| (1)   | NAME. |
|-----------------|-------|

| (2)   | DEFINITIONS. |
|-----------------|--------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (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 promulgatedthereunder.                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

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

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|   |   |                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (s)    | "Share"      means one share of Common Stock, adjusted in accordance with Section 10(b)      of the Plan, if applicable.                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                 |
|   | (t)    | "Stock Option      Agreement" means the written agreement between the Company and the      Participant that contains the terms and conditions pertaining to an      Option.                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                 |
|   | (u)    | "Subsidiary" means      any corporation of which the Company, directly or indirectly, is the      beneficial owner of fifty percent (50%) or more of the total voting power      of all classes of its stock having voting power and which qualifies as a      subsidiary corporation pursuant to Section 424(f) of theCode.                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                 |
|   | (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. |
|-----------------|----------|

|            |            |
|-----------------|-----------------|
| (4)   | ADMINISTRATION. |

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

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

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

| (5)   | EFFECTIVE      DATE AND TERM OF THE      PLAN.                                                                               |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

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|            |                                         |
|-----------------|----------------------------------------------|
| (7)   | SOURCE      OF SHARES ISSUED UNDER THE PLAN. |
|            |                                         |

|            |         |
|-----------------|--------------|
| (8)   | ELIGIBILITY. |
|            |         |

|            |     |
|-----------------|----------|
| (9)   | OPTIONS. |
|            |     |

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

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

|   |   | (i)      the failure of an Option to vest for any reason whatsoever shall cause the      Option to expire and be of no further force or effect;(ii)      unless terminated earlier pursuant to Sections 9(i) or 11, the term of any      Option granted under the Plan shall be ten years from the date of grant;      provided, however, that no ISO granted to      a Ten Percent Stockholder shall have a term of more than five years from      the date of grant;(iii)      in the case of an ISO, the aggregate Fair Market Value (determined as of      the time the ISO is granted) of Shares exercisable for the first time by a      Participant during any calendar year (under the Plan and any other      incentive stock option plans of the Company, any Subsidiary or any parent      of the Company (as defined in Section 424(e) of the Code) shall not exceed      $100,000; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |   | (i)      Options      shall not be transferable by the Participant otherwise than by will or by      the laws of descent and distribution, and shall be exercisable during the      lifetime of the Participant only by him or by his guardian or legal      representative;(v)      no Option or interest therein may be transferred, assigned, pledged or      hypothecated by the Participant during his lifetime whether by operation      of law or otherwise, or be made subject to execution, attachment or      similar process; and(vi)      payment for the Shares to be received upon exercise of an Option may be      made in cash, in Shares (determined with reference to their Fair Market      Value on the date of exercise) or any combination  thereof. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |      |
|--------|--------|-----------|
|   | (f)    | Exercise. |

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

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

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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | (B)      If actively traded over-the-counter, the value shall be deemed to be the      average of the closing bid or sale prices (whichever is applicable) during      the thirty calendar day period ending three (3) calendar days prior to the      exercise date; and(C)      If there is no active public market, the value shall be the fair market      value thereof, as determined by the Board of Directors in the good faith      exercise of its reasonable business judgment. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

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

|   |   | X =      Y (A-B)                A |
|--------|--------|-------------------------------------------------------------------------------------|
|   |   |                                                                                |

|   |   | where      X = the number of shares to be issued to such Option holder pursuant to      this subsection 9(f)(ii) .Y =      the number of shares covered by the Options in respect of which the net      issue election is made pursuant to this subsection 9(f)(ii).A =      the fair market value of one share of Common stock, as determined in good      faith by the Board of Directors of the Company in accordance with the      provisions of subsection 9(f)(i), at the time the net issue election is      made pursuant to this subsection 9(f)(ii).B =      the Exercise Price in effect under the Option at the time the net issue      election is made pursuant to this subsection 9(f)(ii) .The      Board of Directors of the Company shall promptly respond in writing to an      inquiry by an Option holder as to the fair market value of one share of      Common Stock. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

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

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

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

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

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|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (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.                                                                                                                                                                                                                                 |
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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (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.                                                                                                                                                                                                                                                                                                                                                                                |

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

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|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (b)    | Other      Compensation Arrangements. Nothing      contained in the Plan shall prevent the Board from adopting other      compensation arrangements, subject to stockholder approval if such      approval is required. Such other arrangements may be either generally      applicable or applicable only in specific cases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | (c)    | Treatment      of Proceeds. Proceeds      realized from the exercise of Options under the Plan shall constitute      general funds of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | (d)    | Costs      of the Plan. The      costs and expenses of administering the Plan shall be borne by the      Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | (e)    | No      Right to Continue Employment or Services. Nothing      contained in the Plan or in any instrument executed pursuant to the Plan      will confer upon any Participant any right to continue to render services      to the Company, a Subsidiary or Affiliate; to continue as an Officer or      Employee; or affect the right of the Company, a Subsidiary, the Board, the      board of directors of a Subsidiary, the stockholders of the Company or a      Subsidiary, as applicable, to terminate the office or employment, as the      case may be, of any Participant at any time with or without Cause or with      or without any other cause, reason or justification. The term "Cause" as      defined herein is included solely for the purposes of the Plan and is not,      and shall not be deemed to be: (i) a restriction on the right of the      Company or a Subsidiary, as the case may be, to terminate any Officer or      Employee for any reason whatsoever; or (ii) a part of the employment      relationship (whether oral or written, express or implied) of any such      individual. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | (f)    | Severability.The      provisions of the Plan shall be deemed severable and the validity or      unenforceability of any provision shall not affect the validity or      enforceability of the other provisionshereof.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

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

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

|                             |   |   |
|----------------------------------|--------|--------|
| Carrie      L. Majeski Secretary |   |   |