EXHIBIT 10.3

 
Prepared by and Return to: Cristina Kuhn, Dorsey & Whitney LLP, 801 Grand, Suite
3900, Des Moines, Iowa 50309, (515) 283-1000
 
 
Grantor/Mortgagor/Taxpayer: Art’s-Way Manufacturing Co., Inc., 5556 Hwy 9,
Armstrong, IA 50514
Grantee/Mortgagee:  The First National Bank of West Union, 115 North Vine, P.O.
Box 233, West Union, Iowa  52175
Legal Description: See Exhibit A (Page A-1)
 

 
MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS
AND FIXTURE FINANCING STATEMENT
 

 
ART’S-WAY MANUFACTURING CO., INC.

as Mortgagor

and

THE FIRST NATIONAL BANK OF WEST UNION

as Mortgagee

Dated as of May 1, 2010

Notice:  This Mortgage secures credit in the amount of $1,300,000.  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.
 
This Mortgage contains an after acquired property clause.  This Mortgage
constitutes a construction mortgage within the meaning of Iowa Uniform
Commercial Code and Section 572.18 of the Code of Iowa.
 
 
 
 

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TABLE OF CONTENTS
 
This Table of Contents is not a part of this Mortgage and is provided only for
convenience of reference.
 
SECTION 1.
TERMS DEFINED.
3
SECTION 2.
TITLE TO THE MORTGAGED PROPERTY AND THE
STATUS OF THE LIEN OF THIS MORTGAGE;
MAINTENANCE OF LIEN; RECORDING; FURTHER ASSURANCE;
AFTER-ACQUIRED PROPERTY.
5
SECTION 3.
PAYMENTS UNDER THE AGREEMENT.
6
SECTION 4.
TAXES AND ASSESSMENTS.
6
SECTION 5.
MAINTENANCE AND REPAIR;
INSURANCE REQUIRED TO BE CARRIED.
7
SECTION 6.
INSPECTION OF THE MORTGAGED PROPERTY.
7
SECTION 7.
COMPLIANCE WITH LAWS.
7
SECTION 8.
ADVANCES.
8
SECTION 9.
MORTGAGE, SALE, LEASE, ETC. OF THE
MORTGAGED PROPERTY.
9
SECTION 10.
DEFAULTS, EVENTS OF DEFAULT.
9
SECTION 11.
REMEDIES ON DEFAULT.
10
SECTION 12.
ASSIGNMENT OF RENTS, ISSUES AND PROFITS; RECEIVER.
13
SECTION 13.
LITIGATION.
13
SECTION 14.
NON-WAIVER.
14
SECTION 15.
REMEDIES CUMULATIVE.
14
SECTION 16.
WAIVER OF CERTAIN RIGHTS AND REMEDIES.
14
SECTION 17.
ATTORNEYS FEES.
14
SECTION 18.
USURY.
14
SECTION 19.
SEVERABILITY.
15
SECTION 20.
SECURITY INTEREST; FINANCING STATEMENT.
15
SECTION 21.
CONSTRUCTION.
17
SECTION 22.
AMENDMENTS, CHANGES AND MODIFICATIONS.
17
SECTION 23.
ADDRESSES FOR NOTICE AND DEMANDS.
17
SECTION 24.
DISCHARGE OF LIEN.
17
SECTION 25.
INDEMNIFICATION OF THE MORTGAGEE.
18
SECTION 26.
DAMAGE, DESTRUCTION OR CONDEMNATION;
APPLICATION OF NET PROCEEDS.
18
SECTION 27.
EXECUTION OF COUNTERPARTS.
19
SECTION 28.
SPECIAL NOTICE IN ACCORDANCE WITH
SECTION 654.12A OF THE IOWA CODE.
19
SECTION 29.
CONSTRUCTION MORTGAGE.
19

 
 
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THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS AND FIXTURE
FINANCING STATEMENT (the “Mortgage”), made as of the 1st day of May, 2010, by
and between Art’s-Way Manufacturing Co., Inc.  (the “Mortgagor”), as Mortgagor,
and The First National Bank of West Union (the “Mortgagee”), as Mortgagee.
 
WITNESSETH:
 
WHEREAS, pursuant to the provisions of Chapter 16 of the Code of Iowa, 2009, as
amended (the “Act”), Iowa Finance Authority (the “Issuer”) has entered into a
Loan Agreement, dated as of even date herewith (as amended from time to time,
the “Agreement”) with the Mortgagor pursuant to which the Issuer has agreed to
issue its $1,300,000 Manufacturing Facility Revenue Note (Art’s-Way
Manufacturing Co., Inc. Project), Series 2010 (the “Series 2010 Note”) to (1)
finance a Project (as defined in the Loan Agreement) and (2) pay costs of
issuance associated with the Series 2010 Note; and
 
WHEREAS, the Agreement provides that the Issuer will lend the proceeds from the
sale of the Series 2010 Note to the Mortgagor and the Mortgagor will pay the
Issuer sums sufficient to pay the principal of, interest, and premium, if any,
on the Series 2010 Note as and when the same become due; and
 
WHEREAS, the Agreement further provides that as a condition to the issuance of
the Note, to secure performance by the Mortgagor of its obligations under the
Agreement, including the payment of sums sufficient to pay the Series 2010 Note
and any Additional Notes, as hereinafter defined (together, the “Notes”), and as
an inducement to the purchase of the Notes by all who shall at any time become
holders thereof, the Mortgagor will execute and deliver this Mortgage to the
Mortgagee; and
 
WHEREAS, the Agreement further provides for the issuance and sale from time to
time by the Issuer of bonds, notes or other obligations (the “Additional Notes”)
and the issuance or incurrence from time to time by the Mortgagor of Parity
Obligations (the “Parity Obligations”) to be of equal standing with the Notes
and the Mortgagor’s obligations under the Agreement and secured as a payment and
performance by a lien equal to and on a parity with the lien of this Mortgage;
and
 
WHEREAS, the last stated maturity of the Series 2010 Note and the maturity date
of this Mortgage, is June 1, 2020.
 
