Document:

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                                                                  EXHIBIT 10.2

                              WeSync.com, Inc.
                              ----------------

                           1999 Stock Option Plan
                           ----------------------

                 (As Adopted and Effective February 8, 1999)
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                              TABLE OF CONTENTS
                              -----------------

                                                             Page
                                                             ----

SECTION 1. PURPOSE............................................  1

SECTION 2. DEFINITIONS........................................  1

     (a)   "Award"............................................  1
     (b)   "Board of Directors"...............................  1
     (c)   "Change in Control"................................  1
     (d)   "Code".............................................  1
     (e)   "Committee"........................................  2
     (f)   "Common-Law Employee"..............................  2
     (g)   "Company"..........................................  2
     (h)   "Employee".........................................  2
     (i)   "Exchange Act".....................................  2
     (j)   "Exercise Price"...................................  2
     (k)   "Fair Market Value"................................  2
     (l)   "Incentive Stock Option" or "ISO"..................  3
     (m)   "Nonstatutory Option" or "NSO".....................  3
     (n)   "Offeree"..........................................  3
     (o)   "Option"...........................................  3
     (p)   "Optionee".........................................  3
     (q)   "Outside Director".................................  3
     (r)   "Participant"......................................  3
     (s)   "Plan".............................................  3
     (t)   "Purchase Price"...................................  3
     (u)   "Restricted Share".................................  3
     (v)   "Service"..........................................  3
     (w)   "Share"............................................  3
     (x)   "Stock"............................................  3
     (y)   "Stock Award Agreement"............................  3
     (z)   "Stock Option Agreement"...........................  3
     (aa)  "Stock Purchase Agreement".........................  4
     (bb)  "Subsidiary".......................................  4
     (cc)  "Total and Permanent Disability"...................  4
     (dd)  "W-2 Payroll"......................................  4

SECTION 3. ADMINISTRATION.....................................  4

     (a)   Committee Membership...............................  4
     (b)   Committee Procedures...............................  4
     (c)   Committee Responsibilities.........................  4
     (d)   Committee Liability................................  5
     (e)   Financial Reports..................................  5

                                      -i-
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SECTION 4. ELIGIBILITY........................................  5

     (a)   General Rule.......................................  5
     (b)   Ten-Percent Shareholders...........................  5
     (c)   Attribution Rules..................................  5
     (d)   Outstanding Stock..................................  5

SECTION 5. STOCK SUBJECT TO PLAN..............................  5

     (a)   Basic Limitation...................................  5
     (b)   Additional Shares..................................  6

SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES............  6

     (a)   Stock Purchase Agreement...........................  6
     (b)   Duration of Offers.................................  6
     (c)   Purchase Price.....................................  6
     (d)   Payment for Shares.................................  6
     (e)   Exercise of Awards on Termination of Service.......  7

SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED......  7

     (a)   Form and Amount of Award...........................  7
     (b)   Exercisability.....................................  7
     (c)   Effect of Change in Control........................  7
     (d)   Voting Rights......................................  7

SECTION 8. TERMS AND CONDITIONS OF OPTIONS....................  8

     (a)   Stock Option Agreement.............................  8
     (b)   Number of Shares...................................  8
     (c)   Exercise Price.....................................  8
     (d)   Exercisability.....................................  8
     (e)   Effect of Change in Control........................  8
     (f)   Term...............................................  8
     (g)   Exercise of Options on Termination of Service......  8
     (h)   Payment of Option Shares...........................  9
     (i)   No Rights as a Shareholder.........................  9
     (j)   Modification, Extension and Assumption of Options..  9

SECTION 9. ADJUSTMENT OF SHARES...............................  9

     (a)   General............................................  9
     (b)   Reorganizations.................................... 10
     (c)   Reservation of Rights.............................. 10

SECTION 10. WITHHOLDING TAXES................................. 10

     (a)   General............................................ 10
     (b)   Share Withholding.................................. 10
     (c)   Cashless Exercise/Pledge........................... 10
     (d)   Other Forms of Payment............................. 10

                                      -ii-
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SECTION 11. ASSIGNMENT OR TRANSFER OF AWARDS.................. 11

     (a)   General............................................ 11
     (b)   Trusts............................................. 11

SECTION 12. LEGAL REQUIREMENTS................................ 11

SECTION 13. NO EMPLOYMENT RIGHTS.............................. 11

SECTION 14. DURATION AND AMENDMENTS........................... 11

     (a)   Term of the Plan................................... 11
     (b)   Right to Amend or Terminate the Plan............... 12
     (c)   Effect of Amendment or Termination................. 12

                                     -iii-
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                              WeSync.com, Inc.
                              ----------------
                           1999 Stock Option Plan
                           ----------------------

                 (As Adopted and Effective February 8, 1999)

SECTION 1. PURPOSE.
-------------------

     The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, to encourage such selected persons
to remain in the employ of the Company and to attract new employees with
outstanding qualifications. The Plan seeks to achieve this purpose by
providing for Awards in the form of Restricted Shares and Options (which may
constitute Incentive Stock Options or Nonstatutory Stock Options) as well as
the direct award or sale of Shares of the Company's Common Stock. While this
Plan is intended to satisfy federal Rule 701 and Section 25102(o) of the
California Corporations Code, awards may be granted under this Plan in
reliance upon other federal and state securities law exemptions and to the
extent another exemption is relied upon, the terms of this Plan which are
required only because of Rule 701 or Section 25102(o) need not apply to the
extent provided by the Committee in the award agreement.

SECTION 2. DEFINITIONS.
-----------------------

     (a)  "Award" shall mean any award of an Option, Restricted Share or other
           -----
right under the Plan.

     (b)  "Board of Directors" shall mean the Board of Directors of the
           ------------------
Company, as constituted from time to time.

     (c)  "Change in Control" shall mean
           -----------------

          (i)  The consummation of a merger, consolidation, sale of the
     Company's stock, or other reorganization of the Company (other than a
     reincorporation of the Company), if after giving effect to such merger,
     consolidation or other reorganization of the Company, the stockholders of
     the Company immediately prior to such merger, consolidation or other
     reorganization do not represent a majority interest of the holders of
     voting securities (on a fully diluted basis) with the ordinary voting
     power to elect directors of the surviving or resulting entity after such
     merger, consolidation or other reorganization; or

         (ii)  The sale of all or substantially all of the assets of the
     Company to a third party who is not an affiliate of the Company.

