artsway_10q-053110.htm

(iv) 100% of the annual debt service of the Guaranteed Debt must be included if (a) the Debt Service Credit Ratio of the Primary Obligor, determined on the basis of the last consecutive twelve month period for which audited financial statements of the Primary Obligor have been prepared immediately preceding the date the calculation is made, is less than 1.50:1, or (b) all payments under the Guaranteed Debt have not been made when due by the Primary Obligor during the consecutive twelve month period immediately preceding the date the calculation is made, or (c) no audited financial statements have been prepared for the Primary Obligor during the eighteen months preceding the date the calculation is made.

ARTICLE IV

THE BORROWER’S COVENANTS

Section 4.01 Assignment.

The Borrower recognizes the authority of the Issuer to assign the Issuer’s interest in and pledge all monies receivable under this Loan Agreement (other than any payments required to be made to the Issuer under Sections 4.03, 4.05, 6.04 or 7.09 hereof and other rights of the Issuer under Sections 7.06 and 7.07 hereof) (hereinafter referred to collectively as the “Issuer’s Reserved Rights”) to the Lender as security for the payment of the principal of and interest on the Note and the payment of all fees and expenses of the Lender and others as provided herein and consents to such assignment.

Section 4.02 General Covenants of the Borrower.

The Borrower covenants and agrees with the Issuer and the Lender that it will:

(A) Complete the construction of the Project as soon as practical and as required by the terms and conditions of this Loan Agreement.

(B) Repay the Loan by making the Loan Repayments required to be made hereunder, which payments will be at all times sufficient to provide for the prompt payment of principal and interest on the Note;

(C) Pay all expenses of the operation and maintenance of the Facilities and the Project; maintain insurance on the insurable portions of the Facilities and the Project of a kind and in the amount which normally would be carried by entities engaged in a similar kind of business including, but not limited to, property and liability insurance on the Facilities and the Project in the amounts and with the coverage determined by the Borrower; and pay all taxes and special assessments levied upon or with respect to the Facilities and the Project;

(D) Use and maintain the Project in good repair and in good operating condition at its own cost, making such repairs and replacements as are necessary in the judgment of the Borrower so that the Project will remain a “project” under the Act and that the interest on the Note will be exempt from federal income taxation; and

(E) Comply with and fulfill all other requirements and conditions of the Code and regulations and rulings issued pursuant thereto relating to the operation of the Facilities and the Project, and not take any action, or refrain from taking any action, or permit others to take any action or refrain from taking any action if a result thereof is to cause the interest on the Note to be subject to federal income taxation to which it would not otherwise have been subject.

(F) Conduct the same general type of business as it presently conducts and remain duly qualified to do business in the State of Iowa.

(G) Maintain all necessary licenses, permits and certifications for it to continue its operations in substantially the same manner as the Borrower has operated in the past.

(H) Allow the Lender to periodically inspect the Project, upon request and reasonable notice to the Borrower.

(I) Maintain a demand deposit account with the Lender, so long as the Lender is The First National Bank of West Union, located in West Union, Iowa.

Section 4.03 Indemnity.

The Borrower will, to the fullest extent permitted by law, protect, indemnify and save the Issuer and the State of Iowa and their officers, agents, and employees and any person who controls the Issuer within the meaning of the Securities Act of 1933, harmless from and against all liabilities, losses, damages, costs, expenses (including attorneys’ fees and expenses of the Issuer), taxes, causes of action, suits, claims, demands and judgments in connection with the transaction contemplated by this Agreement or arising from or related to the issuance or sale of the Note, including but not limited to:

1. any injury to or death of any person or damage to property in or upon the Project or growing out of or connected with the use, non-use, condition or occupancy of the Facilities or any part thereof, including any and all acts or operations relating to the acquisition or installation of property or improvements. The foregoing indemnification obligations shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by or for the Borrower, customers, suppliers or affiliated organizations under any Workers’ Compensation Acts, Disability Benefit Acts or other employee benefit acts;

2. violation of any agreement, provision or condition of this Agreement or the Note, except a violation by the party seeking indemnification;

3. violation by the Borrower of any contract, agreement or restriction which shall have existed at the commencement of the term of this Agreement or shall have been approved by the Borrower;

4. violation by the Borrower of any law, ordinance, court order or regulation affecting the Project or a part thereof or the ownership, occupancy or use thereof;

5. any statement or information relating to the expenditure of the proceeds of the Note contained in the Borrower’s closing certificate or similar document furnished by the Borrower to the Issuer which, at the time made, is misleading, untrue or incorrect in any material respect; and

6. any untrue statement or alleged untrue statement of a material fact contained in any offering material relating to the sale of the Note (as from time to time amended or supplemented) or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or failure to properly register or otherwise qualify the sale of the Note or failure to comply with any licensing or other law or regulation which would affect the manner whereby or to whom the Note could be sold.

