FOR RECORDER’S USE ONLY

--------------------------------------------------------------------------------

Prepared By:  Kevin Smith, WEST BANK, 1601 22ND STREET, WEST DES MOINES, IA
50266, (515) 222-2300

RECORDATION REQUESTED BY:
WEST BANK, MAIN BANK, 1601 22ND STREET, WEST DES MOINES, IA 50266

WHEN RECORDED MAIL TO:
WEST BANK, MAIN BANK, 1601 22ND STREET, WEST DES MOINES, IA 50266

MORTGAGE

NOTICE:  This Mortgage secures credit in the amount of 92,000,000.00.  Loans and
advances up to this amount, together with interest, are senior to indebtedness
to other creditors under subsequently recorded or filed mortgages and liens.

The names of all Grantors (sometimes “Grantor”) can be found on page 1 of this
Mortgage.  The names of all Grantees (sometimes “Lender”) can be found on page 1
of this Mortgage.  The property address can be found on page 1 of this
Mortgage.  The legal description can be found on page 1 of this Mortgage.

THIS MORTGAGE dated October 9, 2007, is made and executed between ART’S-WAY
MANUFACTURING COMPANY, INC., whose address is PO BOX 288, ARMSTRONG, IA
50514-0288 (referred to below as “Grantor”) and WEST BANK, whose address is 1601
22ND STREET, WEST DES MOINES, IA 50266 (referred to below as “Lender”).

GRANT OF MORTGAGE.  For valuable consideration, Grantor mortgages and conveys to
Lender and grants to Lender a security interest in all of Grantor’s right,
title, and interest in and to the following described real property, together
with all existing or subsequently erected or affixed buildings, improvements and
fixtures; rents and profits; all easements.  rights of way, and appurtenances;
all water, water rights, watercourses and ditch rights (including stock in
utilities with ditch or irrigation rights); and all other rights, royalties, and
profits relating to the real property, including without limitation all
minerals, oil, gas, geothermal and similar matters, (the “Real Property”)
located In CLAYTON County, State of Iowa:

LOT TWO (2) OF LOT ONE (1) OF LOT NINE (9) OF THE NORTHEAST QUARTER (NE 114) OF
THE SOUTHEAST QUARTER (SE 1/4) OF SECTION FOURTEEN (14), TOWNSHIP NINETY-FIVE
(95) NORTH, RANGE FIVE (5), WEST OF THE 5TH P.M., IN CLAYTON COUNTY, IOWA,
ACCORDING TO THE RECORDED PLAT THEREOF IN BOOK 29, LAND PLATS, PAGE 85 IN THE
OFFICE OF THE CLAYTON COUNTY RECORDER

 
 

--------------------------------------------------------------------------------

 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 2

The Real Property or its address is commonly known as 203 OAK STREET, MONONA, IA
52159.

Grantor presently assigns to Lender all of Grantor’s right, title, and interest
in and to all present and future leases of the Property and all Rents from the
Property.  In addition, Grantor grants to Lender a Uniform Commercial Code
security interest in the Personal Property and Rents.  The lien on the rents
granted in this Mortgage shall be effective from the date of the Mortgage and
not just in the event of default.

FUTURE ADVANCES.  In addition to the Note, this Mortgage secures all future
advances made by Lender to Grantor whether or not the advances are made pursuant
to a commitment.  Specifically, without limitation, this Mortgage secures, in
addition to the amounts specified in the Note, all future amounts Lender in its
discretion may loan to Grantor, together with all interest thereon; however, in
no event shall such future advances (excluding interest) exceed in the aggregate
$2,000,000.00.

THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN
THE RENTS AND PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF 111E
INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS UNDER THE NOTE, THE
RELATED DOCUMENTS, AND THIS MORTGAGE.  THIS MORTGAGE IS GIVEN AND ACCEPTED ON
THE FOLLOWING TERMS:

PAYMENT AND PERFORMANCE.  Except as otherwise provided in this Mortgage, Grantor
shall pay to Lender all amounts secured by this Mortgage as they become due and
shall strictly perform all of Grantor’s obligations under this Mortgage.

POSSESSION AND MAINTENANCE OF THE PROPERTY.  Grantor agrees that Grantor’s
possession and use of the Property shall be governed by the following
provisions; None of the collateral for the Indebtedness constitutes, and none of
the funds represented by the Indebtedness will be used to purchase:  (1)
Agricultural products or property used for an agricultural purpose as defined in
Iowa Code Section 535.13; (2) Agricultural land as defined in Iowa Code Section
91-11 (2) or 175.2 (1); or (3) Property used for an agricultural purpose as
defined in Iowa.  Code Section 570.A.1 (2).  Grantor represents and warrants
that:  (1) There are not now and will not be any wells situated on the Property;
(2) There are not now and will not be any solid waste disposal sites on the
Property; (3) There are not now and there will not be any hazardous wastes on
the Property; (4) There are not now and there will not be any underground
storage tanks on the Property.

Possession and Use.  Until the occurrence of an Event of Default, Grantor may
(1) remain in possession and control of the Property; (2) use, operate or manage
the Property; and (3) collect the Rents from the Property.
 
