Custodial Agreement

TABLE OF CONTENTS


PAGE


ARTICLE I


DEFINITIONS
Section 1.1. Definitions.......................................... 2
Section 1.2. Interpretation of the Agreement...................... 2


ARTICLE II


CUSTODIAL ARRANGEMENT


Section 2.1. Appointment as Custodian............................. 2
Section 2.2. Maintenance of Office................................ 3


ARTICLE III


CUSTODIAL ARRANGEMENT
Section 3.1. Transfer of Receivables; Delivery of Documents....... 3
Section 3.2. Certification........................................ 4
Section 3.3. Release of Receivables Files......................... 4
Section 3.4. Purchase; Payment In Full............................ 5
Section 3.5. Other Duties of Custodian............................ 5
Section 3.6. Access to Records.................................... 6
Section 3.7. Instructions; Authority to Act....................... 6


ARTICLE IV


OWNERSHIP AND TRANSFER OF RECEIVABLES
Section 4.1. Transfer of Receivables.............................. 6
Section 4.2. Substitution and Purchase of Receivables............. 7
Section 4.3. No Service Charge for Transfer of Receivables........ 7
Section 4.4. Defeasance........................................... 7


ARTICLE V


CUSTODIAN
Section 5.1. Representations, Warranties and Covenants of
Custodian.......................................... 7
Section 5.2. Charges and Expenses................................. 9
Section 5.3. No Adverse Interests................................. 9
Section 5.4. Inspections.......................................... 9
Section 5.5. Insurance............................................ 9
Section 5.6. Limitation of Liability.............................. 10


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Section 5.7. Indemnification..................................... 10
Section 5.8. Further Rights of Custodian......................... 10


ARTICLE VI


MISCELLANEOUS PROVISIONS
Section 6.1. Amendment 11
Section 6.2. Governing Law 11
Section 6.3. Notices 11
Section 6.4. Severability of Provisions 11
Section 6.5. No Partnership 12
Section 6.6. Termination of Agreement 12
Section 6.7. Counterparts 12
Section 6.8. Assignment 12
Section 6.9. Headings 12
Section 6.10. Advice of Counsel 12
Section 6.11. No Petition 12
Section 6.12. Resignation of Custodian 12
Section 6.13. Limitation of Liability of Indenture Trustee
and Owner Trustee................................. 13


EXHIBIT A Custodian Certification.......................................A-1 EXHIBIT B Request for Release of Documents..............................B-1 EXHIBIT C Transfer Certificate..........................................C-1


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CUSTODIAL AGREEMENT
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THIS CUSTODIAL AGREEMENT is made as of May 1, 1997, by and among CATERPILLAR FINANCIAL SERVICES CORPORATION (the "Originator"), CATERPILLAR FINANCIAL SERVICES CORPORATION, as Servicer (the "Servicer"), CATERPILLAR FINANCIAL FUNDING CORPORATION (the "Seller"), CATERPILLAR FINANCIAL ASSET TRUST 1997-A (the "Trust"), THE FIRST NATIONAL BANK OF CHICAGO, as Indenture Trustee under the Indenture (the "Indenture Trustee") and THE FIRST NATIONAL BANK OF CHICAGO, as Custodian ("Custodian").


RECITALS
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WHEREAS, before the Closing Date the Originator is the owner of the Receivables.


WHEREAS, pursuant to the Purchase Agreement, the Originator will sell the Receivables to the Seller.


WHEREAS, pursuant to the Sale and Servicing Agreement, the Seller will sell the Receivables acquired pursuant to the Purchase Agreement to the Trust.


WHEREAS, pursuant to the Indenture, the Trust will Grant to the Indenture Trustee, as trustee for the benefit of the Noteholders (and to the extent set forth in the Sale and Servicing Agreement, the Certificateholder), all of the Trust's right, title and interest in, to and under the Receivables and the other assets of the Trust.


