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8. Security. This Note is given to evidence indebtedness of Maker arising in <br /> connection with the terms, provisions and conditions of the Construction Loan Agreement. This <br /> Note shall be entitled to the benefits of and is secured by (a) a certain Assignment of Capital <br /> Contributions of even date herewith executed by Borrower to Bondholder, as from time to time <br /> amended or modified, (b) any other security agreements or documents, as from time to time <br /> amended or modified, executed in connection with the Construction Loan Agreement, and (c) <br /> any funds of Maker on deposit with Bondholder. Notwithstanding anything contained herein to <br /> the contrary, until such time as the HUD Loan is paid in full, the Loan shall be non-recourse <br /> against the Project and Borrower, and Issuer shall have no claim against the Project, proceeds of <br /> the HUD Loan or any reserve or deposit made with Merchants Capital in connection with the <br /> HUD Loan. <br /> 9. Application of Payments. Each payment hereunder shall be applied to the <br /> payment of accrued and unpaid interest, the principal balance outstanding under this Note and <br /> any other sums payable to Issuer in connection with this Note or any documents entered into by <br /> Maker in connection herewith, in such order and in such amounts as Issuer shall determine in its <br /> sole discretion. Such order may include, without limitation, the application first to any advance <br /> made by Issuer under the terms of any instruments securing this Note which has not been repaid, <br /> then to any costs of collection or other costs or expenses for which Maker is obligated to <br /> reimburse Issuer pursuant to this Note or pursuant to any document executed in connection with <br /> this Note, then to any late charges due and owing under this Note, then to any accrued and <br /> unpaid interest, and then to the principal balance outstanding. All amounts advanced by Issuer <br /> (in addition to the principal advanced under this Note) pursuant to applicable provisions of the <br /> Construction Loan Agreement or any other document entered into by Maker in connection with <br /> this Note, together with interest at the Default Rate or other charges as provided therein, shall be <br /> added to and immediately due and payable under this Note. In the event any such advance is not <br /> so repaid by Maker, Issuer may, at its option, first apply any payments received hereunder to <br /> repay such advances together with any interest thereon or other charges, and the balance, if any, <br /> shall be applied toward the payment of interest and principal then due hereunder in such order as <br /> Issuer shall determine, in its sole discretion. <br /> 10. Advancements. All advancements of the indebtedness evidenced by this Note <br /> shall be subject to and governed by the terms and provisions of the Construction Loan <br /> Agreement and other Loan Documents. <br /> 11. Events of Default. The occurrence of an "Event of Default" under the Loan <br /> Agreement shall constitute an event of default under this Note and each such occurrence is <br /> herein referred to as an "Event of Default". Accordingly, the provisions of the Loan Agreement <br /> are by reference incorporated herein and made a part hereof. For purposes of clarification, an <br /> "Event of Default" under the Loan Agreement shall mean the occurrence of any event or <br /> circumstance that would constitute an "Event of Default" as that term is defined in the Loan <br /> Agreement. <br /> 12. Remedies. Upon the occurrence of an Event of Default, all of the indebtedness <br /> evidenced by this Note and remaining unpaid, including without limitation the entire unpaid <br /> principal balance, any accrued and unpaid interest, all prepayment premiums payable hereunder, <br /> if any, and all other amounts payable under this Note, shall, at the option of Issuer and without <br /> 9 <br />