Duty to Maintain.  Grantor shall maintain the Property in tenantable condition
and promptly perform all repairs, replacements, and maintenance necessary to
preserve its value.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 3

 
Compliance With Environmental Laws.  Grantor represents and warrants to Lender
that:  (1) During the period of Grantor’s ownership of the Property, there has
been no use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under, about or
from the Property; (2) Grantor has no knowledge of, or reason to believe that
there has been, except as previously disclosed to and acknowledged by Lender in
writing, (a) any breach or violation of any Environmental Laws, (b) any use,
generation, manufacture, storage, treatment, disposal, release or threatened
release of any Hazardous Substance on, under, about or from the Property by any
prior owners or occupants of the Property, or (c) any actual or threatened
litigation or claims of any kind by any person relating to such matters; and (3)
Except as previously disclosed to and acknowledged by Lender in writing, (a)
neither Grantor nor any tenant, contractor, agent or other authorized user of
the Property shall use, generate, manufacture, store, treat, dispose of or
release any Hazardous Substance on, under, about or from the Property; and (b)
any such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations and ordinances, including without limitation
all Environmental Laws.  Grantor authorizes Lender and its agents to enter upon
the Property to make such inspections and tests, at Grantor’s expense, as Lender
may deem appropriate to determine compliance of the Property with this section
of the Mortgage.  Any inspections or tests made, by Lender shall be for Lender’s
purposes only and shall not be construed to create any responsibility or
liability on the part of Lender to Grantor or to any other person.  The
representations and warranties contained herein are based on Grantor’s due
diligence in investigating the Property for Hazardous Substances.  Grantor
hereby (1) releases and waives any future claims against Lender for Indemnity or
contribution in the event Grantor becomes liable for cleanup or other costs
under any such laws; and (2) agrees to indemnify, defend, and hold harmless
Lender against any and all claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting
from a breach of this section of the Mortgage or as a consequence of any use,
generation, manufacture, storage, disposal, release or threatened release
occurring prior to Grantor’s ownership or interest in the Property, whether or
not the same was or should have been known to Grantor.  The provisions of this
section of the Mortgage, including the obligation to indemnify and defend, shall
survive the payment of the Indebtedness and the satisfaction and reconveyance of
the lien of this Mortgage and shall not be affected by Lender’s acquisition of
any interest in the Property, whether by foreclosure or otherwise.
 
Nuisance, Waste.  Grantor shall not cause, conduct or permit any nuisance nor
commit, permit, or suffer any stripping of or waste on or to the Property or any
portion of the Property.  Without limiting the generality of the foregoing,
Grantor will not remove, or grant to any other party the right to remove, any
timber, minerals (including oil and gas), coal, clay, scoria, soil, gravel or
rock products without Lender’s prior written consent.
 
Removal of Improvements.  Grantor shall not demolish or remove any Improvements
from the Real Property without Lender’s prior written consent.  As a condition
to the removal of any Improvements, Lender may require Grantor to make
arrangements satisfactory to Lender to replace such Improvements with
Improvements of at least equal value.
 
Lender’s Right to Enter.  Lender and Lender’s agents and representatives may
enter upon the Real Property at all reasonable times to attend to Lender’s
interests and to inspect the Real Property for purposes of Grantor’s compliance
with the terms and conditions of this Mortgage.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 4

 
Compliance with Governmental Requirements.  Grantor shall promptly comply with
all laws, ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the use or occupancy of the Property,
Including without limitation, the Americans With Disabilities Act.  Grantor may
contest in good faith any such law, ordinance, or regulation and withhold
compliance during any proceeding, including appropriate appeals, so long as
Grantor has notified Lender in writing prior to doing so and so long as, in
Lender’s sole opinion, Lender’s interests in the Property are not
jeopardized.  Lender may require Grantor to post adequate security or a surety
bond, reasonably satisfactory to Lender, to protect Lender’s interest.
 
Duty to Protect.  Grantor agrees neither to abandon or leave unattended the
Property.  Grantor shall do all other acts, in addition to those acts set forth
above in this section, which from the character and use of the Property are
reasonably necessary to protect and preserve the Property.
 
TAXES AND LIENS.  The following provisions relating to the taxes and liens on
the Property are part of this Mortgage:

Payment.  Grantor shall pay when due (and in all events prior to delinquency)
all taxes, payroll taxes, special taxes, assessments, water charges and sewer
service charges levied against or on account of the Property, and shall pay when
due all claims for work done on or for services rendered or material furnished
to the Property.  Grantor shall maintain the Property free of any liens having
priority over or equal to the interest of Lender under this Mortgage, except for
those liens specifically agreed to in writing by Lender, and except for the lien
of taxes and assessments not due as further specified in the Right to Contest
paragraph.
 
Right to Contest.  Grantor may withhold payment of any tax, assessment, or claim
in connection with a good faith dispute over the obligation to pay, so long as
Lender’s interest in the Property is not jeopardized.  if a lien arises or Is
filed as a result of nonpayment, Grantor shall within fifteen (15) days after
the lien arises or, if a lien is filed, within fifteen (15) days after Grantor
has notice of the filing, secure the discharge of the lien, or if requested by
Lender, deposit with Lender cash or a sufficient corporate surety bond or other
security satisfactory to Lender in an amount sufficient to discharge the lien
plus any costs and attorneys’ fees, or other charges that could accrue as a
result of a foreclosure or sale under the lien.  In any contest, Grantor shall
defend itself and Lender and shall satisfy any adverse judgment before
enforcement against the Property.  Grantor shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings.
 
