PRINCIPAL UNDERWRITING AGREEMENT
KEYSTONE FAMILY OF FUNDS
AGREEMENT made this 11th day of December, 1996 by and between each of
the parties listed on Exhibit A attached hereto and made a part hereof, each for
itself and not jointly (each a "Fund"), and Evergreen Keystone Investment
Services, Inc., a Delaware corporation ("Principal Underwriter").
It is hereby mutually agreed as follows:
1. The Fund hereby appoints Principal Underwriter a principal
underwriter of the shares of beneficial interest of the Fund sold prior to
December 11, 1996 (the "Shares") as an independent contractor upon the terms and
conditions hereinafter set forth. Except as the Fund may from time to time
agree, Principal Underwriter will act as agent for the Fund and not as
principal.
2. Having assigned all rights to commission payments for Shares sold on
or after December 1, 1996 but before December 11, 1996 to Evergreen Keystone
Distributor, Inc., Principal Underwriter will not be entitled to commissions on
such Shares. Principal Underwriter shall be entitled to commissions on Shares
outstanding prior to December 1, 1996 and as set forth on Exhibit B attached
hereto and made a part hereof and in the then current prospectus and/or
statement of additional information of the Fund. Principal Underwriter may
reallow all or a part of such commissions to such of its representatives, or to
such brokers or dealers, as Principal Underwriter may determine.
3. Principal Underwriter shall not make, or permit any representative,
broker or dealer to make, any representations concerning the Shares except those
contained in the then current prospectus and/or statement of additional
information covering the Shares and in printed information approved by the Fund
as information supplemental to such prospectus and statement of additional
information.
4. Principal Underwriter agrees to comply with the Business Conduct
Rules of the National Association of Securities Dealers, Inc.
5. The Fund agrees to indemnify and hold harmless the Principal
Underwriter, its officers and Directors and each person, if any, who controls
the Principal Underwriter within the meaning of Section 15 of the Securities Act
of 1933 ("1933 Act"), against any losses, claims, damages, liabilities and
expenses (including the cost of any legal fees incurred in connection therewith)
which the Principal Underwriter, its officers, Directors or any such controlling
person may incur under the 1933 Act, under any other statute, at common law or
otherwise, arising out of or based upon
a) any untrue statement or alleged untrue statement of a
material fact contained in the Fund's registration statement,
prospectus or statement of additional information (including amendments
and supplements thereto), or
b) any omission or alleged omission to state a material fact
required to be stated in the Fund's registration statement, prospectus
or statement of additional information necessary to make the statements
therein not misleading, provided, however, that insofar as losses,
claims, damages, liabilities or expenses arise out of or are based upon
any such untrue statement or omission or alleged untrue statement or
omission made in reliance and in conformity with information furnished
to the Fund by the Principal Underwriter for use in the Fund's
registration statement, prospectus or statement of additional
information, such indemnification is not applicable. In no case shall
the Fund indemnify the Principal Underwriter or its controlling person
as to any amounts incurred for any liability arising out of or based
upon any action for which the Principal Underwriter, its officers and
Directors or any controlling person would otherwise be subject to
liability by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of the
reckless disregard of its obligations and duties under this Agreement.
6. The Principal Underwriter agrees to indemnify and hold harm less the
Fund, its officers, Trustees and each person, if any, who controls the Fund
within the meaning of Section 15 of the 1933 Act against any loss, claims,
damages, liabilities and expenses (including the cost of any legal fees incurred
in connection therewith) which the Fund, its officers, Directors or any such
controlling person may incur under the 1933 Act, under any other statute, at
common law or otherwise arising out of the acquisition of any Shares by any
person which
a) may be based upon any wrongful act by the Principal
Underwriter or any of its employees or representatives, or
b) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Fund's registration
statement, prospectus or statement of additional information (including
amendments and supplements thereto), or any omission or alleged
omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
or confirmed in writing to the Fund by the Principal Underwriter.
7. To the extent required by the Fund's 12b-1 Plan, Principal
Underwriter shall provide to the Board of Trustees of the Fund in connection
with such 12b-1 Plan, not less than quarterly, a written report of the amounts
expended pursuant to such 12b-1 Plan and the purpose for which such expenditures
were made.
8. The term of this Agreement shall begin on the date hereof and,
unless sooner terminated or continued as provided below, shall expire after two
years. This Agreement shall continue in effect after such term if its
continuance is specifically approved by a majority of the Trustees of the Fund
and a majority of the 12b-1 Trustees referred to in the 12b-1 Plans of the Fund
("Rule 12b-1 Trustees") at least annually in accordance with the 1940 Act and
the rules and regulations thereunder.
This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of any Rule 12b-1 Trustees or by a vote of a
majority of the Fund's outstanding Shares on not more than sixty (60) days
written notice to any other party to the Agreement; and shall terminate
automatically in the event of its assignment (as defined in the 1940 Act).
9. This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized at Boston,
Massachusetts, on the day and year first written above.
