UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM T-3
APPLICATION FOR QUALIFICATION OF INDENTURES
UNDER THE TRUST INDENTURE ACT OF 1939
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DELTA FINANCIAL CORPORATION
(Name of applicant)
1000 Woodbury Road
Woodbury, New York 11797
(Address of Principal Executive Offices)
------------
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
9 1/2% Senior Secured Notes Due 2004 $150,000,000
------------------------------------------------------------
Approximate date of proposed public offering: As soon as practicable following
the qualification of the indenture covered hereby under the Trust Indenture Act
of 1939, as amended.
Name and address of agent for service: With copies to:
Mr. Marc E. Miller Bradley Kulman, Esq.
Delta Financial Corporation Stroock & Stroock & Lavan LLP
1000 Woodbury Road 180 Maiden Lane
Woodbury, New York 11797 New York, New York 10038-4982
The applicant hereby amends this application for qualification on such
date or dates as may be necessary to delay its effectiveness until (i) the 20th
day after the filing of a further amendment which specifically states that it
shall supersede this amendment, or (ii) such date as the Commission, acting
pursuant to Section 307(c) of the Trust Indenture Act of 1939, as amended (the
"Act"), may determine upon the written request of the applicant.
<PAGE>
GENERAL
1. GENERAL INFORMATION
(a) The applicant is a corporation.
(b) The applicant was organized under the laws of the State of
Delaware.
2. SECURITIES ACT EXEMPTION APPLICABLE
Delta Financial Corporation ("Delta" or the "Applicant") proposes to
issue up to $150,000,000 aggregate principal amount of 9 1/2% Senior Secured
Notes due 2004 (the "Secured Notes"), to be issued by Delta under the indenture
to be qualified hereby (the "Indenture"), and up to an aggregate of 1,590,000
warrants (the "Warrants") to subscribe for newly issued, fully paid and
nonassessable shares of common stock, par value $.01 per share, of Delta
("Common Stock") in exchange for the entire aggregate principal amount
($150,000,000) of Delta's outstanding 9 1/2% Senior Notes due 2004 (the "Old
Notes"). Subject to the terms and conditions of the Offering Circular (the
"Offering Circular") and the related Letter of Transmittal (which, together with
the Offering Circular, constitute the "Exchange Offer"), Delta will issue $1,000
principal amount of Secured Notes and 10.6 Warrants for each $1,000 principal
amount of Old Notes that are properly tendered and not withdrawn pursuant to the
Exchange Offer.
As the Secured Notes and Warrants are proposed to be offered for
exchange by Delta with its existing security holders exclusively and solely for
outstanding securities of Delta, the transaction is exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to
the provisions of Section 3(a)(9) thereof. There have not been, and there will
not be, any sales of the Secured Notes, Warrants or any other securities of the
same class as the Secured Notes and Warrants by Delta (other than sales pursuant
to the Exchange Offer) or by or through an underwriter at or about the same time
as the Exchange Offer. No consideration has been, or will be given, directly or
indirectly, to any broker, dealer, salesman, or other person for soliciting
exchanges of the Old Notes.
Delta has retained The Bank of New York as the "Exchange Agent" and
D.F. King & Co., Inc. as the "Information Agent" in connection with the Exchange
Offer. The Information Agent and the Exchange Agent will provide to the holders
of Old Notes only information otherwise contained in the Offering Circular and
general information regarding the mechanics of the Exchange Offer. Delta has
agreed to reimburse the Exchange Agent and the Information Agent for their
reasonable out-of-pocket expenses in connection therewith and to indemnify the
Exchange Agent and the Information Agent against any losses or claims incurred
without gross negligence or willful misconduct on the part of the Exchange Agent
and the Information Agent, respectively, in connection with their respective
duties as Exchange Agent and Information Agent relating to the Exchange Offer.
In addition, Delta will pay remuneration to the Exchange Agent's and the
Information Agent's financial, legal, and accounting advisors for the provision
of advisory, legal and accounting services, respectively, in connection with the
Exchange Offer.
No holder of the outstanding Old Notes has made or will be requested
to make any cash payment to Delta in connection with the Exchange Offer.
AFFILIATIONS
3. AFFILIATES
Section 5 of this application sets forth the names and addresses of
those security holders of Delta holding 10% or more of Delta's voting securities
as of October 17, 2000.
Delta, directly or indirectly, owns 100% of the voting securities of
each of the entities listed below. The names of indirectly owned entities are
indented and listed under their direct parent entities.