Evidence of Payment.  Grantor shall upon demand furnish to Lender satisfactory
evidence of payment of the taxes or assessments and shall authorize the
appropriate governmental official to deliver to Lender at any time a written
statement of the taxes and assessments against the Property.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 5

 
Notice of Construction.  Grantor shall notify Lender at least fifteen (15) days
before any work is commenced, any services are furnished, or any materials are
supplied to the Property, if any mechanic’s lien, materialmen’s lien, or other
lien could be asserted on account of the work, services, or materials.  Grantor
will upon request of Lender furnish to Lender advance assurances satisfactory to
Lender that Grantor can and will pay the cost of such improvements.
 
PROPERTY DAMAGE INSURANCE.  The following provisions relating to Insuring the
Property are a part of this Mortgage:

Maintenance of Insurance.  Grantor shall procure and maintain policies of fire
insurance with standard extended coverage endorsements on a replacement basis
for the full insurable value covering all improvements on the Real Property in
an amount sufficient to avoid application of any coinsurance clause, and with a
standard mortgagee clause in favor of Lender.  Grantor shall also procure and
maintain comprehensive general liability insurance in such coverage amounts as
Lender may request with Lender being named as additional insureds in such
liability insurance policies.  Additionally, Grantor shall maintain such other
insurance, including but not limited to hazard, business interruption and boiler
insurance as Lender may require.  Policies shall be written by such insurance
companies and in such form as may be reasonably acceptable to Lender.  Grantor
shall deliver to Lender certificates of coverage from each insurer containing a
stipulation that coverage will not be cancelled or diminished without a minimum
of thirty (30) days’ prior written notice to Lender and not containing any
disclaimer of the insurer’s liability for failure to give such notice.  Each
insurance policy also shall include an endorsement providing that coverage in
favor of Lender will not be impaired in any way by any act, omission or default
of Grantor or any other person.  Should the Real Property be located in an area
designated by the Director of the Federal Emergency Management Agency as a
special flood hazard area, Grantor agrees to obtain and maintain Federal Flood
Insurance, if available, for the full unpaid principal balance of the loan and
any prior liens on the property securing the loan, up to the maximum policy
limits set under the National Flood Insurance Program, or as otherwise required
by Lender, and to maintain such insurance for the term of the loan.
 
Application of Proceeds.  Grantor shall promptly notify Lender of any loss or
damage to the Property.  Lender may make proof of loss if Grantor fails to do so
within fifteen (15) days of the casualty.  Whether or not Lender’s security is
impaired, Lender may, at Lender’s election, receive and retain the proceeds of
any insurance and apply the proceeds to the reduction of the Indebtedness,
payment of any hen affecting the Property, or the restoration and repair of the
Property.  If Lender elects to apply the proceeds to restoration and repair,
Grantor shall repair or replace the damaged or destroyed Improvements in a
mariner satisfactory to Lender.  Lender shall, upon satisfactory proof of such
expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost
of repair or restoration if Grantor is not in default under this Mortgage.  Any
proceeds which have not been disbursed within 180 days after their receipt and
which Lender has not committed to the repair or restoration of the Property
shall be used first to pay any amount owing to Lender under this Mortgage, then
to pay accrued interest and the remainder, if any, shall be applied to the
principal balance of the Indebtedness.  If Lender holds any proceeds after
payment in full of the Indebtedness, such proceeds shall be paid to Grantor as
Grantor’s interests may appear.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 6

 
Grantor’s Report on Insurance.  Upon request of Lender, however not more than
once a year, Grantor shall furnish to Lender a report on each existing policy of
insurance showing; (1) the name of the insurer; (2) the risks insured; (3) the
amount of the policy; (4) the property insured, the then current replacement
value of such property, and the manner of determining that value; and (5) the
expiration date of the policy.  Grantor shall, upon request of Lender, have an
independent appraiser satisfactory to Lender determine the cash value
replacement cost of the Property,
 
LENDER’S EXPENDITURES.  If any action or proceeding is commenced that would
materially affect Lender’s interest in the Property or if Grantor fails to
comply with any provision of this Mortgage or any Related Documents, including
but not limited to Grantor’s failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Mortgage or any Related
Documents, Lender on Grantor’s behalf may (but shalt not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Property and paying all costs
for insuring, maintaining and preserving the Property.  All such expenditures
incurred or paid by Lender for such purposes will then bear interest at the rate
charged under the Note from the date incurred or paid by Lender to the date of
repayment by Grantor, All such expenses will become a part of the Indebtedness
and, at Lender’s option, will (A) be payable on demand; (B) be added to the
balance of the Note and be apportioned among and be payable with any installment
payments to become due during either (1) the term of any applicable insurance
policy; or (2) the remaining term of the Note; or (C) be treated as a balloon
payment which will be due and payable at the Note’s maturity.  The Mortgage also
will secure payment of these amounts.  Such right shall be in addition to all
other rights and remedies to which Lender may be entitled upon Default.