GRANTING CLAUSES
 
NOW, THEREFORE, for the purposes of securing the payment of all amounts now or
hereafter advanced under the Agreement, owing under the Notes, the Agreement,
any Parity Obligations or this Mortgage and the faithful performance of all
covenants, conditions, stipulations and agreements of the Notes, any Parity
Obligations, the Agreement and this Mortgage contained, and in consideration of
the premises, and as an inducement to the purchase of the Notes by all who shall
at any time become holders thereof, and other good and valuable consideration
the receipt whereof is hereby acknowledged, the Mortgagor has executed and
delivered this Mortgage to the Mortgagee and the Mortgagor does hereby grant,
bargain, sell, convey, transfer, assign, set over, mortgage, grant a security
interest in, and warrant to the Mortgagee, its successors and assigns forever,
all and singular the following described properties, whether now owned or
hereafter acquired (herein collectively called the “Mortgaged Property”):
 
 
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A.           All of the Mortgagor’s interest in the tract or parcel of land (the
“Land”) located in Fayette County, Iowa, that is described in Exhibit A attached
hereto;
 
B.           All buildings, structures, additions, improvements and
appurtenances now standing or at any time hereafter constructed on or made an
integral part of the Land;
 
C.           All building materials, building equipment and fixtures of every
kind and nature now or hereafter located on the Land and suitable or intended to
be incorporated in any building or structure now or hereafter standing on the
Land;
 
D.           All fixtures and articles of personal property that constitute
fixtures that will integrally belong to, be or hereafter become an integral part
of the Land, and whether attached or detached, and whether now owned or
hereafter acquired by Mortgagor, including, but without limiting the generality
of the foregoing, any and all carpeting, drapes, screens, awnings, storm
windows, floor coverings, call and sprinkler systems, and all attached heating,
lighting, ventilating, incinerating, air-conditioning and air-cooling equipment,
attached gas and electric machinery, and all of the right, title and interest of
the Mortgagor in and to any fixtures which may be subject to any title retention
or security agreement superior in lien to the lien of this Mortgage, and all
additions, accessions, increases, parts, fittings, accessories, replacements,
substitutions, betterments, repairs and proceeds of all of the foregoing, all of
which shall be construed as fixtures;
 
E.           Any and all leases, subleases, licenses, concessions or grants of
other possessory interests now or hereafter in force, oral or written, covering
or affecting the building and improvements to be constructed on the Land;
 
F.           All the rents, issues, uses, profits, condemnation awards,
insurance proceeds and other rights and interests now or hereafter belonging or
in any way pertaining to the Mortgagor’s interest in the Land and each and every
lease, sublease and agreement described in the foregoing paragraph E and every
right, title and interest thereunder, from the date of this Mortgage until the
terms hereof are complied with and fulfilled; and
 
G.           All machinery, apparatus, equipment, furnishings and personal
property wherever located which may or might now or hereafter be or be deemed to
be personal property and not an integral part of the Land now owned or
hereinafter acquired by the Mortgagor (hereinafter called the “Equipment”) and
all accessions, parts, fittings, accessories, replacements, substitutions,
betterments, repairs and proceeds of all of the foregoing, and a security
interest is hereby granted by the Mortgagor and hereby attaches thereto, all as
provided by the Iowa Uniform Commercial Code;
 
 
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TOGETHER with the reversions, remainders and benefits and all other revenues,
rents, earnings, issues and income and profits arising or to arise out of or to
be received or had of and from the properties hereby mortgaged or intended so to
be or any part thereof and all the estate, right, title, interest and claims, at
law or in equity which the Mortgagor now or may hereafter acquire or be or
become entitled to in and to the aforesaid properties and any and every part
thereof.  The above described Mortgaged Property is hereby declared to be
subject to the lien of this Mortgage as security for the payment of the
aforementioned indebtedness.
 
TO HAVE AND TO HOLD all and singular, the Mortgaged Property, whether now owned
or hereafter acquired, unto the Mortgagee, its successors and assigns forever;
provided, however, that this Mortgage is upon the express condition that if the
Mortgagor shall pay or cause to be paid all indebtedness secured hereby and
shall keep, perform and observe all and singular the covenants and promises in
the Notes and in this Mortgage expressed to be kept, performed and observed by
the Mortgagor, then this Mortgage and the rights hereby granted shall cease,
determine and be void, otherwise to remain in full force and effect.
 
As additional security for the payment of the Notes and the amounts due under
the Agreement and the payment of any Parity Obligations, the Mortgagor hereby
further covenants, warrants and agrees with the Mortgagee as follows:
 
SECTION 1. Terms Defined.
 
All words and phrases defined in Article I of the Agreement shall have the same
meaning in this Mortgage, unless the context clearly otherwise requires.  In
addition, the following words and phrases shall have the following meanings:
 
“Net Proceeds”, when used with respect to any insurance or condemnation award,
means the gross proceeds from the insurance or condemnation award remaining
after payment of all expenses (including attorneys fees and any extraordinary
expenses of the Mortgagee) incurred in the collection of such gross proceeds.
 
“Permitted Encumbrances” means, as of any particular time:
 
(i) liens for real estate taxes, ad valorem taxes and special assessments or
installments thereof not then delinquent;
 
(ii) presently recorded utility, access and other easements and rights of way
which do not underlie any existing or contemplated improvements, restrictions
and exceptions that will not materially interfere with or impair any activities
permitted under applicable zoning ordinances or the operations currently being
conducted on the Mortgaged Property or elsewhere on the Land;
 
(iii) such minor defects, irregularities, encumbrances (exclusive of liens and
judgments) and clouds on title as normally exist with respect to properties
similar in character to the Mortgaged Property and as do not in the aggregate
render title unmarketable or materially impair (a) the property affected thereby
for the purpose for which it was acquired or is held by the Mortgagor or (b) the
value of the Mortgaged Property as security for any other obligations secured
hereby;
 
 
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(iv) zoning and building laws, ordinances or regulations and similar
restrictions which are not violated by the Mortgaged Property or its current or
contemplated uses;
 
(v) liens arising in connection with taxes, assessments, or statutory
obligations or liens which are not delinquent;
 
(vi) undetermined or inchoate liens and charges incidental to construction,
which have not at the time been filed pursuant to law, including those of
contractors, subcontractors, materialmen and suppliers with respect to the
Project, expressly excluding any such liens or charges as and when same are
filed, become determined or a choate lien or encumbrance upon the Mortgaged
Property unless such liens are being contested in good faith by appropriate
negotiations or proceedings and in a manner not to jeopardize any of the
Mortgaged Property or subject the Mortgagee to any liability and adequate
reserves as agreed upon by the Mortgagor and the Mortgagee are maintained by the
Mortgagor with the Mortgagee in escrow to assure full payment thereof;
 
(vii) such other liens and charges at the time required by law as a condition
precedent to the exercise of any privileges or licenses necessary to the normal
operations of the Mortgagor which are not delinquent;
 
(viii) this Mortgage and any financing statements showing the Mortgagor as the
debtor and the Mortgagee as the secured party;
 
(ix) liens on property received by the Mortgagor through gifts, grants or
bequests, such liens being due to restrictions on such gifts, grants or bequests
of property or income thereon;
 
(x) any lien or security interest created in connection with the issuance of
Additional Notes or Parity Obligations;
 
(xi) any subordinate mortgage, security interest or lien;
 
(xii) any purchase money security interest in personal property acquired by the
Mortgagor and any financing statement showing (i) the Mortgagor as debtor and
(ii) the holder of such purchase money security interest as the secured party;
and
 
(xiii) any capital lease for personal property being acquired by the Mortgagor
and any financing statement showing (i) the Mortgagor as debtor and (ii) the
lessor of such personal property as the secured party.
 