        (iii)  The term Change in Control shall not include a transaction the
sole purpose of which is to change the state of the Company's incorporation.

     (d)  "Code" shall mean the Internal Revenue Code of 1986, as amended.
           ----

                                      -1-
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     (e)  "Committee" shall mean a committee of the Board of Directors which is
           ---------
authorized to administer the Plan under Section 3.

     (f)  "Common-Law Employee" shall mean an individual paid from W-2 Payroll
           -------------------
of the Company or a Subsidiary. If, during any period, the Company (or
Subsidiary, as applicable) has not treated an individual as a Common-Law
Employee and, for that reason, has not paid such individual in a manner which
results in the issuance of a Form W-2 and withheld taxes with respect to him
or her, then that individual shall not be an eligible Employee for that
period, even if any person, court of law or government agency determines,
retroactively, that that individual is or was a Common-Law Employee during all
or any portion of that period.

     (g)  "Company" shall mean WeSync.com, Inc.
           -------

     (h)  "Employee" shall mean (i) any individual who is a Common-Law
           --------
Employee of the Company or of a Subsidiary, (ii) a member of the Board of
Directors, including (without limitation) an Outside Director, or an affiliate
of a member of the Board of Directors, (iii) a member of the board of
directors of a Subsidiary, or (iv) an independent contractor who performs
services for the Company or a Subsidiary. Service as a member of the Board of
Directors, a member of the board of directors of a Subsidiary or an
independent contractor shall be considered employment for all purposes of the
Plan except the second sentence of Section 4(a).

     (i)  "Exchange Act" means the Securities and Exchange Act of 1934, as
           ------------
amended.

     (j)  "Exercise Price" shall mean the amount for which one Share may be
           --------------
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.

     (k)  "Fair Market Value" means the market price of Shares, determined by
           -----------------
the Committee as follows:

          (i)  If the Shares were traded over-the-counter on the date in
     question but were not traded on the Nasdaq Stock Market or the Nasdaq
     National Market System, then the Fair Market Value shall be equal to the
     mean between the last reported representative bid and asked prices quoted
     for such date by the principal automated inter-dealer quotation system on
     which the Shares are quoted or, if the Shares are not quoted on any such
     system, by the "Pink Sheets" published by the National Quotation Bureau,
     Inc.;

         (ii)  If the Shares were traded over-the-counter on the date in
     question and were traded on the Nasdaq Stock Market or the Nasdaq
     National Market System, then the Fair Market Value shall be equal to the
     last-transaction price quoted for such date by the Nasdaq Stock Market or
     the Nasdaq National Market;

        (iii)  If the Shares were traded on a stock exchange on the date in
     question, then the Fair Market Value shall be equal to the closing price
     reported by the applicable composite transactions report for such date;
     and

                                      -2-
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         (iv)  If none of the foregoing provisions is applicable, then the
     Fair Market Value shall be determined by the Committee in good faith on
     such basis as it deems appropriate.

     In all cases, the determination of Fair Market Value by the Committee
shall be conclusive and binding on all persons.

     (l)  "Incentive Stock Option" or "ISO" shall mean an employee incentive
           -------------------------------
stock option described in Code section 422(b).

     (m)  "Nonstatutory Option" or "NSO" shall mean an employee stock option
           ----------------------------
that is not an ISO.

     (n)  "Offeree" shall mean an individual to whom the Committee has offered
           -------
the right to acquire Shares under the Plan (other than upon exercise of an
Option).

     (o)  "Option" shall mean an Incentive Stock Option or Nonstatutory Option
           ------
granted under the Plan and entitling the holder to purchase Shares.

     (p)  "Optionee" shall mean an individual or estate who holds an Option.
           --------

     (q)  "Outside Director" shall mean a member of the Board who is not a
           ----------------
Common-Law Employee of the Company or a Subsidiary.

     (r)  "Participant" shall mean an individual or estate who holds an Award.
           -----------

     (s)  "Plan" shall mean this 1999 Stock Option Plan of WeSync.com, Inc.
           ----

     (t)  "Purchase Price" shall mean the consideration for which one Share
           --------------
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.

     (u)  "Restricted Share" shall mean a Share sold or granted to an eligible
           ----------------
Employee which is nontransferable and subject to substantial risk of
forfeiture until restrictions lapse.

     (v)  "Service" shall mean service as an Employee.
           -------

     (w)  "Share" shall mean one share of Stock, as adjusted in accordance
           -----
with Section 9 (if applicable).

     (x)  "Stock" shall mean the common stock of the Company.
           -----

     (y)  "Stock Award Agreement" shall mean the agreement between the Company
           ---------------------
and the recipient of a Restricted Share which contains the terms, conditions
and restrictions pertaining to such Restricted Share.

     (z)  "Stock Option Agreement" shall mean the agreement between the
           ----------------------
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.

                                      -3-
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     (aa)  "Stock Purchase Agreement" shall mean the agreement between the
            ------------------------
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such
Shares.

     (bb)  "Subsidiary" means any corporation (other than the Company) in an
            ----------
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that
attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.

     (cc)  "Total and Permanent Disability" means that the Optionee is unable
            ------------------------------
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment.

     (dd)  "W-2 Payroll" means whatever mechanism or procedure that the
            -----------
Company or a Subsidiary utilizes to pay any individual which results in the
issuance of Form W-2 to the individual. "W-2 Payroll" does not include any
mechanism or procedure which results in the issuance of any form other than a
Form W-2 to an individual, including, but not limited to, any Form 1099 which
may be issued to an independent contractor, an agency employee or a
consultant. Whether a mechanism or procedure qualifies as a "W-2 Payroll"
shall be determined in the absolute discretion of the Company (or Subsidiary,
as applicable), and the Company or Subsidiary determination shall be
conclusive and binding on all persons.

SECTION 3. ADMINISTRATION.
--------------------------

     (a)  Committee Membership. The Plan shall be administered by the Board of
          --------------------
Directors. In the event the Company's Shares become publicly traded, the Board
may appoint a Committee which, if appointed, shall be comprised solely of two
or more Outside Directors (although Committee functions may be delegated to
officers to the extent the awards relate to persons who are not subject to the
reporting requirements of Section 16 of the Exchange Act). If no Committee has
been appointed, the entire Board shall constitute the Committee.

