DEFICIENCY PAYMENT AGREEMENT
Exhibit
(h)(ix)
THIS AGREEMENT is made and entered into
as of the 22nd day of February, 2008, by and among FAF Advisors, Inc., a
Delaware corporation (“FAF”), U.S. Bancorp Fund Services, LLC, a Wisconsin
limited liability company (“USBFS”), and Baird Funds, Inc., a Wisconsin
corporation (“Baird”).
WHEREAS,
USBFS provides transfer agent, fund administration, fund accounting and other
services to Baird.
WHEREAS,
FAF provides securities lending services to Baird pursuant to a Securities
Lending Agreement dated as of 2006 (the “Securities Lending
Agreement”).
WHEREAS, under the Securities Lending
Agreement, FAF enters into securities loans on behalf of certain series of Baird
(the “Series”) and invests the cash received as collateral for the
loans.
WHEREAS, FAF invested certain cash
collateral received by the Series in $16,000,000 principal amount of secured
liquidity notes issued by KKR Atlantic Funding Trust (the “KKR
SLNs”).
WHEREAS,
following a default under the program documents governing the KKR SLNs, the
holders of the KKR SLNs negotiated a restructuring of such notes, which was
completed on October 15, 2007 (the “Issuance Date”).
WHEREAS,
in connection with this restructuring, Baird was issued new notes (the “New
Notes”) with an aggregate principal amount of approximately $13,606,400
(reflecting principal payments prior to such issuance of approximately
$2,393,600).
WHEREAS,
the New Notes have a maturity date of March 13, 2008, with 50% of the principal
amount of such notes subject to mandatory prepayment on February 15,
2008.
WHEREAS,
the holders of the New Notes have entered into an Extension Amendment Agreement
amending the mandatory prepayment date to March 3, 2008.
WHEREAS,
in the event that all or a portion of the principal amount of the New Notes then
due is not paid on March 3, 2008, and in certain other circumstances set forth
in the program documents governing the New Notes, each holder of New Notes may
elect to receive, in full payment for its New Notes, such holder’s pro rata
share of the collateral underlying the New Notes (the
“Collateral”).
WHEREAS,
due to current liquidity conditions, the New Notes cannot be sold in the current
market other than at a discount to their face value, and it is uncertain when or
to what extent the market will recover.
WHEREAS,
in consideration of their ongoing business relationships with Baird, FAF and
USBFS wish to limit the potential loss to Baird resulting from the sale of the
New Notes, Replacement Securities or Collateral to the extent set forth in this
Agreement.
NOW,
THEREFORE, in consideration of the promises and mutual covenants herein
contained, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Defined
Terms
“Deficiency
Amount” means the lower of (a) the Specified Cap as of the Realization Date and
(b) the Realized Loss.
“Realization
Date” means the date as of which all of the New Notes, Replacement Securities
and/or Collateral have been liquidated for cash.
“Realized
Loss” means the amount by which the sum of (a) all principal payments received
on the New Notes, Replacement Securities and/or Collateral since the Issuance
Date, plus (b) all cash received upon the liquidation of the New Notes,
Replacement Securities and/or Collateral, is less than the sum of (x) the
aggregate principal amount of the New Notes on the Issuance Date, plus (y) all
accrued but unpaid interest on the New Notes or Replacement Securities, plus (z)
if interest that has been paid or has accrued on any Replacement Securities is
less than the amount that would have been payable on the New Notes for which
such Replacement Securities were exchanged (the “Exchanged New Notes”) had the
Exchanged New Notes paid interest at a rate equal to one-month LIBOR, then the
difference between the interest actually paid or accrued on the Replacement
Securities and the amount of interest that would have been paid or accrued
during the relevant time period on the Exchanged New Notes using an interest
rate equal to one-month LIBOR.
“Replacement
Securities” means any notes or other securities issued to replace the New
Notes.
“Specified
Cap” means an amount which equals $1,140,000 as of the date of this Agreement
and which increases on the last day of each month, beginning on February 29,
2008 and ending on the earlier of December 31, 2008 or the last day of the month
prior to the Realization Date, by the lesser of $140,000 or the aggregate amount
of fees payable during such month by Baird (a) to FAF for services under the
Securities Lending Agreement, (b) to USBFS for services rendered to Baird by
USBFS and (c) to U.S. Bank National Bank (“U.S. Bank”) for custody services
rendered to Baird by U.S. Bank.. In any event, the Specified Cap
shall not exceed $2,680,000 (initial amount of $1,140,000 plus $140,000 per
month for the remaining 11 months of 2008).
