Document:

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                                                                   Exhibit 10.39

                         SUPPLEMENTAL AGREEMENT NO. 1
                         ----------------------------
                                    to the
                                    ------
                              ADVISORY AGREEMENT
                              ------------------

     This Supplemental Agreement No. 1 (this "Supplemental Agreement") is
entered into as of August 2, 2000 by and among ChipPAC, Inc., a Delaware
corporation, ChipPAC Limited, a corporation incorporated under the laws of the
Territory of the British Virgin Islands, ChipPAC International Company Limited,
a corporation incorporated under the laws of the Territory of the British Virgin
Islands (collectively, the "Companies") and SXI Group LLC ("SXI") (collectively,
the "Parties"), and hereby amends and supplements the Advisory Agreement (the
"Advisory Agreement") entered into as of August 5, 1999 by and among the
Parties.

     WHEREAS, pursuant to a Registration Statement on Form S-1 (Registration No.
333-39428) filed with the Securities and Exchange Commission on June 16, 2000,
and as amended from time to time (the "Registration Statement"), the Company is
preparing an initial public offering (the "Offering");

     WHEREAS, the Parties have agreed that upon completion of the Offering, the
Company will no longer need the services provided to it by SXI under the
Advisory Agreement, and SXI will no longer need to provide such services;

     NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other goods and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto, intending to be legally
bound, hereby agree as follows:

     1.   Early Termination.  The Advisory Agreement shall terminate immediately
upon the satisfaction or written waiver of all of the conditions listed in
Section 2 below; provided however, that any obligations of the Companies owed
under Sections 3 or 4 of the Advisory Agreement arising prior to the termination
shall survive termination and Sections 6, 7, 8 and 12 of the Advisory Agreement
shall survive termination.

of the Advisory Agreement.

     2.   Conditions.  The Advisory Agreement shall terminate pursuant to
Section 1 above, upon the satisfaction or written waiver of all of the
following:

          a.   Offering.  The Offering shall have been consummated.

          b.   Payment of Termination Fee.  The Company shall have delivered to
SXI, by wire transfer of immediately available funds to an account or accounts
as SXI shall designate, an amount equal to $4 million (the "Termination Fee").

          c.   Payment of All Fees.  The Company shall have delivered to SXI by
wire transfer of immediately available funds to an account or accounts as SXI
shall designate, or by any other method or form of payment as SXI approves, all
and any amounts owed under Sections 3 or 4 of the Advisory Agreement as of and
up until the date of the termination of the Advisory Agreement pursuant to
Section 1, above.

          d.   The Advisory Agreement between the Companies and Bain Capital,
Inc. shall have been terminated on terms identical to those contained in this
Supplemental Agreement.
<PAGE>

     3.   Notices.  All notices hereunder shall be in writing and shall be
delivered personally or mailed by United States mail, postage prepaid, addressed
to the parties as follows:

          To the Companies, as appropriate:
          --------------------------------

          ChipPAC, Inc.
          3151 Coronado Drive
          Santa Clara, California 95054
          Attention: Chief Executive Officer
          Facsimile: (408) 486-5914

          ChipPAC Limited
          Road Town
          Tortola, British Virgin Islands
          Facsimile: (284) 494-3547

          ChipPAC Operating Limited
          (Name to be changed to
          ChipPAC International Company Limited)
          Road Town
          Tortola, British Virgin Islands
          Facsimile: (284) 494-3547

          To SXI:
          ------

          c/o Citicorp Venture Capital, Ltd.
          399 Park Avenue
          New York, New York 10043
          U.S.A.
          Attention:  Michael A. Delaney
                      Paul C. Schorr IV
          Facsimile:  (212) 888-2940

     4.   Assignment.  None of the Companies may assign any obligations
hereunder to any other party without the prior written consent of SXI (which
consent shall not be unreasonably withheld), and SXI may not assign any
obligations hereunder to any other party without the prior written consent of
the Companies (which consent shall not be unreasonably withheld); provided that
SXI may, without consent of the Companies, assign its rights and obligations
under this Supplemental Agreement to any of its affiliates (but only if such
affiliate is a person or entity (excluding any SXI portfolio

                                       2
<PAGE>

companies) controlled by SXI, or in the case of an affiliate which is a
partnership, only if SXI is the ultimate general partner of such partnership) or
to Citicorp Venture Capital Ltd. The assignor shall remain liable for the
performance of any assignee.

     5.   Successors.  This Supplemental Agreement and all the obligations and
benefits hereunder shall inure to the successors and assigns of the parties.

     6.   Counterparts.  This Supplemental Agreement may be executed and
delivered by each party hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original and all of which taken
together shall constitute but one and the same agreement.