     (b)  Committee Procedures. The Board of Directors shall designate one of
          --------------------
the members of the Committee as chairperson. The Committee may hold meetings
at such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts
reduced to or approved in writing by all Committee members, shall be valid
acts of the Committee.

     (c)  Committee Responsibilities. The Committee has and may exercise such
          --------------------------
power and authority as may be necessary or appropriate for the Committee to
carry out its functions as described in the Plan. The Committee has authority
in its discretion to determine eligible Employees to whom, and the time or
times at which, Awards may be granted and the number of Shares subject to each
Award. Subject to the express provisions of the respective Award agreements
(which need not be identical) and to make all other determinations necessary
or advisable for Plan administration, the Committee has authority to
prescribe, amend, and rescind

                                      -4-
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rules and regulations relating to the Plan. All interpretations,
determinations, and actions by the Committee will be final, conclusive, and
binding upon all persons.

     (d)  Committee Liability. No member of the Board or the Committee will be
          -------------------
liable for any action or determination made in good faith by the Committee
with respect to the Plan or any Award made under the Plan.

     (e)  Financial Reports. To the extent required by applicable law, and not
          -----------------
less often than annually, the Company shall furnish to Offerees, Optionees and
Shareholders who have received Stock under the Plan its financial statements
including a balance sheet regarding the Company's financial condition and
results of operations, unless such Offerees, Optionees or Shareholders have
duties with the Company that assure them access to equivalent information.
Such financial statements need not be audited.

SECTION 4. ELIGIBILITY.
----------------------

     (a)  General Rule. Only Employees shall be eligible for designation as
          ------------
Participants by the Committee. In addition, only individuals who are employed
as Common-Law Employees by the Company or a Subsidiary shall be eligible for
the grant of ISOs.

     (b)  Ten-Percent Shareholders. An Employee who owns more than ten percent
          ------------------------
(10%) of the total combined voting power of all classes of outstanding stock
of the Company or any of its Subsidiaries shall not be eligible for
designation as an Offeree or Optionee unless (i) the Exercise Price for an ISO
(and a NSO to the extent required by applicable law) is at least one hundred
ten percent (110%) of the Fair Market Value of a Share on the date of grant,
(ii) if required by applicable law, the Purchase Price of Shares is at least
one hundred percent (100%) of the Fair Market Value of a Share on the date of
grant, and (iii) in the case of an ISO, such ISO by its terms is not
exercisable after the expiration of five years from the date of grant.

     (c)  Attribution Rules. For purposes of Subsection (b) above, in
          -----------------
determining stock ownership, an Employee shall be deemed to own the stock
owned, directly or indirectly, by or for his brothers, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries. Stock
with respect to which such Employee holds an Option shall not be counted.

     (d)  Outstanding Stock. For purposes of Subsection (b) above,
          -----------------
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding Stock" shall not include shares
authorized for issuance under outstanding Options held by the Employee or by
any other person.

SECTION 5. STOCK SUBJECT TO PLAN.
--------------------------------

     (a)  Basic Limitation. Shares offered under the Plan shall be authorized
but unissued Shares. Subject to Sections 5(b) and 9 of the Plan, the aggregate
number of Shares which may be issued or transferred as common stock pursuant
to an Award under the Plan shall not exceed 490,000 Shares.

                                      -5-
<PAGE>

     In any event, (i) the number of Shares which are subject to Awards or other
rights outstanding at any time under the Plan shall not exceed the number of
Shares which then remain available for issuance under the Plan; and (ii) to the
extent an award is made in reliance upon the exemption available under Section
25102(o) of the California Corporations Code, the number of Shares which are
subject to Awards or other rights outstanding at any time under the Plan or
otherwise shall not exceed the limitation imposed by Section 260.140.45 of Title
10 of the California Code of Regulations.  The Company, during the term of the
Plan, shall at all times reserve and keep available sufficient Shares to satisfy
the requirements of the Plan.

     (b)  Additional Shares. In the event that any outstanding Option or other
right for any reason expires or is canceled or otherwise terminated, the
Shares allocable to the unexercised portion of such Option or other right
shall again be available for the purposes of the Plan. If a Restricted Share
is forfeited before any dividends have been paid with respect to such
Restricted Share, then such Restricted Share shall again become available for
award under the Plan.

SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.
--------------------------------------------------

     (a)  Stock Purchase Agreement. Each award or sale of Shares under the
          ------------------------
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such award or sale
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions which are not inconsistent with the
Plan and which the Committee deems appropriate for inclusion in a Stock
Purchase Agreement. The provisions of the various Stock Purchase Agreements
entered into under the Plan need not be identical.

     (b)  Duration of Offers. Any right to acquire Shares under the Plan
          ------------------
(other than an Option) shall automatically expire if not exercised by the
Offeree within 30 days after the grant of such right was communicated to the
Offeree by the Committee.

     (c)  Purchase Price. Unless otherwise permitted by applicable law, the
          --------------
Purchase Price of Shares to be offered under the Plan shall not be less than
eighty-five percent (85%) of the Fair Market Value of a Share on the date of
grant (100% for 10% shareholders), except as otherwise provided in Section
4(b). Subject to the preceding sentence, the Purchase Price shall be
determined by the Committee in its sole discretion. The Purchase Price shall
be payable in a form described in Subsection (d) below.

     (d)  Payment for Shares. The entire Purchase Price of Shares issued under
          ------------------
the Plan shall be payable in lawful money of the United States of America at
the time when such Shares are purchased, except as provided below:

          (i)  Surrender of Stock. To the extent that a Stock Option Agreement
               ------------------
     so provides, payment may be made all or in part with Shares which have
     already been owned by the Optionee or Optionee's representative for any
     time period specified by the Committee and which are surrendered to the
     Company in good form for transfer. Such shares shall be valued at their
     Fair Market Value on the date when the new Shares are purchased under the
     Plan.

                                      -6-
<PAGE>

         (ii)  Promissory Notes. To the extent that a Stock Option Agreement
               ----------------
     or Stock Purchase Agreement so provides, payment may be made all or in
     part with a full recourse promissory note executed by the Optionee or
     Offeree. The interest rate and other terms and conditions of such note
     shall be determined by the Committee. The Committee may require that the
     Optionee or Offeree pledge his or her Shares to the Company for the
     purpose of securing the payment of such note. In no event shall the stock
     certificate(s) representing such Shares be released to the Optionee or
     Offeree until such note is paid in full.

