BUSINESS
LOAN AGREEMENT

     

    
      
        
          	
                  Principal

                  $3,898,161.13

                	
                  Loan
      Date

                  05-01-2008

                	
                  Maturity

                  05-01-2013

                	
                  Loan
      No

                  1260080536

                	
                  Call/Coll

                	
                  Account

                  0000128524

                	
                  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.,

                          	 
      	
                            Lender:

                          	 
      	
                            WEST
      BANK

                          
	 
      	 
      	
                            INC.
      (TIN:  42-0920725)

                          	 
      	 
      	 
      	
                            MAIN
      BANK

                          
	 
      	 
      	
                            5556
      HIGHWAY 9 WEST, PO BOX 288

                          	 
      	 
      	 
      	
                            1601
      22ND STREET

                          
	 
      	 
      	
                            ARMSTRONG,
      IA  50514

                          	 
      	 
      	 
      	
                            WEST
      DES MOINES, IA 50265

                          
	 
      	 
      	 
      	 
      	 
      	 
      	
                            (515)
      222-2300

                          
	 
      	 
      	 
      	 
      	 
      	 
      	 
      


                  

                

              

            

          

        

      

    

    


    THIS
BUSINESS LOAN AGREEMENT dated May 1,2008, is made and executed between ART’S-WAY
MANUFACTURING CO., INC. (“Borrower”) and WEST BANK (“Lender”) on the following
terms and conditions.  Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans or other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement.  Borrower understands and
agrees that:  (A) In granting, renewing, or extending any Loan, Lender
is relying upon Borrower’s representations, warranties, and agreements as set
forth in this Agreement; (B) the granting, renewing, or extending of any Loan by
Lender at all times shall be subject to Lender’s sole judgment and discretion;
and (C) all such Loans shall be and remain subject to the terms and conditions
of this Agreement.

     

    TERM.  This
Agreement shall be effective as of May 1, 2008, and shall continue in full force
and effect until such time as all of Borrower’s Loans in favor of Lender have
been paid in full, including principal, interest, costs, expenses, attorneys’
fees, and other fees and charges, or until such time as the parties may agree in
writing to terminate this Agreement.

     

    CONDITIONS PRECEDENT TO EACH
ADVANCE.  Lender’s obligation to make the initial Advance and
each subsequent Advance under this Agreement shall be subject to the fulfillment
to Lender’s satisfaction of all of the conditions set forth in this Agreement
and in the Related Documents.

     

    Loan
Documents.  Borrower shall provide to Lender the following
documents for the Loan:  (1) the Note; (2) Security Agreements
granting to Lender security interests in the Collateral; (3) financing
statements and all other documents perfecting Lender’s Security Interests; (4)
evidence of insurance as required below; (5) together with all such Related
Documents as Lender may require for the Loan; all in form and substance
satisfactory to Lender and Lender’s counsel.

     

    Borrower’s
Authorization.  Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents.  In addition, Borrower shall have provided such
other resolutions, authorizations, documents and instruments as Lender or its
counsel, may require.

     

    Payment of Fees and
Expenses.  Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in this
Agreement or any Related Document.

     

    Representations and
Warranties.  The representations and warranties set forth in
this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.

     

    No Event of
Default.  There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this ‘Agreement or
under any Related Document.

     

    REPRESENTATIONS AND
WARRANTIES.  Borrower represents and warrants to Lender, as of
the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      2

                


        

         

      

    

