Grant of Individual Exemptions; MBNA America Bank, National Association

Federal RegisterApr 7, 1998

Ask Donna

What actually matters in this document.

Text

DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

Prohibited Transaction Exemption 98-13; Exemption Application No.

D-10304, et al.]

Grant of Individual Exemptions; MBNA America Bank, National

Association

AGENCY: Pension and Welfare Benefits Administration, Labor.

ACTION: Grant of individual exemptions.

-----------------------------------------------------------------------

SUMMARY: This document contains exemptions issued by the Department of

Labor (the Department) from certain of the prohibited transaction

restrictions of the Employee Retirement Income Security Act of 1974

(the Act) and/or the Internal Revenue Code of 1986 (the Code).

Notices were published in the Federal Register of the pendency

before the Department of proposals to grant such exemptions. The

notices set forth a summary of facts and representations contained in

each application for exemption and referred interested persons to the

respective applications for a complete statement of the facts and

representations. The applications have been available for public

inspection at the Department in Washington, D.C. The notices also

invited interested persons to submit comments on the requested

exemptions to the Department. In addition the notices stated that any

interested person might submit a written request that a public hearing

be held (where appropriate). The applicants have represented that they

have complied with the requirements of the notification to interested

persons. No public comments and no requests for a hearing, unless

otherwise stated, were received by the Department.

The notices of proposed exemption were issued and the exemptions

are being granted solely by the Department because, effective December

31, 1978, section 102 of Reorganization Plan No. 4 of 1978 (43 FR

47713, October 17, 1978) transferred the authority of the Secretary of

the Treasury to issue exemptions of the type proposed to the Secretary

of Labor.

Statutory Findings

In accordance with section 408(a) of the Act and/or section

4975(c)(2) of the Code and the procedures set forth in 29 CFR Part

2570, Subpart B (55 FR 32836, 32847, August 10, 1990) and based upon

the entire record, the Department makes the following findings:

(a) The exemptions are administratively feasible;

(b) They are in the interests of the plans and their participants

and beneficiaries; and

beneficiaries of the plans.

MBNA America Bank, National Association (MBNA)

Located in Wilmington, Delaware

[Prohibited Transaction Exemption No. 98-13; Application No. D-

10304]

[[Page 17021]]

Exemption

Section I--Transactions

A. The restrictions of sections 406(a) and 407(a) of the Act and

the taxes imposed by section 4975(a) and (b) of the Code, by reason of

section 4975(c)(1)(A) through (D) of the Code, shall not apply to the

following transactions involving trusts and certificates evidencing

interests therein:

(1) The direct or indirect sale, exchange or transfer of

certificates in the initial issuance of certificates between the trust,

the sponsor or an underwriter and an employee benefit plan subject to

the Act or section 4975 of the Code (a plan) when the sponsor,

servicer, trustee or insurer of a trust, the underwriter of the

certificates representing an interest in the trust, or an obligor is a

party in interest with respect to such plan;

(2) The direct or indirect acquisition or disposition of

certificates by a plan in the secondary market for such certificates;

and

(3) The continued holding of certificates acquired by a plan

pursuant to Section I.A.(1) or (2).

Notwithstanding the foregoing, Section I.A. does not provide an

exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and

407 for the acquisition or holding of a certificate on behalf of an

Excluded Plan, as defined in Section III.K. below, by any person who

has discretionary authority or renders investment advice with respect

to the assets of the Excluded Plan that are invested in

certificates.1

---------------------------------------------------------------------------

\1\ Section I.A. provides no relief from sections 406(a)(1)(E),

406(a)(2) and 407 for any person rendering investment advice to an

Excluded Plan within the meaning of section 3(21)(A)(ii) and

regulation 29 CFR 2510.3-21(c).

---------------------------------------------------------------------------

B. The restrictions of sections 406(b)(1) and 406(b)(2) of the Act

and the taxes imposed by section 4975(a) and (b) of the Code, by reason

of section 4975(c)(1)(E) of the Code, shall not apply to:

(1) The direct or indirect sale, exchange or transfer of

certificates in the initial issuance of certificates between the trust,

the sponsor or an underwriter and a plan when the person who has

discretionary authority or renders investment advice with respect to

the investment of plan assets in the certificates is (a) an obligor

with respect to receivables contained in the trust constituting 0.5

percent or less of the fair market value of the aggregate undivided

interest in the trust allocated to the certificates of the relevant

series, or (b) an affiliate of a person described in (a); if

(i) The plan is not an Excluded Plan;

(ii) Solely in the case of an acquisition of certificates in

connection with the initial issuance of the certificates, at least 50

percent of each class of certificates in which plans have invested is

acquired by persons independent of the members of the Restricted Group,

as defined in Section III.L., and at least 50 percent of the aggregate

undivided interest in the trust allocated to the certificates of a

series is acquired by persons independent of the Restricted Group;

(iii) A plan's investment in each class of certificates of a series

does not exceed 25 percent of all of the certificates of that class

outstanding at the time of the acquisition;

(iv) Immediately after the acquisition of the certificates, no more

than 25 percent of the assets of a plan with respect to which the

person has discretionary authority or renders investment advice is

invested in certificates representing the aggregate undivided interest

in a trust allocated to the certificates of a series and containing

receivables sold or serviced by the same entity; 2 and

---------------------------------------------------------------------------

\2\ For purposes of this exemption, each plan participating in a

commingled fund (such as a bank collective trust fund or insurance

company pooled separate account) shall be considered to own the same

proportionate undivided interest in each asset of the commingled

fund as its proportionate interest in the total assets of the

commingled fund as calculated on the most recent preceding valuation

date of the fund.