     7.   Entire Agreement; Modification; Governing Law. The terms and
conditions hereof constitute the entire agreement between the parties hereto
with respect to the subject matter of this Supplemental Agreement and
supersede all previous communications, either oral or written, representations
or warranties of any kind whatsoever, except as expressly set forth herein. No
modifications of this Supplemental Agreement nor waiver of the terms or
conditions thereof shall be binding upon either party unless approved in
writing by any authorized representative of such party. All issues concerning
this agreement shall be governed by and construed in accordance with the laws
of the State of New York, without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of New York or any
other jurisdiction) that would cause the application of the law of any
jurisdiction other than the State of New York.

     8.   Lapse. This Supplemental Agreement shall terminate and be of no
force and effect if the conditions set forth in Section 2 have not been
satisfied on or prior to December 31, 2000.

                     *     *     *     *     *     *     *

                                       3
<PAGE>

     IN WITNESS WHEREOF, each of the Parties have caused this Supplemental
Agreement to be executed on its behalf as an instrument under seal as of the
date first above written by its officer or representative thereunto duly
authorized.

                              CHIPPAC, INC.

                              By /s/ Robert Krakauer
                                 --------------------------------------
                                 Name (Please print): Robert Krakauer
                                 Title:

                              CHIPPAC LIMITED

                              By /s/ Richard Parsons
                                 --------------------------------------
                                 Name (Please print): Richard Parsons
                                 Title: Director

                              CHIPPAC INTERNATIONAL COMPANY
                              LIMITED

                              By /s/ Richard Parsons
                                 --------------------------------------
                                 Name (Please print): Richard Parsons
                                 Title: Director

                              SXI GROUP LLC

                              By /s/ Paul C. Schorr
                                 ---------------------------------------
                                 Name (Please print): Paul C. Schorr
                                 Title: Authorized Signatory

                                      S-1FIRST SUPPLEMENTAL INDENTURE

      FIRST  SUPPLEMENTAL  INDENTURE,  dated as of August 1, 2000,  by and among
Delta Financial  Corporation,  a Delaware  corporation (the "Company"),  each of
Delta Funding Corporation,  a New York Corporation ("Delta Funding"), DF Special
Holdings Corporation,  a Delaware corporation ("DF Special Holdings"),  Fidelity
Mortgage,  Inc., a Delaware  Corporation,  DFC Financial of Canada  Limited,  an
Ontario,  Canada corporation,  DFC Funding of Canada Limited, an Ontario, Canada
corporation,  Continental  Property  Management  Corp.,  a New York  corporation
(collectively, the "Subsidiary Guarantors") and The Bank of New York, as trustee
(the "Trustee"), under the Indenture referred to below.

      WHEREAS,  the  Company,  the  Subsidiary  Guarantors  and the Trustee have
previously entered into an Indenture dated as of July 23, 1997 (the "Indenture")
relating to the Company's 9 1/2% Senior Notes Due 2004 (the "Notes");

      WHEREAS,  Section 9.2 of the  Indenture  provides  that the  Company,  the
Subsidiary  Guarantors  and the Trustee  may,  with the  written  consent of the
holders of at least a majority in  principal  amount of the  outstanding  Notes,
amend or supplement the Indenture as provided herein;

      WHEREAS,  the holders of a majority in principal amount of the outstanding
Notes (the "Consenting  Noteholders")  have consented to this First Supplemental
Indenture and agreed with the Company to consummate a restructuring of the Notes
as  described  in  the  Term  Sheet  of  Informal   Noteholder   Committee   for
Restructuring attached hereto as ANNEX A (the "Term Sheet"); and

      WHEREAS,  all acts and things  prescribed  by law and by the Company's and
the Subsidiary  Guarantors'  Certificates of Incorporation  and By-laws (each as
now in effect)  necessary  to make this  First  Supplemental  Indenture  a valid
instrument legally binding on the Company and the Subsidiary  Guarantors for the
purposes herein expressed, in accordance with its terms, have been duly done and
performed;

      NOW THEREFORE,  in  consideration  of the foregoing and for other good and
valuable  consideration,  the  receipt  of which  is  hereby  acknowledged,  the
Company, the Subsidiary  Guarantors and the Trustee hereby agree for the benefit
of each other and the equal and  ratable  benefit of the holders of the Notes as
follows:

      1. AMENDMENT OF ARTICLE 1, SECTION 1.1.

      (a) The last  sentence  of the  definition  of "Asset  Sale"  included  in
Section 1.1 of the  Indenture is hereby  deleted in its entirety and replaced by
the following:

"Notwithstanding  the  foregoing,  the following  will not be deemed to be Asset
Sales:  (i)  an  issuance  of  Equity  Interests  by a  Wholly-Owned  Restricted
Subsidiary to the Company or to another Wholly-Owned Restricted Subsidiary; (ii)
a Restricted  Payment that is permitted by Section 4.7; (iii) a disposition by a
Restricted Subsidiary to the Company or a Wholly-Owned  Restricted Subsidiary or
by the Company to a Wholly-Owned  Restricted Subsidiary of the Company; and (iv)
the sale,  conveyance or any other  disposition by the Company or any Restricted
Subsidiary,  of Residual Receivables and/or Servicing  Receivables in connection
with the consummation of the Interim Financing (as defined in and subject ot the
terms and conditions set forth in the Term Sheet)."