Promptly after receipt by the Issuer or any such other indemnified person, as the case may be, of notice of the commencement of any action with respect to which indemnity may be sought against the Borrower under this Section, such person will notify the Borrower in writing of the commencement thereof, and, subject to the provisions hereinafter stated, the Borrower shall assume the defense of such action (including the employment of counsel, who shall be counsel subject to the approval of the Issuer, which approval shall not be unreasonably withheld, and the payment of expenses). Insofar as such action shall relate to any alleged liability with respect to which indemnity may be sought against the Borrower, the Issuer or any such other indemnified person shall have the right to employ separate counsel of their own choice in any such action and to participate in the defense thereof, and the fees and expenses of such counsel shall be at the expense of the Borrower. The Borrower shall not be liable to indemnify any person for any settlement of any such action effected without its consent.

The provisions of this Section shall survive payment and discharge of the Note.

Section 4.04 The Mortgage.

Simultaneously with the execution and delivery of this Agreement, the Borrower will execute and deliver the Mortgage as additional security for the payment of the Loan Repayments hereunder and the principal of and interest on the Note.

Section 4.05 Annual Information for Audit.

The Borrower agrees that it will annually on or before August 15 of each year furnish the Issuer with a statement of the principal amount of the Note outstanding as of the immediately preceding June 30. In addition, the Borrower shall provide the Issuer with any other information which may from time to time be requested concerning the Note according to the rules and interpretations of the Governmental Accounting Standards Board required to be disclosed concerning conduit debt obligations.

Section 4.06 Financial Covenants.

The Borrower covenants and agrees that it will maintain during the term of this Agreement, tested as of the end of each Fiscal Year beginning with the Fiscal Year ending November 30, 2011 a Debt Service Credit Ratio of at least 1.50 to 1.00.

ARTICLE V

THE BORROWER’S OPTIONS

Section 5.01 Prepayment of the Loan Repayments and the Note.

The Borrower shall have, and is hereby granted, the option to prepay the Loan, in whole, or in part, on any Business Day. The prepayment price shall be equal to the prepayment price set forth in the Note plus accrued interest to the prepayment date. In the event the Borrower elects to prepay the Loan in whole or in part, the Borrower shall cause to be given in the name of the Issuer due notice of redemption or prepayment of the Note as provided in the Note, and shall pay the prepayment price when due to the Lender. The Issuer hereby authorizes the Borrower to give notice of prepayment by electronic means or certified mail and, if required by law, published notice of prepayment of the Note in the name of the Issuer, from time to time.

Section 5.02 Termination Upon Retirement of the Note.

At such time as no principal balance on the Note remains outstanding, and arrangements satisfactory to the Lender and the Issuer have been made for the discharge of all other accrued liabilities, if any, under this Agreement, this Agreement shall by its terms terminate, and the Lender and the Issuer, on demand of the Borrower and at the Borrower’s cost and expense, shall execute and deliver to the Borrower a proper instrument or proper instruments acknowledging the satisfaction and termination of this Agreement and the 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 Borrower, all property, including money, then held hereunder and under the Mortgage.

ARTICLE VI

EVENTS OF DEFAULT AND REMEDIES

Section 6.01 Events of Default.

Any one or more of the following events is an Event of Default under this Loan Agreement:

(A) If the Borrower shall fail to pay any Loan Repayment required under this Loan Agreement on or before the date that the payment is due;

(B) If the Borrower shall fail to observe and perform any other covenant, condition or agreement on its part under this Loan Agreement for a period of thirty (30) days after written notice, specifying such default and requesting that it be remedied, given to the Borrower by the Issuer or the Lender; provided, however, that if such default can be cured but cannot be cured within such 30 days, it shall not constitute a default hereunder if the Borrower provides to the Lender a proposed method and schedule of curing such default, initiates action within such 30 days to cure such default, diligently pursues such action until such default is cured and provides the Lender with progress reports relating thereto at such in tervals as may be reasonably requested by the Lender; provided further, however, that at any time after the initiation of action to cure such default, the Lender, in its sole judgment, determines that the Borrower is not making adequate progress to cure such default, the Lender may rescind the period for curing such default and pursue the remedial steps set forth in Section 6.02 hereof or Section 11 of the Mortgage;

(C) If there shall be entered any decree or order by a court having jurisdiction thereof adjudging the Borrower a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Borrower under the Federal Bankruptcy Act or any other applicable federal or state law which in the case of an involuntary petition is not dismissed within 90 days, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Borrower or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Borrower in furtherance of any such action;

(D) If any event of default has occurred under the Mortgage and is not cured during any applicable grace period;