---------------------------------------------------------------------------

(v) Immediately after the acquisition of the certificates, no more

than 25 percent of the assets of a plan with respect to which the

person has discretionary authority or renders investment advice is

invested in certificates representing an interest in the trust, or

trusts containing receivables sold or serviced by the same entity. For

purposes of paragraphs B.(1)(iv) and B.(1)(v) only, an entity shall not

be considered to service receivables contained in a trust if it is

merely a subservicer of that trust;

(2) The direct or indirect acquisition or disposition of

certificates by a plan in the secondary market for such certificates,

provided that conditions set forth in Section I.B.(1)(i) and (iii)

through (v) are met; and

(3) The continued holding of certificates acquired by a plan

pursuant to Section I.B. (1) or (2).

C. The restrictions of sections 406(a), 406(b) and 407(a) of the

Act and the taxes imposed by section 4975 (a) and (b) of the Code, by

reason of section 4975(c) of the Code, shall not apply to transactions

in connection with the servicing, management and operation of a trust,

including reassigning receivables to the sponsor, removing from the

trust receivables in accounts previously designated to the trust,

changing the underlying terms of accounts designated to the trust,

adding new receivables to the trust, designating new accounts to the

trust, the retention of a retained interest by the sponsor in the

receivables, the exercise of the right to cause the commencement of

amortization of the principal amount of the certificates, or the use of

any eligible swap transactions, provided that:

(1) Such transactions are carried out in accordance with the terms

of a binding pooling and servicing agreement;

(2) The pooling and servicing agreement is provided to, or

described in all material respects in the prospectus or private

placement memorandum provided to, investing plans before they purchase

certificates issued by the trust; 3

---------------------------------------------------------------------------

\3\ In the case of a private placement memorandum, such

memorandum must contain substantially the same information that

would be disclosed in a prospectus if the offering of the

certificates were made in a registered public offering under the

Securities Act of 1933. In the Department's view, the private

placement memorandum must contain sufficient information to permit

plan fiduciaries to make informed investment decisions. For purposes

of this exemption, all references to ``prospectus'' include any

related supplement thereto, and any documents incorporated by

reference therein, pursuant to which certificates are offered to

investors.

---------------------------------------------------------------------------

(3) The addition of new receivables or designation of new accounts,

or the removal of receivables in previously-designated accounts, meets

the terms and conditions for such additions, designations or removals

as are described in the prospectus or private placement memorandum for

such certificates, which terms and conditions have been approved by

Standard & Poor's Ratings Services, Moody's Investors Service, Inc.,

Duff & Phelps Credit Rating Co., or Fitch IBCA, Inc., or their

successors (collectively, the Rating Agencies), and does not result in

the certificates receiving a lower credit rating from the Rating

Agencies than the then current rating of the certificates; and

(4) The series of which the certificates are a part will be subject

to an ``Economic Pay Out Event'' (as defined in Section III.BB.), which

is set forth in the pooling and servicing agreement and described in

the prospectus or private placement memorandum associated with the

series, the occurrence of which will cause any revolving period,

scheduled amortization period or scheduled accumulation period

applicable to the certificates to end, and principal collections to be

applied to

[[Page 17022]]

monthly payments of principal to, or the accumulation of principal for

the benefit of, the certificateholders of such series until the earlier

of payment in full of the outstanding principal amount of the

certificates of such series or the series termination date specified in

the prospectus or private placement memorandum.

Notwithstanding the foregoing, Section I.C. does not provide an

exemption from the restrictions of section 406(b) of the Act, or from

the taxes imposed under section 4975(a) and (b) of the Code, by reason

of section 4975(c)(1) (E) or (F) of the Code, for the receipt of a fee

by the servicer of the trust, in connection with the servicing of the

receivables and the operation of the trust, from a person other than

the trustee or sponsor, unless such fee constitutes a ``qualified

administrative fee'' as defined in Section III.U. below.

D. The restrictions of sections 406(a) and 407(a) of the Act and

the taxes imposed by sections 4975 (a) and (b) of the Code, by reason

of sections 4975(c)(1) (A) through (D) of the Code, shall not apply to

any transaction to which those restrictions or taxes would otherwise

apply merely because a person is deemed to be a party in interest or

disqualified person (including a fiduciary) with respect to a plan by

virtue of providing services to the plan (or by virtue of having a

relationship to such service provider as described in section 3(14)

(F), (G), (H) or (I) of the Act or section 4975(e)(2) (F), (G), (H) or

(I) of the Code), solely because of the plan's ownership of

certificates.

Section II--General Conditions

A. The relief provided under Section I is available only if the

following conditions are met:

(1) The acquisition of certificates by a plan is on terms

(including the certificate price) that are at least as favorable to the

plan as such terms would be in an arm's-length transaction with an

unrelated party;

(2) The rights and interests evidenced by the certificates are not

subordinated to the rights and interests evidenced by other

certificates of the same trust;

(3) The certificates acquired by the plan have received a rating at

the time of such acquisition that is either: (i) In one of the two

highest generic rating categories from any one of the Rating Agencies;

or (ii) for certificates with a duration of one year or less, the

highest short-term generic rating category from any one of the Rating

Agencies; provided that, notwithstanding such ratings, this exemption

shall apply to a particular class of certificates only if such class

(an Exempt Class) is at the time of such acquisition part of a series

in which credit support is provided to the Exempt Class through a

senior-subordinated series structure or other form of third-party

credit support which, at a minimum, represents five (5) percent of the

outstanding principal balance of certificates issued for the Exempt

Class, so that an investor in the Exempt Class will not bear the

initial risk of loss;

(4) The trustee is not an affiliate of any other member of the

Restricted Group. However, the trustee shall not be considered to be an

affiliate of a servicer solely because the trustee has succeeded to the

rights and responsibilities of the servicer pursuant to the terms of a

pooling and servicing agreement providing for such succession upon the

occurrence of one or more events of default by the servicer;