WHEREAS, during such time as the Seller, the Trust or the Indenture Trustee owns or has an interest in the Receivables, such Person or Persons shall be referred to herein as the "Receivables Holder", and the Custodian shall hold all Receivables as bailee of the Seller, the Trust and the Indenture Trustee (for the benefit of the Noteholders and, to the extent set forth in the Sale and Servicing Agreement, the Certificateholder) during such time as such Person is a Receivables Holder. References in this Agreement to the Receivables Holder, when referring to transfers or possession of, or security interests in, Receivables, shall refer to Custodian, in its capacity as custodian for the benefit of such Receivables Holder.


WHEREAS, in connection with the foregoing, the parties hereto desire to provide for the custody and management of the Receivables transferred pursuant to the Purchase Agreement, the Sale and Servicing Agreement and the Indenture (each, a "Transfer").


WHEREAS, Custodian is a financial institution regulated by the Comptroller of the Currency of the United States.


WHEREAS, the Originator, the Seller, the Trust and the Indenture Trustee, during such time as each such Person is a Receivables Holder, desire to have the Custodian (i) hold the Receivables as custodian for each such party, (ii) take possession of the Contracts and the Receivables Files related to the Receivables, along with certain other documents specified in this Agreement, as the custodian for, and bailee of, such Receivables Holder in accordance with the terms and conditions of this Agreement, and (iii) retain possession of the Contracts and Receivables Files and such other documents as custodian for and bailee of the Indenture Trustee. Custodian is willing and able to perform the duties and obligations of a custodian and bailee as set forth herein.


WHEREAS, Servicer will act as servicer of the Receivables pursuant to the Sale and Servicing Agreement.


NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the Originator, the Servicer, the Seller, the Trust, the Indenture Trustee and Custodian hereby agree as follows:


ARTICLE I


DEFINITIONS


Section 1.1. DEFINITIONS. Certain capitalized terms used in this Agreement and not otherwise defined herein shall have the respective meanings assigned them in Article I of the Sale and Servicing Agreement dated as of May 1, 1997 (the "Sale and Servicing Agreement") among the Trust, the Seller and the Servicer or in Article I of the Indenture dated as of May 1, 1997 (the "Indenture") between the Trust and the Indenture Trustee. All references in this Agreement to Articles, Sections, Subsections and Exhibits are to the same contained in or attached to this Agreement unless otherwise specified. All terms defined in this Agreement shall have the defined meanings when used in any certificate, notice or other document made or delivered pursuant hereto unless otherwise defined therein.


Section 1.2. INTERPRETATION OF THE AGREEMENT. In interpreting any mistake or ambiguity contained herein, the parties hereto agree to resolve any such mistakes or ambiguities in favor of the Indenture Trustee (for the benefit of the Noteholders, and to the extent set forth in the Sale and Servicing Agreement, for the benefit of the Certificateholder).


ARTICLE II


CUSTODIAL ARRANGEMENT


Section 2.1. APPOINTMENT AS CUSTODIAN. Subject to the terms and conditions hereof, the Seller, the Trust and the Indenture Trustee (for the benefit of the Noteholders and, to the extent set forth in the Sale and Servicing Agreement, the Certificateholder), as their interests may appear, hereby appoint The First National Bank of Chicago, and The First National Bank of Chicago hereby accepts such appointment, as Custodian to maintain custody


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of the Receivables, the Contracts and the Receivables Files during such time as each such Person is a Receivables Holder.


Section 2.2. MAINTENANCE OF OFFICE. The Custodian agrees to maintain each Receivables File identified in Section 3.03 of the Sale and Servicing Agreement and Section 2.04 of the Purchase Agreement at its office located at 2950 East Flamingo Road, Suite C-3C, Las Vegas, Nevada 89121, or at such of its other offices in Nevada as Custodian shall designate from time to time after giving the Originator, the Seller, the Trust, each of the Rating Agencies and the Indenture Trustee prior written notice, which office shall be maintained separate from the offices of the Originator, the Seller and the Servicer and shall be at all times under the exclusive dominion of the Custodian. None of the Custodian's employee's shall be employees of the Originator, the Seller, the Servicer or any of the Servicer's Affiliates.