    Organization.  Borrower
is a corporation for profit which is, and at all times shall be, duly organized,
validly existing, and in good standing under and by virtue of the laws of the
State of Iowa.  Borrower is duly authorized to transact business in
all other states in which Borrower is doing business, having obtained all
necessary filings, governmental licenses and approvals for each state in which
Borrower is doing business.  Specifically, Borrower is, and at all
times shall be, duly qualified as a foreign corporation in all states in which
the failure to so qualify would have a material adverse effect on its business
or financial condition.  Borrower has the full power and authority to
own its properties and to transact the business in which it is presently engaged
or presently proposes to engage.  Borrower maintains an office at 5556
HIGHWAY 9 WEST, PO BOX 288, ARMSTRONG, IA 50514.  Unless Borrower has
designated otherwise in writing, the principal office is the office at which
Borrower keeps its books and records including its records concerning the
Collateral.  Borrower will notify Lender prior to any change in the
location of Borrower’s state of organization or any change in Borrower’s
name.  Borrower shall do all things necessary to preserve and to keep
in full force and effect its existence, rights and privileges, and shall comply
with all regulations, rules, ordinances, statutes, orders and decrees of any
governmental or quasi-governmental authority or court applicable to Borrower and
Borrower’s business activities.

     

    Assumed Business
Names.  Borrower has filed or recorded all documents or filings
required by law relating to all assumed business names used by
Borrower.  Excluding the name of Borrower, the following is a complete
list of all assumed business names under which Borrower does
business:  None.

     

    Authorization.  Borrower’s
execution, delivery, and performance of this Agreement and all the Related
Documents have been duly authorized by all necessary action by Borrower and do
not conflict with, result in a violation of, or constitute a default under (1)
any provision of (a) Borrower’s articles of incorporation or organization, or
bylaws, or (b) any agreement or other instrument binding upon Borrower or (2)
any law, governmental regulation, court decree, or order applicable to Borrower
or to Borrower’s properties.

     

    Financial
Information.  Each of Borrower’s financial statements supplied
to Lender truly and completely disclosed Borrower’s financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower’s financial condition subsequent to the date of the most recent
financial statement supplied to Lender.  Borrower has no material
contingent obligations except as disclosed in such financial
statements.

     

    Legal Effect.  This
Agreement constitutes, and any instrument or agreement Borrower is required to
give under this Agreement when delivered will constitute legal, valid, and
binding obligations of Borrower enforceable against Borrower in accordance with
their respective terms.

     

    Properties.  Except
as contemplated by this Agreement or as previously disclosed in Borrower’s
financial statements or in writing to Lender and as accepted by Lender, and
except for property tax liens for taxes not presently due and payable, Borrower
owns and has good title to all of Borrower’s properties free and clear of all
Security Interests, and has not executed any security documents or financing
statements relating to such properties.  All of Borrower’s properties
are titled in Borrower’s legal name, and Borrower has not used or filed a
financing statement under any other name for at least the last five (5)
years.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      3

                


        

         

      

    

    Hazardous
Substances.  Except as disclosed to and acknowledged by Lender
in writing, Borrower represents and warrants that:  (1) During the
period of Borrower’s ownership of the Collateral, there has been no use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance by any person on, under, about or from any of
the Collateral.  (2) Borrower has no knowledge of, or reason to
believe that there has been (a) any breach or violation of any Environmental
Laws; (b) any use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any Hazardous Substance on, under, about or
from the Collateral by any prior owners or occupants of any of the Collateral;
or (c) any actual or threatened litigation or claims of any kind by any person
relating to such matters.  (3) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the Collateral shall use,
generate, manufacture, store, treat, dispose of or release any Hazardous
Substance on, under, about or from any of the Collateral; and any such activity
shall be conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation all
Environmental Laws.  Borrower authorizes Lender and its agents to
enter upon the Collateral to make such inspections and tests as Lender may deem
appropriate to determine compliance of the Collateral with this section of the
Agreement.  Any inspections or tests made by Lender shall be at
Borrower’s expense and for Lender’s purposes only and shall not be construed to
create any responsibility or liability on the part of Lender to Borrower or to
any other person.  The representations and warranties contained herein
are based on Borrower’s due diligence in investigating the Collateral for
hazardous waste and Hazardous Substances.  Borrower hereby (1)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other costs
under any such laws, and (2) agrees to indemnify, defend, and hold harmless
Lender against any and all claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Agreement or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release of a
hazardous waste or substance on the Collateral.  The provisions of
this section of the Agreement, including the obligation to indemnify and defend,
shall survive the payment of the Indebtedness and the termination, expiration or
satisfaction of this Agreement and shall not be affected by Lender’s acquisition
of any interest in any of the Collateral, whether by foreclosure or
otherwise.