(5) The sum of all payments made to and retained by the

underwriters in connection with the distribution or placement of

certificates represents not more than reasonable compensation for

underwriting or placing the certificates; the consideration received by

the sponsor as a consequence of the assignment of receivables (or

interests therein) to the trust, to the extent allocable to the class

of certificates purchased by a plan, represents not more than the fair

market value of such receivables (or interests); and the sum of all

payments made to and retained by the servicer, to the extent allocable

to the class of certificates purchased by a plan, represents not more

than reasonable compensation for the servicer's services under the

pooling and servicing agreement and reimbursement of the servicer's

reasonable expenses in connection therewith;

(6) The plan investing in such certificates is an ``accredited

investor'' as defined in Rule 501(a)(1) of Regulation D of the

Securities and Exchange Commission (SEC) under the Securities Act of

1933;

(7) The trustee of the trust is a substantial financial institution

or trust company experienced in trust activities and is familiar with

its duties, responsibilities, and liabilities as a fiduciary under the

Act (i.e. ERISA). The trustee, as the legal owner of, or holder of a

perfected security interest in, the receivables in the trust, enforces

all the rights created in favor of certificateholders of such trust,

including plans;

(8) Prior to the issuance by the trust of any new series,

confirmation is received from the Rating Agencies that such issuance

will not result in the reduction or withdrawal of the then current

rating of the certificates held by any plan pursuant to this exemption;

(9) To protect against fraud, chargebacks or other dilution of the

receivables in the trust, the pooling and servicing agreement and the

Rating Agencies require the sponsor to maintain a seller interest of

not less than 2 percent of the principal balance of the receivables

contained in the trust;

(10) Each receivable added to a trust is an eligible receivable,

based on criteria of the relevant Rating Agency(ies) and as specified

in the pooling and servicing agreement. The pooling and servicing

agreement requires that any change in the terms of the cardholder

agreements must be made applicable to the comparable segment of

accounts owned or serviced by the sponsor which are part of the same

program or have the same or substantially similar characteristics;

(11) The pooling and servicing agreement limits the number of the

sponsor's newly originated accounts to be designated to the trust,

unless the Rating Agencies otherwise consent in writing, to the

following: (i) With respect to any three-month period, 15 percent of

the number of existing accounts designated to the trust as of the first

day of such period, and (ii) with respect to any twelve-month period,

20 percent of the number of existing accounts designated to the trust

as of the first day of such twelve-month period;

(12) The pooling and servicing agreement requires the sponsor to

deliver an opinion of counsel semi-annually confirming the validity and

perfection of each transfer of receivables in newly originated accounts

to the trust if such opinion is not delivered with respect to each

interim addition;

(13) The pooling and servicing agreement requires the sponsor and

the trustee to receive confirmation from a Rating Agency that no

Ratings Effect (i) will result from a proposed transfer of receivables

in newly originated accounts to the trust, or (ii) will have resulted

from the transfer of receivables in all newly originated accounts added

to the trust during the preceding three-month period (beginning at

quarterly intervals specified in the pooling and servicing agreement

and ending in the calendar month prior to the date such confirmation is

issued), provided that a Rating Agency confirmation shall not be

required under clause (ii) for any three-month period in which any

additions of newly originated accounts occurred only after receipt of

prior Rating Agency confirmation pursuant to clause (i);

(14) If a particular class of certificates held by any plan

involves a Ratings

[[Page 17023]]

Dependent or Non-Ratings Dependent Swap entered into by the trust, then

each particular swap transaction relating to such certificates:

(a) shall be an Eligible Swap;

(b) shall be with an Eligible Swap Counterparty;

early payout event, as specified in the pooling and servicing

agreement, the withdrawal or reduction by any Rating Agency of the swap

counterparty's credit rating below a level specified by the Rating

Agency where the servicer (as agent for the trustee) has failed, for a

specified period after such rating withdrawal or reduction, to meet its

obligation under the pooling and servicing agreement to:

(i) obtain a replacement swap agreement with an Eligible Swap

Counterparty which is acceptable to the Rating Agency and the terms of

which are substantially the same as the current swap agreement (at

which time the earlier swap agreement shall terminate); or

(ii) cause the swap counterparty to establish any collateralization

or other arrangement satisfactory to the Rating Agency such that the

then current rating by the Rating Agency of the particular class of

certificates will not be withdrawn or reduced;

(d) in the case of a Non-Ratings Dependent Swap, shall provide

that, if the credit rating of the swap counterparty is withdrawn or

reduced below the lowest level specified in Section III.II. hereof, the

servicer, as agent for the trustee, shall within a specified period

after such rating withdrawal or reduction:

(i) obtain a replacement swap agreement with an Eligible Swap

Counterparty, the terms of which are substantially the same as the

current swap agreement (at which time the earlier swap agreement shall

terminate); or

(ii) cause the swap counterparty to post collateral with the

trustee of the trust in an amount equal to all payments owed by the

counterparty if the swap transaction were terminated; or

(iii) terminate the swap agreement in accordance with its terms;

and

(e) shall not require the trust to make any termination payments to

the swap counterparty (other than a currently scheduled payment under

the swap agreement) except from ``Excess Finance Charge Collections''

(as defined below in Section III.LL.) or other amounts that would

otherwise be payable to the servicer or the seller; and

(15) Any class of certificates, to which one or more swap

agreements entered into by the trust applies, may be acquired or held

in reliance upon this exemption only by Qualified Plan Investors.

B. Neither any underwriter, sponsor, trustee, servicer, insurer,

nor any obligor, unless it or any of its affiliates has discretionary

authority or renders investment advice with respect to the plan assets

used by a plan to acquire certificates, shall be denied the relief

provided under Section I, if the provision in Section II.A.(6) above is

not satisfied for the acquisition or holding by a plan of such

certificates, provided that:

(1) Such condition is disclosed in the prospectus or private

placement memorandum; and

(2) In the case of a private placement of certificates, the trustee

obtains a representation from each initial purchaser which is a plan

that it is in compliance with such condition, and obtains a covenant

from each initial purchaser to the effect that, so long as such initial

purchaser (or any transferee of such initial purchaser's certificates)

is required to obtain from its transferee a representation regarding

compliance with the Securities Act of 1933, any such transferees shall

be required to make a written representation regarding compliance with

the condition set forth in Section II.A.(6).