KEYSTONE QUALITY BOND FUND (B-1)
KEYSTONE DIVERSIFIED BOND FUND (B-2)
KEYSTONE HIGH INCOME BOND FUND (B-4)
KEYSTONE BALANCED FUND (K-1)
KEYSTONE STRATEGIC GROWTH FUND (K-2)
KEYSTONE GROWTH AND INCOME FUND
(S-1) KEYSTONE MID-CAP GROWTH FUND
(S-3) KEYSTONE SMALL COMPANY GROWTH
FUND (S-4) each for itself and not
jointly
By: /s/ Xxxxxx X. Xxxxxxx
________________________________
Xxxxxx X. Xxxxxxx, Chairman
EVERGREEN KEYSTONE INVESTMENT
SERVICES, INC.
By: /s/ Xxxxxxxx X. Van Antwerp
________________________________
Xxxxxxxx X. Van Antwerp
Senior Vice President
EXHIBIT A
TO
PRINCIPAL UNDERWRITING AGREEMENT
DATED DECEMBER 11, 1996
BETWEEN EVERGREEN KEYSTONE INVESTMENT SERVICES, INC.
AND
KEYSTONE FAMILY OF FUNDS
KEYSTONE QUALITY BOND FUND (B-1)
KEYSTONE DIVERSIFIED BOND FUND (B-2)
KEYSTONE HIGH INCOME BOND FUND (B-4)
KEYSTONE BALANCED FUND (K-1)
KEYSTONE STRATEGIC GROWTH FUND (K-2)
KEYSTONE AND INCOME FUND (S-1)
KEYSTONE MID-CAP GROWTH FUND (S-3)
KEYSTONE SMALL COMPANY GROWTH FUND (S-4)
EXHIBIT B
TO
PRINCIPAL UNDERWRITING AGREEMENT
DATED DECEMBER 11, 1996
BETWEEN EVERGREEN KEYSTONE INVESTMENT SERVICES, INC.
AND
KEYSTONE FAMILY OF FUNDS
Until such time as each Fund has paid to the Principal Underwriter an
amount equal to the aggregate amount set forth for such Fund in the table
entitled "KID Receivables," the calculation of the distribution fees and
contingent deferred sales charges (collectively the "Fees") that the Principal
Underwriter is entitled to receive hereunder with respect to such Fund pursuant
to Paragraph 2 in respect of the Shares sold before December 1, 1996 shall be
based upon only those assets of that Fund that are attributable to Shares sold
before December 1, 1996 (the "Pre-Acquisition Shares"). The Fees calculated in
accordance with the foregoing sentence will be used to pay amounts in respect of
KID Receivables or, to the extent for any month amounts are payable by the
Principal Underwriter with respect to Travelers/KID Receivables in respect of
the amounts set forth for each Fund in the table entitled "Travelers/KID
Receivables," amounts in respect of Travelers/KID Receivables.
Once a Fund has paid the aggregate amount of KID Receivables
attributable to such Fund, or in the event there are no KID Receivables
attributable to such Fund at the time this Agreement is entered into, the
Principal Underwriter shall no longer be entitled to payment of any Fees
hereunder so long as any amounts remain payable with respect to the Fund to
Evergreen Keystone Distributor, Inc. ("EKDI") under the Principal Underwriting
Agreement between EKDI and the Fund dated as of December 11, 1996 (the
"Post-Acquisition Underwriting Agreement"). To the extent that no amounts are
payable to EKDI with respect to a Fund as provided for in subparagraph (a) of
Exhibit B of the Post-Acquisition Underwriting Agreement as of any month end,
for that month and that month only, the Principal Underwriter will be entitled
to the payment of Fees hereunder, such payment to be payable from the Fees
calculated with respect to the entire net assets of the Fund and not just those
assets attributable to Pre-Acquisition Shares, up to an amount equal to the
aggregate amount set forth for such Fund in the table entitled "Travelers/KID
Receivables," if any. Once a Fund has made payments hereunder in an aggregate
amount equal to the sum of the KID Receivables and the Travelers/KID
Receivables, no further amounts shall be payable under this Principal
Underwriting Agreement for such Fund and it shall terminate.
For purposes of this Principal Underwriting Agreement and Exhibit B,
Pre-Acquisition Shares shall be such shares which are defined in Schedule I
attached hereto as "Distributor Shares" calculated as though the Distributor
Last Sale Cut-off Date, as such term is defined in said Schedule I, was November
30, 1996.
KID Receivables
Keystone Quality Bond Fund (B-1) $ 1,417,312.63
Keystone Diversified Bond Fund (B-2) $ 5,538,666.38
Keystone High Income Bond Fund (B-4) $ 3,303,927.43
Keystone Balanced Fund (K-1) $ 4,102,973.74
Keystone Strategic Growth Fund (K-2) None
Keystone Growth and Income Fund (S-1) None
Keystone Mid-Cap Growth Fund (S-3) None
Keystone Small Company Growth Fund (S-4) $11,000,687.71
Travelers/KID Receivables
Keystone Quality Bond Fund (B-1) $ 7,603,267.21
Keystone Diversified Bond Fund (B-2) $11,894,293.78
Keystone High Income Bond Fund (B-4) $ 974,711.00
Keystone Balanced Fund (K-1) None
Keystone Strategic Growth Fund (K-2) None
Keystone Growth and Income Fund (S-1) None
Keystone Mid-Cap Growth Fund (S-3) None
Keystone Small Company Growth Fund (S-4) None