WARRANTY; DEFENSE OF TITLE.  The following provisions relating to ownership of
the Property are a part of this Mortgage:

Title.  Grantor warrants that:  (a) Grantor holds good and marketable title of
record to the Property in fee simple, free and clear of all liens and
encumbrances other than those set forth in the Real Property description or in
any title insurance policy, title report, or final title opinion issued in favor
of, and accepted by, Lender in connection with this Mortgage, (b) Grantor has
the full right, power, and authority to execute and deliver this Mortgage to
Lender, and (c) the liens granted hereby are not the type of lien referred to in
Chapter 575 of the Iowa Code Supplement, as now enacted or hereafter modified,
amended or replaced.  Grantor, for itself and all persons claiming by, through
or under Grantor, agrees that it claims no lien or right to a lien of the type
contemplated by Chapter 575 or any other chapter of the Code of Iowa and further
waives all notices and rights pursuant to said law with respect to the liens
hereby granted, and represents and warrants that it is the sole party entitled
to do so and agrees to indemnify, defend, and hold harmless Lender from any
loss, damage, and costs, including reasonable attorneys’ fees, threatened or
suffered by Lender arising either directly or indirectly as a result of any
claim of the applicability of said law to the liens hereby granted.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 7

 
Defense of Title.  Subject to the exception in the paragraph above, Grantor
warrants and will forever defend the title to the Property against the lawful
claims of all persons.  In the event any action or proceeding is commenced that
questions Grantor’s title or the interest of Lender under this Mortgage, Grantor
shall defend the action at Grantor’s expense.  Grantor may be the nominal party
in such proceeding, but Lender shall be entitled to participate in the
proceeding and to be represented in the proceeding by counsel of Lender’s own
choice, and Grantor will deliver, or cause to be delivered, to Lender such
Instruments as Lender may request from time to time to permit such
participation.
 
Compliance With Laws.  Grantor warrants that the Property and Grantor’s use of
the Property complies with all existing applicable laws, ordinances, and
regulations of governmental authorities.
 
Survival of Representations and Warranties.  All representations, warranties,
and agreements made by Grantor in this Mortgage shall survive the execution and
delivery of this Mortgage, shall be continuing in nature, and shall remain in
full force and effect until such time as Grantor’s Indebtedness shall be paid in
full.
 
CONDEMNATION.  The following provisions relating to condemnation proceedings are
a part of this Mortgage:

Proceedings.  If any proceeding in condemnation is filed, Grantor shall promptly
notify Lender in writing, arid Grantor shall promptly take such steps as may be
necessary to defend the action and obtain the award.  Grantor may be the nominal
party in such proceeding, but Lender shall be entitled to participate in the
proceeding and to be represented in the proceeding by counsel of its own choice,
and Grantor will deliver or cause to be delivered to Lender such instruments and
documentation as may be requested by Lender from time to time to permit such
participation.
 
Application of Net Proceeds.  If all or any part of the Property is condemned by
eminent domain proceedings or by any proceeding or purchase in lieu of
condemnation, Lender may at its election require that all or any portion of the
net proceeds of the award be applied to the Indebtedness or the repair or
restoration of the Property.  The net proceeds of the award shall mean the award
after payment of all reasonable costs, expenses, and attorneys’ fees incurred by
Lender in connection with the condemnation.
 
IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES.  The
following provisions relating to governmental taxes, fees and charges are a part
of this Mortgage:

Current Taxes, Fees and Charges.  Upon request by Lender, Grantor shall execute
such documents in addition to this Mortgage and take whatever other action is
requested by Lender to perfect and continue Lender’s lien on the Real
Property.  Grantor shall reimburse Lender for all taxes, as described below,
together with all expenses incurred in recording, perfecting or continuing this
Mortgage, including without limitation all taxes, fees, documentary stamps, and
other charges for recording or registering this Mortgage.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 8

 
Taxes.  The following shall constitute taxes to which this section applies:  (1)
a specific tax upon this type of Mortgage or upon all or any part of the
Indebtedness secured by this Mortgage; (2) a specific tax on Grantor which
Grantor is authorized or required to deduct from payments on the Indebtedness
secured by this type of Mortgage; (3) a tax on this type of Mortgage chargeable
against the Lender or the holder of the Note; and (4) a specific tax on all or
any portion of the Indebtedness or on payments of principal and interest made by
Grantor,
 
Subsequent Taxes.  If any tax to which this section applies is enacted
subsequent to the date of this Mortgage, this event shall have the same effect
as an Event of Default, and Lender may exercise any or all of its available
remedies for an Event of Default as provided below unless Grantor either (1)
pays the tax before it becomes delinquent, or (2) contests the tax as provided
above in the Taxes and Liens section and deposits with Lender cash or a
sufficient corporate surety bond or other security satisfactory to Lender.
 
SECURITY AGREEMENT; FINANCING STATEMENTS.  The following provisions relating to
this Mortgage as a security agreement are a pan of this Mortgage:

Security Agreement.  This instrument shall constitute a Security Agreement to
the extent any of the Property constitutes fixtures, and Lender shall have all
of the rights of a secured party under the Uniform Commercial Code as amended
from time to time.
 