(E) If (i) an event of default has occurred in the payment of the principal of, premium, if any, or interest on any obligation of the Borrower for borrowed money, as and when the same shall become due, or under any mortgage, agreement or other instrument under or pursuant to which such indebtedness is issued, and such default shall continue beyond the period of grace, if any, allowed with respect thereto and (ii)(a) the creditor has commenced foreclosure proceedings against the Borrower, (b) the creditor has obtained a judgment in excess of $100,000 against the Borrower and has begun execution proceedings thereon or (c) the creditor has obtained a judgment in excess of $100,000 against the Borrower and within thirt y (30) days thereof, the Borrower has failed to pay such judgment or post a supersedeas bond for the payment thereof; or

(F) If there is a determination that any representation or warranty made by the Borrower in this Loan Agreement or in any certificate, document or instrument furnished in connection with the issuance and sale of the Note or under the terms of this Loan Agreement is untrue in any material respect and such representation or warranty cannot be made currently true within a period of thirty (30) days after written notice, specifying such default and requesting that it be remedied, given to the Borrower by the Issuer or the Lender; provided, however, that if such default can be cured but cannot be cured within such 30 days, it shall not constitute a default hereunder if the Borrower provides the Lender with a proposed me thod and schedule of curing such default, initiates action to cure such default within such 30 days, diligently pursues such action until such default is cured and provides the Lender with progress reports relating thereto at such intervals as may be reasonably requested by the Lender;

Provided, however, that if after any default shall have occurred which does not result in a nonpayment of principal of, or interest on, the Note, and prior to the Issuer or the Lender exercising any of the remedies provided in Section 6.02(A) hereof, the Borrower shall have completely cured such default by depositing with the Lender or the Issuer, as appropriate, sufficient money, or by performing such other acts or things in respect of which it may have been in default under this Agreement as the Lender may determine, then in every such case such default shall be waived, rescinded and annulled by the Lender or the Issuer, as appropriate, by written notice given to the Borrower; but no such waiver, rescission and annulment shall extend to or affect any subsequent default or impair any right or remedy consequent ther eon; and provided further that if any default shall have occurred which does not result in a nonpayment of principal of, or interest on the Note and which results in a Determination of Taxability, the sole remedy hereunder shall be an adjustment of the interest rate on the Note to the Taxable Rate as defined therein.

Section 6.02 The Remedies.

Whenever any Event of Default referred to in Section 6.01 shall have happened and be subsisting, any one or more of the following remedial steps may be taken by the Issuer (or by the Lender pursuant to Section 6.06 hereof):

(A) Declare the principal amount of all Loan Repayments payable under this Loan Agreement for the remainder of the term of this Loan Agreement with interest accrued thereon (being an amount equal to that necessary to pay in full the Note, assuming acceleration of the Note, and pay all other indebtedness thereunder) to be immediately due and payable, whereupon, without further notice, the same shall become immediately due and payable by the Borrower; or

(B) Require the Borrower to make available or furnish copies of all books and records of the Borrower pertaining to its property; or

(C) Take whatever action at law or in equity as may appear necessary or appropriate to collect the payments then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of the Borrower under this Loan Agreement and the Mortgage.

Whenever any Event of Default referred to in subparagraph (E) of the first paragraph of Section 6.01 shall have happened and be subsisting the remedial step set out in subparagraph (A) of the first paragraph of this Section 6.02 shall be deemed to have been taken by the Lender without any notice to the Borrower and the Lender may take any of the other remedial steps listed above, pursuant to Section 6.06 hereof. Notwithstanding any provision herein to the contrary, the Issuer shall have the right to exercise any and all remedies with respect to the Issuer’s Reserved Rights.

Section 6.03 Manner of Exercise.

No remedy herein conferred upon or reserved to the Issuer and the Lender is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Loan Agreement or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer or the Lender to exercise any right reserved to it in this Article, it shall be necessary to give only such notice as may be herein or therein expressly required, but no remedy shall be exercised by the Issuer without the prior written consent of the Lender.

Section 6.04 Attorneys’ Fees and Expenses.

In the event the Borrower should default under any of the provisions of this Loan Agreement and the Issuer or the Lender should employ attorneys or incur other expenses for the collection of payments or the enforcement of performance of any obligation or agreement on the part of the Borrower, the Borrower will on demand and receipt of an accounting therefor pay to the Issuer or the Lender, respectively, the reasonable fee of such attorneys and such other reasonable and necessary expenses so incurred from and after the occurrence of an Event of Default.

Section 6.05 Effect of Waiver.