      (b) Subclause  (ii) of the  definition of  "Permitted  Liens"  included in
Section 1.1 of the  Indenture is hereby  amended by adding the  following at the
end thereof:

"PROVIDED FURTHER,  HOWEVER,  that the preceding proviso shall not be applicable
to Liens on  Residual  Receivables  and/or  Servicing  Receivables  (and/or  the
Capital Stock of Restricted Subsidiaries of the Company substantially all of the
assets of which are Residual Receivables and/or Servicing  Receivables) incurred
in connection with the consummation of the Interim Financing."

      (c) The definition of Servicing Receivables included in Section 1.1 of the
Indenture is hereby amended and restated as follows:

""Servicing  Receivables"  means  all  rights  arising  by  virtue  of being the
Servicer of  Receivables,  including  without  limitation,  the right to receive
servicing fees,  ancillary income,  reinvestment  income,  prepayment  premiums,
reimbursements for advances, or any interest in such rights, whether or not such
rights  or  interests  are  certificated;   PROVIDED,  HOWEVER,  that  Servicing
Receivables  excludes  the  right to be or to  replace  the  servicer  except in
connection  with the  securitization,  whole loan sale or pledge of  Receivables
under Warehouse Lines."

      (d) The following definition is added to Section 1.1 of the Indenture:

" "TERM SHEET" means the Term Sheet of Informal Noteholder Committee as attached
as ANNEX A to the First Supplemental Indenture, dated August 1, 2000."

      2. AMENDMENT OF ARTICLE 4, SECTION 4.10.

      The third  paragraph of Section 4.10 of the Indenture is hereby amended by
adding the following after the end thereof:

"The  restrictions  contained in this  paragraph  shall not be applicable to the
sale or  other  conveyance  or  disposition  by the  Company  or any  Restricted
Subsidiary of Residual Receivables and Servicing Receivables (and/or the Capital
Stock of Restricted  Subsidiaries  substantially  all of the assets of which are
Residual  Receivables  and/or  Servicing  Receivables)  in  connection  with the
consummation  of the Interim  Financing  (as defined in and subject to the terms
and conditions set forth in the Term Sheet)."

      3.  PLEDGE  OF  RESIDUAL  RECEIVABLES.  Notwithstanding  anything  to  the
contrary,  the sale,  conveyance or other  disposition  of, or the creation of a
Lien on Residual Receivables and Servicing Receivables (and/or the Capital Stock
of Restricted Subsidiaries substantially all of the assets of which are Residual
Receivables  and/or  Servicing  Receivables)  by the Company,  or any Restricted
Subsidiary  in connection  with the  consummation  of the Interim  Financing (as
defined in and subject to the terms and  conditions set forth in the Term Sheet)
shall not be  deemed a breach  or  violation  of any  covenant,  representation,
warranty or provision in the Indenture.

      4. GUARANTEE OF  INDEBTEDNESS.  Notwithstanding  anything to the contrary,
the Guarantee of the Company of any Indebtedness secured by Residual Receivables
and/or   Servicing   Receivables   (and/or  the  Capital   Stock  of  Restricted
Subsidiaries  substantially all of the assets of which are Residual  Receivables
and/or Servicing  Receivables) by the Company,  or any Restricted  Subsidiary in
connection  with the  consummation  of the Interim  Financing (as defined in and
subject to the terms and  conditions  set forth in the Term Sheet)  shall not be
deemed a breach  or  violation  of any  covenant,  representation,  warranty  or
provision in the Indenture.

      5. EFFECTIVENESS.  This First Supplemental Indenture shall be effective as
of the date  hereof.  If (i) the  definitive  terms of the  Exchange  Offer  (as
defined in the Term Sheet) have not been agreed with the Consenting  Noteholders
on or prior to September 1, 2000 or (ii) if the Company does not  consummate the
Exchange  Offer by exchanging New Notes (as defined in the Term Sheet) for Notes
with the Exchanging Holders on or prior to October 15, 2000, an Event of Default
shall be deemed to have occurred at such time under the Indenture.

