PRINCIPAL UNDERWRITING AGREEMENT
KEYSTONE TAX FREE FUND
AGREEMENT made this 11th day of December, 1996 by and between KEYSTONE TAX
FREE FUND, a Massachusetts business trust ("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 common stock 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 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 A 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, Directors 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 Directors 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 Directors of the Fund
and a majority of the 12b-1 Directors referred to in the 12b-1 Plans of the Fund
("Rule 12b-1 Directors") 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 Directors 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 TAX FREE FUND
By:
EVERGREEN KEYSTONE INVESTMENT
SERVICES, INC.
By:
EXHIBIT A
TO
PRINCIPAL UNDERWRITING AGREEMENT
DATED DECEMBER 11, 1996
BETWEEN EVERGREEN KEYSTONE INVESTMENT SERVICES, INC.
AND
KEYSTONE TAX FREE FUND
Until such time as the Fund has paid to the Principal Underwriter an
amount equal to the aggregate amount set forth for the 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 the Fund pursuant
to Paragraph 2 in respect of the Shares sold before December 1, 1996 shall be
based upon only those assets of the 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 the Fund in the table entitled "Travelers/KID
Receivables," amounts in respect of Travelers/KID Receivables.
Once the Fund has paid the aggregate amount of KID Receivables
attributable to it, or in the event there are no KID Receivables attributable to
the 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 the Fund as provided for in subparagraph (a) of Exhibit B to 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 the Fund in the table entitled "Travelers/KID Receivables," if any. Once the
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 the Fund and it shall
terminate.
For purposes of this Principal Underwriting Agreement and Exhibit A,
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
$4,907,041.67
Travelers/KID Receivables
$7,837,755.10