     

    Litigation and
Claims.  No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower’s financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.

     

    Taxes.  To the best
of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or
were required to be filed, have been filed, and all taxes, assessments and other
governmental charges have been paid in full, except those presently being or to
be contested by Borrower in good faith in the ordinary course of business and
for which adequate reserves have been provided.

     

    Lien
Priority.  Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or affecting any
of the Collateral directly or indirectly securing repayment of Borrower’s Loan
and Note, that would be prior or that may in any way be superior to Lender’s
Security Interests and rights in and to such Collateral.

     

    Binding
Effect.  This Agreement, the Note, all Security Agreements (if
any), and all Related Documents are binding upon the signers thereof, as well as
upon their successors, representatives and assigns, and are legally enforceable
in accordance with their respective terms.

     

    AFFIRMATIVE
COVENANTS.  Borrower covenants and agrees with Lender that, so
long as this Agreement remains in effect, Borrower will:

     

    Notices of Claims and
Litigation.  Promptly inform Lender in writing of (1) all
material adverse changes in Borrower’s financial condition, and (2) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial condition
of any Guarantor.

     

    Financial
Records.  Maintain its books and records in accordance with
GAAP, applied on a consistent basis, and permit Lender to examine and audit
Borrower’s books and records at all reasonable times.

     

    Financial
Statements.  Furnish Lender with the following:

     

    Additional
Requirements.  1) MAXIMUM DEBT/TANGIBLE NETWORTH OF
1.25x

    2)
MINIMUM DEBT SERVICE COVERAGE RATIO OF 1.50x

    3)
MINIMUM TANGIBLE NETWORTH OF $8,500,000.00.

     

    All
financial reports required to be provided under this Agreement shall be prepared
in accordance with GAAP, applied on a consistent basis, and certified by
Borrower as being true and correct.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      4

                


        

         

      

    

    Additional
Information.  Furnish such additional information and
statements, as Lender may request from time to time.

     

    Insurance.  Maintain
fire and other risk insurance, public liability insurance, and such other
insurance as Lender may require with respect to Borrower’s properties and
operations, in form, amounts, coverages and with insurance companies acceptable
to Lender.  Borrower, upon request of Lender, will deliver to Lender
from time to time the policies or certificates of insurance in form satisfactory
to Lender, including stipulations that coverages will not be cancelled or
diminished without at least thirty (30) days prior written notice to
Lender.  Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any way by
any act, omission or default of Borrower or any other person.  In
connection with all policies covering assets in which Lender holds or is offered
a security interest for the Loans, Borrower will provide Lender with such
lender’s loss payable or other endorsements as Lender may require.

     

    Insurance
Reports.  Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following:  (1) the name of
the insurer; (2) the risks insured; (3) the amount of the policy; (4) the
properties insured; (5) the then current property values on the basis of which
insurance has been obtained, and the manner of determining those values; and (6)
the expiration date of the policy.  In addition, upon request of
Lender (however not more often than annually), Borrower will have an independent
appraiser satisfactory to Lender determine, as applicable, the actual cash value
or replacement cost of any Collateral.  The cost of such appraisal
shall be paid by Borrower.

     

    Other
Agreements.  Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
party and notify Lender immediately in writing of any default in connection with
any other such agreements.

     

    Loan Proceeds.  Use
all Loan proceeds solely for Borrower’s business operations, unless specifically
consented to the contrary by Lender in writing.