 
“Repayment Rate” means the rate of 10% per annum.
 
 
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SECTION 2. Title to the Mortgaged Property and the Status of the Lien of this
Mortgage; Maintenance of Lien; Recording; Further Assurance; After-Acquired
Property.
 
(a) The Mortgagor is lawfully seized of the Land and the lien created by this
Mortgage is a first, prior and paramount lien on the Mortgagor’s interest in and
to the Land and the remainder of the above described Mortgaged Property, except
for Permitted Encumbrances, and Mortgagor will keep said premises and the
rights, privileges and appurtenances thereto free from all lien claims of every
kind on a parity with or superior to the lien of this Mortgage, except Permitted
Encumbrances and as otherwise provided in this Mortgage, and if any such lien be
filed, Mortgagor, within thirty (30) days after such filing shall cause same to
be discharged by payment or protected against by bonding or adequate reserves as
agreed upon by the Mortgagor and the Mortgagee being maintained with the
Mortgagee in escrow.  The Mortgagor further agrees to protect and defend the
title and possession of the Mortgaged Property so that this Mortgage shall be
and remain a lien thereon prior to all liens other than Permitted Encumbrances
until the Notes, any Parity Obligations and the indebtedness secured hereby have
been fully paid, or if foreclosure sale be had hereunder so that the purchaser
at said sale shall acquire good title in and  to said premises free and clear of
all liens and encumbrances, except Permitted Encumbrances;
 
(b) The Mortgagor will, at its expense, take all necessary action to maintain
and preserve the lien and security interest of this Mortgage so long as any of
the Notes, any Parity Obligations and any of the indebtedness secured hereby
remain outstanding;
 
(c) The Mortgagor will, forthwith after the execution and delivery of this
Mortgage and thereafter from time to time, cause this Mortgage and any financing
statements in respect thereof to be filed, registered and recorded in such
manner and in such places as may be required by law in order to publish notice
of and fully to protect the lien hereof upon, and the title of the Mortgagor to,
the Mortgaged Property; and from time to time will perform or cause to be
performed any other act as provided by law and will execute or cause to be
executed any and all continuation statements and further instruments for such
publication and protection.  Except to the extent that it is exempt therefrom,
the Mortgagor will pay or cause to be paid all filing, registration and
recording fees incident to such filing, registration and recording, and all
expenses incident to the preparation, execution and acknowledgment of this
assurance, and all federal or state fees and other similar fees, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Mortgage and such instruments of further
assurance;
 
(d) The Mortgagor will do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered, all such further acts, deeds,
conveyances, mortgages, assignments, transfers, financing statements,
continuation statements and assurances as the Mortgagee reasonably may require
for the better assuring, conveying, mortgaging, assigning and confirming unto
the Mortgagee all and singular the Mortgaged Property as now or hereafter
constituted; and
 
 
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(e) All right, title and interest of the Mortgagor in and to all improvements,
betterments, renewals, substitutions, replacements and proceeds of the Mortgaged
Property or any part thereof, hereafter constructed or acquired by the
Mortgagor, which shall become a part of the Mortgaged Property, immediately upon
such construction or acquisition, and without any further mortgaging, conveyance
or assignment, shall become and be part of the Mortgaged Property and shall be
subject to the lien of this Mortgage as fully and completely and with the same
effect as though now owned by the Mortgagor, but at any and all times the
Mortgagor will execute and deliver to the Mortgagee any and all such further
assurances, mortgages, conveyances or assignments therefor and other instruments
with respect thereto as the Mortgagee may reasonably require for the purpose of
expressly and specifically subjecting the same to the lien of this Mortgage.
 
SECTION 3. Payments Under the Agreement.
 
The Mortgagor agrees to pay the repayment installment and other amounts required
by the Agreement and all amounts due under the Notes and any Parity Obligations
in accordance with their terms.
 
SECTION 4. Taxes and Assessments.
 
The Mortgagor agrees to promptly pay before the same become delinquent:
 
(a) All taxes, liabilities, charges, impositions and assessments of every type
or nature at any time levied and assessed upon or against the Mortgaged
Property;
 
(b) All other claims which might or could become a lien on the Mortgaged
Property or any part thereof equal to or prior to the lien of this Mortgage
except for Permitted Encumbrances unless approved in writing by the Mortgagee;
 
(c) All taxes, assessments or impositions upon this Mortgage or on the interest
of the Mortgagee herein, or upon the Agreement, the Notes, any Parity
Obligations or indebtedness secured hereby.
 
Provided, however, that no such tax, liability, charge, imposition, assessment
or claim need be paid so long as the validity thereof is being contested in good
faith by appropriate proceedings and in a manner not to jeopardize any of the
Mortgaged Property or to subject the Mortgagee to any liability, and adequate
reserves as agreed upon by the Mortgagor and the Mortgagee are maintained by the
Mortgagor with the Mortgagee in escrow to assure full payment thereof.
 
Except as otherwise provided in this Mortgage and the Loan Agreement, the
Mortgagor will not allow to arise or exist any lien of whatsoever kind or nature
equal to or prior to the lien of this Mortgage, or create, allow to arise or
exist any lien thereof upon the Mortgaged Property, or any part thereof, save
and except for Permitted Encumbrances which, as herein provided, are permitted
to remain unpaid.
 
The Mortgagor agrees to exhibit to the Mortgagee, at least annually and at any
time upon request, official receipts showing payment of all taxes, assessments
and charges which the Mortgagor is required or elects to pay hereunder ten days
prior to the respective delinquency dates.

 
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SECTION 5. Maintenance and Repair; Insurance Required to be Carried.
 
The Mortgagor shall at all times maintain, preserve and keep, or shall cause to
be maintained, the Mortgaged Property and every part thereof in good condition,
repair and working order (ordinary wear and tear accepted) and will from time to
time make, or shall cause to be made, all needful and proper repairs thereto and
renewals, replacements, additions, betterments and improvements thereto so that
the value and the operating efficiency thereof shall at all times be maintained
and preserved.  Except for the Project and all improvements related thereto, the
Mortgagor will not commit or permit waste of the Mortgaged Property or any part
thereof, and shall not remove or demolish nor alter or impair the structural
character of any building, structure, or other improvements now or hereafter
situated upon the Land without the prior written consent of the Mortgagee.  The
Mortgagor shall not do or permit any other act or thing that will damage the
Mortgaged Property or cause the same or any part thereof to depreciate in value,
reasonable and ordinary wear and tear excepted.  Notwithstanding the foregoing
or the requirements of Section 9 hereof, the Mortgagor may remove and dispose of
obsolete, worn out or surplus items of Equipment or replace any item of
Equipment with Equipment of equivalent function or utility without consent of
the Mortgagee.
 