The Lender may, in its discretion, waive any Event of Default (other than an Event of Default with respect to the Issuer’s Reserved Rights) hereunder and its consequences and rescind any declaration of acceleration of principal; provided, however, that no action or inaction by the Lender shall be deemed a waiver of any of the Lender’s rights or remedies unless the Lender specifically agrees in writing that such action or inaction will constitute a waiver of its rights or remedies. Any waiver shall only apply to the particular instance for which it was agreed. No delay by either party in exercising and no failure by either party in exercising any right or remedy hereunder, or afforded by law, shall be a waiver of or preclude the exercise of any right or remedy hereunder, or provided by law, whether on such occasion or any future occasion, nor shall such delay be construed to be a waiver of any Event of Default or acquiescence therein. The exercise or the beginning of the exercise of one right or remedy shall not be deemed a waiver of the right to exercise at the same time or thereafter any other right or remedy.

Section 6.06 The Lender’s Exercise of the Issuer’s Remedies.

Whenever any Event of Default shall have happened and be subsisting the Lender may, but shall not be obliged to, exercise any or all of the rights of the Issuer under this Article VI, upon notice to the Issuer.

Section 6.07 Application of Money.

The proceeds and avails of any remedy hereunder shall be applied as follows:

(A) First, to the payment of all costs and proper expenses (including reasonable attorneys’ fees as permitted by law), liabilities incurred or advances made hereunder by the Issuer or the Lender;

(B) Second, to the payment to the Lender, on behalf of the Issuer, of the amount then owing or unpaid for principal and interest due on the Note and in case any such proceeds shall be insufficient to pay the whole amount so due, then first to the payment of interest thereon and then to the payment of principal; and

(C) Third, to the payment of any excess to the Borrower, its successor and assigns, or to whomsoever may be lawfully entitled to receive the same.

ARTICLE VII

GENERAL

Section 7.01 Notices.

Except as otherwise provided in this Loan Agreement, 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 electronic mail (with receipt confirmed) or facsimile transmission (with receipt confirmed), provided that a copy is mailed on the same day, 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 indicated below:

If to the Issuer:	Iowa Finance Authority
	2015 Grand Avenue
	Des Moines, IA 50312
	Attention: Executive Director
	Fax: 515-725-4901

If to the Borrower:	Art’s-Way Manufacturing Co., Inc
	P.O. Box 288
	Armstrong, IA 50514
	Attention: Chief Executive Officer
	Fax: 712-864-3154

If to the Lender:	The First National Bank of West Union
	115 North Vine
	West Union, Iowa 52175-0233
	Attention: Legal Department
	Fax: 563-422-5356

A duplicate copy of each notice, directive, certificate, request or other communication given hereunder by either the Issuer or the Borrower to the other shall also be given to the Lender; provided, however, failure to give such duplicate notice shall not constitute a failure to give such notice hereunder. The Issuer, the Borrower and the Lender may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates or other communications shall be sent.

Section 7.02 Binding Effect.

This Loan Agreement shall inure to the benefit of and shall be binding upon the Issuer and the Borrower and their respective successors and assigns.

Section 7.03 Severability.

If any term, condition or provision of this Loan Agreement or the application thereof to any person or circumstance shall, to any extent, be held to be invalid or unenforceable, the remainder thereof and the application of such term, provision and condition to persons or circumstances other than those as to whom it shall be held invalid or unenforceable shall not be affected thereby, and this Loan Agreement and all the terms, provisions and conditions hereof shall, in all other respects, continue to be effective and be complied with to the full extent permitted by law.

Section 7.04 Amendments, Changes and Modifications.

Except as otherwise provided in this Loan Agreement, subsequent to the issuance of the Note and before the Note has been paid in full in accordance with its terms, this Loan Agreement may not be effectively amended, changed, modified, altered or terminated without the written consent of the Issuer, the Lender and the Borrower.

Section 7.05 Execution Counterparts.

This Loan Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 7.06 Limitation on the Issuer’s Liability.

It is understood and agreed by the Borrower and the Lender that no covenant, provisions or agreement of the Issuer herein or in the Note or in any other document executed by the Issuer in connection with the issuance, sale and delivery of the Note, or any obligation herein or therein imposed upon the Issuer or breach thereof, shall give rise to a pecuniary liability of the Issuer, its directors, officers, employees or agents or a charge against the Issuer’s general credit or general fund or shall obligate the Issuer, its directors, officers, employees or agents financially in any way except with respect to this Loan Agreement, and from the proceeds of the Note. No failure of the Issuer to comply with any term, condition, covenant or agreement herein or in the Note shall subject the Issuer, its directors, officers, employees or agents to liability for any claim for damages, costs or other financial or pecuniary charges except to the extent that the same can be paid or recovered from this Loan Agreement and from the proceeds of the Note. No execution on any claim, demand, cause of action or judgment shall be levied upon or collected from the general credit or general fund of the Issuer. In making the agreements, provisions and covenants set forth herein, the Issuer has not obligated itself except with respect to this Loan Agreement, and from the proceeds of the Note, as hereinabove provided.