Section III--Definitions

For purposes of this exemption:

A. Certificate means a certificate:

(1) That (i) represents a beneficial ownership interest in the

assets of a trust and entitles the holder to payments denominated as

principal, interest and/or other payments made as described in the

applicable prospectus or private placement memorandum and in accordance

with the pooling and servicing agreement in connection with the assets

of such trust, to the extent allocable to the series of certificates

purchased by a plan, either currently or after a revolving period

during which principal payments on assets of the trust are reinvested

in new assets, or (ii) is denominated as a debt instrument that

represents a regular interest in a financial asset securitization

investment trust (FASIT), within the meaning of section 860L(a) of the

Code, and is issued by and is an obligation of the trust.

For purposes of this exemption, references to ``certificates

representing an interest in a trust'' include certificates denominated

as debt which are issued by a trust; and

(2) With respect to which (a) MBNA or any of its affiliates is the

sponsor, and (b) MBNA, any of its affiliates, or an ``underwriter'' (as

defined in Section III.C.) is the sole underwriter or the manager or

co-manager of the underwriting syndicate or a selling or placement

agent.

B. Trust means an investment pool, the corpus of which is held in

trust and consists solely of:

(1) Either

(a) Receivables (as defined in Section III.V.); or

(b) Participations in a pool of receivables (as defined in Section

III.V.) where such beneficial ownership interests are not subordinated

to any other interest in the same pool of receivables; 4

---------------------------------------------------------------------------

\4\ The Department notes that no relief would be available under

the exemption if the participation interests held by the trust were

subordinated to the rights and interests evidenced by other

participation interests in the same pool of receivables.

---------------------------------------------------------------------------

(2) Property which has secured any of the assets described in

Section III.B.(1); 5

---------------------------------------------------------------------------

\5\ MBNA states that it is possible for credit card receivables

to be secured by bank account balances or security interests in

merchandise purchased with credit cards. Thus, the exemption should

permit foreclosed property to be an eligible trust asset.

---------------------------------------------------------------------------

(3) Undistributed cash or permitted investments made therewith

maturing no later than the next date on which distributions are to be

made to certificateholders, except during a Revolving Period (as

defined herein) when permitted investments are made until such cash can

be reinvested in additional receivables described in paragraph (a) of

this Section III.B.(1);

(4) Rights of the trustee under the pooling and servicing

agreement, and rights under any cash collateral accounts, insurance

policies, third-party guarantees, contracts of suretyship and other

credit support arrangements for any certificates, swap transactions, or

under any yield supplement agreements,6 yield maintenance

agreements or similar arrangements; and

---------------------------------------------------------------------------

\6\ In a series involving an accumulation period (as defined in

Section III.Z.), a yield supplement agreement may be used by the

Trust to make up the difference between (i) the reinvestment yield

on permitted investments, and (ii) the interest rate on the

certificates of that series.

---------------------------------------------------------------------------

(5) Rights to receive interchange fees received by the sponsor as

partial compensation for the sponsor's taking credit risk, absorbing

fraud losses and funding receivables for a limited period prior to

initial billing with respect to accounts designated to the trust.

Notwithstanding the foregoing, the term ``trust'' does not include

any investment pool unless: (i) the investment pool consists only of

receivables of the type which have been included in other investment

pools; (ii) certificates evidencing interests in such other investment

pools have been rated in one of the two highest generic rating

[[Page 17024]]

categories by at least one of the Rating Agencies for at least one year

prior to the plan's acquisition of certificates pursuant to this

exemption; and (iii) certificates evidencing an interest in such other

investment pools have been purchased by investors other than plans for

at least one year prior to the plan's acquisition of certificates

pursuant to this exemption.

C. Underwriter means an entity which has received from the

Department an individual prohibited transaction exemption which

provides relief for the operation of asset pool investment trusts that

issue asset-backed pass-through securities to plans that is similar in

format and substance to this exemption (each, an Underwriter

Exemption); 7 any person directly or indirectly, through one

or more intermediaries, controlling, controlled by or under common

control with such entity; and any member of an underwriting syndicate

or selling group of which such firm or affiliated person described

above is a manager or co-manager with respect to the certificates.

---------------------------------------------------------------------------

\7\ For a listing of Underwriter Exemptions, see the description

provided in the text of the operative language of Prohibited

Transaction Exemption (PTE) 97-34 (62 FR 39021, July 21, 1997).

---------------------------------------------------------------------------

D. Sponsor means MBNA, or an affiliate of MBNA that organizes a

trust by transferring credit card receivables or interests therein to

the trust in exchange for certificates.

E. Master Servicer means MBNA or an affiliate that is a party to

the pooling and servicing agreement relating to trust assets and is

fully responsible for servicing, directly or through subservicers, the

receivables in the trust pursuant to the pooling and servicing

agreement.

F. Subservicer means MBNA or an affiliate of MBNA, or an entity

unaffiliated with MBNA which, under the supervision of and on behalf of

the master servicer, services receivables contained in the trust, but

is not a party to the pooling and servicing agreement.

G. Servicer means MBNA or an affiliate which services receivables

contained in the trust, including the master servicer and any

subservicer or their successors pursuant to the pooling and servicing

agreement.

H. Trustee means an entity which is independent of MBNA and its

affiliates and is the trustee of the trust. In the case of certificates

which are denominated as debt instruments, ``trustee'' also means the

trustee of the indenture trust.

I. Insurer means the insurer or guarantor of, provider of other

credit support for, or other contractual counterparty of, a trust.

Notwithstanding the foregoing, a swap counterparty is not an insurer,

and a person is not an insurer solely because it holds securities

representing an interest in a trust which are of a class subordinated

to certificates representing an interest in the same trust.