Security Interest.  Upon request by Lender, Grantor shall take whatever action
is requested by Lender to perfect and continue Lender’s security interest in the
Rents and Personal Property, In addition to recording this Mortgage in the real
property records, Lender may, at any time and without further authorization from
Grantor, file executed counterparts, copies or reproductions of this Mortgage as
a financing statement.  Grantor shall reimburse Lender for all expenses incurred
in perfecting or continuing this security interest.  Upon default, Grantor shall
not remove, sever or detach the Personal Property from the Property.  Upon
default, Grantor shall assemble any Personal Property not affixed to the
Property in a manner and at a place reasonably convenient to Grantor and Lender
and make it available to Lender within three (3) days after receipt of written
demand from Lender to the extent permitted by applicable law.
 
Fixture Filing.  From the date of its recording, this Mortgage shall be
effective as a financing statement filed as a fixture filing with respect to the
Personal Property and for this purpose, the name and address of the debtor is
the name and address of Grantor as set forth on the first page of this Mortgage
and the name and address of the secured party is the name and address of Lender
as set forth on the first page of this Mortgage.
 
Addresses.  The mailing addresses of Grantor (debtor) and Lender (secured party)
from which information concerning the security interest granted by this Mortgage
may be obtained (each as required by the Uniform Commercial Code) are as stated
on the first page of this Mortgage.
 
FURTHER ASSURANCES; ATTORNEY-IN-FACT.  The following provisions relating to
further assurances and attorney-in-fact are a part of this Mortgage:

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 9

 
Further Assurances.  At any time, and from time to time, upon request of Lender,
Grantor will make, execute and deliver, or will cause to be made, executed or
delivered, to Lender or to Lender’s designee, and when requested by Lender,
cause to be filed, recorded, refiled, or rerecorded, as the case may be, at such
times and in such offices and places as Lender may deem appropriate, any and all
such mortgages, deeds of trust, security deeds security agreements, financing
statements, continuation statements, instruments of further assurance,
certificates, and other documents as may, in the sole opinion of Lender, be
necessary or desirable in order to effectuate, complete, perfect, continue, or
preserve (1) Grantor’s obligations under the Note, this Mortgage, and the
Related Documents, and (2) the liens and security interests created by this
Mortgage as first and prior liens on the Property, whether now owned or
hereafter acquired by Grantor.  Unless prohibited by law or Lender agrees to the
contrary in writing, Grantor shall reimburse Lender for all costs and expenses
incurred in connection with the matters referred to in this paragraph.
 
Attorney-in-Fact.  If Grantor fails to do any of the things referred to in the
preceding paragraph, Lender may do so for and in the name of Grantor and at
Grantor’s expense.  For such purposes, Grantor hereby irrevocably appoints
Lender as Grantor’s attorney-in-fact for the purpose of making, executing,
delivering, filing, recording, and doing all other things as may be necessary or
desirable, in Lender’s sole opinion, to accomplish the matters referred to in
the preceding paragraph.
 
FULL PERFORMANCE.  If Grantor pays alt the Indebtedness, including without
limitation all future advances, when due, and otherwise performs all the
obligations imposed upon Grantor under this Mortgage, Lender shall execute and
deliver to Grantor a suitable satisfaction of this Mortgage and suitable
statements of termination of any financing statement on file evidencing Lender’s
security interest in the Rents and the Personal Property.  Grantor will pay, if
permitted by applicable law, any reasonable termination fee as determined by
Lender from time to time.

EVENTS OF DEFAULT.  Each of the following, at Lender’s option, shall constitute
an Event of Default under this Mortgage:

Payment Default.  Grantor fails to make any payment when due under the
Indebtedness.
 
Default on Other Payments.  Failure of Grantor within the time required by this
Mortgage to make any payment for taxes or insurance, or any other payment
necessary to prevent filing of or to effect discharge of any lien.
 
Other Defaults.  Grantor fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Mortgage or in any of the
Related Documents or to comply with or to perform any term, obligation, covenant
or condition contained in any other agreement between Lender and Grantor.
 
Default in Favor of Third Parties.  Should Grantor default under any loan,
extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially
affect any of Grantor’s property or Grantor’s ability to repay the Indebtedness
or Grantor’s ability to perform Grantor’s obligations under this Mortgage or any
related document.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 10

 
False Statements.  Any warranty, representation or statement made or furnished
to Lender by Grantor or on Grantor’s behalf under this Mortgage or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter,
 
Defective Collateralization.  This Mortgage or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.
 
Insolvency.  The dissolution or termination of Grantor’s existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.
 
Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
any property securing the Indebtedness.  This includes a garnishment of any of
Grantor’s accounts, including deposit accounts, with Lender.  However, this
Event of Default shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.
 
Breach of Other Agreement.  Any breach by Grantor under the terms of any other
agreement between Grantor and Lender that is not remedied within any grace
period provided therein, including without limitation any agreement concerning
any indebtedness or other obligation of Grantor to Lender, whether existing now
or later.
 
Events Affecting Guarantor.  Any of the preceding events occurs with respect to
any guarantor, endorser, surety, or accommodation party of any of the
Indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes the validity of.  or liability
under, any Guaranty of the Indebtedness.  In the event of a death, Lender, at
its option, may, but shall not be required to, permit the guarantor’s estate to
assume unconditionally the obligations arising under the guaranty in a manner
satisfactory to Lender, and, in doing so, cure any Event Dl Default.
 
Adverse Change.  A material adverse change occurs in Grantor’s financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
 
Insecurity.  Lender in good faith believes itself insecure.
 