The Note constitutes a special, limited obligation of the Issuer, payable solely from proceeds of the Note and the revenues pledged to the payment thereof pursuant to this Loan Agreement. The Note, the interest thereon and any other payments or costs incident thereto do not constitute an indebtedness or a loan of the credit of the Issuer, the State of Iowa or any political subdivision thereof within the meaning of any constitutional or statutory provisions. The Issuer does not pledge its faith or credit nor the faith or credit of the State of Iowa nor any political subdivision of the State of Iowa to the payment of the principal of, the interest on or any other payments or costs incident to the Note. The issuance of the Note and the exe cution of any documents in relation thereto do not directly, indirectly or contingently obligate the State of Iowa or any political subdivision of the State of Iowa to apply money from or levy or pledge any form of taxation whatever to the payment of the principal of or interest on the Note or any other payments or costs incident thereto. The Issuer has no taxing power.

It is further understood and agreed by the Borrower and the Lender that the Issuer, its directors, officers, employees or agents shall incur no pecuniary liability hereunder and shall not be liable for any expenses related hereto, all of which the Borrower agrees to pay. If, notwithstanding the provisions of this Section, the Issuer, its directors, officers, employees or agents incur any expense, or suffer any losses, claims or damages or incurs any liabilities relating to this Agreement, the Note or any transactions relating thereto, the Borrower will indemnify and hold harmless the Issuer, its directors, officers, employees or agents from the same and will reimburse the Issuer, its directors, officers, employees or agents in relation thereto, and this cove nant to indemnify, hold harmless and reimburse the Issuer, its directors, officers, employees or agents shall survive delivery of and payment for the Note.

Section 7.07 Delegation of Duties by the Issuer.

It is agreed that under the terms of this Agreement the Issuer has delegated certain of its duties hereunder to the Borrower and to the Lender. The fact of such delegation shall be deemed a sufficient compliance by the Issuer to satisfy the duties so delegated and the Issuer shall not be liable in any way by reason of acts done or omitted by the Borrower or the Lender. The Issuer shall have the right at all times to act in reliance upon the authorization, representation or certification of the Borrower or Lender.

Section 7.08 Enforcement and Waiver by the Issuer and the Lender.

The Issuer or the Lender, as the case may be, shall have the right at all times to enforce the provisions of this Agreement in strict accordance with the terms hereof, notwithstanding any conduct or custom on the part of either the Issuer or the Lender in refraining from so doing at any time or times. The failure of the Issuer or the Lender at any time or times to enforce its rights under such provisions, strictly in accordance with the same, shall not be construed as having created a custom in any way or manner contrary to specific provisions of this Agreement or as having in any way or manner modified or waived the same. All rights and remedies of the Issuer and the Lender are cumulative and concurrent, and the exercise of one right or remedy shall not be deemed a waiver or release of any oth er right or remedy.

Section 7.09 Payment of Fees and Expenses.

Borrower agrees to pay all reasonable fees and expenses, including reasonable attorney fees and costs related to the perfection of the Lender’s security interest, of the Issuer and the Lender incurred in connection with the preparation, administration, amendment, modification or enforcement of this Agreement, the Note, the Mortgage, other documents required for the issuance of the Note, and the collection or attempted collection of the Note.

Section 7.10 Governing Law/Venue.

This Agreement is governed by the laws of the State of Iowa, without regard to the choice of law rules of the State of Iowa. Venue for any action under this Agreement to which the Issuer is a party shall lie within the district courts of the State of Iowa, and the parties hereto consent to the jurisdiction and venue of any such court and hereby waive any argument that venue in such forums is not convenient.

Section 7.11 Election under IRC Section 144(a)(4).

The Issuer hereby elects to have the provisions of Section 144(a)(4) of the Internal Revenue Code of 1986 apply to the Note.

IN WITNESS WHEREOF, the Issuer has caused this Loan Agreement to be executed in its respective name, all as of the date first above written.

	IOWA FINANCE AUTHORITY

	By:	/s/ Joseph O’Hern
		Joseph O’Hern
		Title Executive Director

IN WITNESS WHEREOF, the Borrower has caused this Loan Agreement to be executed in its respective name, all as of the date first above written.

	ART’S-WAY MANUFACTURING CO., INC.

	By:	/s/ Carrie Majeski
		Carrie Majeski
		Chief Executive Officer

EX-10.3 5 ex10-3.htm ex10-3.htm

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.

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

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 s uccessors and assigns forever, all and singular the following described properties, whether now owned or hereafter acquired (herein collectively called the “Mortgaged Property”):

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;

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;

(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 Mo rtgagee 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.