J. Obligor means any person, other than the insurer, that is

obligated to make payments with respect to any receivable included in

the trust.

K. Excluded Plan means any plan with respect to which any member of

the Restricted Group is a ``plan sponsor'' within the meaning of

section 3(16)(B) of the Act.

L. Restricted Group with respect to a class of certificates means:

(1) Each underwriter;

(2) Each insurer;

(3) The sponsor;

(4) The trustee;

(5) Each servicer;

(6) Each swap counterparty;

(7) Any obligor with respect to receivables contained in the trust

constituting more than 0.5 percent of the fair market value of the

aggregate undivided interest in the trust allocated to the certificates

of a series, determined on the date of the initial issuance of such

series of certificates by the trust; or

(8) Any affiliate of a person described in Section III.L.(1)-(7).

M. Affiliate of another person includes:

(1) Any person directly or indirectly, through one or more

intermediaries, controlling, controlled by, or under common control

with such other person;

(2) Any officer, director, partner, employee, relative (as defined

in section 3(15) of the Act), a brother, a sister, or a spouse of a

brother or sister of such other person; and

(3) Any corporation or partnership of which such other person is an

officer, director or partner.

N. Control means the power to exercise a controlling influence over

the management or policies of a person other than an individual.

O. A person will be independent of another person only if:

(1) Such person is not an affiliate of that other person; and

(2) The other person, or an affiliate thereof, is not a fiduciary

who has investment management authority or renders investment advice

with respect to any assets of such person.

P. Sale includes the entrance into a forward delivery commitment

(as defined in Section III.Q. below), provided that:

(1) The terms of the forward delivery commitment (including any fee

paid to the investing plan) are no less favorable to the plan than they

would be in an arm's length transaction with an unrelated party;

(2) The prospectus or private placement memorandum is provided to

an investing plan prior to the time the plan enters into the forward

delivery commitment; and

(3) At the time of the delivery, all conditions of this exemption

applicable to sales are met.

Q. Forward Delivery Commitment means a contract for the purchase or

sale of one or more certificates to be delivered at an agreed future

settlement date. The term includes both mandatory contracts (which

contemplate obligatory delivery and acceptance of the certificates) and

optional contracts (which give one party the right but not the

obligation to deliver certificates to, or demand delivery of

certificates from, the other party).

R. Reasonable Compensation has the same meaning as that term is

defined in 29 CFR section 2550.408c-2.

S. Pooling and Servicing Agreement means the agreement or

agreements among a sponsor, a servicer and the trustee establishing a

trust and any supplement thereto pertaining to a particular series of

certificates. In the case of certificates which are denominated as debt

instruments, ``pooling and servicing agreement'' also includes the

indenture entered into by the trustee of the trust issuing such

certificates and the indenture trustee.

T. Series means an issuance of a class or various classes of

certificates by the trust all on the same date pursuant to the same

pooling and servicing agreement, and any supplement thereto and

restrictions therein.

U. Qualified Administrative Fee means a fee which meets the

following criteria:

(1) The fee is triggered by an act or failure to act by the obligor

other than the normal timely payment of amounts owing with respect to

the receivables;

(2) The servicer may not charge the fee absent the act or failure

to act referred to in (1);

(3) The ability to charge the fee, the circumstances in which the

fee may be charged, and an explanation of how the fee is calculated are

set forth in the pooling and servicing agreement or described in all

material respects in the prospectus or private placement memorandum

provided to the plan before it purchases certificates issued by the

trust; and

(4) The amount paid to investors in the trust is not reduced by the

amount of any such fee waived by the servicer.

V. Receivables means secured or unsecured obligations of credit

card holders which have arisen or arise in

[[Page 17025]]

Accounts designated to a trust. Such obligations represent amounts

charged by cardholders for merchandise and services and amounts

advanced as cash advances, as well as periodic finance charges, annual

membership fees, cash advance fees, late charges on amounts charged for

merchandise and services and certain other fees (such as bad check

fees, cash advance fees, and other fees specified in the cardholder

agreements) designated by card issuers (other than a qualified

administrative fee as defined in Section III.U.).

W. Accounts are revolving credit card accounts serviced by MBNA or

an affiliate, which were originated or purchased by MBNA or an

affiliate, and are designated to a trust such that receivables arising

in such accounts become assets of the trust.

X. Revolving Period means a period of time, as specified in the

pooling and servicing agreement, during which principal collections

allocated to a series are reinvested in newly generated receivables

arising in the accounts.

Y. Amortization Period means a period of time specified in the

pooling and servicing agreement during which a portion of the principal

collections allocated to a series will commence to be paid to the

certificateholders of such series in installments.

Z. Accumulation Period means a period of time specified in the

pooling and servicing agreement during which a portion of the principal

collections allocated to a series will be deposited in an account to be

distributed to certificateholders in a lump sum on the expected

maturity date.

AA. Pay Out Event means any of the events specified in the pooling

and servicing agreement or supplement thereto that results (in some

instances without further affirmative action by any party) in the early

commencement of either an amortization period or an accumulation

period, including (1) the failure of the sponsor or the servicer,

whichever is subject to the relevant obligation under the pooling and

servicing agreement, (i) to make any payment or deposit required under

the pooling and servicing agreement within five (5) business days after

such payment or deposit was required to be made, or (ii) to observe or

perform any of its other covenants or agreements set forth in the

pooling and servicing agreement, which failure has a material adverse

effect on holders of investor certificates of the relevant series and

continues unremedied for 60 days; (2) a breach of any representation or

warranty made by the sponsor or the servicer in the pooling and

servicing agreement that continues to be incorrect in any material

respect for 60 days; (3) the occurrence of certain bankruptcy events

relating to the sponsor or the servicer; (4) the failure by the sponsor

to convey to the trust additional receivables to maintain the minimum

seller interest that is required by the pooling and servicing agreement

and the Rating Agencies; (5) the failure to pay in full amounts owing

to investors on the expected maturity date; and (6) the Economic Pay

Out Event.

