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b. Owner shall invoice City in June of each year for the annual financial grant amount or an amount developed by applying the Financial Grant Formula. The invoice shall cover the period of July 1 to June 30 of each year. The annual financial grant amount or the Financial Grant Formula may not increase more than four percent (4 annually as set forth in Exhibit 2. In the event the annual financial grant amount or the Financial Grant Formula results in an increase in excess of four percent (4 Owner may include any increase above four percent (4 to the subsequent year or years provided that in no event shall the annual increase be more than four percent (4 If over the term of this amendment, the cumulative amount of rent increases exceeds the annual financial grant, City shall pay Owner the difference between the rent increases and annual financial grant payment provided the total payments shall not exceed the cumulative Maximum Annual Financial Grant Payment for the entire fifteen (15) year period as detailed on Exhibit 2. c. Owner shall use the City annual financial grant to reduce the monthly rent payment of five (5) tenants to the 40% TCAC Rent. The selection of tenants for 40% TCAC Rent shall be based on financial need as determined by City and Owner provided each tenant shall have an annual income less than 40% of the AMI. Owner shall also make the rent reduction program available to applicants seeking tenancy who would not otherwise qualify financially for occupancy provided the applicant has an annual income less than 40% of the AMI and provided the applicant selection is based on the City Preference System as set forth in Section 4 of the Agreement. Households benefiting from the rent reduction program shall be informed in writing annually that the rent reduction grant is temporary, applied annually and may be terminated. d. The rent reduction grant program shall have a term of 15 years commencing July I, 2007. Owner agrees to extend the rent reduction grant program for three five (5) year terms if requested in writing by the City and provided the City agrees to provide an annual financial grant as set forth in the Amendment. The City shall notify Owner in writing, at a minimum of (15) months prior to the expiration of any term if it intends to extend the rent reduction program. Section 2. In all other respects, the terms and provisions of the Agreement, as amended, are to continue in full force and effect. This Amendment 112 is executed the date and year as shown above. Sh 6o d ns Investors, LP Richard D. Baker, President Ali'b:u.. a Li die J a Morasch, i•e President Nelson Fialho, City Manager G of Fleas9nfon SECOND AMENDMENT TO THE AFFORDABLE HOUSING AGREEMENT WTTH BIJSCH GARDENS INVESTORS