2. Payment
of Deficiency Amount
As soon
as is practicable following the Realization Date, USBFS shall pay to Baird the
Deficiency Amount.
3. Sale of
New Notes and Collateral
The
parties acknowledge that FAF, as agent for the Series under the Securities
Lending Agreement, has full discretion regarding (a) any exchange of New Notes
for Replacement Securities or Collateral and (b) the sale of the New Notes,
Replacement Securities and/or Collateral, including the timing of such sale or
sales and the prices at which the New Notes, Replacement Securities and/or
Collateral are sold.
4. No
Admission of Liability; No Compromise of Rights
(a) Baird acknowledges and agrees that
(i) USBFS and FAF are entering into this Agreement to preserve the business
relationships that such parties have with Baird and (ii) by entering into this
Agreement, FAF and USBFS are not (x) admitting to any facts with respect to the
purchase of the KKR SLNs or any liability with respect to such purchase under
the Securities Lending Agreement or otherwise, (y) compromising any defenses
that such parties might have under the Securities Lending Agreement or
otherwise, or (z) creating any rights (other than the express rights contained
in this Agreement) in addition to those that Baird might have under the
Securities Lending Agreement.
(b) FAF
and USBFS acknowledge and agree that, by entering into this Agreement, Baird is
not compromising any rights that it might have under the Securities Lending
Agreement or otherwise with respect to the purchase of the KKR SLNs or any other
related actions taken thereafter.
5. Automatic
Termination
This Agreement shall automatically
terminate in the event that Baird terminates either (a) any agreement with USBFS
under which USBFS provides to Baird transfer agent, fund administration, fund
accounting or any other services, or (b) the Securities Lending
Agreement.
6. Amendment;
Termination
This
Agreement may not be amended except in a writing executed by the party against
which such amendment is sought to be enforced. No course of dealing
between or among any persons having any interest in this Agreement will be
deemed effective to modify or amend any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement. Other
than as set forth in Section 5 hereof, this Agreement may not be terminated
except with the written consent of all of the parties hereto.
6. Assignment
Neither
this Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any party hereto without the prior written consent of the other
parties.
7. Counterparts
This
Agreement may be executed in one or more counterparts, any one of which need not
contain the signatures of more than one party, but all such counterparts taken
together will constitute one and the same instrument.
8. Governing
Law
The
internal law, without regard to conflicts of laws principles, of the State of
Wisconsin shall govern all questions concerning the construction, validity and
interpretation of this Agreement and the performance of the obligations imposed
by this Agreement.
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the day and year first above written.
FAF ADVISORS,
INC.
By
_______________________________________
Its
_______________________________________
U.S.
BANCORP FUND SERVICES, LLC
By
_______________________________________
Its
_______________________________________
BAIRD
FUNDS, INC.
By
_______________________________________
Its
_______________________________________
Exhibit (h)(ix)
AMENDMENT NO. 1 TO
DEFICIENCY PAYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO DEFICIENCY
PAYMENT AGREEMENT is made and entered into as of this 12th day of
March, 2008, by and among FAF Advisors, Inc., a Delaware corporation (“FAF”),
U.S. Bancorp Fund Services, LLC, a Wisconsin limited liability company
(“USBFS”), and Baird Funds, Inc., a Wisconsin corporation
(“Baird”).
WHEREAS,
the parties hereto previously entered into a Deficiency Payment Agreement dated
February 22, 2008 (the “Deficiency Payment Agreement”), and all capitalized
terms not otherwise defined herein shall have the meanings assigned to them in
the Deficiency Payment Agreement;
WHEREAS,
given significant recent declines in the value of the New Notes, the current
amount of the Specified Cap is not sufficient to cover the difference between
the current fair value of the New Notes and the par value of the New Notes;
and
WHEREAS,
the parties mutually desire to amend the Deficiency Payment Agreement to change
the definition of Specified Cap as described herein;
NOW,
THEREFORE, in consideration of the promises and mutual covenants herein
contained, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Definition
of “Specified Cap”
The parties hereto agree to amend the
definition of Specified Cap as set forth in Section 1 of the Deficiency Payment
Agreement, so that it reads in its entirety as follows:
“Specified
Cap” means an amount which equals $2,680,000.
2. Continued
Effect of Deficiency Payment Agreement
As
amended pursuant to Section 1 above, the Deficiency Payment Agreement shall
remain in full force and effect.
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment
as of the day and year first above written.
FAF ADVISORS,
INC.
By
_______________________________________
Its
_______________________________________
U.S.
BANCORP FUND SERVICES, LLC
By
_______________________________________
Its
_______________________________________
BAIRD
FUNDS, INC.
By
_______________________________________
Its
_______________________________________