The Mortgagor shall maintain insurance on the insurable portions of the
Mortgaged Property of a kind and in an amount which normally would be carried by
private companies engaged in a similar kind of business, including, but not
limited to, comprehensive general public liability insurance, workers’
compensation insurance, use and occupancy insurance, professional liability
insurance, business interruption and boiler insurance.
 
SECTION 6. Inspection of the Mortgaged Property.
 
The Mortgagee may (but has no duty to) by itself, its agents or workmen enter
and inspect during normal business hours and upon providing reasonable notice to
Mortgagor, unless an Event of Default has occurred, any part of the Mortgaged
Property for the purpose of inspecting the same and for the purpose of
performing any of the acts it is authorized to perform under the terms of this
Mortgage.
 
SECTION 7. Compliance with Laws.
 
The Mortgagor shall furnish and keep in force a certificate of occupancy, or its
equivalent, and shall comply with all laws, ordinances, regulations, covenants,
conditions and restrictions from time to time affecting the Mortgaged Property
and shall not suffer or permit any act to be done in or upon the Mortgaged
Property in violation thereof, unless and to the extent the same are being
contested in good faith by appropriate proceedings and in a manner not to
jeopardize the Mortgaged Property or the lien or priority of this Mortgage or
the Notes or subject the Mortgagee to any liability.
 
Except as heretofore disclosed by the Mortgagor to Mortgagee in writing, the
Mortgagor has no knowledge of any public health, environmental or other land-use
action or proceeding, either instituted or threatened, which would or might
materially and detrimentally affect the use or operation of the Mortgaged
Property or materially and adversely affect the value thereof.  Promptly upon
learning of any such action or proceeding, whether threatened or initiated, the
Mortgagor will notify the Mortgagee thereof in writing.
 
 
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All public health and environmental permits, licenses and authorizations
required by law, ordinance or regulation, if any, in connection with the
intended use or operation of the Mortgaged Property have been obtained; and the
Mortgagor and any lessee claiming by, through or under the Mortgagor at all
times hereafter will be in full compliance in all material respects with all
requirements of all such permits, licenses, authorities, laws, regulations and
ordinances.
 
If any of the foregoing covenants or representations are breached or prove to be
inaccurate in any material respect, then, in addition to all rights, powers and
remedies granted to the Mortgagee by law hereunder (including rights of
acceleration of indebtedness as in the case of any other default or Event of
Default hereunder or under any obligation secured hereby) the Mortgagee, upon
failure of the Mortgagor to do so and in exercise of its reasonable judgment,
may (but shall not be required to) do any or all of the following, at the
expense of the Mortgagor:
 
(a) Appear in and defend any such action or proceeding; and
 
(b) Retain such legal and technical advice and counsel as the Mortgagee believes
necessary to protect itself and the security of this instrument.
 
The Mortgagor hereby agrees to indemnify, protect and hold the Mortgagee
harmless of and from all loss or damage (including reasonable attorneys’ fees
and expenses) which the Mortgagee may incur by reason of any material breach or
inaccuracy in any of the covenants or representations contained in this Section.
 
If any action has occurred in the past which would constitute a violation of any
of the laws, ordinances and regulations referred to in this Section, the
Mortgagor hereby agrees to indemnify, protect and hold the Mortgagee harmless of
and from all loss or damage (including reasonable attorneys’ fees and expenses)
which the Mortgagee may incur by reason thereof.
 
SECTION 8. Advances.
 
Upon the Mortgagor’s failure to comply with the preceding covenants and
agreements, the payment of prior liens, liens on a parity with this Mortgage,
taxes, assessments and charges, and maintenance of insurance and repairs as
required by the Agreement and this Mortgage, the Mortgagee without prejudice to
any rights given herein may upon notice to the Mortgagor make advances to
perform the same in behalf of the Mortgagor and, in furtherance thereof, the
Mortgagee may: place or cause the Mortgaged Property to be placed in good
condition, repair and working order; pay, settle or contest any such taxes,
liabilities, charges and assessments; redeem the Mortgaged Property from any
sale or forfeiture for any tax or assessment; purchase any tax title obtained or
that shall be obtained thereon; pay any judgments based on such tax or
assessment; pay, settle or contest any unpermitted lien on the Mortgaged
Property and procure such insurance as may be necessary to comply with the
provisions of this Mortgage and the Agreement.  The Mortgagor hereby agrees to
repay all sums so advanced, on demand, with interest thereon, to the extent
permitted by law, from the date advanced until paid at the Repayment Rate, and
all sums so advanced with interest as aforesaid until paid by the Mortgagor
shall be immediately due and payable and be added to and become a part of any
indebtedness or obligation secured hereby in such manner or order as the
Mortgagee may desire or determine, having the benefit of the lien hereby created
as a part thereof, and of its priority, but no such advances shall be deemed to
relieve the Mortgagor from any default hereunder or impair any right or remedy
consequent thereon, and the exercise of the rights to make advances granted in
this Section shall be optional with the Mortgagee and not obligatory, and the
Mortgagee shall not in any case be liable to the Mortgagor for failure to
exercise any such right.
 
 
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SECTION 9. Mortgage, Sale, Lease, etc. of the Mortgaged Property.
 
Except as hereinafter provided, the Mortgagor will not, now or in the future,
mortgage, pledge or encumber or place any lien or encumbrance (or permit same to
exist) on the Mortgaged Property, or any part thereof except as provided in the
Agreement and without the consent of the Mortgagee except for Permitted
Encumbrances.
 
The Mortgagor shall not sell, convey, transfer or otherwise alienate in any
manner, whether directly or indirectly, any right, title or interest in the
Mortgaged Property, or any part thereof having a value in excess of $100,000,
except as expressly permitted under the Agreement and this Mortgage (ordinary
wear and tear excepted).  The Mortgagor may however lease any portion or all of
the Mortgaged Property as permitted under the Agreement.
 
Nothing in this Mortgage shall prohibit the Mortgagor from (1) conveying,
mortgaging, pledging, encumbering or placing a lien on any equipment and
personal property that do not constitute fixtures, (2) leasing equipment and
personal property that do not constitute fixtures; and (3) giving a purchase
money security interest in equipment or personal property that do not constitute
fixtures.
 
SECTION 10. Defaults, Events of Default.
 