     

    Taxes, Charges and
Liens.  Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or
its properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge
upon any of Borrower’s properties, income, or profits.  Provided
however, Borrower will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (1) the legality of the same shall
be contested in good faith by appropriate proceedings, and (2) Borrower shall
have established on Borrower’s books adequate reserves with respect to such
contested assessment, tax, charge, levy, lien, or claim in accordance with
GAAP.

     

    Performance.  Perform
and comply, in a timely manner, with all terms, conditions, and provisions set
forth in this Agreement, in the Related Documents, and in all other instruments
and agreements between Borrower and Lender.  Borrower shall notify
Lender immediately in writing of any default in connection with any
agreement.

     

    Operations.  Maintain
executive and management personnel with substantially the same qualifications
and experience as the present executive and management personnel; provide
written notice to Lender of any change in executive and management personnel;
conduct its business affairs in a reasonable and prudent manner.

     

    Environmental
Studies.  Promptly conduct and complete, at Borrower’s expense,
all such investigations, studies, samplings and testings as may be requested by
Lender or any governmental authority relative to any substance, or any waste or
by-product of any substance defined as toxic or a hazardous substance under
applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by
Borrower.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      5

                


        

         

      

    

    Compliance with Governmental
Requirements.  Comply with all laws, ordinances, and
regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower’s properties, businesses and operations,
and to the use or occupancy of the Collateral, including without limitation, the
Americans With Disabilities Act.  Borrower may contest in good faith
any such law, ordinance, or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Borrower has notified
Lender in writing prior to doing so and so long as, in Lender’s sole opinion,
Lender’s interests in the Collateral are not jeopardized.  Lender may
require Borrower to post adequate security or a surety bond, reasonably
satisfactory to Lender, to protect Lender’s interest.

     

    Inspection.  Permit
employees or agents of Lender at any reasonable time to inspect any and all
Collateral for the Loan or Loans and Borrower’s other properties and to examine
or audit Borrower’s books, accounts, and records and to make copies and
memoranda of Borrower’s books, accounts, and records.  If Borrower now
or at any time hereafter maintains any records (including without limitation
computer generated records and computer software programs for the generation of
such records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such records at
all reasonable times and to provide Lender with copies of any records it may
request, all at Borrower’s expense.

     

    Compliance
Certificates.  Unless waived in writing by Lender, provide
Lender at least annually, with a certificate executed by Borrower’s chief
financial officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that, as of the
date of the certificate, no Event of Default exists under this
Agreement.

     

    Environmental Compliance and
Reports.  Borrower shall comply in all respects with any and
all Environmental Laws; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on Borrower’s part or on the
part of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower’s part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.

     

    Additional
Assurances.  Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as Lender or
its attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.

     

    LENDER’S
EXPENDITURES.  If any action or proceeding is commenced that
would materially affect Lender’s interest in the Collateral or if Borrower fails
to comply with any provision of this Agreement or any Related Documents,
including but not limited to Borrower’s failure to discharge or pay when due any
amounts Borrower is required to discharge or pay under this Agreement or any
Related Documents, Lender on Borrower’s behalf may (but shall not be obligated
to) take any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral.  All
such expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower.  All such expenses will
become a part of the Indebtedness and, at Lender’s option, will (A) be payable
on demand; (B) be added to the balance of the Note and be apportioned among and
be payable with any installment payments to become due during either (1) the
term of any applicable insurance policy; or (2) the remaining term of the Note;
or (C) be treated as a balloon payment which will be due and payable at the
Note’s maturity.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      6

                


        

         

      

    

    CESSATION OF
ADVANCES.  If Lender has made any commitment to make any Loan
to Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds
if:  (A) Borrower or any Guarantor is in default under the terms of
this Agreement or any of the Related Documents or any other agreement that
Borrower or any Guarantor has with Lender; (B) Borrower or any Guarantor dies,
becomes incompetent or becomes insolvent, files a petition in bankruptcy or
similar proceedings, or is adjudged a bankrupt; (C) there occurs a material
adverse change in Borrower’s financial condition, in the financial condition of
any Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender in
good faith deems itself insecure, even though no Event of Default shall have
occurred.