        (iii)  Cashless Exercise. To the extent that a Stock Option Agreement
               -----------------
     so provides and a public market for the Shares exists, payment may be
     made all or in part by delivery (on a form prescribed by the Committee)
     of an irrevocable direction to a securities broker to sell shares and to
     deliver all or part of the sale proceeds to the Company in payment of the
     aggregate Exercise Price.

         (iv)  Other Forms of Payment. To the extent provided in the Stock
               ----------------------
     Option Agreement, payment may be made in any other form that is
     consistent with applicable laws, regulations and rules.

     (e)  Exercise of Awards on Termination of Service. Each Stock Award
          --------------------------------------------
Agreement shall set forth the extent to which the recipient shall have the
right to exercise the Award following termination of the recipient's Service
with the Company and its Subsidiaries. Such provisions shall be determined in
the sole discretion of the Committee, need not be uniform among all the Awards
issued pursuant to the Plan, and may reflect distinctions based on the reasons
for termination of employment.

SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED SHARES.
---------------------------------------------------------------

     (a)  Form and Amount of Award. Each Stock Award Agreement shall specify
          ------------------------
the number of Shares that are subject to the Award. Restricted Shares may be
awarded in combination with NSOs and such an Award may provide that the
Restricted Shares will be forfeited in the event that the related NSOs are
exercised.

     (b)  Exercisability. Each Stock Award Agreement shall specify the
          --------------
conditions upon which Restricted Shares shall become vested, in full or in
installments. To the extent required by applicable law, each Stock Award shall
become exercisable no less rapidly than the rate of 20% per year for each of
the first five years from the date of grant. Subject to the preceding
sentence, the exercisability of any Stock Award shall be determined by the
Committee in its sole discretion.

     (c)  Effect of Change in Control. The Committee may determine at the time
          ---------------------------
of making an Award or thereafter, that such Award shall become fully vested,
in whole or in part, in the event that a Change in Control occurs with respect
to the Company.

     (d)  Voting Rights. Holders of Restricted Shares awarded under the Plan
          -------------
shall have the same voting, dividend and other rights as the Company's other
stockholders. A Stock Award

                                      -7-
<PAGE>

Agreement, however, may require that the holders invested any cash dividends
received in additional Restricted Shares. Such additional Restricted Shares
shall be subject to the same conditions and restrictions as the Award with
respect to which the dividends were paid. Such additional Restricted Shares
shall not reduce the number of Shares available under Section 5.

SECTION 8. TERMS AND CONDITIONS OF OPTIONS.
------------------------------------------

     (a)  Stock Option Agreement. Each grant of an Option under the Plan shall
          ----------------------
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the
Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical.

     (b)  Number of Shares. Each Stock Option Agreement shall specify the
          ----------------
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 9. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.

     (c)  Exercise Price. Each Stock Option Agreement shall specify the
          --------------
Exercise Price. The Exercise Price of an ISO shall not be less than one
hundred percent (100%) of the Fair Market Value of a Share on the date of
grant, except as otherwise provided in Section 4(b). To the extent required by
applicable law and except as otherwise provided in Section 4(b), the Exercise
Price of a Nonstatutory Option shall not be less than eighty-five percent
(85%) of the Fair Market Value of a Share on the date of grant. Subject to the
preceding two sentences, the Exercise Price under any Option shall be
determined by the Committee in its sole discretion. The Exercise Price shall
be payable in a form described in Subsection (h) below.

     (d)  Exercisability. Each Stock Option Agreement shall specify the date
          --------------
when all or any installment of the Option is to become exercisable. To the
extent required by applicable law, an Option shall become exercisable no less
rapidly than the rate of 20% per year for each of the first five years from
the date of grant. Subject to the preceding sentence, the exercisability of
any Option shall be determined by the Committee in its sole discretion.

     (e)  Effect of Change in Control. The Committee may determine, at the
          ---------------------------
time of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Shares subject to such Option in the event that a Change
in Control occurs with respect to the Company.

     (f)  Term. The Stock Option Agreement shall specify the term of the
          ----
Option. The term shall not exceed ten years from the date of grant (or five
(5) years for ten percent (10%) shareholders as provided in Section 4(b)).
Subject to the preceding sentence, the Committee at its sole discretion shall
determine when an Option is to expire.

     (g)  Exercise of Options on Termination of Service. Each Option shall set
          ---------------------------------------------
forth the extent to which the Optionee shall have the right to exercise the
Option following termination of the Optionee's Service with the Company and
its Subsidiaries. Such provisions shall be determined in the sole discretion
of the Committee, need not be uniform among all Options

                                      -8-
<PAGE>

issued pursuant to the Plan, and may reflect distinctions based on the reasons
for termination of employment. Notwithstanding the foregoing, to the extent
required by applicable law, each Option shall provide that the Optionee shall
have the right to exercise the vested portion of any Option held at
termination for at least 30 days following termination of Service with the
Company for any reason, and that the Optionee shall have the right to exercise
the Option for at least six months if the Optionee's Service terminates due to
death or Disability.

     (h)  Payment of Option Shares. The entire Exercise Price of Shares issued
          ------------------------
under the Plan shall be payable in lawful money of the United States of
America at the time when such Shares are purchased, except as provided below:

          (i)  Surrender of Stock. To the extent that a Stock Option Agreement
               ------------------
     so provides, payment may be made all or in part with Shares which have
     already been owned by the Optionee or Optionee's representative for any
     time period specified by the Committee and which are surrendered to the
     Company in good form for transfer. Such shares shall be valued at their
     Fair Market Value on the date when the new Shares are purchased under the
     Plan.

         (ii)  Promissory Notes. To the extent that a Stock Option Agreement
               ----------------
     or Stock Purchase Agreement so provides, payment may be made all or in
     part with a full recourse promissory note executed by the Optionee or
     Offeree. The interest rate and other terms and conditions of such note
     shall be determined by the Committee. The Committee may require that the
     Optionee or Offeree pledge his or her Shares to the Company for the
     purpose of securing the payment of such note. In no event shall the stock
     certificate(s) representing such Shares be released to the Optionee or
     Offeree until such note is paid in full.

        (iii)  Cashless Exercise. To the extent that a Stock Option Agreement
               -----------------
     so provides and a public market for the Shares exists, payment may be
     made all or in part by delivery (on a form prescribed by the Committee)
     of an irrevocable direction to a securities broker to sell shares and to
     deliver all or part of the sale proceeds to the Company in payment of the
     aggregate Exercise Price.