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 a dequate 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 theref rom, 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

(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.

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 La nd 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.

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.

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:

(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 loa ns 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 balan ce 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 incom e 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.

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 pre parations 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.

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 exclu sive 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 S ections 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 def ense 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.

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 pa yable 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 s hall 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.

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.

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

	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.

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.

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 inst rument 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.

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.

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]

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]

EXHIBIT A

DESCRIPTION OF THE LAND

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

A - 1

EX-31.1 6 ex31-1.htm ex31-1.htm

Exhibit 31.1

CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)

(SECTION 302 CERTIFICATION)

I, Carrie L. Majeski, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Art’s-Way Manufacturing Co., Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of and for, the periods presented in this report;

4.	I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 13, 2010

/s/ Carrie L. Majeski

Carrie L. Majeski, President, Chief Executive Officer

(principal executive and financial officer)

EX-32.1 7 ex32-1.htm ex32-1.htm

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Art’s-Way Manufacturing Co., Inc. (the “Company”) for the quarter ended May 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carrie L. Majeski, as the President, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: July 13, 2010

/s/ Carrie L. Majeski

Carrie L. Majeski, President, Chief Executive Officer

(principal executive and financial officer)

-----END PRIVACY-ENHANCED MESSAGE-----

DELAWARE	42-0920725
(State or other jurisdiction of incorporation or organization)	I.R.S. Employer Identification No.

	Large Accelerated filer o		Accelerated filer o
	Non-accelerated filer o		Smaller reporting company x
	(Do not check if a smaller reporting company)

		Page No.
PART I – FINANCIAL INFORMATION		1

Item 1	Financial Statements	1

	Consolidated Balance Sheets
	May 31, 2010 and November 30, 2009	1

	Consolidated Statements of Operations Condensed
	Three-month and six-month periods ended May 31, 2010 and May 31, 2009	2

	Consolidated Statements of Cash Flows Condensed
	Three-month and six-month period ended May 31, 2010 and May 31, 2009	3

	Notes to Consolidated Financial Statements	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 4T.	Controls and Procedures	18

PART II – OTHER INFORMATION		19

Item 1	Legal Proceedings	19

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 3	Defaults Upon Senior Securities	19

Item 5	Other Information	19

Item 6	Exhibits	20

	SIGNATURES	21

	Exhibits Index	22

ART’S-WAY MANUFACTURING CO., INC.
Consolidated Balance Sheets
	(Unaudited)
	May 31,		November 30,
Assets	2010		2009
Current assets:
Cash	$	20,610	$	387,218
Accounts receivable-customers, net of allowance for doubtful
accounts of $156,310 and $194,185 in 2010 and 2009, respectively		4,566,192		2,347,956
Inventories, net		14,435,695		11,928,234
Deferred taxes		847,000		882,000
Cost and Profit in Excess of Billings		100,106		141,778
Other current assets		351,416		1,038,902
Total current assets		20,321,019		16,726,088
Property, plant, and equipment, net		8,110,206		6,638,661
Covenant not to Compete		150,000		180,000
Goodwill		375,000		375,000
Total assets	$	28,956,225	$	23,919,749
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable to bank	$	1,463,000	$	2,438,892
Current portion of term debt		586,522		473,341
Accounts payable		880,570		439,127
Checks issued in excess of deposits		85,892		-
Customer deposits		4,010,440		249,278
Billings in Excess of Cost and Profit		589,215		28,884
Accrued expenses		1,021,430		791,381
Income taxes payable		133,932		422,205
Total current liabilities		8,771,001		4,843,108
Long-term liabilities
Deferred taxes		613,000		613,000
Term debt, excluding current portion		6,751,494		5,796,223
Total liabilities		16,135,495		11,252,331
Stockholders’ equity:
Common stock – $0.01 par value. Authorized 5,000,000 shares;
issued 3,992,182 and 3,990,352 shares in 2010 and 2009		39,922		39,904
Additional paid-in capital		2,237,681		2,219,286
Retained earnings		10,543,127		10,408,228
Total stockholders’ equity		12,820,730		12,667,418
Total liabilities and stockholders’ equity	$	28,956,225	$	23,919,749