     

    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.

     

    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
Loan.

     

    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 or any Grantor 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 or any Grantor’s property or Borrower’s or any
Grantor’s ability to repay the Loans or perform their respective 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.

     

    Defective
Collateralization.  This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of any
collateral document to create a valid and perfected security interest or lien)
at any time and for any reason.

     

    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 Loan.  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.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      7

                


        

         

      

    

    Events Affecting
Guarantor.  Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.

     

    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 Loan is
impaired.

     

    Insecurity.  Lender
in good faith believes itself insecure.

     

    Right to Cure. If any default,
other than a default on Indebtedness, is curable and if Borrower or Grantor, as
the case may be, has not been given a notice of a similar default within the
preceding twelve (12) months, it may be cured if Borrower or Grantor, as the
case may be, after receiving written notice from Lender demanding cure of such
default:  (1) cure the default within twenty (20) days; or (2) if the
cure requires more than twenty (20) days, immediately initiate steps which
Lender deems in Lender’s sole discretion to be sufficient to cure the default
and thereafter continue and complete all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.

     

    EFFECT OF AN EVENT OF
DEFAULT.  If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender’s option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the “Insolvency” subsection above, such acceleration shall be
automatic and not optional.  In addition, Lender shall have all the
rights and remedies provided in the Related Documents or available at law, in
equity, or otherwise.  Except as may be prohibited by applicable law,
all of Lender’s rights and remedies shall be cumulative and may be exercised
singularly or concurrently.  Election by Lender to pursue any remedy
shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Borrower or of any
Grantor shall not affect Lender’s right to declare a default and to exercise its
rights and remedies.

     

    MISCELLANEOUS
PROVISIONS.  The following miscellaneous provisions are a part
of this Agreement:

     

    Amendments.  This
Agreement, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this
Agreement.  No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.

     

    Attorneys’ Fees;
Expenses.  Borrower agrees to pay upon demand all of Lender’s
costs and expenses, including Lender’s attorneys’ fees and Lender’s legal
expenses, incurred in connection with the enforcement of this
Agreement.  Lender may hire or pay someone else to help enforce this
Agreement, and Borrower shall pay the costs and expenses of such
enforcement.  Costs and expenses include Lender’s attorneys’ fees and
legal expenses whether or not there is a lawsuit, including attorneys’ fees and
legal expenses for bankruptcy proceedings (including efforts to modify or vacate
any automatic stay or injunction), appeals, and any anticipated post—judgment
collection services.  Borrower also shall pay all court costs and such
additional fees as may be directed by the court.

     

    Caption
Headings.  Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      8

                


        

         

      

    

    Consent to Loan
Participation.  Borrower agrees and consents to Lender’s sale
or transfer, whether now or later, of one or more participation interests in the
Loan to one or more purchasers, whether related or unrelated to
Lender.  Lender may provide, without any limitation whatsoever, to any
one or more purchasers, or potential purchasers, any information or knowledge
Lender may have about Borrower or about any other matter relating to the Loan,
and Borrower hereby waives any rights to privacy Borrower may have with respect
to such matters.  Borrower additionally waives any and all notices of
sale of participation interests, as well as all notices of any repurchase of
such participation interests.  Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loan and will have all the rights
granted under the participation agreement or agreements governing the sale of
such participation interests.  Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or against
any purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower’s obligation under the Loan
irrespective of the failure or insolvency of any holder of any interest in the
Loan.  Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any personal
claims or defenses that Borrower may have against Lender.

     

    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.