      6. CONSTRUCTION.  For all purposes of this First  Supplemental  Indenture,
except as otherwise  herein expressly  provided or unless the context  otherwise
requires: (i) the terms and expressions used herein shall have the same meanings
as corresponding terms and expressions used in the Indenture; and (ii) the words
"herein,"  "hereof" and "hereby" and other words of similar  import used in this
First  Supplemental  Indenture refer to this First  Supplemental  Indenture as a
whole and not to any particular Section hereof.

      7. TRUSTEE ACCEPTANCE.  The Trustee accepts the amendment of the Indenture
effected by this First  Supplemental  Indenture  and agrees to execute the trust
created  by the  Indenture,  as  hereby  amended,  but only  upon the  terms and
conditions set forth in the Indenture,  as hereby  amended,  including the terms
and provisions defining and limiting the liabilities and responsibilities of the
Trustee,  which terms and  provisions  shall in like manner define and limit its
liabilities and  responsibilities in the performance of the trust created by the
Indenture, as hereby amended.  Without limiting the generality of the foregoing,
the Trustee has no  responsibility  for the  correctness of the recitals of fact
herein contained which shall be taken as the statements of the Company and makes
no representations as to the validity,  enforceability  against the Company,  or
sufficiently of this First Supplemental Indenture.

      8. INDENTURE  RATIFIED.  Except as expressly amended hereby, the Indenture
is in all respects  ratified and  confirmed  and all the terms,  conditions  and
provisions thereof shall remain in full force and effect.

      9. HOLDERS BOUND. This First  Supplemental  Indenture shall form a part of
the  Indenture  for all  purposes,  and every Holder of the Notes  heretofore or
hereafter authenticated and delivered shall be bound hereby.

      10.  SUCCESSORS AND ASSIGNS.  This First  Supplemental  Indenture shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

      11. COUNTERPARTS. This First Supplemental Indenture may be executed in any
number of counterparts,  each of which when so executed shall be deemed to be an
original,  and all of such  counterparts  shall together  constitute one and the
same instrument.

      12.  GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN
AND BE USED TO CONSTRUE  THIS FIRST  SUPPLEMENTAL  INDENTURE  WITHOUT  REGARD TO
PRINCIPLES OF CONFLICTS OF LAW THEREOF.

                       [SIGNATURE BLOCK ON FOLLOWING PAGE]

<PAGE>

      IN WITNESS WHEREOF, the Company, the Subsidiary Guarantors and the Trustee
have caused this First  Supplemental  Indenture  to be signed and executed as of
the day and year first above written.

                                    DELTA FINANCIAL CORPORATION

                                    By:   /S/ RICHARD BLASS             _
                                       Name: Richard Blass
                                       Title:   Executive Vice President

                                    DELTA FUNDING CORPORATION

                                    By:   /S/ RICHARD BLASS             _
                                       Name: Richard Blass
                                       Title:   Executive Vice President

                                    DF SPECIAL HOLDINGS CORPORATION

                                    By:   /S/ RICHARD BLASS             _
                                       Name: Richard Blass
                                       Title:   Executive Vice President

                                    FIDELITY MORTGAGE, INC.

                                    By:   /S/ RICHARD BLASS             _
                                       Name: Richard Blass
                                       Title:   Executive Vice President

                                    DFC FINANCIAL OF CANADA LIMITED

                                    By:   /S/ RICHARD BLASS             _
                                       Name: Richard Blass
                                       Title:   Executive Vice President

<PAGE>

                                    DFC FUNDING OF CANADA LIMITED

                                    By:   /S/ RICHARD BLASS             _
                                       Name: Richard Blass
                                       Title:   Executive Vice President

                                    CONTINENTAL PROPERTY MANAGEMENT CORP.

                                    By:   /S/ RICHARD BLASS             _
                                       Name: Richard Blass
                                       Title:   Executive Vice President

                                    THE BANK OF NEW YORK, Indenture Trustee

                                    By:/S/ JULIE SALOVITCH-MILLER
                                       Name: Julie Salovitch-Miller
                                       Title:   Vice President

<PAGE>

                                     ANNEX A

                 Delta Financial Corporation and Subsidiaries

                 TERM SHEET OF INFORMAL NOTEHOLDER COMMITTEE
              FOR RESTRUCTURING (THE "RESTRUCTURING TERM SHEET")

DEBTORS AND OLD               Delta Financial Corporation ("DELTA HOLDINGS"),
SECURITIES                    and all of its subsidiaries (collectively the
                              "DEBTORS") that are guarantors of the 9.5%
                              Senior Notes of Delta Holdings (the "OLD
                              Notes").