ARTICLE III


CUSTODIAL ARRANGEMENT


Section 3.1. TRANSFER OF RECEIVABLES; DELIVERY OF DOCUMENTS. On or before the Closing Date, the Originator shall deliver, or cause to be delivered, to Custodian, the Receivables Files referred to in Section 2.04 of the Purchase Agreement and Section 3.03 of the Sale and Servicing Agreement, including without limitation, the Original Contract evidencing each Receivable. Until the Closing Date and the occurrence of the initial Transfer described below, the Custodian shall hold the Receivables (including the Receivables Files) as custodian and bailee for the Originator.


On the Closing Date, the Originator shall deliver to the Custodian a Transfer Certificate in the form attached hereto as EXHIBIT C evidencing the Transfer by the Originator to the Seller of the Receivables pursuant to the Purchase Agreement. Upon receipt of the Transfer Certificate duly executed by the Originator, the Custodian shall issue to the Seller a Custodian Certification (as defined below) (the "Seller's Custodian Certification"), as described in SECTION 3.2 below.


On the Closing Date, upon receipt of the Seller's Custodian Certification, the Seller shall deliver to the Custodian a Transfer Certificate in the form attached hereto as EXHIBIT C (a "Transfer Certificate") evidencing the Transfer by the Seller to the Trust of the Receivables pursuant to the Sale and Servicing Agreement, together with the Seller's Custodian Certification. Upon receipt of the Transfer Certificate duly executed by the Seller and the Seller's Custodian Certification, the Custodian shall issue to the Trust a Custodian Certification (the "Trust's Custodian Certification"), as described in SECTION 3.2 below, and shall cancel the Seller's Custodian Certification.


On the Closing Date, upon receipt of the Trust's Custodian Certification, the Trust shall deliver to the Custodian a Transfer Certificate in the form attached hereto as EXHIBIT C evidencing the Transfer by the Trust to the Indenture Trustee of the Receivables pursuant to the Indenture, together with the Trust's Custodian Certification. Upon receipt of


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the Transfer Certificate duly executed by the Trust and the Trust's Custodian Certification, the Custodian shall issue to the Indenture Trustee a Custodian Certification (the "Trustee's Custodian Certification"), as described in SECTION 3.2 below, and shall cancel the Trust's Custodian Certification.


Custodian hereby acknowledges receipt of the Purchase Agreement, the Sale and Servicing Agreement and the Indenture. Custodian further acknowledges that, on the Closing Date and pursuant to this Agreement, the Purchase Agreement, the Sale and Servicing Agreement and the Indenture, Custodian will be given possession of the Receivables Files relating to the Receivables constituting a portion of the Collateral, each of which Receivables will be described specifically on Schedule A to each of the Purchase Agreement, the Sale and Servicing Agreement and the Indenture, a copy of which will be delivered to Custodian simultaneously with the delivery of the Receivables Files relating thereto. On and after the Closing Date and the completion of the Transfers described above, and so long as this Agreement shall remain in effect, Custodian shall hold the Receivables Files now and hereafter, from time to time, in its sole custody and control as custodian for and bailee of the Indenture Trustee, as trustee for the benefit of the Noteholders and the Certificateholder (as their interests may appear), unless and until released from the lien of the Indenture and otherwise in accordance with the Sale and Servicing Agreement, in which event, Custodian shall hold the Receivables and the Receivables Files as trustee and bailee for the benefit of the applicable Receivables Holder.