     

    No Waiver by
Lender.  Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
Lender.  No delay or omission on the part of Lender in exercising any
right shall operate as a waiver of such right or any other right.  A
waiver by Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender’s right otherwise to demand strict compliance with
that provision or any other provision of this Agreement.  No prior
waiver by Lender, nor any course of dealing between Lender and Borrower, or
between Lender and any Grantor, shall constitute a waiver of any of Lender’s
rights or of any of Borrower’s or any Grantor’s obligations as to any future
transactions.  Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the sole
discretion of Lender.

     

    Notices. Any notice required
to be given under this Agreement shall be given in writing, and shall be
effective when actually delivered, when actually received by telefacsimile
(unless otherwise required by law), when deposited with a nationally recognized
overnight courier, or, if mailed, when deposited in the United States mail, as
first class, certified or registered mail postage prepaid, directed to the
addresses shown near the beginning of this Agreement.  Any party may
change its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is to
change the party’s address.  For notice purposes, Borrower agrees to
keep Lender informed at all times of Borrower’s current
address.  Unless otherwise provided or required by law, if there is
more than one Borrower, any notice given by Lender to any Borrower is deemed to
be notice given to all Borrowers.

     

    Severability.  If a
court of competent jurisdiction finds any provision of this Agreement to be
illegal, invalid, or unenforceable as to any circumstance, that finding shall
not make the offending provision illegal, invalid, or unenforceable as to any
other circumstance.  If feasible, the offending provision shall be
considered modified so that it becomes legal, valid and
enforceable.  If the offending provision cannot be so modified, it
shall be considered deleted from this Agreement.  Unless otherwise
required by law, the illegality, invalidity, or unenforceability of any
provision of this Agreement shall not affect the legality, validity or
enforceability of any other provision of this Agreement.

     

    Subsidiaries and Affiliates of
Borrower.  To the extent the context of any provisions of this
Agreement makes it appropriate, including without limitation any representation,
warranty or covenant, the word “Borrower” as used in this Agreement shall
include all of Borrower’s subsidiaries and
affiliates.  Notwithstanding the foregoing however, under no
circumstances shall this Agreement be construed to require Lender to make any
Loan or other financial accommodation to any of Borrower’s subsidiaries or
affiliates.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      9

                


        

         

      

    

    Successors and
Assigns.  All covenants and agreements by or on behalf of
Borrower contained in this Agreement or any Related Documents shall bind
Borrower’s successors and assigns and shall inure to the benefit of Lender and
its successors and assigns.  Borrower shall not, however, have the
right to assign Borrower’s rights under this Agreement or any interest therein,
without the prior written consent of Lender.

     

    Survival of Representations and
Warranties.  Borrower understands and agrees that in making the
Loan, Lender is relying on all representations, warranties, and covenants made
by Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement or the Related
Documents.  Borrower further agrees that regardless of any
investigation made by Lender, all such representations, warranties and covenants
will survive the making of the Loan and delivery to Lender of the Related
Documents, shall be continuing in nature, and shall remain in full force and
effect until such time as Borrower’s Indebtedness shall be paid in full, or
until this Agreement shall be terminated in the manner provided above, whichever
is the last to occur.

     

    Time is of the
Essence.  Time is of the essence in the performance of this
Agreement.

     

    DEFINITIONS.  The
following capitalized words and terms shall have the following meanings when
used in this Agreement.  Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the
United States of America.  Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require.  Words and terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the Uniform Commercial
Code.  Accounting words and terms not otherwise defined in this
Agreement shall have the meanings assigned to them in accordance with generally
accepted accounting principles as in effect on the date of this
Agreement:

     

    Advance.  The word
“Advance” means a disbursement of Loan funds made, or to be made, to Borrower or
on Borrower’s behalf on a line of credit or multiple advance basis under the
terms and conditions of this Agreement.

     

    Agreement.  The word
“Agreement” means this Business Loan Agreement, as this Business Loan Agreement
may be amended or modified from time to time, together with all exhibits and
schedules attached to this Business Loan Agreement from time to
time.