OVERVIEW                      Certain holders of Old Notes, consisting of
                              beneficial owners of a majority in principal
                              amount thereof, shall consent to a supplemental
                              indenture (the "FIRST SUPPLEMENTAL INDENTURE")
                              that shall permit the Debtors to pledge, or
                              transfer to a special purpose entity, of
                              interest-only and residual certificates
                              ("RESIDUALS") and Servicing Receivables, or
                              rights therein, to initially obtain
                              approximately $16 million of interim financing
                              (the "INTERIM FINANCING") from an interim
                              finance lender.  The negative pledge under the
                              Old Notes Indenture shall continue to apply to
                              $150MM of Residuals until the Exchange Offer
                              occurs, and thereafter the terms of the
                              Exchange Offer shall govern.  This $150MM shall
                              be Senior Residuals, except if the Company
                              deposits $7.125 million into escrow,
                              simultaneous with such deposit, such $150
                              million requirement shall be modified to $112.5
                              million of Senior Residuals and $42.5 million
                              of other Residuals.  Except for this negative
                              pledge, pending consummation of the Exchange
                              Offer, the Debtors will be permitted to do
                              financings currently permitted under the Old
                              Notes Indenture.

                              The   capitalization   of  the  Debtors  shall  be
                              restructured  (the  "EXCHANGE  OFFER")  through an
                              exchange  offer.  Holders  of Old Notes  tendering
                              into the  exchange  shall  receive  new  notes and
                              warrants.  At  the  time  the  Exchange  Offer  is
                              consummated,  the new notes indenture shall permit
                              one  or  more  financing   transactions  utilizing
                              Residuals  and  Servicing   Receivables  to  raise
                              capital  for  the  company,  subject  to  all  the
                              limitations   herein.  The  Exchange  Offer  shall
                              include  covenant-stripping  amendments to the Old
                              Notes Indenture.

                              It  shall  be  a  default   under  the  Old  Notes
                              Indenture if the  Consenting  Noteholders  and the
                              Debtors have not reached  definitive  agreement on
                              the  terms  of an  exchange  offer  on  or  before
                              September 1, 2000.

NEW SECURITIES                Each holder of Old Notes who tenders into the
                              Exchange Offer shall receive a PRO RATA share
                              of a new issue of up to $150.0 million
NEW SENIOR SECURED NOTES      aggregate principal amount 9.5% Senior Secured
                              Notes (the "NEW NOTES") of Delta Holdings.
                              SEE TERM SHEET FOR NEW NOTES, ATTACHED HERETO AS
                              ANNEX A.

NEW WARRANTS                  Each holder of Old Notes who tenders into the
                              Exchange Offer shall receive a PRO RATA share
                              of a new issue of warrants (the "WARRANTS") of
                              Delta Holdings for 10% of the currently issued
                              and outstanding common stock of Delta
                              Holdings.  SEE TERM SHEET FOR NEW WARRANTS,
                              ATTACHED HERETO AS ANNEX B.

INTERIM FINANCING             The Consenting Noteholders shall agree to
CONSENT                       permit the Interim Financing (the "INTERIM
                              FINANCING   CONSENT").   The  First   Supplemental
                              Indenture  shall  lift the  negative  pledge  from
                              certain   Residuals   and  all  other   applicable
                              covenants  to the  extent  necessary  in  order to
                              permit the Interim Financing.

COUPON PAYMENT                At the time of the Interim Financing Consent
                              the Debtors shall direct the interim finance
                              lender to make payments out of the proceeds of
                              the Interim Financing directly to the indenture
                              trustee for the Old Notes to pay the August 1,
                              2000 coupon on the Old Notes.

LOCK-UP AGREEMENT

PARTIES TO  LOCK-UP           Certain  holders  of Old  Notes  will
                              become  party  to a  Lock-up  Agreement  with  the
                              Debtors  (such   holders  being  the   "CONSENTING
                              NOTEHOLDERS").

COMMITTEE ADVISORS            During the Lock-up Period, and until the hot
                              back-up servicer is in place, and thereafter
                              (if applicable) following the occurrence of an
                              Event of Default under either of the Old Notes
                              Indenture (if the Exchange Offer is not
                              consummated) or the New Notes Indenture, the
                              Debtors shall pay the fees and expenses of
                              Ropes & Gray (counsel to the Informal
                              Committee) and Houlihan Lokey Howard & Zukin
                              Capital ("HLH&Z") (financial advisor to the
                              Informal Committee).  All such fees shall be
                              paid under retainer agreements similar in form
                              to the payment agreement between the Company
                              and Ropes & Gray, with retainer amounts for
                              HLH&Z acceptable to the Informal Committee and
                              HLH&Z in their reasonable discretion.