         (iv)  Other Forms of Payment. To the extent provided in the Stock
               ----------------------
     Option Agreement, payment may be made in any other form that is
     consistent with applicable laws, regulations and rules.

     (i)  Modification, Extension and Assumption of Options. Within the
          -------------------------------------------------
limitations of the Plan, the Committee may modify, extend or assume
outstanding Options or may accept the cancellation of outstanding Options
(whether granted by the Company or another issuer) in return for the grant of
new Options for the same or a different number of Shares and at the same or a
different Exercise Price or for other consideration.

SECTION 9. ADJUSTMENT OF SHARES.
-------------------------------

     (a)  General. In the event of a subdivision of the outstanding Stock, a
          -------
declaration of a dividend payable in Shares, a combination or consolidation of
the outstanding Stock into a lesser

                                      -9-
<PAGE>

number of Shares, a recapitalization, a reclassification or a similar
occurrence, the Committee shall make appropriate adjustments, subject to the
limitations set forth in Section 9(c), in one or more of (i) the number of
Shares available for future Awards under Section 5, (ii) the number of Shares
covered by each outstanding Option or Purchase Agreement or (iii) the Exercise
Price or Purchase Price under each outstanding Option or Stock Purchase
Agreement.

     (b)  Reorganizations. In the event that the Company is a party to a
          ---------------
merger or reorganization, and the company is not the surviving company, the
outstanding Options may be assumed by the surviving company. If the Options
are not assumed by the surviving company, all outstanding Options shall become
fully vested and immediately exercisable as of the closing of the merger or
reorganization.

     (c)  Reservation of Rights. Except as provided in this Section 9, an
          ---------------------
Optionee or an Offeree shall have no rights by reason of (i) any subdivision
or consolidation of shares of stock of any class, (ii) the payment of any
dividend or (iii) any other increase or decrease in the number of shares of
stock of any class. Any issue by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number,
Exercise Price or Purchase Agreement of Shares subject to an Option or Stock
Purchase Agreement. The grant of an Award pursuant to the Plan shall not
affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.

SECTION 10. WITHHOLDING TAXES.
-----------------------------

     (a)  General. To the extent required by applicable federal, state, local
          -------
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Committee for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until
such obligations are satisfied.

     (b)  Share Withholding. The Committee may permit a Participant to satisfy
          -----------------
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Shares that otherwise would be issued
to him or her or by surrendering all or a portion of any Shares that he or she
previously acquired. Such Shares shall be valued at their Fair Market Value on
the date when taxes otherwise would be withheld in cash. Any payment of taxes
by assigning Shares to the Company may be subject to restrictions, including
any restrictions required by rules of any federal or state regulatory body or
other authority.

     (c)  Cashless Exercise/Pledge. The Committee may provide that if Company
          ------------------------
Shares are publicly traded at the time of exercise, arrangements may be made
to meet the Optionee's withholding obligation by cashless exercise or pledge.

     (d)  Other Forms of Payment. The Committee may permit such other means of
          ----------------------
tax withholding as it deems appropriate.

                                      -10-
<PAGE>

SECTION 11. ASSIGNMENT OR TRANSFER OF AWARDS.
--------------------------------------------

     (a)  General. An Award granted under the Plan shall not be anticipated,
          -------
assigned, attached, garnished, optioned, transferred or made subject to any
creditor's process, whether voluntarily, involuntarily or by operation of law,
except as approved by the Committee. Notwithstanding the foregoing, ISOs may
not be transferable. Also notwithstanding the foregoing, while the Shares are
subject to California Corporations Code (S) 25102(o), (i) Offerees and
Optionees may not transfer their rights hereunder except by will, beneficiary
designation or the laws of descent and distribution, and (ii) any rights of
repurchase in favor of the Company shall take into account the provisions of
Sections 260.140.41 or 260.140.42 of Title 10 of the California Code of
Regulations, as applicable.

     (b)  Trusts. Neither this Section 11 nor any other provision of the Plan
          ------
shall preclude a Participant from transferring or assigning Restricted Shares
to (a) the trustee of a trust that is revocable by such Participant alone,
both at the time of the transfer or assignment and at all times thereafter
prior to such Participant's death, or (b) the trustee of any other trust to
the extent approved by the Committee in writing. A transfer or assignment of
Restricted Shares from such trustee to any other person than such Participant
shall be permitted only to the extent approved in advance by the Committee in
writing, and Restricted Shares held by such trustee shall be subject to all
the conditions and restrictions set forth in the Plan and in the applicable
Stock Award Agreement, as if such trustee were a party to such Agreement.

SECTION 12. LEGAL AND FINANCIAL REQUIREMENTS.
--------------------------------------------

     Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of
1933, as amended, the rules and regulations promulgated thereunder, state
securities laws and regulations, and the regulations of any stock exchange on
which the Company's securities may then be listed. No provision of any option
or award agreement may be inconsistent with applicable law and to the extent a
provision of any such agreement is determined by the Board to violate the law
or create material adverse legal, financial, or regulatory problems such
provision shall not apply.

SECTION 13. NO EMPLOYMENT RIGHTS.
--------------------------------

     No provision of the Plan, nor any right or Option granted under the Plan,
shall be construed to give any person any right to become, to be treated as,
or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason.

SECTION 14. DURATION AND AMENDMENTS.
-----------------------------------

     (a)  Term of the Plan. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors, subject to
the approval of the Company's shareholders. In the event that the shareholders
fail to approve the Plan within twelve (12) months after its adoption by the
Board of Directors, any grants already made shall be null and void, and no
additional grants shall be made after such date. The Plan shall terminate
automatically ten

                                      -11-
<PAGE>

(10) years after its adoption by the Board of Directors and may be terminated
on any earlier date pursuant to Subsection (b) below.

     (b)  Right to Amend or Terminate the Plan. The Board of Directors may
          ------------------------------------
amend the Plan at any time and from time to time. Rights and obligations under
any right or Option granted before amendment of the Plan shall not be
materially altered, or impaired adversely, by such amendment, except with
consent of the person to whom the right or Option was granted. An amendment of
the Plan shall be subject to the approval of the Company's shareholders only
to the extent required by applicable laws, regulations or rules including the
rules of any applicable exchange.

     (c)  Effect of Amendment or Termination. No Shares shall be issued or
          ----------------------------------
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Shares previously issued or any Option
previously granted under the Plan.