If any of the following defaults occur, it is hereby declared to constitute an
“Event of Default”:
 
(a) The occurrence of an Event of Default under the Agreement or an event of
default under any Additional Notes or Parity Obligations; or
 
(b) The failure of the Mortgagor to observe and perform any covenant, condition
or agreement on its part to be observed or performed in this Mortgage (other
than an occurrence which may sooner constitute an Event of Default under the
Agreement or an event of default under any Additional Notes or Parity
Obligations) for a period of thirty (30) days after written notice specifying
such failure and requesting that it be remedied, given to the Mortgagor by the
Mortgagee, unless the Mortgagee shall agree in writing to an extension of such
time prior to its expiration; provided that any such default may be waived by
the Mortgagee.
 
SECTION 11. Remedies on Default.
 
Upon the occurrence of an Event of Default:
 
 
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(a) The Mortgagee may, at its option, by notice in writing to the Mortgagor and
the holder of any Parity Obligation, declare the installments under the
Agreement and in the Notes or any Parity Obligations remaining unpaid
immediately due and payable and accelerate the Notes or Parity Obligations, upon
the same terms and conditions and in the manner provided for in the Agreement;
 
(b) The Mortgagee may, at its option, after notice in writing to the Mortgagor
and the holder of any Parity Obligation, institute proceedings for the
collection at law or in equity of any and all indebtedness due under the
provisions of the Agreement secured by this Mortgage;
 
(c) The Mortgagee may, at its option, after notice in writing to the Mortgagor,
immediately cause this Mortgage to be foreclosed in the manner prescribed by law
and, upon the commencement of foreclosure proceedings, shall be entitled to have
a receiver appointed at once or at any time thereafter, either before or after
sale, without notice and without requiring bond, and without regard to the
solvency or insolvency of any person liable for payment of the indebtedness
secured hereby, and without regard to the then value of the Mortgaged Property
(the provisions for the appointment of a receiver and assignment of rents hereby
granted to the Mortgagee being an express condition upon which the loans and
payments hereby secured are made) for the benefit of the Mortgagee, with power
to rent the same and to collect the rents, issues and profits of the Mortgaged
Property, due and to become due, during the pendency of such foreclosure suit
and in the case of a sale and deficiency, during the full statutory period of
redemption whether there be redemption or not, as well as during any future
times when the Mortgagor, except for the intervention of such receiver, would be
entitled to collect such rents, issues and profits and shall have all other
powers which may be necessary or are usual in such cases for the protection,
possession, control, management and operation of the Mortgaged Property during
the whole of said period. Any amount so collected by such receiver, whether
prior to or following foreclosure, shall be applied under direction of the court
upon the costs and expenses of foreclosure and receivership, expense of
insurance on the improvements, expense of repairs, taxes, assessments, and the
balance shall be paid to the Mortgagee to be applied on the indebtedness secured
by this Mortgage in accordance with the Agreement and any Parity Obligation, pro
rata, according to their outstanding principal amounts.
 
(d) The Mortgagee may, at its option, after 10 days notice in writing to the
Mortgagor and the holder of any Notes or Parity Obligation, at any time either
by its agents, attorneys, employees or by a receiver to be appointed by a court
and without regard to the adequacy of any security for the indebtedness hereby
secured, either with or without process of law, forcibly or otherwise (to the
extent permitted by law), enter upon and take possession of the Mortgaged
Property or any part thereof, expel and remove any persons, goods or chattels
occupying or upon the same, do and perform any act that the Mortgagee may deem
necessary or proper to conserve the value thereof, and to collect and receive
all rents, issues and profits therefrom, including those past due and unpaid, as
well as those accruing thereunder, to manage and control the same, and to lease
the same or any part thereof.  The Mortgagor further agrees that the Mortgagee
may also take possession of, and use any and all personal property contained in
the Mortgaged Property and used by the Mortgagor in the rental or leasing of the
Mortgaged Property or any part thereof.  The expense (including receiver’s fees,
if any, and compensation to any agent appointed by the Mortgagee, and counsel
fees and costs and disbursements) incurred in taking possession and effecting
such collection, shall be deemed a portion of the expense of this Mortgage
secured hereby.  Neither the collection of such rents, issues and profits and
the application or release thereof as aforesaid shall cure or waive any
default.  After deducting all attorneys fees and expenses incurred in connection
herewith, the remaining net income shall be paid to the Mortgagee to be applied
upon the indebtedness secured hereby in accordance with the Agreement according
to their outstanding principal amounts.
 
 
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In any suit to foreclose the lien of this Mortgage there shall be allowed and
included in the decree for sale, to be paid out of the proceeds of such sale:
 
(i) All of the principal remaining unpaid on the Notes, and the principal
balance of any Parity Obligation, plus all interest accrued thereon and which
will accrue thereon to the date of payment, plus interest on the foregoing
amounts of principal and interest (to the extent permitted by law) from their
respective due dates until paid;
 
(ii) All items advanced or paid by the Mortgagee pursuant to this Mortgage, with
interest thereon at the Repayment Rate per annum from the date of advancement
until paid; and
 
(iii) All reasonable court costs, attorneys’ fees, appraisers’ fees,
expenditures for documentary and expert evidence, stenographer’s charges,
publication costs, and costs (which may be estimated as to items to be expended
after entry of the decree) of procuring all abstracts of title, title searches
and examinations, title guarantee or insurance policies, and similar data with
respect to title which the Mortgagee may deem necessary in connection with any
proceeding, including probate and bankruptcy proceedings, to which the Mortgagee
shall be a party, either as plaintiff, claimant or defendant, by reason of this
Mortgage or any indebtedness secured or in connection with preparations for the
commencement of any suit for the foreclosure hereof after accrual of such right
to foreclose, whether or not actually commenced, and all such expenses shall
become so much additional indebtedness secured hereby and immediately due and
payable, with interest thereon at the Repayment Rate per annum from the date
when paid or incurred by the Mortgagee until paid.
 
The proceeds of any foreclosure shall be distributed and applied to the items
described in (ii) and (iii) of this Section, in the order of their listing, then
to (i) and any surplus of the proceeds of such sale shall be paid to the
Mortgagor.
 
In case of any sale under this Mortgage by virtue of judicial proceedings or
otherwise, the Mortgaged Property may be sold in one parcel, as an entirety, or
in such parcels, manner or order as the Mortgagee in its sole discretion may
elect, and the Mortgagor waives any and all rights which the Mortgagor may have
to insist upon the sale of the Mortgaged Property in one parcel or separate
parcels.
 
To the extent permitted by law, the Mortgagor hereby waives any and all rights
of redemption or reinstatement that it may have.
 
 
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If the aforementioned waiver is not effective, then it is agreed that if this
Mortgage covers less than ten (10) acres of land, and in the event of the
foreclosure of this Mortgage and sale of the property by sheriff’s sale in such
foreclosure proceedings, the time of one (1) year for redemption from said sale
provided by the statutes of the State of Iowa shall be reduced to six (6) months
provided the Mortgagee, in such action, files an election to waive any
deficiency judgment against Mortgagor which may arise out of the foreclosure
proceedings; all to be consistent with the provisions of Chapter 628 of the Code
of Iowa, 2009, as amended (the “Iowa Code”).  If the redemption period is so
reduced, for the first three (3) months after the sale, such right of redemption
shall be exclusive to the Mortgagor, and the time periods in Sections 628.5,
628.15 and 628.16 of the Iowa Code shall be reduced to four (4) months.
 