BB. An Economic Pay Out Event occurs automatically when the

portfolio yield for any series of certificates, averaged over three

consecutive months (or such other period approved by one of the Rating

Agencies) is less than the base rate of the series averaged over the

same period. Portfolio yield for a series of certificates for any

period is equal to the sum of the finance charge collections and other

amounts treated as finance charge collections less total defaults for

the series divided by the outstanding principal balance of the investor

certificates of the series, or such other measure approved by one of

the Rating Agencies. The base rate for a series of certificates for any

period is the sum of (i) amounts payable to certificateholders of the

series with respect to interest, (ii) servicing fees allocable to the

series payable to the servicer, and (iii) any credit enhancement fee

allocable to the series payable to a third party credit enhancer,

divided by the outstanding principal balance of the investor

certificates of the series, or such other measure approved by one of

the Rating Agencies.

CC. CCA or Cash Collateral Account means that certain account

established in the name of the trustee that serves as credit

enhancement with respect to the investor certificates and holds cash

and/or permitted investments (as defined below in Section III.KK.)

which conform to applicable provisions of the pooling and servicing

agreement.

DD. Group means a group of any number of series offered by the

trust that share finance charge and/or principal collections in the

manner described in the applicable prospectus or private placement

memorandum.

EE. Ratings Effect means the reduction or withdrawal by a Rating

Agency of its then current rating of the certificates held by any plan

pursuant to this exemption.

FF. Principal Receivables Discount means, with respect to any

account designated by the sponsor, the portion of the related principal

receivables that represents a discount from the face value thereof and

that is treated under the pooling and servicing agreement as finance

charge receivables.

GG. Ratings Dependent Swap means an interest rate swap, or (if

purchased by or on behalf of the trust) an interest rate cap contract,

that is part of the structure of a series of certificates where the

rating assigned by the Rating Agency to any senior class of

certificates held by any plan is dependent on the terms and conditions

of the swap and the rating of the swap counterparty, and if such

certificate rating is not dependent on the existence of the swap and

rating of the swap counterparty, such swap or cap shall be referred to

as a ``Non-Ratings Dependent Swap''. With respect to a Non-Ratings

Dependent Swap, each Rating Agency rating the certificates must

confirm, as of the date of issuance of the certificates by the trust,

that entering into an Eligible Swap with such counterparty will not

affect the rating of the certificates.

HH. Eligible Swap means a Ratings Dependent or Non-Ratings

Dependent Swap:

(1) which is denominated in U.S. Dollars;

(2) pursuant to which the trust pays or receives, on or immediately

prior to the respective payment or distribution date for the senior

class of certificates, a fixed rate of interest, or a floating rate of

interest based on a publicly available index (e.g. LIBOR or the U.S.

Federal Reserve's Cost of Funds Index (COFI)), with the trust receiving

such payments on at least a quarterly basis and obligated to make

separate payments no more frequently than the swap counterparty, with

all simultaneous payments being netted;

(3) which has a notional amount that does not exceed either (i) the

certificate balance of the class of certificates to which the swap

relates, or (ii) the portion of the certificate balance of such class

represented by receivables;

(4) which is not leveraged (i.e. payments are based on the

applicable notional amount, the day count fractions, the fixed or

floating rates designated in subparagraph (2) above, and the difference

between the products thereof, calculated on a one to one ratio and not

on a multiplier of such difference);

(5) which has a final termination date that is the earlier of the

date on which the trust terminates or the related class of certificates

is fully repaid; and

(6) which does not incorporate any provision which could cause a

unilateral alteration in any provision described in subparagraphs (1)

through (4) above without the consent of the trustee.

II. Eligible Swap Counterparty means a bank or other financial

institution which has a rating, at the date of

[[Page 17026]]

issuance of the certificates by the trust, which is in one of the three

highest long-term credit rating categories, or one of the two highest

short-term credit rating categories, utilized by at least one of the

Rating Agencies rating the certificates; provided that, if a swap

counterparty is relying on its short-term rating to establish

eligibility hereunder, such counterparty must either have a long-term

rating in one of the three highest long-term rating categories or not

have a long-term rating from the applicable Rating Agency, and provided

further that if the senior class of certificates with which the swap is

associated has a final maturity date of more than one year from the

date of issuance of the certificates, and such swap is a Ratings

Dependent Swap, the swap counterparty is required by the terms of the

swap agreement to establish any collateralization or other arrangement

satisfactory to the Rating Agencies in the event of a ratings downgrade

of the swap counterparty.

JJ. Qualified Plan Investor means a plan investor or group of plan

investors on whose behalf the decision to purchase certificates is made

by an appropriate independent fiduciary that is qualified to analyze

and understand the terms and conditions of any swap transaction used by

the trust and the effect such swap would have upon the credit ratings

of the certificates. For purposes of the exemption, such a fiduciary is

either:

(1) A qualified professional asset manager (QPAM),8 as

defined under Part V(a) of PTE 84-14 (49 FR 9494, 9506, March 13,

1984);

---------------------------------------------------------------------------

\8\ PTE 84-14 provides a class exemption for transactions

between a party in interest with respect to an employee benefit plan

and an investment fund (including either a single customer or pooled

separate account) in which the plan has an interest, and which is

managed by a QPAM, provided certain conditions are met. QPAMs (e.g.

banks, insurance companies, registered investment advisers with

total client assets under management in excess of $50 million) are

considered to be experienced investment managers for plan investors

that are aware of their fiduciary duties under ERISA.

---------------------------------------------------------------------------

(2) An in-house asset manager (INHAM),9 as defined under

Part IV(a) of PTE 96-23 (61 FR 15975, 15982, April 10, 1996); or

---------------------------------------------------------------------------

\9\ PTE 96-23 permits various transactions involving employee

benefit plans whose assets are managed by an INHAM, an entity which

is generally a subsidiary of an employer sponsoring the plan which

is a registered investment adviser with management and control of

total assets attributable to plans maintained by the employer and

its affiliates which are in excess of $50 million.