                                      -12-DELTA FINANCIAL CORPORATION
                          1000 Woodbury Road, Suite 200
                            Woodbury, New York 11797

February 23, 2001

VIA FACSIMILE

Beneficial holders of the Notes (as defined below)
listed on the signature pages hereof

Ladies and Gentlemen:

      This  letter of intent,  together  with the term sheet (the "Term  Sheet")
attached  hereto  (collectively,  "Letter  of  Intent"),  sets  forth our mutual
intentions  with  respect  to  the  restructuring   (the   "Restructuring")   of
outstanding indebtedness owed by Delta to the holders (the "Holders") of Delta's
9 1/2% Senior Secured Notes due 2004 (the "Notes").

      This  Letter  of Intent  sets  forth  the  basis  for the  negotiation  of
definitive   documentation  between  Delta  and  the  Holders  (the  "Definitive
Restructuring Agreements"). It is understood that this Letter of Intent does not
contain  all of the  material  terms of the  Restructuring  and is not a binding
agreement,  except for the penultimate  paragraph of this Letter of Intent which
shall be binding on the Holders party hereto.

      Subject  to the  foregoing,  this  Letter of Intent  sets forth our mutual
understanding of the basis of the  Restructuring  as currently  contemplated and
the manner in which the  parties  intend to proceed  between the date hereof and
the execution of the Definitive Restructuring Agreements.

      Promptly  following  the  execution  of this Letter of Intent,  Delta will
solicit the  consents of the  holders of a majority in  principal  amount of the
Notes to the amend (a) the Indenture  governing the Notes (the  "Indenture") (i)
to  allow  for  the  release  to  Delta  of  the  1999-3  and  1996-2  Residuals
(collectively, the "Released Residuals") from the Delta Funding Residual Holding
Trusts (the "Trusts"), (ii) to eliminate the Residual Receivable Coverage Ratios
set forth in Section 4.17 of the Indenture;  PROVIDED,  that after giving effect
to the  release  described  in clause (i) above and the  exchange  described  in
clause (iii) below, the Residuals then remaining in the Trusts had a book value,
as of December 31, 2000, of approximately $150 million, of which,  approximately
$75 million were senior  residuals,  (iii) to provide  that all other  Residuals
currently  in the trusts be kept in the  Trusts  until the  consummation  of the
Exchange  Offer  referred to in the Term Sheet  (other than the  exchange of the
1998-2  Residual  currently  owned by Delta outside of the Trusts for the 1996-3
and 1997-1  Residuals  currently  owned by the Trust as  referred to in the Term
Sheet)  and (iv) to  provide  that a  failure  of Delta to obtain  financing  in
accordance  with the terms of the attached Term Sheet,  or commence the Exchange
Offer described in the Term Sheet, will constitute an event of default under the
Indenture, and (b) the Deposit Trust Agreements to eliminate the Collateral Test
prescribed therein;  PROVIDED, that after giving effect to the release described
in clause  (i) above and the  exchange  described  in clause  (iii)  above,  the
Residuals  then  remaining  in the Trusts had a book value,  as of December  31,
2000, of approximately  $150 million,  of which,  approximately $75 million were
senior  residuals,  and to provide for the release and  exchange of Residuals as
described  above.  For  purposes of this Letter of Intent,  the  "Deposit  Trust
Agreements" mean,  collectively,  (a) that certain Deposit Trust Agreement dated
as of December 22, 2000 between DF Special Holdings  Corporation,  as depositor,
and Wilmington  Trust Company,  as owner trustee,  and (b) that certain  Deposit
Trust Agreement dated as of December 22, 2000 between Delta Funding Corporation,
as depositor, and Wilmington Trust Company, as owner trustee.

      Each of the  undersigned  beneficial  holders  hereby  agrees to grant its
consent to the proposed amendments and consents described above,  subject to its
satisfaction with the applicable Definitive  Restructuring  Agreements.  Each of
the  undersigned  beneficial  holders  hereby  represents  and warrants  that it
beneficially owns the aggregate principal amount of Notes set forth opposite its
name below.

      If the  foregoing  accurately  summarizes  our mutual  understanding  with
respect to the  Restructuring,  please  evidence your approval by executing this
Letter of Intent and returning it to the undersigned.

                                    Very truly yours,

                                    DELTA FINANCIAL CORPORATION

                                    By:  /S/ MARC E. MILLER
                                         Name: Marc E. Miller
                                         Title: SVP

Accepted and Agreed to by:

<PAGE>

Dated:   February 23, 2001  PUTNAM INVESTMENT MANAGEMENT INC., on
                                behalf of:

    $    8,890,000          Putnam High Yield Trust
         7,245,000          Putnam High Yield Advantage Fund
            80,000          Putnam High Income Convertible and Bond Fund
         3,020,000          Putnam Variable Trust-Putnam VT High Yield Fund
           760,000          Putnam Master Income Trust
         1,885,000          Putnam Premier Income Trust
         1,380,000          Putnam Master Intermediate Income Trust
         6,905,000          Putnam Diversified Income Trust
            70,000          Putnam Convertible Opportunities and Income Trust
         6,385,000          Putnam Funds Trust - Putnam High Yield Trust II
           310,000          Putnam Managed High Yield Trust
           320,000          Putnam Strategic Income Fund
         1,170,000          Putnam Variable Trust - Putnam VT Diversified Income
                                    Fund

                            By:/S/ JOHN VERANI
                            Name:  John Verani
                            Its:   Senior Vice President

                            One Post Office Square
                            Boston, MA 02109
                            Telephone: (617)292-1000
                            Telecopy:  (617)760-1676

<PAGE>

Dated: February 23, 2001   PUTNAM ADVISORY COMPANY, INC., on behalf of:

           200,000         Ameritech Pension Trust

                           By:/S/ JOHN VERANI
                           Name:  John Verani
                           Its:   Senior Vice President

                           One Post Office Square
                           Boston, MA 02109
                           Telephone: (617)292-1000
                           Telecopy:  (617)760-1676

Dated: February 23, 2001   PUTNAM FIDUCIARY TRUST COMPANY, on behalf of:

    $    1,305,000         Putnam High Yield Managed Trust
           295,000         Putnam High Yield Fixed Income Fund, LLC

                           By:/S/ JOHN VERANI
                           Name:  John Verani
                           Its:   Senior Vice President

                           One Post Office Square
                           Boston, MA 02109
                           Telephone: (617)292-1000
                           Telecopy:  (617)760-1676