Right to Cure.  If any default, other than a default in payment is curable and
if Grantor has not been given a notice of a breach of the same provision of this
Mortgage within the preceding twelve (12) months, it may be cured if Grantor,
after receiving written notice from Lender demanding cure of such default:  (1)
cures the default within twenty (20) days; or (2) if the cure requires more than
twenty (20) days, immediately initiates steps which Lender deems in Lender’s
sole discretion to be sufficient to cure the default and thereafter continues
and completes all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical,

 
 

--------------------------------------------------------------------------------

 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 11

RIGHTS AND REMEDIES ON DEFAULT.  Upon the occurrence of an Event of Default and
at any time thereafter, Lender, at Lender’s option, may exercise any one or more
of the following rights and remedies, in addition to any other rights or
remedies provided by law:

Accelerate Indebtedness.  Lender shall have the right at its option to declare
the entire Indebtedness immediately due and payable, including any prepayment
penalty which Grantor would be required to pay without notice, except as may be
expressly required by applicable law.
 
UCC Remedies.  With respect to all or any part of the Personal Property, Lender
shall have all the rights and remedies of a secured party under the Uniform
Commercial Code.
 
Collect Rents.  Lender shall have the right, without notice to Grantor, to take
possession of the Property and collect the Rents, including amounts past due and
unpaid, and apply the net proceeds, over and above Lender’s costs, against the
Indebtedness.  In furtherance of this right, Lender may require any tenant or
other user of the Property to make payments of rent or use fees directly to
Lender.  If the Rents are collected by Lender, then Grantor irrevocably
designates Lender as Grantor’s attorney-in-fact to endorse instruments received
in payment thereof in the name of Grantor and to negotiate the same and collect
the proceeds.  Payments by tenants or other users to Lender in response to
Lender’s demand shall satisfy the obligations for which the payments are made,
whether or not any proper grounds for the demand existed.  Lender may exercise
its rights under this subparagraph either in person, by agent, or through a
receiver.
 
Appoint Receiver.  Lender shall have the right to have a receiver appointed to
take possession of all or any part of the Property, with the power to protect
and preserve the Property, to operate the Property preceding foreclosure or
sale, and to collect the Rents from the Property and apply the proceeds, over
and above the cost of the receivership, against the Indebtedness.  The receiver
may serve without bond if permitted by law.  Lender’s right to the appointment
of a receiver shall exist whether or not the apparent value of the Property
exceeds the Indebtedness by a substantial amount.  Employment by Lender shall
not disqualify a person from serving as a receiver.
 
Judicial Foreclosure.  Lender may obtain a judicial decree foreclosing Grantor’s
interest in all or any part of the Property.
 
Nonjudicial Foreclosure.  Lender may exercise the right to non-judicial
foreclosure pursuant to Iowa Code Section 654.18 and Chapter 655A as now enacted
or hereafter modified, amended or replaced.
 
Deficiency Judgment.  If permitted by applicable law, Lender may obtain a
judgment for any deficiency remaining in the Indebtedness due to Lender after
application of all amounts received from the exercise of the rights provided in
this section.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 12

 
Tenancy at Sufferance.  If Grantor remains in possession of the Property after
the Property is sold as provided above or Lender otherwise becomes entitled to
possession of the Property upon default of Grantor, Grantor shall become a
tenant at sufferance of Lender or the purchaser of the Property and shall, at
Lender’s option, either (1) pay a reasonable rental for the use of the Property,
or (2) vacate the Property immediately upon the demand of Lender.  This
paragraph is subject to any rights of Grantor, under Iowa law, to remain in
possession of the Property during a redemption period.
 
Other Remedies.  Lender shall have all other rights and remedies provided in
this Mortgage or the Note or available at law or in equity.
 
Sale of the Property.  To the extent permitted by applicable law, Grantor hereby
waives any and all right to have the Property marshalled.  In exercising its
rights and remedies, Lender shall be free to sell all or any part of the
Property together or separately, in one sale or by separate sales, Lender shall
be entitled to bid at any public sale on all or any portion of the Property.
 
Notice of Sale.  Lender shall give Grantor reasonable notice of the time and
place of any public sale of the Personal Property or of the time after which any
private sale or other intended disposition of the Personal Property is to be
made.  Reasonable notice shall mean notice given at least ten (10) days before
the time of the sale or disposition.  Any sale of the Personal Property may be
made in conjunction with any sale of the Real Property,
 
Shortened Redemption.  Grantor hereby agrees that, in the event of foreclosure
of this Mortgage, Lender may, at Lender’s sole option, elect to reduce the
period of redemption pursuant to Iowa Code Sections 628.26, 628.27, or 628.28,
or any other Iowa Code Section, to such time as may be then applicable and
provided by law.
 
Election of Remedies.  Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to take
action to perform an obligation of Grantor under this Mortgage, after Grantor’s
failure to perform, shall not affect Lender’s right to declare a default and
exercise its remedies.  Nothing under this Mortgage or otherwise shall be
construed so as to limit or restrict the rights and remedies available to Lender
following an Event of Default, or in any way to limit or restrict the rights and
ability of Lender to proceed directly against Grantor and/or against any other
co—maker, guarantor, surety or endorser and/o r to proceed against any other
collateral directly or indirectly securing the Indebtedness.
 