     

    Borrower.  The word
“Borrower” means ART’S-WAY MANUFACTURING CO., INC. and includes all co-signers
and co-makers signing the Note and all their successors and
assigns.

     

    Collateral.  The
word “Collateral” means all property and assets granted as collateral security
for a Loan, whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted in the
form of a security interest, mortgage, collateral mortgage, deed of trust,
assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage,
chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt,
lien, charge, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.

     

    Environmental
Laws.  The words “Environmental Laws” mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules, or regulations adopted pursuant
thereto.

     

    Event of
Default.  The words “Event of Default” mean any of the events
of default set forth in this Agreement in the default section of this
Agreement.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      10

                


        

         

      

    

    GAAP.  The word
“GAAP” means generally accepted accounting principles.

     

    Grantor.  The word
“Grantor” means each and all of the persons or entities granting a Security
Interest in any Collateral for the Loan, including without limitation all
Borrowers granting such a Security Interest.

     

    Guarantor.  The word
“Guarantor” means any guarantor, surety, or accommodation party of any or all of
the Loan.

     

    Guaranty.  The word
“Guaranty” means the guaranty from Guarantor to Lender, including without
limitation a guaranty of all or part of the Note.

     

    Hazardous
Substances.  The words “Hazardous Substances” mean materials
that, because of their quantity, concentration or physical, chemical or
infectious characteristics, may cause or pose a present or potential hazard to
human health or the environment when improperly used, treated, stored, disposed
of, generated, manufactured, transported or otherwise handled.  The
words “Hazardous Substances” are used in their very broadest sense and include
without limitation any and all hazardous or toxic substances, materials or waste
as defined by or listed under the Environmental Laws.  The term
“Hazardous Substances” also includes, without limitation, petroleum and
petroleum by-products or any fraction thereof and asbestos.

     

    Indebtedness.  The
word “Indebtedness” means the indebtedness evidenced by the Note or Related
Documents, including all principal and interest together with all other
indebtedness and costs and expenses for which Borrower is responsible under this
Agreement or under any of the Related Documents.

     

    Lender.  The word
“Lender” means WEST BANK, its successors and assigns.

     

    Loan. The word “Loan” means
any and all loans and financial accommodations from Lender to Borrower whether
now or hereafter existing, and however evidenced, including without limitation
those loans and financial accommodations described herein or described on any
exhibit or schedule attached to this Agreement from time to time.

     

    Note.  The word
“Note” means the Note executed by ART’S-WAY MANUFACTURING CO.,
INC.  in the principal amount of $3,898,161.13 dated May 1, 2008,
together with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the note or credit
agreement.

     

    Related
Documents.  The words “Related Documents” mean all promissory
notes, credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Loan.

     

    Security
Agreement.  The words “Security Agreement” mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.

     

    Security
Interest.  The words “Security Interest” mean, without
limitation, any and all types of collateral security, present and future,
whether in the form of a lien, charge, encumbrance, mortgage, deed of trust,
security deed, assignment, pledge, crop pledge, chattel mortgage, collateral
chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional
sale, trust receipt, lien or title retention contract, lease or consignment
intended as a security device, or any other security or lien interest whatsoever
whether created by law, contract, or otherwise.

     

    BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND
BORROWER AGREES TO ITS TERMS.  THIS BUSINESS LOAN AGREEMENT IS DATED
MAY 1, 2008.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    
      
        


        
          	
                  
                  

                  Loan
      No:  1260080536

                	
                  BUSINESS
      LOAN AGREEMENT

                  (Continued)

                	
                  
                  

                  Page 
      11

                


        

         

      

    

    BORROWER
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS BUSINESS LOAN 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.

            	 
      


    

    


    LENDER:

    


    WEST
BANK

    


    
      	
              By:

            	
              [illegible]

            	 
      
	 
      	
               
      Authorized Signer