any limits under applicable
law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there
is a lawsuit, including without limitation all attorneys’ fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), and appeals.  If not prohibited by
applicable law, Borrower also will pay any court costs, in addition to all other
sums provided by law.

     

    GOVERNING
LAW.  This Agreement will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
Iowa without regard to its conflicts of law provisions.  This
Agreement has been accepted by Lender in the State of Iowa.

     

    CHOICE OF VENUE.  If
there is a lawsuit, Borrower agrees upon Lender’s request to submit to the
jurisdiction of the courts of POLK County, State of Iowa.

     

    RIGHT OF SETOFF.  To
the extent permitted by applicable law, Lender reserves a right of setoff in all
Borrower’s accounts with Lender (whether checking, savings, or some other
account).  This includes all accounts Borrower holds jointly with
someone else and all accounts Borrower may open in the
future.  However, this does not include any IRA or Keogh accounts, or
any trust accounts for which setoff would be prohibited by
law.  Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the indebtedness against
any and all such accounts, and, at Lender’s option, to administratively freeze
all such accounts to allow Lender to protect Lender’s charge and setoff rights
provided in this paragraph.

     

    COLLATERAL.  Borrower
acknowledges this Agreement is secured by UNLIMITED SECURED GUARANTEES OF
ARTS–WAY SCIENTIFIC, INC, AND ARTS–WAY VESSELS, INC.; SECURITY AGREEMENTS DATED
04/25/03 AND 04/20/07; REAL ESTATE MORTGAGES DATED 04/25/03, 10/09/07, AND
11/30/07.

     

    CONTINUING
VALIDITY.  Except as expressly changed by this Agreement, the
terms of the original obligation or obligations, including all agreements
evidenced or securing the obligation(s), remain unchanged and in full force and
effect.  Consent by Lender to this Agreement does not waive Lender’s
right to strict performance of the obligation(s) as changed, nor obligate Lender
to make any future change in terms.  Nothing in this Agreement will
constitute a satisfaction of the obligation(s).  It is the intention
of Lender to retain as liable parties all makers and endorsers of the original
obligation(s), including accommodation parties, unless a party is expressly
released by Lender in writing.  Any maker or endorser, including
accommodation makers, will not be released by virtue of this
Agreement.  If any person who signed the original obligation does not
sign this Agreement below, then all persons signing below acknowledge that this
Agreement is given conditionally, based on the representation to Lender that the
non–signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it.  This waiver applies not only to
any initial extension, modification or release, but also to all such subsequent
actions.

     

    SUCCESSORS AND
ASSIGNS.  Subject to any limitations stated in this Agreement
on transfer of Borrower’s interest, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns.  If
ownership of the Collateral becomes vested in a person other than Borrower,
Lender, without notice to Borrower, may deal with Borrower’s successors with
reference to this Agreement and the Indebtedness by way of forbearance or
extension without releasing Borrower from the obligations of this Agreement or
liability under the Indebtedness.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    
      
        	
                Loan
      No:  81289

              	
                CHANGE
      IN TERMS AGREEMENT

                (Continued)

              	
                Page
      4

              


      

    

     

    MISCELLANEOUS
PROVISIONS.  If any part of this Agreement cannot be enforced,
this fact will not affect the rest of the Agreement.  Lender may delay
or forgo enforcing any of its rights or remedies under this Agreement without
losing them.  Borrower and any other person who signs, guarantees or
endorses this Agreement, to the extent allowed by law, waive presentment, demand
for payment, and notice of dishonor.  Upon any change in the terms of
this Agreement, and unless otherwise expressly stated in writing, no party who
signs this Agreement, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability.  All such parties agree
that Lender may renew or extend (repeatedly and for any length of time) this
loan or release any party or guarantor or collateral; or impair, fail to realize
upon or perfect Lender’s security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice to
anyone.  All such parties also agree that Lender may modify this loan
without the consent of or notice to anyone other than the party with whom the
modification is made.  The obligations under this Agreement are joint
and several.

     

    PRIOR
TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS AGREEMENT.  BORROWER AGREES TO THE TERMS OF THE
AGREEMENT.

     

    BORROWER
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS CHANGE IN TERMS AGREEMENT AND
ALL OTHER DOCUMENTS RELATING TO THIS DEBT.

     

    BORROWER:

    


    ART’S-WAY
MANUFACTURING CO., INC.

    


    
      	
              By:

            	
              /s/ Carrie L. Majeski

            	 
      
	 
      	
              CARRIE
      L. MAJESKI, President of ART’S-WAY

            
	 
      	
              MANUFACTURING
      CO., INC.