---------------------------------------------------------------------------

(3) A plan fiduciary with total assets under management of at least

$100 million at the time of the acquisition of such certificates.

KK. Permitted Investments means investments that either (i) are

direct obligations of, or obligations fully guaranteed as to timely

payment of principal and interest by, the United States or any agency

or instrumentality thereof, provided that such obligation is backed by

the full faith and credit of the United States, or (ii) have been rated

(or the obligor thereof has been rated) in one of the three highest

generic rating categories by a Rating Agency; are described in the

pooling and servicing agreement; and are permitted by the relevant

Rating Agency(ies).

LL. Excess Finance Charge Collections means, as of any day funds

are distributed from the trust, the amount by which the finance charge

collections allocated to certificates of a series exceed the amount

necessary to pay certificate interest, servicing fees and expenses, to

satisfy cardholder defaults or charge-offs, and to reinstate credit

support.

The Department notes that this exemption is included within the

meaning of the term ``Underwriter Exemption'' as it is defined in

Section V(h) of the Grant of the Class Exemption for Certain

Transactions Involving Insurance Company General Accounts, which was

published in the Federal Register on July 12, 1995 (see PTE 95-60, 60

FR 35925).

For a more complete statement of the facts and representations

supporting the Department's decision to grant this exemption refer to

the notice of proposed exemption (the Proposal) published on January

27, 1998, at 63 FR 4038.

Written Comments and Modifications. The applicant (i.e. MBNA)

submitted certain comments on the text of the Proposal.

With respect to issues of a substantive nature, the applicant

suggested two revisions which are discussed below.

First, MBNA requests that the phrase ``at the time of such

acquisition'' should be inserted immediately following the word ``is''

in the 13th line of Section II.A.(3) of the Proposal (63 FR at 4039,

column 3). In this regard, Section II.A.(3) concerns minimum ratings

for the certificates issued by a trust and the proviso contained

therein requires certain minimum credit support for each Exempt Class

of certificates. MBNA suggests that the proviso with respect to minimum

credit support be changed to clarify that the five (5) percent minimum

only needs to be present at the time of an acquisition of a

certificate.

The Department believes that this modification is consistent with

the requirements of Section II.A.(3) that the certificates acquired by

a plan have received a rating at the time of acquisition that is in one

of the high rating categories discussed therein. The Department notes

that the conditions of this exemption are designed to ensure, among

other things, that certain actions taken by the trust or the sponsor

(i.e. MBNA) do not result in the certificates issued by the trust

receiving a lower credit rating from the Rating Agencies than the then

current rating of the certificates--i.e. a Ratings Effect. For example,

Section II.A.(8) requires that confirmation must be received from the

Rating Agencies that the issuance of any new series of certificates by

the trust will not result in a Ratings Effect. Likewise, Sections

I.C.(3) and II.A.(13) require that the addition of new receivables or

designation of new accounts to the trust must meet terms and conditions

which have been described in the prospectus or private placement

memorandum for the certificates and have been approved by the Rating

Agencies. The pooling and servicing agreements also require

confirmations from the Rating Agencies that such actions will not

result in a Ratings Effect. Therefore, the Department has made MBNA's

suggested modification to the language of Section II.A.(3) with the

understanding that any credit enhancements used by a trust to obtain a

high rating for a particular class of certificates at the time such

certificates are acquired by a plan should be sufficient to avoid any

Ratings Effect on the certificates in the future, and that adverse

changes to the level of minimum credit support required for an Exempt

Class may have a Ratings Effect unless other arrangements satisfactory

to the Rating Agencies are made.

Second, with respect to the definition of the term ``Pay Out

Event'' contained in Section III.AA. of the Proposal, MBNA states that

clause (5) of that definition does not describe a pay out event for

MBNA's securitization transactions for credit card receivables. In this

regard, Section III.AA. of the Proposal contains a nonexclusive list of

seven events which may trigger an early payout to certificateholders.

Clause (5) of the Proposal describes a Pay Out Event as follows:

``* * * if a class of investor certificates is in an

Accumulation Period, the amount on deposit in the accumulation

account in any month is less than the amount required to be on

deposit therein.''

However, MBNA states that a Pay Out Event does not occur with

regard to the amount of principal accumulated each month in the

accumulation account.

[[Page 17027]]

MBNA states further that Clause (6) of Section III.AA. of the Proposal

expresses the operative requirement, i.e., Class A certificateholders

must be repaid the principal amount of their investment by the expected

maturity date. Thus, MBNA represents that the inclusion of Clause (5)

in the Proposal, as described above, should be deleted.

The Department acknowledges the applicant's clarification and has

deleted Clause (5) as it appeared in the definition of the term ``Pay

Out Event'' in the Proposal. Thus, Section III.AA. of the Proposal has

been renumbered to reflect this deletion.

In addition, the applicant submitted a number of comments that

relate to what are described as certain language ``glitches'' in the

Proposal. These are discussed below.

First, MBNA requests that the heading used in the Proposal be

changed to reflect the fact that its headquarters is now located in

Wilmington, Delaware (rather than Newark, Delaware).

Second, with respect to Section I.B.(1) of the Proposal relating to

an obligor for receivables contained in the trust constituting 0.5

percent or less of the fair market value of the obligations or

receivables contained in the aggregate undivided interest in the trust

allocated to the certificates of a series, MBNA states that the

language ``* * * obligations or receivables contained in the * * *'' is

unnecessary and should be deleted from that subsection in order to be

consistent with the description of such an obligor used in the

definition of ``Restricted Group'' in Section III.L.(7).

Third, in Section I.B.(1)(v) of the Proposal, MBNA requests that

the word ``not'' be changed to ``no'' in order to be consistent with

the description in Section I.B.(1)(iv).