It is further agreed that the period of redemption after a foreclosure of this
Mortgage shall be reduced to sixty (60) days if all of the three following
contingencies develop: (1) the real estate is less than ten (10) acres in size;
(2) the court finds affirmatively that the said real estate has been abandoned
by the owners and those persons personally liable under this Mortgage at the
time of such foreclosure; and (3) Mortgagee in such action files an election to
waive any deficiency judgment against Mortgagor or its successor in interest in
such action.  If the redemption period is so reduced, Mortgagor or its
successors in interest or the owner shall have the exclusive right to redeem for
the first thirty (30) days after such sale, and the time provided for redemption
by creditors as provided in Sections 628.5, 628.15 and 628.16 of the Iowa Code
shall be reduced to forty (40) days.  Entry of appearance by pleading or docket
entry by or on behalf of Mortgagor shall be presumption that the property is not
abandoned.  Any such redemption period shall be consistent with all of the
provisions of Chapter 628 of the Iowa Code.
 
This Section shall not be construed to limit or otherwise affect any other
redemption provisions contained in Chapter 628 of the Iowa Code.  This Section
also shall not be construed to limit Mortgagee’s right to elect foreclosure
without redemption or to elect foreclosure by nonjudicial procedure as set forth
in Chapters 654 and 655A of the Iowa Code.  Mortgagor agrees that, in the event
of a foreclosure of the Mortgage, under any provision of Iowa law, Mortgagee
shall be entitled to sole possession and use of the Mortgaged Property during
any redemption period.
 
Any sale or sales under this Section shall operate, after any applicable
redemption period, to divest all estate, right, title, interest, claim or demand
whatsoever, whether at law or in equity, of the Mortgagor in and to the
premises, property, privileges and rights so sold, and shall be a perpetual bar
both at law and in equity against the Mortgagor, its successors and assigns and
against any and all persons claiming or who may claim the same, or any part
thereof, from, through or under the Mortgagor, its successors or assigns.
 
SECTION 12. Assignment of Rents, Issues and Profits; Receiver.
 
All of the rents, issues, proceeds and profits and any and all leases, subleases
and the rights of management of the Mortgaged Property are hereby assigned to
the Mortgagee as further security for the payment of the indebtedness and
performance of the Notes and any Parity Obligations, covenants, promises and
agreements secured hereby in granting clauses E and F hereof.  Such assignment,
grant and conveyance is intended by the parties hereto to be a present
conveyance of and security interest in and chattel mortgage upon such
collateral, subject to the right of the Mortgagor to receive the same prior to
any default hereunder, and is not a mere pledge of such collateral to be given
effect as a lien upon default, foreclosure and the appointment of a
receiver.  The Mortgagor agrees that it will duly perform and observe all of the
terms and provisions of the landlord’s part to be performed and observed under
any and all leases of the Mortgaged Property and that it will refrain from any
action or inaction which would result in the termination by the tenants
thereunder of any such leases or subleases or in the diminution of the value
thereof or of the rents, issues, profits and revenues thereunder.  Nothing
herein contained shall be deemed to obligate the Mortgagee to perform or
discharge any obligation, duty or liability of landlord under any lease of the
Mortgaged Property, and the Mortgagor shall and does hereby agree to indemnify
and hold the Mortgagee harmless from any and all liability, loss or damage which
the Mortgagee may or might incur in good faith under any lease of the Mortgaged
Property, and any and all such liability, loss or damage incurred by the
Mortgagee, together with the costs and expenses, including reasonable attorneys’
fees, incurred by the Mortgagee in the defense of any claims or demands therefor
(whether successful or not), shall be so much additional indebtedness hereby
secured, and the Mortgagor shall reimburse the Mortgagee therefor on demand,
together with interest at the Repayment Rate per annum, from the date of demand
to the date of payment.
 
 
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SECTION 13. Litigation.
 
If any action or proceedings be commenced, to which action or proceeding the
Mortgagee is made a party by reason of the execution of this Mortgage or in
which the Mortgagee deems it necessary to appear or answer in order to uphold
the lien of this Mortgage or the priority thereof or the possession of the
Mortgaged Property, or otherwise to protect the interest of the Noteholders, the
holders of the Parity Obligations, or the Mortgagee or security hereunder, all
sums paid or incurred by the Mortgagee for attorneys fees and other expenses in
such action or proceeding shall be repaid by the Mortgagor, together with
interest thereon to the extent permitted by law from the date of payment by the
Mortgagee at the Repayment Rate per annum until paid and all such sums and the
interest thereon shall be immediately due and payable and shall be added to and
become a part of the indebtedness secured hereby, and be secured hereby, having
the benefit of the lien hereby created and of its priority.
 
SECTION 14. Non-Waiver.
 
Acceptance by the Mortgagee of any sum in payment or part payment of any
indebtedness secured hereby after the same is due or after foreclosure
proceedings are filed shall not constitute a waiver of the right to require
prompt payment when due of all the sums so secured nor shall such acceptance
cure or waive any remaining default or invalidate any foreclosure proceedings
for any such remaining default or prejudice any of the rights of the
Noteholders, the holders of any Parity Obligations or the Mortgagee under this
Mortgage.  Further, the failure of the Mortgagee to insist upon the strict
performance of any of the covenants or agreements of the Mortgagor contained in
this Mortgage, or the delay by the Mortgagee in the enforcement of any of its
remedies herein contained upon any default of the Mortgagor shall never
constitute a waiver of any requirement or obligation of the Mortgagor or right
or remedy of the Mortgagee contained in or based upon said covenants or
agreements.
 
 
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SECTION 15. Remedies Cumulative.
 
No remedy herein or in the Agreement conferred upon or reserved to the Mortgagee
is intended to be exclusive of any other remedy or remedies, and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by
statute.  In addition, no recovery of any judgment by the Mortgagee and no levy
of any execution under any judgment upon the Mortgaged Property or upon any
other property shall affect the lien created by this Mortgage upon the Mortgaged
Property or any part thereof or any lien, rights, powers or remedies of the
Mortgagee hereunder, but such lien, rights, powers or remedies of the Mortgagee
shall continue unimpaired as before.
 
SECTION 16. Waiver of Certain Rights and Remedies.
 
If applicable and if permitted by law, the Mortgagor hereby waives and releases
any and all rights and remedies related to redemption or marshalling of liens
and assets under the Mortgage.
 