Attorneys’ Fees; Expenses.  If Lender institutes any suit or action to enforce
any of the terms of this Mortgage.  Lender shall be entitled to recover such sum
as the court may adjudge reasonable as attorneys’ fees at trial and upon any
appeal.  Whether or not any court action is involved, and to the extent not
prohibited by law, all reasonable expenses Lender incurs that in Lender’s
opinion are necessary at any time for the protection of its interest or the
enforcement of its rights shall become a part of the Indebtedness payable on
demand and shall bear interest at the Note rate from the date of the expenditure
until repaid.  Expenses covered by this paragraph include, without limitation,
however subject to any limits under applicable law, Lender’s attorneys’ fees and
Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’
fees and expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post—judgment collection services, the cost of searching records, obtaining
title reports (including foreclosure reports), surveyors reports, and appraisal
fees and title insurance, to tile extent permitted by applicable law.  Grantor
also will pay any court costs, in addition to all other sums provided by law,

 
 

--------------------------------------------------------------------------------

 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 13

NOTICES.  Any notice required to be given under this Mortgage, including without
limitation any notice of default and any notice of sale shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this
Mortgage.  All copies of notices of foreclosure from the holder of any lien
which has priority over this Mortgage shall be sent to Lender’s address, as
shown near the beginning of this Mortgage.  Any party may change its address for
notices under this Mortgage by giving formal written notice to the other
parties, specifying that the purpose of the notice is to change the party’s
address.  For notice purposes, Grantor agrees to keep Lender informed at all
times of Grantor’s current address.  Unless otherwise provided or required by
law, if there is more than one Grantor, any notice given by Lender to any
Grantor is deemed to be notice given to all Grantors.

NOTICE OF WAIVER OF HOMESTEAD EXEMPTION.

I UNDERSTAND THAT HOMESTEAD PROPERTY IS IN MANY CASES PROTECTED FROM THE CLAIMS
OF CREDITORS AND EXEMPT FROM JUDICIAL SALE, AND THAT BY SIGNING THIS CONTRACT, I
VOLUNTARILY GIVE UP MY RIGHT TO THIS PROTECTION FOR THIS PROPERTY WITH RESPECT
TO CLAIMS BASED UPON THIS CONTRACT.

Sign name:
 
Print name:
Date
   
Sign name:
 
Print name:
Date.

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

Amendments.  This Mortgage, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Mortgage.  No alteration of or amendment to this Mortgage shall be
effective unless given in writing and signed by the party or parties sought to
be charged or bound by the alteration or amendment.
 
Annual Reports.  If the Property is used for purposes other than Grantor’s
residence, Grantor shall furnish to Lender, upon request, a certified statement
of net operating income received from the Property during Grantor’s previous
fiscal year in such form and detail as Lender shall require.  “Net operating
income’ shall mean all cash receipts from the Property less all cash
expenditures made in connection with the operation of the Property.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 14

 
Caption Headings.  Caption headings in this Mortgage are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Mortgage.
 
Governing Law.  This Mortgage will be governed by federal law applicable to
Lender and, to the extent not preempted by federal law, the laws of the State of
Iowa without regard to its conflicts of law provisions.  This Mortgage has been
accepted by Lender in the State of Iowa.
 
Choice of Venue.  If there is a lawsuit, Grantor agrees upon Lender’s request to
submit to the jurisdiction of the courts of POLK County, State of Iowa.

No Waiver by Lender.  Lender shall not be deemed to have waived any rights under
this Mortgage unless such waiver is given in writing and signed by Lender.  No
delay or omission on the part of Lender in exercising any right shall operate as
a waiver of such right or any other right.  A waiver by Lender of a provision of
this Mortgage shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other provision
of this Mortgage.  No prior waiver by Lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender’s rights or of
any of Grantor’s obligations as to any future transactions.  Whenever the
consent of Lender is required under this Mortgage, the granting of such consent
by Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.
 
Severability.  If a court of competent jurisdiction finds any provision of this
Mortgage to be illegal.  invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance.  If feasible, the offending
provision shall be considered modified so that it becomes legal, valid and
enforceable.  If the offending provision cannot be so modified, it shall be
considered deleted from this Mortgage.  Unless otherwise required by law, the
illegality, invalidity, or unenforceability of any provision of this Mortgage
shall not affect the legality, validity or enforceability of any other provision
of this Mortgage.
 
Merger.  There shall be no merger of the interest or estate created by this
Mortgage with any other interest or estate in the Property at any time held by
or for the benefit of Lender in any capacity, without the written consent of
Lender.
 
Successors and Assigns.  Subject to any limitations stated in this Mortgage on
transfer of Grantor’s interest, this Mortgage shall be binding upon and inure to
the benefit of the parties, their successors and assigns.  If ownership of the
Property becomes vested in a person other than Grantor, Lender, without notice
to Grantor, may deal with Grantor’s successors with reference to this Mortgage
and the Indebtedness by way of forbearance or extension without releasing
Grantor from the obligations of this Mortgage or liability under the
Indebtedness.
 