				Three Months Ended			Year to Date
	May 31,			May 31,			May 31,			May 31,
	2010			2009			2010			2009
Net sales	$	6,748,178		$	7,115,645		$	12,328,019		$	13,806,511
Cost of goods sold		5,178,362			5,647,551			9,432,492			11,022,137
Gross profit		1,569,816			1,468,094			2,895,527			2,784,374
Expenses:
Engineering		110,405			70,177			207,300			159,129
Selling		478,384			393,181			926,143			813,313
General and administrative		769,173			713,599			1,426,803			1,423,158
Total expenses		1,357,962			1,176,957			2,560,246			2,395,600
Income from operations		211,854			291,137			335,281			388,774
Other income (expense):
Interest expense		(97,614	)		(140,534	)		(189,794	)		(266,696	)
Other		34,105			23,479			51,961			57,543
Total other income		(63,509	)		(117,055	)		(137,833	)		(209,153	)
Income before income taxes		148,345			174,082			197,448			179,621
Income tax expense		47,865			61,164			62,543			63,108
Net income	$	100,480		$	112,918		$	134,905		$	116,513
Net income per share:
Basic		0.03			0.03			0.03			0.03
Diluted		0.03			0.03			0.03			0.03

	For the three months ended
	May 31, 2010		May 31, 2009
Basic:
Numerator, net income	$	100,480	$	112,918
Denominator: Average number
of common shares
outstanding		3,991,586		3,986,830
Basic earnings per
common share	$	0.03	$	0.03
Diluted:
Numerator, net income	$	100,480	$	112,918
Denominator: Average number
of common shares outstanding		3,991,586		3,986,830

Effect of dilutive stock options		14,482		2,256
		4,006,068		3,989,086
Diluted earnings per
common share	$	0.03	$	0.03

	For the six months ended
	May 31, 2010		May 31, 2009
Basic:
Numerator, net income	$	134,905	$	116,513
Denominator: Average number
of common shares		3,990,975		3,986,594
outstanding
Basic earnings per
common share	$	0.03	$	0.03
Diluted:
Numerator, net income	$	134,905	$	116,513
Denominator: Average number
of common shares outstanding		3,990,975		3,986,594

Effect of dilutive stock options		9,241		604
		4,000,216		3,987,198
Diluted earnings per
common share	$	0.03	$	0.03

	May 31, 2010			November 30, 2009
Raw materials	$	10,239,854		$	9,209,873
Work in process		517,828			258,621
Finished goods		5,428,366			4,060,163
	$	16,186,048		$	13,528,657
Less: Reserves		(1,750,353	)		(1,600,423	)
	$	14,435,695		$	11,928,234

	May 31, 2010		November 30, 2009
Salaries, wages, and commissions	$	527,113	$	425,133
Accrued warranty expense		148,412		96,370
Other		345,905		269,878
	$	1,021,430	$	791,381

		May 31, 2010		November 30, 2009

West Bank loan payable in monthly installments of $42,500 including interest at 5.75%, due May 1, 2013	$	3,301,230	$	3,457,625

West Bank loan payable in monthly installments of $11,000 including interest at 5.75%, due May 1, 2013		1,199,488		1,230,104
West Bank loan payable in monthly installments of $12,550 including interest at 5.75%, due May 1, 2013		1,364,713		1,399,751
Iowa Finance Authority loan payable in monthly installments of $12,891.68 including interest at 3.5%,
due June 1, 2020		1,300,000		0
IDED loan payable in monthly installments of $1,583.33 including interest at 0%, due July 1, 2014.		77,585		87,084

IDED loan payable in monthly installments of $0 including interest at 0%, due July 1, 2014		95,000		95,000

Total term debt		7,338,016		6,269,564
Less current portion of term debt		586,522		473,341
Term debt, excluding current portion	$	6,751,494	$	5,796,223

Three Months Ended May 31, 2010
	Agricultural Products		Pressurized Vessels			Modular Buildings		Consolidated
Revenue from external customers	$	4,606,000	$	480,000		$	1,662,000	$	6,748,000
Income from operations		117,000		(41,000	)		136,000		212,000
Income before tax		128,000		(97,000	)		117,000		148,000
Total Assets		21,111,000		3,061,000			4,784,0000		28,956,000
Capital expenditures		1,511,000		6,000			27,000		1,544,000
Depreciation & Amortization		128,000		26,000			25,000		179,000

Three Months Ended May 31, 2009
	Agricultural Products		Pressurized Vessels			Modular Buildings			Consolidated
Revenue from external customers	$	6,165,000	$	226,000		$	725,000		$	7,116,000
Income from operations		694,000		(167,000	)		(236,000	)		291,000
Income before tax		653,000		(219,000	)		(260,000	)		174,000
Total Assets		19,302,000		2,959,000			3,404,000			25,665,000
Capital expenditures		59,000		7,000			0			66,000
Depreciation & Amortization		114,000		24,000			25,000			163,000

Six Months Ended May 31, 2010
	Agricultural Products		Pressurized Vessels			Modular Buildings		Consolidated
Revenue from external customers	$	8,202,000	$	743,000		$	3,383,000	$	12,328,000
Income from operations		195,000		(228,000	)		368,000		335,000
Income before tax		209,000		(342,000	)		330,000		197,000
Total Assets		21,111,000		3,061,000			4,784,0000		28,956,000
Capital expenditures		1,738,000		16,000			37,000		1,791,000
Depreciation & Amortization		247,000		52,000			50,000		349,000