                              The Debtors  shall give the  Informal  Committee's
                              advisors  full  reasonable  access  to all  legal,
                              operational and financial  materials to allow them
                              to monitor the Debtor's operations and status.

COVENANTS OF DEBTORS          The Debtors shall use their best efforts to
DURING LOCK-UP PERIOD         have the Exchange Offer consummated with not
                              less than the  percentage  of holders of Old Notes
                              required under the Old Notes  Indenture  tendering
                              into the  exchange,  so as to be  consummated  not
                              later than October 15, 2000. Failure to consummate
                              by October 15, 2000 shall  constitute  an Event of
                              Default under the Old Notes Indenture,  as amended
                              by the First Supplemental Indenture.

                              Until  consummation  of the  Exchange  Offer,  the
                              Debtors  shall  not  engage  in  any   transaction
                              outside the ordinary course of business,  or enter
                              into   any   agreement   to   consummate   such  a
                              transaction.

ONGOING COVENANTS OF          During the Lock-up Period and thereafter, the
DEBTORS                       Debtors shall make all preparations to be able
                              to facilitate  the  effectuation  of a transfer of
                              servicing  and  other  matters  necessary  for the
                              bondholders   to   effectively   realize   on  the
                              collateral being pledged should a default occur in
                              the  future.   These  preparations  shall  include
                              implementing  a  hot-back-up  servicer  within 150
                              days after  consummation of the Exchange Offer, if
                              the Exchange Offer is  consummated,  or as quickly
                              as is  practicable  if the  Exchange  Offer is not
                              consummated,  such servicer to be  satisfactory to
                              the Informal Committee. The requirements for a hot
                              back-up  servicer shall be  extinguished  upon the
                              Debtors  reaching  a  liquidity  threshold  to  be
                              agreed upon prior to September 1, 2000.

REPRESENTATIONS OF            Each Consenting Noteholder shall represent and
CONSENTING NOTEHOLDERS        warrant, in favor of the Debtors and the
                              Indenture Trustee, that it is the beneficial owner
                              of a stated amount of Old Notes.

TERMINATION OF LOCK-UP        The passage of October 15, 2000 without
PERIOD AND OBLIGATIONS        consummation of the Exchange Offer.
OF CONSENTING
NOTEHOLDERS

FORM OF DOCUMENTATION         All documentation (including all documentation
                              contemplated by Annexes A and B hereto) to be
                              satisfactory in form and substance to both the
                              Consenting Noteholders and to the Debtors in
                              their respective sole discretion.  The Debtors
                              and their officers and directors shall provide
                              such certificates, representations and
                              warranties as the Consenting Noteholders shall
                              require.

<PAGE>

                                                                  AUGUST 1, 2000

                                                                         ANNEX A

                  Restructuring of Delta Financial Corporation
                                and Subsidiaries

                                 TERM SHEET FOR
             9.5% SENIOR SECURED NOTES DUE 2004 (THE "NEW NOTES")1

ISSUER                        Delta Financial  Corporation  ("DELTA  HOLDINGS"),
                              under a trust indenture with an indenture  trustee
                              (the "INDENTURE  TRUSTEE") mutually  acceptable to
                              the Debtors and the Consenting
                              Noteholders.

GUARANTORS                    All   subsidiaries   of  Delta   Holdings,   which
                              currently are  guarantors  of the Old Notes,  plus
                              all   additional   subsidiaries   which   are  not
                              contractually  prohibited  from being a  guarantor
                              (subject to further review).

PRINCIPAL AMOUNT              up to $150,000,000

INTEREST                      9.5% per annum, payable semiannually in arrears on
                              February  1 and  August  1 of each  year  (each an
                              "INTEREST PAYMENT DATE"). Interest shall be deemed
                              to accrue  as of the last  interest  payment  date
                              under the Old Notes.

MATURITY                      August 1, 2004.

--------
      1Capitalized  terms  defined  in the  Restructuring  Term  Sheet  and  not
    otherwise defined herein are used herein with the meanings so defined.

<PAGE>

COLLATERAL                    Perfected  first priority liens on all contractual
                              rights to be the servicer (and following  exercise
                              of such right,  in all rights arising by virtue of
                              the  servicing  rights)  and upon the stock of all
                              subsidiaries of Delta Holdings.

                              Perfected  first  priority liens on the beneficial
                              interests in one or more (in the discretion of the
                              Consenting  Noteholders)  Delaware business trusts
                              that holds Residuals  received by the Debtors (the
                              "RESIDUALS   COLLATERAL  TRUSTS").   The  Residual
                              Collateral Trusts shall be restricted subsidiaries
                              and wholly  owned  subsidiaries  of Delta  Funding
                              Corporation   and/or   of  DF   Special   Holdings
                              Corporation  and each Residuals  Collateral  Trust
                              shall hold Residuals received by its parent.