<PAGE>

Dated: February 23, 2001   PUTNAM ADVISORY COMPANY, INC., on behalf of:

         3,000,000         Putnam CBO I, Limited
         1,270,000         Putnam CBO II, Limited
         3,000,000         Putnam CBO III, Limited

                           By:/S/ JOHN VERANI
                           Name:  John Verani
                           Its:   Senior Vice President

                           One Post Office Square
                           Boston, MA 02109
                           Telephone: (617)292-1000
                           Telecopy:  (617)760-1676

<PAGE>

Dated: February 23, 2001   PUTNAM INVESTMENT MANAGEMENT, INC., on
                           behalf of:

           190,000         Travelers Series Fund Inc. - Putnam Diversified
                           Income Portfolio

                           By:/S/ JOHN VERANI
                           Name:  John Verani
                           Its:   Senior Vice President

                           One Post Office Square
                           Boston, MA 02109
                           Telephone: (617)292-1000
                           Telecopy:  (617)760-1676

<PAGE>

Dated: February 23, 2001   PUTNAM ADVISORY COMPANY, INC., on behalf of:

           200,000         Abbott Laboratories Annuity Retirement Plan
           180,000         Strategic Global Fund-High Yield Fixed Income
                           (Putnam) Fund

                           By:/S/ JOHN VERANI
                           Name:  John Verani
                           Its:   Senior Vice President

                           One Post Office Square
                           Boston, MA 02109
                           Telephone: (617)292-1000
                           Telecopy:  (617)760-1676

<PAGE>

Dated: February 23, 2001   PUTNAM INVESTMENT MANAGEMENT, INC., on
                           behalf of:
           131,000         Putnam Variable Trust-Putnam VT Global Asset
                           Allocation Fund
           767,000         Putnam Asset Allocation Funds - Growth Portfolio
           192,000         Putnam Asset Allocation Funds - Conservative
                           Portfolio

                           By:/S/ JOHN VERANI
                           Name:  John Verani
                           Its:   Senior Vice President

                           One Post Office Square
                           Boston, MA 02109
                           Telephone: (617)292-1000
                           Telecopy:  (617)760-1676

<PAGE>

Dated: February 23, 2001   PUTNAM ADVISORY COMPANY, INC., on behalf of:

           300,000         Northrop Grumman Corporation
           190,000         Putnam World Trust II-Putnam High Yield Bond Fund
                           (Dublin)

                           By:/S/ JOHN VERANI
                           Name:  John Verani
                           Its:   Senior Vice President

                           One Post Office Square
                           Boston, MA 02109
                           Telephone: (617)292-1000
                           Telecopy:  (617)760-1676

<PAGE>

Dated: February 23, 2001   PUTNAM INVESTMENT MANAGEMENT, INC., on
                           behalf of:

            75,000         Lincoln National Global Asset Allocation fund, Inc.

                           By:/S/ JOHN VERANI
                           Name:  John Verani
                           Its:   Senior Vice President

                           One Post Office Square
                           Boston, MA 02109
                           Telephone: (617)292-1000
                           Telecopy:  (617)760-1676

<PAGE>

Dated: February 23, 2001   PRUDENTIAL INVESTMENT CORPORATION, as
                           Investment Advisor for:

    $    7,320,000         Prudential High Yield Fund, Inc.
           435,000         Prumerica WorldWide Investors Portfolio:  U.S. High
                           Yield Fund
           160,000         The High Yield Income Fund, Inc.
           560,000         The U.S. High Yield Fund, SICAV
         1,075,000         The Prudential Series Fund, Inc., High Yield Bond
                           Portfolio

                           By: /S/ GEORGE EDWARDS
                           Name:   George Edwards
                           Its:    Vice President

                           Two Gateway Center
                           Newark, NJ  07102
                           Telephone: (973) 802-8877
                           Telecopy: (973) 367-8555

<PAGE>

FIDELITY SUMMER STREET TRUST:
Fidelity Capital & Income Fund

By:/S/ROBERT DWIGHT                     $13,527,000
   Robert Dwight
   Treasurer

VARIABLE INSURANCE PRODUCTS FUND:
High Income Portfolio

By:/S/ ROBERT DWIGHT                     $1,350,000
   Robert Dwight
   Treasurer

FIDELITY ADVISOR SERIES II:
Fidelity Advisor High Income Fund

By:/S/ ROBERT DWIGHT                       $255,000
   Robert Dwight
   Treasurer

CYPRESS TREE INVESTMENT PARTNERS I, LTD.

By:/S/ ROBERT LAWRENCE                   $2,000,000
   Robert Lawrence

<PAGE>

                   SUMMARY OF MATERIAL TERMS AND CONDITIONS
                   FOR NOTEHOLDER RESTRUCTURING TRANSACTION

1.     RESTRUCTURING OF NOTES

         Except as provided in the next bullet  points,  all residuals  owned by
         the two Residual  Holding Trusts  (and/or the Owner Trust  Certificates
         for  such  Residual   Holding  Trusts)  to  be  contributed  to  a  new
         Liquidating   Trust  formed  in  connection  with  the  Exchange  Offer
         (contingent  upon  at  least  90-95%  of  Noteholders  agreeing  to the
         Exchange Offer and exchanging  their Notes for a commensurate  interest
         in the Liquidating  Trust). The Liquidating Trust will be owned 100% by
         Noteholders  who agree to Exchange  Offer,  but will provide that Delta
         Funding  Corporation  is to receive (a) a management  fee of 15% of the
         cashflows generated by the residuals owned by the Liquidating Trust for
         services rendered by it for each of the first three years following the
         consummation of the Exchange  Offer,  and 10% per year  thereafter,  in
         return for its oversight  and absorbing  certain costs and fees for the
         Liquidating Trust (e.g.  calculating  agent and custodial fees),  which
         rights and obligations  shall be  non-assignable  and non-delegable and
         shall terminate on a change of control,  cessation of operations or the
         liquidation  of  Delta;  provided,  however,  that  the  assignment  or
         delegation  of  such  rights  and  obligations  in  connection  with  a
         transaction  (including,  without  limitation,  a change of  control of
         Delta) that does not result in management  services  being  provided by
         individuals  other the  members  of the Miller  family (or  individuals
         working under the direct supervision of the Miller Family) shall not be
         deemed  breach of this  clause  (a) and shall not affect the rights and
         obligations  of the  parties  hereto  and (b) all cash  flows  from the
         residuals  through and including the June 2001  distributions.  Subsidy
         payments  associated with New York State Banking Department  settlement
         will be netted  from the  Liquidating  Trust so long as the  Company is
         providing  management  services to the Liquidating  Trust, as set forth
         above.  The residuals to be contributed to the trust have a book value,
         as of 12/31/00  (unaudited),  of approximately $152 million,  of which,
         approximately $75 million are senior residuals.