Time is of the Essence.  Time is of the essence in the performance of this
Mortgage.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 15

 
Release of Rights of Dower, Homestead and Distributive Share.  Each of the
undersigned hereby relinquishes all rights of dower, homestead and distributive
share in and to the Property and waives all rights of exemption as to any of the
Property.  If a Grantor is not an owner of the Property, that Grantor executes
this Mortgage for the sole purpose of relinquishing and waiving such rights.
 
DEFINITIONS.  The following capitalized words and terms shall have the following
meanings when used in this Mortgage.  Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America.  Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require.  Words and terms not otherwise defined in this Mortgage shall have
the meanings attributed to such terms in the Uniform Commercial Code:

Borrower.  The word “Borrower” means ART’S–WAY MANUFACTURING COMPANY, INC.  and
includes all co–signers and co–makers signing the Note and all their successors
and assigns.
 
Default.  The word “Default” means the Default set forth in this Mortgage in the
section titled “Default”.
 
Environmental Laws.  The words “Environmental Laws” mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act.  42 U.S.C. Section 6901, et seq., or other
applicable state or federal laws, rules, or regulations adopted pursuant
thereto.
 
Event of Default.  The words “Event of Default” mean any of the events of
default set forth in this Mortgage in the events of default section of this
Mortgage.
 
Grantor.  The word ‘Grantor” means ART’S—WAY MANUFACTURING COMPANY, INC.
 
Guaranty.  The word “Guaranty” means the guaranty from guarantor, endorser,
surety, or accommodation party to Lender, including without limitation a
guaranty of all or part of the Note.
 
Hazardous Substances.  The words “Hazardous Substances” mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human health
or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled.  The words “Hazardous
Substances” are used in their very broadest sense and include without limitation
any and all hazardous or toxic substances, materials or waste as defined by or
listed under the Environmental Laws.  The term “Hazardous Substances” also
includes, without limitation, petroleum and petroleum by—products or any
fraction thereof and asbestos.

 
 

--------------------------------------------------------------------------------

 
 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 16

 
Improvements.  The word “Improvements” means all existing and future
improvements, buildings, structures, mobile homes affixed on the Real Property,
facilities, additions, replacements and other construction on the Real Property.
 
Indebtedness.  The word “Indebtedness” means all principal, interest and late
fees, and other amounts, costs and expenses payable under the Note or Related
Documents, together with all renewals of.  extensions of, modifications of,
consolidations of and substitutions for the Note or Related Documents and any
amounts expended or advanced by Lender to discharge Grantor’s obligations or
expenses incurred by Lender to enforce Grantor’s obligations under this
Mortgage, together with interest on such amounts as provided in this
Mortgage.  Specifically, without limitation, Indebtedness includes the future
advances set forth in the Future Advances provision of this Mortgage, together
with all interest thereon.
 
Lender.  The word “Lender” means WEST BANK, its successors and assigns,
Mortgage.  The word “Mortgage” means this Mortgage between Grantor and Lender.
 
Note.  The word “Note” means the promissory note dated October 9, 2007, in the
original principal amount of $1,330,000.00 from Grantor to Lender, together with
all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the promissory note or agreement.  The
maturity date of this Mortgage is May 1, 2017.
 
Personal Property.  The words “Personal Property” mean all equipment, fixtures,
and other articles of personal property now or hereafter owned by Grantor, and
now or hereafter attached or affixed to the Real Property; together with all
accessions, parts, and additions to, all replacements of, and all substitutions
for, any of such property; and together with all proceeds (including without
limitation all insurance proceeds and refunds of premiums) from any sale or
other disposition of the Property.
 
Property.  The word “Property” means collectively the Real Property and the
Personal Property.
 
Real Property.  The words “Real Property” mean the real property, interests and
rights, as further described in this Mortgage.
 
Related Documents.  The words “Related Documents” mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness,
 
Rents.  The word “Rents” means all present and future rents, revenues, Income,
issues, royalties, profits, and other benefits derived from the Property.

 
 

--------------------------------------------------------------------------------

 

 
MORTGAGE
 
Loan No. 81289
(Continued)
Page 17

GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND
GRANTOR AGREES TO ITS TERMS.

GRANTOR ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS MORTGAGE AND ALL OTHER
DOCUMENTS RELATING TO THIS DEBT.

GRANTOR:

ART’S-WAY MANUFACTURING COMPANY, INC.

By:
/s/ Carrie L. Majeski
   
CARRIE L. MAJESKI, Secretary of ART’S-WAY
   
MANUFACTURING COMPANY, INC.
 

CORPORATE ACKNOWLEDGMENT

STATE OF IOWA
  )
   
  ) SS
 
COUNTY OF POLK
  )
 

On this 9th day of October, A.D. 2007, before me, the undersigned Notary Public
in said County and State, personally appeared President and CARRIE L. MAJESKI,
Secretary of ART’S-WAY MANUFACTURING COMPANY, INC., to me personally known, who,
being by me duly sworn did say they are authorized signers of said corporation,
that no seal has been procured by said corporation and that said instrument was
signed on behalf of the said corporation by authority of its Board of directors
and that CARRIE L. MAJESKI of ARTS-WAY MANUFACTURING COMPANY, INC. acknowledged
the execution of said instrument to be the voluntary act and deed of said
corporation by it voluntarily executed.

 
/s/ Kevin J. Smith
 
Notary Public

 
 

--------------------------------------------------------------------------------