SECTION 17. Attorneys’ Fees.
 
The Mortgagor hereby agrees in the event of foreclosure to pay to the Mortgagee
such reasonable attorneys’ fees as are authorized by law, together with the cost
of extending the abstract and all court costs.
 
SECTION 18. Usury.
 
Notwithstanding any provision herein or in the Agreement, the total liability
for payments in the nature of interest shall not exceed the limits imposed by
the usury laws of Iowa, if such laws are applicable to this transaction.
 
SECTION 19. Severability.
 
If any provision hereof should be held unenforceable or void, then such
provision shall be deemed separable from the remaining provisions and shall in
no way affect the validity of this Mortgage.
 
All rights, remedies and powers provided by this Mortgage may be exercised only
to the extent that the exercise thereof does not violate any applicable
provision of law in the premises, and all the provisions of this Mortgage are
intended to be subject to all applicable mandatory provisions of law which may
be controlling in the premises and to be limited to the extent necessary so that
they will not render this Mortgage invalid or unenforceable under the provisions
of any applicable law.
 
SECTION 20. Security Interest; Financing Statement.
 
Mortgagor executes this instrument as a Debtor under the Iowa Uniform Commercial
Code, it being intended that this Mortgage shall constitute and be a security
agreement and financing statement under the laws of the State of Iowa.
 
 
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This Mortgage constitutes a financing statement filed as a fixture filing under
the Iowa Uniform Commercial Code, as amended or recodified from time to time,
covering any of the collateral which now is or later may become fixtures
attached to the Land or the improvements thereon.  Pursuant to the provisions of
Section 554.9515 subparagraph 7 of the Iowa Code, such fixture filing remains in
effect until this Mortgage is released or satisfied of record or its
effectiveness otherwise terminates as to the Land.  The following addresses are
the mailing addresses of Mortgagor, as debtor under the Iowa Uniform Commercial
Code, and Mortgagee, as secured party under the Iowa Uniform Commercial Code,
respectively:

Mortgagor/
Debtor/Record Owner:
 
Art’s-Way Manufacturing Co., Inc.
5556 Hwy 9
Armstrong, Iowa  50514
Attention:  Chief Executive Officer
 
Type of Organization: Corporation
Organizational Number: 129532 (IA)
                                           2187431 (DE)
        Mortgagee/     Secured Party: 
The First National Bank of West Union
115 North Vine
P.O. Box 233
West Union, Iowa  52175
Attention:  Legal Department
 

 
 
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Description of the types (or
items) of property covered
by this Fixture Filing:
See granting clauses (C) & (D)     on page 2 and 3 hereof.              
Description of real estate
to which the collateral is
attached or upon which it
is or will be located: 
See Exhibit A hereto.

 
Upon the occurrence of an Event of Default hereunder in addition to the other
rights and remedies available to it, the Mortgagee may exercise all other rights
and remedies with respect to such property that are available to a secured party
under the Iowa Uniform Commercial Code.  In the event notice of intended
disposition of such property is required by law in any particular instance, the
Mortgagor agrees that notice given in the manner and place provided in Section
23 hereunder and sent ten (10) days prior to a disposition of collateral is
commercially reasonable notification within the meaning of the Iowa Uniform
Commercial Code.  Information concerning the security interests may be obtained
from the parties at the addresses set forth above.
 
The Mortgagor warrants and agrees that no financing statement or security
agreement covering any of the Mortgaged Property is or will be placed on file in
any public office or delivered to any secured party except pursuant hereto,
except for Permitted Encumbrances.
 
The Mortgagor authorizes the Mortgagee to prepare, execute, file, record or
deliver financing statements, continuation statements, termination statements,
statements of assignment or like documents to perfect, preserve or release the
Mortgagee’s interest in the Equipment and proceeds thereof.

The Mortgagor shall not remove any Equipment from the Mortgagor’s premises
except in the ordinary course of the Mortgagor’s business.

While an Event of Default exists: (a) the Mortgagor will deliver to the
Mortgagee from time to time, as requested by the Mortgagee, current lists of all
Equipment; (b) the Mortgagor will not dispose of any Equipment or proceeds
except on terms approved by the Mortgagee; (c) at the Mortgagee’s request, the
Mortgagor will assemble and deliver all Equipment and proceeds, and books and
records pertaining thereto, to the Mortgagee at a reasonably convenient place
designated by Mortgagee; and (d) the Mortgagee may, without notice to the
Mortgagor, enter onto the Mortgagor’s premises and take possession of the
Equipment.  The Mortgagor further agrees that the Mortgagee shall have no
obligation to process or prepare any Equipment for sale or other disposition.
 
 
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SECTION 21. Construction.
 
This Mortgage shall be construed according to the laws of the State of Iowa.
 
SECTION 22. Amendments, Changes and Modifications.
 
The Mortgagor and the Mortgagee may from time to time enter into amendments,
changes and modifications of this Mortgage, but only in writing signed by
Mortgagor and Mortgagee.  Whenever Additional Notes are issued or Parity
Obligations are incurred, the Mortgagor and the Mortgagee will enter into such
amendments to this Mortgage as may be required to secure such Additional Notes
or Parity Obligations by this Mortgage on a parity with the Series 2010 Note.
 
SECTION 23. Addresses for Notice and Demands.
 
Except as otherwise provided in this Mortgage, all notices, directives,
certificates, requests, requisitions, or other communications hereunder shall be
in writing and shall be deemed to have been given or made when (a) received if
sent by mail, (b) sent if sent by telex or facsimile transmitter (with receipt
confirmed), provided that a copy is mailed by certified mail on the same day,
return receipt requested, or (c) received by the addressee if sent by delivery
service (receipt requested) or delivered, in each case to the appropriate
addresses, or facsimile numbers designated for a party as provided in Section
7.01 of the Agreement.
 
A duplicate copy of each notice, directive, certificate, request or other
communication given hereunder by either the Issuer or the Mortgagor to the
others shall also be given to the Mortgagee; provided, however, failure to give
such duplicate notice shall not constitute a failure to give such notice
hereunder.  The Issuer, the Mortgagor and the Mortgagee may, by notice given
hereunder, designate any further or different addresses to which subsequent
notices, certificates or other communications shall be sent.
 
 
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SECTION 24. Discharge of Lien.
 
If the Mortgagor shall pay and discharge or provide, in a manner satisfactory to
the Mortgagee, for the payment and discharge of the whole amount of all sums
payable hereunder and under the Agreement and the Notes and any Parity
Obligations, or shall make arrangements satisfactory to the Mortgagee for such
payment and discharge, then and in that case all property, rights and interest
hereby conveyed or assigned or pledged shall revert to the Mortgagor, and the
estate, right, title and interest of the Mortgagee therein shall thereupon
cease, terminate and become void; and this Mortgage, and the covenants of the
Mortgagor contained herein, shall be discharged and the Mortgagee in such case
on demand of the Mortgagor and at the Mortgagor’s cost and expense, shall
execute and deliver to the Mortgagor a proper instrument or proper instruments
acknowledging the satisfaction and termination of this Mortgage, and shall
convey, assign and transfer or cause to be conveyed, assigned or transferred,
and shall deliver or cause to be delivered, to the Mortgagor, all property,
including money, then held by the Mortgagee hereunder.
 