       * Delta will exchange  the 1998-2  residual  (owned  outside the Residual
         Holding  Trusts)  for the  1996-3 and 1997-1  residuals  (which  have a
         similar  aggregate  book  value and are owned by the  Residual  Holding
         Trusts).

       * The 1999-3  and  1996-2  residuals  (collectively  referred  to  as the
         "Released  Residuals")  will be removed from the Residual Holding Trust
         and pledged to Greenwich  as  collateral  for residual  financing of no
         more  than  $6.5  million  on  these  Released  Residuals  (as  part of
         Greenwich's   residual   financing   described   below,   and   to   be
         cross-collateralized,  together  with the other  residuals  pledged  to
         Greenwich,  with all of Delta's indebtedness to Greenwich).  Subject to
         Greenwich's lien and right of offset against all outstanding financing,
         Noteholders will receive a subordinate lien on the Released  Residuals,
         which lien shall  automatically  extinguish upon the transfer of actual
         servicing from Delta to Ocwen (or another third party acceptable to the
         Noteholders party to the Letter of Intent (the "Informal Committee") or
         upon  Greenwich's  purchase of the residual  (with  respect to only the
         1996-2  residual).  If Delta files a bankruptcy  proceeding and has not
         yet  transferred  servicing,  the Released  Residuals to be used by the
         estate to pay for costs of  expenses  of the estate to  facilitate  the
         transfer of servicing, as agreed to by the Informal Committee, provided
         that all of Delta's  indebtedness  to  Greenwich  has been fully repaid
         (which  is  necessary  to  extinguish  Greenwich's  senior  lien on the
         Released Residuals).

2.     NOTEHOLDERS ADDITIONAL CONSIDERATION

       * Net proceeds from transfer of servicing to  Ocwen (inclusive of (a) all
         amounts  received  from,  or paid  over  to,  Ocwen  including  without
         limitation  for Servicing and  Delinquency  Advances,  reconciling  all
         accounts, etc., (b) all amounts paid over to third parties for consents
         and/or  to  effectuate  the  servicing   transfer,   including  without
         limitation  to  the  bond   insurers,   trustees,   ratings   agencies,
         custodians,   etc.,   and  (c)   collapsing   servicing   and   advance
         transactions,  and all costs and fees paid in connection  therewith) to
         be split 80/20 between the Liquidating Trust and Delta.

       * Delta's ownership/residual interest in non-performing loan trust to  be
         transferred to Liquidating Trust.

       * Liquidating  Trust to  receive  preferred  stock  in Delta  with a  $15
         million liquidation  preference,  10% dividend (payable  semi-annually,
         with the  first  dividend  due on  January  1,  2002,  and the  first 3
         dividends  payable in kind).  Preferred  stock is convertible  into __%
         [subject  to  KPMG's  advice  as  to  maximum  level  without   risking
         triggering a "change of  ownership"  and  subjecting  the Net Operating
         Losses to  limitation]  of the fully diluted  shares of Delta once five
         dividends in total have not been paid in cash. In addition,  after five
         dividends in total have not been paid in cash,  the  Liquidating  Trust
         shall have the right to appoint two directors to Delta's board.

       * Delta has  option to redeem  the  preferred  stock at  the  liquidation
         preference plus accrued dividends at any time prior to conversion.

3.     MISCELLANEOUS OTHER ITEMS

       * Upon full  performance  by  Delta,  Noteholders  to  exchange  complete
         releases with all parties.

       * Delta and Greenwich  enter into an amendment to the existing  warehouse
         line on February 22, 2001.

       * Greenwich to proceed  with  purchase of whatever  loans they approve in
         their sole  discretion,  Delta will sell  balance in whole loan  market
         and/or securitize.

       * Subject to  Greenwich's  due  diligence  and  acceptance  and  on terms
         reasonably  acceptable  to the  Informal  Committee,  Greenwich  to (a)
         provide initial residual financing of approximately $2.5 million on the
         1996-1,  1997-2 and 1998-2  residuals,  (b)  subsequently  increase the
         residual financing to approximately $10 million on the 1996-1,  1996-2,
         1996-3,  1997-1,  1997-2  and  1999-3  residuals,  and  (c)  thereafter
         purchase the 1996-1,  1996-2,  1996-3,  1997-1 and 1997-2 residuals for
         approximately  $15 million.  To the extent that the net purchase  price
         (after fees and costs) for these five  residuals  exceeds $15  million,
         all such excess amounts shall be paid into the Liquidating  Trust,  and
         the amount of the preferred  stock  liquidation  preference  (described
         above) shall be reduced commensurately.

       * Current   sub-servicing   agreement  provides  for  Ocwen   to  finance
         outstanding  delinquency  and  servicing  advances.  Delta to negotiate
         collapse of  servicing  advance  transaction  prior to execution of the
         exchange offer (in connection with which,  it is anticipated  that fees
         will need to be paid) on terms  reasonably  acceptable  to the Informal
         Committee.

       * Delta agrees to  hire consultants  designated by Informal Committee who
         will  be  consulted  with  in  connection   with  the  negotiation  and
         implementation  of these  transactions,  including the  negotiation and
         consummation of the transfer of servicing.  The  consultants'  scope of
         duties and amount of compensation shall be agreed upon by Delta and the
         Informal Committee.

       * All   documentation   necessary  to   memorialize   the    transactions
         contemplated by this term sheet (E.G.,  amendments to the Indenture and
         Deposit Trust  Agreements,  and the Consent  Solicitation  and Exchange
         Offer) shall be in a form and content  reasonably  satisfactory  to all
         parties.

       * Delta agrees to  pay fees and expenses of professionals to the Informal
         Committee. Delta agrees to pay to Ropes & Gray, counsel to the Informal
         Committee, a retainer of $75,000, to be replenished to $40,000 whenever
         the unused portion is less than $20,000.

       * A breach of any of the foregoing  conditions  shall  result in an event
         of default under the Notes.

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