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








MORTGAGELoan
      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.







MORTGAGELoan
      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.







MORTGAGELoan
      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.







MORTGAGELoan
      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.







MORTGAGELoan
      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.







MORTGAGELoan
      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.







MORTGAGELoan
      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:







MORTGAGELoan
      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.







MORTGAGELoan
      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,








MORTGAGELoan
      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.







MORTGAGELoan
      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,








MORTGAGELoan
      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:
                      DateSign
      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.







MORTGAGELoan
      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.







MORTGAGELoan
      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.







MORTGAGELoan
      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.








MORTGAGELoan
      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. MajeskiCARRIE
      L. MAJESKI, Secretary of ART’S-WAYMANUFACTURING
      COMPANY, INC.





CORPORATE
ACKNOWLEDGMENT





STATE
      OF IOWA
                  ))
      SSCOUNTY
      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. SmithNotary
      Public