Six Months Ended May 31, 2009
	Agricultural Products		Pressurized Vessels			Modular Buildings			Consolidated
Revenue from external customers	$	10,874,000	$	375,000		$	2,558,000		$	13,807,000
Income from operations		837,000		(380,000	)		(68,000	)		389,000
Income before tax		759,000		(469,000	)		(110,000	)		180,000
Total Assets		19,302,000		2,959,000			3,404,000			25,665,000
Capital expenditures		260,000		34,000			0			294,000
Depreciation & Amortization		226,000		46,000			49,000			321,000

Exhibit No.		Description
2.1		Asset Purchase Agreement between Alamo Group, Inc. and Art’s-Way Manufacturing Co., Inc. dated May 10, 2010. Pursuant to Item 601(b)(2) of Regulation S-K, and subject to claims of confidentiality pursuant to Rule 24B-2 under the Securities Exchange Act of 1934, upon the request of the Commission, the Registrant undertakes to furnish supplementally to the Commission a copy of any schedule or exhibit to the Asset Purchase Agreement as follows:


10.1		Manufacturing Facility Revenue Note dated May 28, 2010, in the principal amount of $1,300,000, from Art’s-Way Manufacturing Co., Inc. to the Iowa Finance Authority
10.2		Loan Agreement Between Iowa Finance Authority and Art’s-Way Manufacturing Co., Inc. dated May 1, 2010
10.3		Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement between The First National Bank of West Union and Art’s-Way Manufacturing Co., Inc. dated May 1, 2010
31.1		Certificate pursuant to 17 CFR 240 13a-14(a)—filed herewith
32.1		Certificate pursuant to 18 U.S.C. Section 1350—filed herewith

Date of	Name and Address	Signature of
Registration	of Registered Owner	Secretary

	The First National Bank of West Union,
Dated Date	West Union, Iowa	/s/ Joseph O’Hern

ARTICLE I
DEFINITIONS AND RULES OF INTERPRETATION		2

Section 1.01	Definitions.	2
Section 1.02	Rules of Interpretation.	5

ARTICLE II
REPRESENTATIONS		6

Section 2.01	Representations by the Issuer.	6
Section 2.02	Representations and Agreements of the Borrower.	6
Section 2.03	The Lender May Rely on Representations.	9

ARTICLE III
THE LOAN; CONSTRUCTION OF THE PROJECT		10

Section 3.01	Amount and Source of the Loan.	10
Section 3.02	Repayment of the Loan.	10
Section 3.03	Determination of Taxability.	10
Section 3.04	Notice of Proposed Taxability and Procedure Thereon.	11
Section 3.05	The Borrower’s Obligations Unconditional.	12
Section 3.06	Agreement to Complete the Project.	12
Section 3.07	Reserved.	12
Section 3.08	Authorized Project Costs.	12
Section 3.09	Changes in the Project.	13
Section 3.10	Additional Notes; Parity Obligations.	13
Section 3.11	Calculation of Debt Service.	13

ARTICLE IV
THE BORROWER’S COVENANTS		16

Section 4.01	Assignment.	16
Section 4.02	General Covenants of the Borrower.	16
Section 4.03	Indemnity.	17
Section 4.04	The Mortgage.	18
Section 4.05	Annual Information for Audit.	18
Section 4.06	Financial Covenants.	18


ARTICLE V
THE BORROWER’S OPTIONS		19

Section 5.01	Prepayment of the Loan Repayments and the Note.	19
Section 5.02	Termination Upon Retirement of the Note.	19

ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES		20

Section 6.01	Events of Default.	20
Section 6.02	The Remedies.	21
Section 6.03	Manner of Exercise.	22
Section 6.04	Attorneys’ Fees and Expenses.	22
Section 6.05	Effect of Waiver.	22
Section 6.06	The Lender’s Exercise of the Issuer’s Remedies.	23
Section 6.07	Application of Money.	23

ARTICLE VII
GENERAL		24

Section 7.01	Notices.	24
Section 7.02	Binding Effect.	24
Section 7.03	Severability.	25
Section 7.04	Amendments, Changes and Modifications.	25
Section 7.05	Execution Counterparts.	25
Section 7.06	Limitation on the Issuer’s Liability.	25
Section 7.07	Delegation of Duties by the Issuer.	26
Section 7.08	Enforcement and Waiver by the Issuer and the Lender.	26
Section 7.09	Payment of Fees and Expenses.	26
Section 7.10	Governing Law/Venue.	27
Section 7.11	Election under IRC Section 144(a)(4).	27