                              In addition to liens  relating to rights to be the
                              servicer, stock of subsidiaries, and the Residuals
                              Collateral  Trusts,  a lien on all other assets as
                              to which there is no  contractual  prohibition  in
                              the granting of liens,  including all unencumbered
                              assets (the "Other Assets").  Notwithstanding  the
                              lien on the  Other  Assets,  the  Debtors  will be
                              permitted to use, sell,  lease or securitize Other
                              Assets in the ordinary course of business.

                              Amounts   sufficient  to  meet  the  first  coupon
                              payment  on the New  Notes  shall be  placed  into
                              escrow  (upon  conclusion  of the  so-called  NIMS
                              trade).

                              So long  as the New  Notes  are  outstanding,  the
                              Debtors   shall   cause   all   Residuals   to  be
                              transferred  to  the  Residuals  Collateral  Trust
                              immediately  upon  the  Debtors'   obtaining  such
                              Residuals.   Provided  no  Event  of  Default  has
                              occurred and is  continuing,  the Debtors shall be
                              permitted to  substitute  other  Residuals for the
                              Residuals within the Residuals  Collateral  Trusts
                              provided  the  Residuals   being   deposited  were
                              received by the parent of the respective Residuals
                              Collateral Trust and the Residuals  Coverage Ratio
                              is satisfied  after giving pro forma effect to the
                              substitution.

DESCRIPTION OF                RESIDUALS COVERAGE RATIO  The value of
FINANCIAL COVENANTS           Residuals and cash in the Residuals Collateral
                              Trust  shall not be less than $165  million.  Such
                              minimum  value  shall  increase  on the  following
                              schedule:

                                    on and after September 30, 2001     $170MM
                                    on and after September 30, 2002     $175MM
                                    on and after September 30, 2003     $200MM
                                    on and after September 30, 2004     $210MM

                              The  aggregate  value of Senior  Residuals  in the
                              Residuals  Collateral Trust shall initially be not
                              less than  $150  million,  or in the  event  Delta
                              Holdings has deposited  $7.125 million into escrow
                              for  coupon   payments,   such  amount   shall  be
                              decreased to $112.5 million simultaneous with such
                              deposit.  (The  Residuals  Collateral  Trust shall
                              still be required to maintain  the minimum  values
                              of $165 million,  and  increasing  after  9/30/01,
                              aggregate  value of Residuals and cash,  set forth
                              in the  first  sentence.).  The  value  amount  of
                              Senior Residuals in the Residuals Collateral Trust
                              shall be raised to $150MM on the third anniversary
                              of the issuance  date and to $155.0  million after
                              the  fourth  anniversary  of  the  Issuance  Date.
                              Residuals  which were created through net interest
                              margin securities  transactions  ("NIMS") shall be
                              deemed to be Senior Residuals when the outstanding
                              principal amount of all other securities issued in
                              the  applicable  NIMS has decreased to 20% or less
                              of their aggregate  original principal amount. For
                              purposes of these  covenants,  the value of Senior
                              Residuals  shall be calculated in accordance  with
                              GAAP except using a discount  rate of 12%, and the
                              value of all other  Residuals  shall be calculated
                              in  accordance  with GAAP except  using a discount
                              rate of 18%.

                              MINIMUM  CASH ON HAND The  Debtors  shall not have
                              less than $10,000,000 of cash and cash equivalents
                              on hand at any time  (including  any money held in
                              escrow),  using  the same  requirements  as in the
                              Debtor's warehouse lines of credit (the "Warehouse
                              Lines").

DESCRIPTION OF OTHER          IN GENERAL:  As under the Old Notes Indenture
COVENANTS                     (to the extent not inconsistent with this Term
                              Sheet)  plus  covenants  set  forth  in  the  loan
                              documents  for the  Warehouse  Lines  [subject  to
                              further review].

                              LIMITATIONS  ON LIENS OR RIGHTS TO BE  SERVICER OR
                              SALE OF STOCK OF SUBSIDIARIES:  Prohibited without
                              consent of 51% of the New Notes.

                              TRANSACTIONS  WITH  AFFILIATES  As  customary  for
                              secured bank loans.

                              REPORTING:  Within  90 days  following  the end of
                              each  fiscal  year,  KPMG (or such  other  firm of
                              internationally  recognized accountants as is then
                              retained  by the  Company  to audit its  financial
                              statements)  as  part  of its  annual  audit  will
                              confirm  that  the   methodology  and  assumptions
                              employed by the Debtor in determining the value of
                              the Residuals.

