STOCK OPTION AGREEMENT

OPTIONEE:

GRANT DATE:

VESTING DATE:

NUMBER OF SHARES:                                       _____ Shares

EXERCISE PRICE PER SHARE:                       _____ per Share

EXPIRATION DATE:

OPTION NO.:                                                        200_-___

THIS AGREEMENT is made as of the Grant Date set forth above by and between Art’s-Way Manufacturing Co., Inc., a Delaware corporation (the “Company”), and the Optionee named above, who is [a Non-Employee Director/an Employee] of the Company.

The Company desires, by affording the Optionee an opportunity to purchase its Common Stock (the “Shares”), to carry out the purpose of the [2007 Non-Employee Directors’ Stock Option Plan/2007 Employee Stock Option Plan] (the “Option Plan”).

NOW, THEREFORE , in consideration of the mutual covenants hereinafter set forth, and for other good and valuable consideration, the parties hereby agree as follows:

1.             Option Plan.   The terms, provisions and definitions of the Option Plan are incorporated herein.  Any capitalized term used herein that is not expressly defined herein shall have the meaning ascribed to it in the Option Plan, a copy of which has been made available to the Optionee.  This Agreement is in all respects subject to and governed by all of the provisions of the Option Plan.

2.             Grant of Option.   Company hereby grants to the Optionee the right and option (the “Option”) to purchase all or any part of the aggregate number of Shares set forth above (the “Option Shares”) (such number being subject to adjustment as provided in the Option Plan) on the terms and subject to the conditions set forth in this Agreement.  This Option is not intended to qualify as an “Incentive Stock Option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

3.             Purchase Price.   The per share purchase price of the Option Shares shall be the Exercise Price Per Share set forth above (such Exercise Price Per Share being determined under and subject to adjustment as provided in the Option Plan).

4.           Term, Vesting, Non-transferability and Exercise of Option.

(a)            Term .  The term of this Option shall commence on the Grant Date set forth above and shall continue until the Expiration Date set forth above, which shall be five (5) years from the Grant Date unless earlier terminated as provided in the Option Plan.

(b)            Vesting .  If this Option is automatically granted to Optionee as provided in the Option Plan, the Option Shares shall vest and become first exercisable immediately upon the Grant Date provided above.  If this Option was granted pursuant to the Board of Director’s discretion, the Option Shares shall vest as provided by the Board of Directors on the Vesting Date provided above.  The failure of Option Shares to vest for any reason whatsoever shall cause the Option to expire and be of no further force or effect.

(c)            Non-transferability .  This Option shall not be transferable by the Optionee otherwise than by will or by the laws of descent and distribution, and s