Section 3.2. CERTIFICATION. Upon delivery to Custodian of the Receivables Files, as specified in SECTION 3.1, Custodian shall review the same on account of the Indenture Trustee in accordance with the terms of Section 3.05 of the Sale and Servicing Agreement and (subject to SECTION 4.1 hereof) shall confirm to the Indenture Trustee that all the documents in the Receivables Files required to be delivered under SECTION 3.1 (being the documents described in Section 3.03 of the Sale and Servicing Agreement) have been delivered. Custodian shall hold such documents on behalf of the Indenture Trustee pursuant to this Agreement. Upon consummation of a Transfer in accordance with ARTICLE IV hereof, Custodian shall, with respect to the Receivables transferred to the applicable Receivables Holder in connection with the applicable Transfer, as described in SECTION 3.1 hereof, number, execute and deliver to the applicable Receivables Holder (with a copy to the Originator) one or more certifications (each, a "CUSTODIAN CERTIFICATION") in the form attached hereto as EXHIBIT A. Upon issuance of a Custodian Certification with respect to any Transfer, the Custodian Certification relating to such Receivable previously delivered shall be deemed and marked cancelled with respect to such Receivable.


Section 3.3. RELEASE OF RECEIVABLES FILES. From time to time and as provided in the Sale and Servicing Agreement, Custodian is hereby authorized, upon written request of Servicer (with the approval of the Indenture Trustee, which approval shall not be unreasonably withheld) in the form annexed hereto as EXHIBIT B, to release to the Servicer the Receivables File related to any Receivable or the specific documents identified in such request to the Servicer. All documents so released to the Servicer shall be held by it in trust for the benefit of the Indenture Trustee (for the benefit of the Noteholders and, to the extent set forth in the Indenture and the Sale and Servicing Agreement, the Certificateholder).


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Servicer shall return the Receivables File, or such other documents which have been released to Servicer, to Custodian when Servicer's need therefor in connection with a foreclosure, modification, termination or repossession no longer exists, unless the Receivable shall be satisfied in full or liquidated, in which case, upon receipt of a certification to such effect from Servicer to Custodian in the form annexed hereto as EXHIBIT B, the related Receivables File shall be released by Custodian to Servicer, and Custodian shall thereupon reflect any such liquidation on the related Receivable. Pursuant to Section 4.07 of the Sale and Servicing Agreement, (i) the Servicer shall return a Receivables File released to it within five (5) Business Days of such release and (ii) if such Receivables File has not been returned to the Custodian within such five (5) Business Day period, the Servicer shall repurchase the related Receivable.


Notwithstanding anything herein or in any other Basic Document to the contrary, (i) the Servicer shall return any Receivables File released to it in connection with a modification or extension of a Receivable to the Custodian on the same day such file is released and (ii) the Custodian shall not release a Receivables File to the Servicer in connection with a modification or extension of a Receivable if, after giving effect to the release of such Receivables File, the aggregate Principal Balance of all Receivables having released Receivables Files in connection with modifications and extensions exceeds $500,000.


Section 3.4. PURCHASE; PAYMENT IN FULL. Upon the purchase of any Receivable pursuant to Section 3.02, 3.05 or 4.07 of the Sale and Servicing Agreement or Section 6.02 of the Purchase Agreement, or upon the payment in full of any Receivable, which shall be evidenced by Custodian's receipt of the request for release in the form annexed hereto as EXHIBIT B, Custodian shall promptly release the related Receivables File to Servicer and the security interest in such Receivable and related Receivables File granted by the Trust to the Indenture Trustee pursuant to the Indenture shall terminate without any further action by the Custodian, the Originator, the Seller or Indenture Trustee.


Section 3.5. OTHER DUTIES OF CUSTODIAN. The Custodian shall have and perform the other following powers and duties:


(a) SAFEKEEPING. To segregate the Receivables and Receivables Files
from all other receivables and installment sale contracts and similar
records in its possession, to identify the Receivables Files as being held
and to hold the Receivables Files for and on behalf of the Receivables
Holders (which, on and after the Closing Date and after completion of the
Transfers described in SECTION 3.1, shall be the Indenture Trustee for the
benefit of the Noteholders and the Certificateholder, as their interests
may appear), to maintain accurate records pertaining to each Contract and
Receivable in the Receivables Files, to provide monthly a list of all
Receivable Files held by it, together with a current exception report, and
to provide such information as is necessary to enable the Servicer to
deliver the reports and notifications required by Section 4.09 of the Sale
and Servicing Agreement. Custodian will promptly report to the Indenture
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