                              BACK-UP  SERVICER:  Within 150 days  following the
                              Issuance  Date,  Delta  Funding  will,  at its own
                              cost,   enter  into  a  "hot"  back-up   servicing
                              agreement  (the  "Servicing   Agreement")  with  a
                              nationally recognized servicer, which will provide
                              for  mapping and  monthly  back-up of  information
                              relating   to  the   mortgage   loans   underlying
                              Residuals created after 1996.

                              EVENTS OF DEFAULT  As in the Old Notes  Indenture,
                              breach of  covenants or  conditions  under the New
                              Notes   Indenture,   and  cross   default  to  all
                              Warehouse Lines.

                              RELIEF FROM STAY.  The Debtors shall consent to
                              relief from the automatic stay in the event of
                              a chapter 11 or chapter 7 filing.

                              COUPON PAYMENT.  The Debtors shall certify 30 days
                              prior to the initial due date  (without  grace) of
                              each  coupon  payment  on the New Notes that funds
                              necessary  to pay the  coupon  payment  have  been
                              placed in escrow on terms  identical  to those for
                              the coupon  required to be escrowed at the time of
                              the Exchange Offer.

CHANGE OF CONTROL PUT         As in the Old Notes Indenture.

REGISTRATION RIGHTS           The New Notes shall not be registered under
                              the  Securities  Exchange Act of 1934. The Debtors
                              shall register the New Notes at the request of 51%
                              of the beneficial holders of the New Notes.

AMENDMENTS                    Majority consent required for all non
                              ministerial amendments, including release of
                              collateral, approval of asset sales by
                              subsidiaries, permitting senior liens and
                              pari-passu debt and subordination of New Notes
                              to other debt; PROVIDED, HOWEVER, consent of
                              each holder shall be required for changes to
                              such holder's rights with respect to (i)
                              interest and principal payments and
                              redemption/call/put provisions, (ii) maturity
                              date, (iii) currency of payment, (iv) place of
                              payment and (v) right to bring suit for
                              interest and principal.

OTHER PROVISIONS              Customary  certification,  notice  and
                              reporting  provisions  for  collateral  monitoring
                              under a senior  secured bank  facility,  including
                              quarterly and audited annual reporting.

                              Other  provisions to be  consistent  with terms of
                              Indenture for the Old Notes or as otherwise agreed
                              by the Debtors  and a majority  of the  Consenting
                              Noteholders.

<PAGE>

                                                                  AUGUST 1, 2000

                                                                         ANNEX B

                  Restructuring of Delta Financial Corporation
                                and Subsidiaries

                                 TERM SHEET FOR
                           WARRANTS (THE "WARRANTS")1

ISSUER                        Delta Financial Corporation ("Delta Holdings").

NUMBER                        Warrants  exercisable  for common  shares equal to
                              10% of  currently  issued and  outstanding  common
                              shares.

EXERCISE                      PERIOD  The  Warrants  shall  expire  on the  10th
                              anniversary  of their  issuance.  The Warrants (if
                              not previously  exercised)  shall expire and be of
                              no further force or effect upon payment of the New
                              Notes in full.

EXERCISE PRICE                At issuance:  $9.10 per share.

                              If  equity  buy-in  of $15MM or more  prior to the
                              second anniversary of their issuance, the exercise
                              price  is reset  to 110% of the per  share  equity
                              buy-in.

                              After the second  anniversary,  the exercise price
                              is $0.01 per share.

DIVIDENDS                     The  Issuer  shall  provide  prior  notice  to the
                              holders  of   Warrants  of  any  record  date  for
                              dividends.

--------
 1Capitalized  terms  defined  in the  Restructuring  Term  Sheet  and  not
    otherwise defined herein are used herein with the meanings so defined.

<PAGE>

MAJOR CORPORATE               Upon any sale or disposition of the company, or
TRANSACTIONS                  change of control, Warrant holders shall have
                              the  right  to  exercise  all  Warrants.   Warrant
                              holders  shall have  tag-along  rights with Miller
                              family  shares  sold  in  any  change  of  control
                              transaction.

ADJUSTMENTS;                  The number of Warrants shall be adjusted in the
ANTIDILUTION                  event of stock-splits, combinations,
                              reclassifications        and       stock-for-stock
                              distributions. In the event of any merger or other
                              such  transaction,  the holders of Warrants  shall
                              receive as part of such transaction  consideration
                              equal  in  amount  and  kind to the  consideration
                              given to holders of common stock of the Issuer.

                              The Warrants shall also have provisions to prevent
                              dilution by below-market-price  issuances of stock
                              or other equity interests.

REGISTRATION RIGHTS           Demand registration rights.

MISCELLANEOUS                 Customary notice rights.

                              Customary rights and remedies, including the right
                              to specific performance.

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