CHANGE
      IN TERMS 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., INC. (TIN:

            	 	
              Lender:

            	
              WEST BANK

            
	 	
              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

            


    

     

      
        

      

    

     

    Principal
      Amount: $3,898,161.13 
Interest
      Rate: 5.750% 
Date
      of Agreement: May 1, 2008

     

    DESCRIPTION
      OF EXISTING INDEBTEDNESS.
      LOAN
      #1260080536 IN THE ORIGINAL AMOUNT OF $4,100,000.00 DATED 06/07/07 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., IN. (“Borrower”) promises to pay to WEST
      BANK (“Lender”), or order, in lawful money of the United States of America, the
      principal amount of Three Million Eight Hundred Ninety-eight Thousand One
      Hundred Sixty-one & 13/100 Dollars ($3,898,161.13), 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 $42,500.00 each and one
      irregular last payment estimated at $2,304,789.08. 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.

     

    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 Foreiture Preceedings.
      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 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, of 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 Borrowers financial condition, or Lender
      believes the prospect of payment or performance of the Indebtedness is
      impaired.

     

    Insecurity.
      Lender
      in
      good faith believes itself insecure.

     

    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 Lenders’ 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
      VALIIDITY. 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.

     

    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 MAJESKI

            
	 	
              CARRIE
                L. MAJESKI, President of 

              ART’S-WAY
                MANUFACTURING 

              CO.,
                INC.