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Equity Incentive Plan

On November 30, 2015, the Company had one equity incentive plan, the 2011 Plan, which is described below. The compensation cost charged against income was $28,484 and $14,504 for 2015 and 2014, respectively, for all awards granted under the 2011 Plan during such years. The total income tax deductions for share-based compensation arrangements were $20,462 and $10,500 for 2015 and 2014 respectively. No compensation cost was capitalized as part of inventory or fixed assets.

On January 27, 2011, the Board of Directors of the Company authorized and approved the Art’s-Way Manufacturing Co., Inc. 2011 Equity Incentive Plan (the “2011 Plan”), subject to approval by the stockholders on or before January 27, 2012. The 2011 Plan was approved by the stockholders on April 28, 2011. It replaced the Employee Stock Option Plan and the Directors’ Stock Option Plan (collectively, the “Prior Plans”), and no further stock options will be awarded under the Prior Plans. Awards to directors and executive officers under the 2011 Plan will be governed by the forms of agreement approved by the Board of Directors. The 2011 Plan permits the plan administrator to award nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, performance awards, and stock appreciation rights to employees (including officers), directors, and consultants. The Board of Directors has approved a director compensation policy pursuant to which non-employee directors are granted non-qualified stock options to purchase 2,000 shares of common stock annually upon their election to the board, which are fully vested. In addition, directors may elect to receive cash retainer fees in the form of fully-vested restricted stock issued under the 2011 Plan.

Stock options granted prior to January 27, 2011 are governed by the applicable Prior Plan and the forms of agreement adopted thereunder.

The fair value of each option award is estimated on the date of grant using the Black Scholes option-pricing model. Expected volatility is based on historical volatility of the Company’s stock and other factors. The Company uses historical option exercise and termination data to estimate the expected term the options are expected to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is calculated using historical dividend amounts and the stock price at the option issuance date.

	2015			2014
Expected Volatility		30.55	%			32.28%
Expected Dividend Yield		1.574	%		1.236%	-	1.277%
Expected Term (in years)		2				2
Risk-Free Rate		3.25	%			3.25%

Summary of activity under the plans as of November 30, 2015 and 2014, and changes during the years then ended as follows:

2015 Option Activity

Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options Outstanding at beginning of period		160,000	$	8.72		-		-
Granted		14,000	$	4.70		-		-
Exercised		-	$	-		-		-
Options Expired or Forfeited		-	$	-		-		-
Options Outstanding at end of Period		174,000	$	8.39		4.68		-
Options Exercisable at end of Period		169,000	$	8.47		4.57		-

2014 Option Activity

Options	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options Outstanding at beginning of period		143,000		$	9.00		-		-
Granted		19,000		$	6.10		-		-
Exercised		(2,000	)	$	3.88		-	$	4,020
Options Expired or Forfeited		-		$	-		-		-
Options Outstanding at end of Period		160,000		$	8.72		5.14	$	15,400
Options Exercisable at end of Period		155,000		$	8.81		5.27	$	15,400

The weighted-average grant-date fair value of options granted during the year 2015 and 2014 was $0.84 and $1.17 respectively. Compensation expense of $8,022 and $11,264 was recognized in 2015 and 2014, respectively, for the issuance of stock options.

A summary of the status of the Company’s non-vested option shares as of November 30, 2015, and changes during the year ended November 30, 2015, is presented below:

Non-vested Option Shares	Shares			Weighted-Average Grant-Date Fair Value
Non-vested at beginning of period		5,000
Granted		14,000		$	0.84
Vested		(14,000	)	$	0.84
Forfeited		-		$	0.00
Non-vested at end of period		5,000

As of November 30, 2015, there was $3,881 unrecognized compensation cost related to non-vested share-based compensation arrangements under the plan related to stock options. The total fair value of options vested during the years ended November 30, 2015 and 2014 was $0 and $0 respectively.

The cash received from the exercise of options during fiscal year 2015 was $0, compared to $7,760 in 2014.

During the fiscal year 2015 the Company issued 12,500 shares of restricted stock, and 4,150 shares of restricted stock became unrestricted. During fiscal year 2014 the Company issued 0 shares of restricted stock, and 500 shares of restricted stock became unrestricted under the 2011 Plan. Compensation expense of $20,462 and $3,240 was recognized in 2015 and 2014, respectively, for shares of restricted stock.