Fourth, MBNA requests that the word ``and'' be substituted for the

comma (``,'') used in Section I.B.(2) of the Proposal.

Fifth, MBNA requests that the word ``for'' be substituted for the

word ``of'' in the 8th line of Section I.C.(3) of the Proposal (see 63

FR at 4039, column 2).

Sixth, MBNA states that Section I.C.(3) and footnote 10 of the

Proposal should be revised to reflect the change in Fitch's formal name

to ``Fitch IBCA, Inc.''

Seventh, MBNA states that in Section I.C.(4), the cross reference

to the definition of an ``Economic Pay Out Event'' should be changed

from Section III.X. to Section III.BB.

Eighth, MBNA requests that the word ``class'' should be substituted

for the word ``series'' in the 11th and 17th lines of Section II.A.(5)

of the Proposal (see 63 FR at 4040, column 1).

Ninth, MBNA requests that the words ``receivables in'' be inserted

between the words ``of'' and ``newly'' in lines 5-6 of Section

II.A.(12) of the Proposal, as well as in lines 5-6 and 8 of Section

II.A.(13) of the Proposal (see 63 FR at 4040, column 2).

Tenth, MBNA requests that the word ``class'' be substituted for the

word ``series'' in line 1 of Section II.A.(14) of the Proposal and in

Section II.A.(14)(c)(ii) therein (63 FR at 4040, columns 2 and 3).

Eleventh, MBNA requests that the word ``class'' be substituted for

the word ``series'' in Section II.A.(15).

Twelfth, MBNA requests that the word ``assets'' be substituted for

the word ``receivables'' in the 4th (but not the 6th) line of the

definition of ``Master Servicer'' in Section III.E. of the Proposal (63

FR at 4041, column 3).

Thirteenth, MBNA requests that the words ``senior class'' be

substituted for the word ``series'' in the 7th line of the definition

of ``Ratings Dependent Swap'' in Section III.GG. of the Proposal (63 FR

at 4043, column 1).

Fourteenth, MBNA requests that the words ``senior class'' be

substituted for the word ``series'' in the 4th line of the definition

of ``Eligible Swap'' in Section III.HH(2) of the Proposal (63 FR at

4043, column 2).

Fifthteenth, MBNA requests that the words ``senior class'' be

substituted for the word ``series'' in the 18th line of the definition

of ``Eligible Swap Counterparty'' in Section III.II. of the Proposal

(63 FR at 4043, column 3).

The Department acknowledges each of these requested revisions to

the Proposal and has so modified the language of the exemption

contained herein.

Finally, the applicant's comments on the Proposal contained certain

minor clarifications concerning the information included in the Summary

of Facts and Representations for the Proposal. The Department

acknowledges all of the clarifications made by MBNA to this

information.

For further information regarding MBNA's comments or other matters

discussed herein, interested persons are encouraged to obtain a copy of

the exemption application file (No. D-10304) which is available in the

Public Documents Room of the Pension and Welfare Benefits

Administration, U.S. Department of Labor, Room N-5638, 200 Constitution

Avenue, N.W., Washington, D.C. 20210.

No other written comments, and no requests for a hearing, were

received by the Department.

Accordingly, the Department has determined to grant the exemption

as modified herein.

FOR FURTHER INFORMATION CONTACT: Mr. E. F. Williams of the Department,

telephone (202) 219-8194. (This is not a toll-free number.)

Citibank (South Dakota), N.A., Citibank (Nevada), N.A., and

Affiliates Located in North Sioux Falls, South Dakota

[Prohibited Transaction Exemption No. 98-14; Application No. D-10313]

Exemption

Section I--Transactions

A. The restrictions of sections 406(a) and 407(a) of the Act and

the taxes imposed by section 4975(a) and (b) of the Code, by reason of

section 4975(c)(1)(A) through (D) of the Code, shall not apply to the

following transactions involving trusts and certificates evidencing

interests therein:

(1) The direct or indirect sale, exchange or transfer of

certificates in the initial issuance of certificates between the trust,

the sponsor or an underwriter and an employee benefit plan subject to

the Act or section 4975 of the Code (a plan) when the sponsor,

servicer, trustee or insurer of a trust, the underwriter of the

certificates representing an interest in the trust, or an obligor is a

party in interest with respect to such plan;

(2) The direct or indirect acquisition or disposition of

certificates by a plan in the secondary market for such certificates;

and

(3) The continued holding of certificates acquired by a plan

pursuant to Section I.A.(1) or (2).

Notwithstanding the foregoing, Section I.A. does not provide an

exemption from the restrictions of sections 406(a)(1)(E), 406(a)(2) and

407 for the acquisition or holding of a certificate on behalf of an

Excluded Plan, as defined in Section III.K. below, by any person who

has discretionary authority or renders investment advice with respect

to the assets of the Excluded Plan that are invested in

certificates.10

---------------------------------------------------------------------------

\10\ Section I.A. provides no relief from sections 406(a)(1)(E),

406(a)(2) and 407 for any person rendering investment advice to an

Excluded Plan within the meaning of section 3(21)(A)(ii) and

regulation 29 CFR 2510.3-21(c).

---------------------------------------------------------------------------

B. The restrictions of sections 406(b)(1) and 406(b)(2) of the Act

and the taxes imposed by section 4975(a) and (b) of the Code, by reason

of section 4975(c)(1)(E) of the Code, shall not apply to:

(1) The direct or indirect sale, exchange or transfer of

certificates in the initial issuance of certificates between

[[Page 17028]]

the trust, the sponsor or an underwriter and a plan when the person who

has discretionary authority or renders investment advice with respect

to the investment of plan assets in the certificates is (a) an obligor

with respect to receivables contained in the trust constituting 0.5

percent or less of the fair market value of the aggregate undivided

interest in the trust allocated to the certificates of a series, or (b)

an affiliate of a person described in (a); if