SECTION 25. Indemnification of the Mortgagee.
 
The Mortgagor agrees to indemnify and save harmless the Mortgagee not in
possession of the Mortgaged Property against any and all losses, injuries,
claims, damages or injuries to persons or property, demands and expenses,
including legal expenses, of whatsoever kind and nature and by whomsoever made
arising from or in any manner directly or indirectly growing out of (a) the use
and occupancy or nonuse of the Mortgaged Property or any equipment or facilities
thereon or used in connection therewith by anyone whomsoever, (b) any repairs,
construction, restoration, replacements, alterations, remodeling on or to the
Mortgaged Property, or any part thereof, or any equipment or facilities therein
or thereon, and (c) the condition of the Mortgaged Property including any
adjoining sidewalks, ways or alleys and any equipment or facilities at any time
located thereon or used in connection therewith.
 
SECTION 26. Damage, Destruction or Condemnation; Application of Net Proceeds.
 
If prior to full payment of the Notes or any Parity Obligations (or provision
for payment thereof) (i) the Mortgaged Property or any portion thereof is
destroyed (in whole or in part) or is damaged by fire or other casualty, or (ii)
title to, or the temporary use of, the Mortgaged Property or any portion thereof
shall be taken under the exercise of the power of eminent domain by any
governmental body or by any person, firm or corporation acting under
governmental authority, the Mortgagee and the Mortgagor shall cause the Net
Proceeds received by the Mortgagor of any insurance proceeds or condemnation
award resulting from any event described above to be paid to the Mortgagor
unless such amount exceeds $100,000 in which case such proceeds shall be paid to
the Mortgagee.  If and only if no default or event of default exists under this
Mortgage, such Net Proceeds may, at the option of the Mortgagor, be applied (i)
to the repair or replacement of the damaged or taken Mortgaged Property if the
Mortgaged Property, in the reasonable judgment of the Mortgagor, can be repaired
or replaced in such a manner as to allow the Mortgagor to carry on its normal
operations thereat, (ii) to the partial repair or replacement of the damaged or
taken Mortgaged Property if the Mortgaged Property, in the reasonable judgment
of the Mortgagor, can be repaired or replaced in such a manner as to allow the
Mortgagor to carry on its normal operations thereat in which case any Net
Proceeds not spent shall be applied as provided in (iii), or (iii) to the
prepayment or partial prepayment of installments payable under the Agreement for
prepayment or partial prepayment of principal of the Notes in accordance with
their terms and to the prepayment of any Parity Obligation on a pro rata
basis.  If an event of default has occurred and is continuing under this
Mortgage, such Net Proceeds shall be applied to the options set forth in the
immediately preceding sentence as may be determined by the Mortgagee.  If the
Net Proceeds are to be applied to the repair, restoration or improvement of the
Mortgaged Property by the Mortgagor, the Mortgagee shall make payments from the
amount of any Net Proceeds held by it for such purposes or to reimburse the
Mortgagor for costs paid by it in connection therewith upon written order of the
Mortgagor, and such disbursements shall be to (i) the Mortgagor to reimburse it
for costs of repair, restoration or improvement of the Mortgaged Property paid
by the Mortgagor, (ii) the general contractor with respect to any such repair,
restoration or improvement, and (iii) any other person designated by the
Mortgagor.  Any balance of the Net Proceeds remaining after such work has been
completed or the prepayment of all installments payable under the Agreement
shall be paid to the Mortgagor.

 
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If the Mortgagor proceeds to repair, restore or improve the Mortgaged Property
as provided and the Net Proceeds are insufficient to pay in full the cost of any
such repair, restoration or improvement, the Mortgagor shall pay, prior to any
disbursement of Net Proceeds by the Mortgagee, any cost in excess of the Net
Proceeds held by the Mortgagee in which case the work will proceed to
completion.
 
SECTION 27. Execution of Counterparts.
 
This Mortgage may be simultaneously executed in several counterparts, each of
which shall be an original and all of which shall constitute but one and the
same instrument.
 
SECTION 28. Special Notice in Accordance with Section 654.12A of the Iowa Code.
 
Notice:  This Mortgage secures credit in the amount of $1,300,000.  Loans and
advances up to this amount together with interest are senior indebtedness to
other creditors under subsequently recorded or filed mortgages and liens.
 
SECTION 29. Construction Mortgage.
 
The Mortgagor and Mortgagee agree that this Mortgage constitutes a construction
mortgage within the meaning of Iowa Code Section 572.18.

 
 
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IN WITNESS WHEREOF, the Mortgagor has caused these presents to be signed and
sealed in its name and behalf by its duly authorized officers, all as of the day
and year first above written.
 

   
ART’S-WAY MANUFACTURING CO., INC.
                               
 
 
By:
/s/ Carrie L. Majeski         Carrie L. Majeski, Chief Executive Officer        
                                                      STATE OF IOWA )         ) 
SS:       COUNTY OF FAYETTE )      

 
This instrument was acknowledged before me on this 28 day of May, 2010, by
Carrie L. Majeski, as the Chief Executive Officer of the Art’s-Way Manufacturing
Co., Inc., respectively.
 

       
 
By:
/s/ Carolyn Breuer       Notary Public               (Seal)  

 
 
 
 

[Execution Page for Mortgage, Security Agreement, Assignment of Leases
and Rents and Fixture Financing Statement]

 
 

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IN WITNESS WHEREOF, the Mortgagee has caused these presents to be signed and
sealed in its name and behalf by its duly authorized officer, all as of the day
and year first above written.
 

   
THE FIRST NATIONAL BANK
OF WEST UNION
                               
 
 
By:
/s/ John A. Grimes         John A. Grimes, CEO & President                      
                                        STATE OF IOWA )         )  SS:      
COUNTY OF FAYETTE )      

 
This instrument was acknowledged before me on this ___ day of May, 2010, by John
A. Grimes, as the CEO and President of The First National Bank of West Union.
 

       
 
By:
        Notary Public               (Seal)  

 
 
 
 
 
 
[Execution Page for Mortgage, Security Agreement, Assignment of Leases
and Rents and Fixture Financing Statement]

 
 
 

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EXHIBIT A
 
DESCRIPTION OF THE LAND

 
 
The following described real estate located in West Union, Iowa:

 
 
 
 
 
A - 1