Delta Funding Corporation
Delta Funding Residual Holding Trust 2000-2
DF Special Holdings Corporation
Delta Funding Residual Holding Trust 2000-1.
DFC Financial of Canada Limited
DFC Funding of Canada Limited
DFC Funding Corporation
Continental Property Management Corp.
DFC 1999-A Corp.
DFC 1999-B Corp.
DFC Holdings-A Corp.
Fidelity Mortgage Inc.
DFC Financial Corporation
With respect to each of the entities listed below, Delta, directly or
indirectly, owns 99% of such entity's voting securities:
DFC Receivables Company, L.L.C.
DFC Servicing Receivable Corp.
DFC Servicing Receivable Company, L.L.C.
Except as set forth in Section 5 of this application, the relationship
among Delta and all of its affiliates, including their respective percentage
holdings of voting securities, will be unchanged upon the consummation of the
Exchange Offer.
MANAGEMENT AND CONTROL
4. DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the name and address of each director and
executive officer of Delta and the office or offices held by each such person.
NAME ADDRESS OFFICE
----- ------- ------
Sidney A. Miller c/o Delta Financial Corporation, Chairman of the
1000 Woodbury Road, Woodbury, NY Board of Directors
11797
Hugh Miller c/o Delta Financial Corporation, President, Chief
1000 Woodbury Road, Woodbury, NY Executive Officer
11797 and Director
Richard Blass c/o Delta Financial Corporation, Executive Vice
1000 Woodbury Road, Woodbury, NY President, Chief
11797 Financial Officer,
Treasurer and
Director
Martin D. Payson c/o Delta Financial Corporation, Director
1000 Woodbury Road, Woodbury, NY
11797
Arnold B. Pollard c/o Delta Financial Corporation, Director
1000 Woodbury Road, Woodbury, NY
11797
Margaret Williams c/o Delta Financial Corporation, Director
1000 Woodbury Road, Woodbury, NY
11797
Christopher Donnelly c/o Delta Financial Corporation, Executive Vice
1000 Woodbury Road, Woodbury, NY President
11797
Randall F. Michaels c/o Delta Financial Corporation, Executive Vice
1000 Woodbury Road, Woodbury, NY President
11797
Franklin E. Pellegrin, Jr. c/o Delta Financial Corporation, Executive Vice
1000 Woodbury Road, Woodbury, NY President
11797
Marc E. Miller c/o Delta Financial Corporation, Senior Vice
1000 Woodbury Road, Woodbury, NY President, General
11797 Counsel and
Secretary
Lee Miller c/o Delta Financial Corporation, Senior Vice
1000 Woodbury Road, Woodbury, NY President
11797
5. PRINCIPAL OWNERS OF VOTING SECURITIES
The following table sets forth certain information with respect to the
ownership of Delta's voting securities by persons known by Delta to own 10% or
more of any class of such voting securities as of October 17, 2000:
<TABLE>
<CAPTION>
PERCENTAGE
OF VOTING
TITLE OF CLASS AMOUNT SECURITIES
NAME AND ADDRESS OWNED OWNER OWNED
---------------- -------------- ------ -----------
<S> <C> <C> <C>
Sidney A. Miller
c/o Delta Financial Corporation, 1000
Woodbury Road, Woodbury, NY 11797 Common Stock 4,987,471 31.3% (1)
Hugh Miller
c/o Delta Financial Corporation, 1000
Woodbury Road, Woodbury, NY 11797 Common Stock 5,341,543 33.5% (2)
Marc E. Miller
c/o Delta Financial Corporation, 1000
Woodbury Road, Woodbury, NY 11797 Common Stock 3,782,383 23.8% (3)
Lee Miller
c/o Delta Financial Corporation, 1000
Woodbury Road, Woodbury, NY 11797 Common Stock 3,773,569 23.7% (4)
----------------------------
(1) Includes 20,000 shares of Common Stock subject to currently exercisable
options or options exercisable within 60 days.
(2) Includes (i) 3,747,231 shares of Common Stock owned by two grantor retained
annuity trusts, of which Hugh Miller is a trustee and has shared voting and
investment power, (ii) 12,676 shares of Common Stock over which he has sole
voting and investment power for the benefit of two family members under the
Uniform Gifts for Minor's Act, and (iii) 80,000 shares of Common Stock subject
to currently exercisable options or options exercisable within 60 days.
(3) Includes (i) 3,747,231 shares of Common Stock owned by two grantor retained
annuity trusts, of which Marc Miller is a trustee and has shared voting and
investment power; (ii) 8,814 shares of Common Stock over which he has sole
voting and investment power for the benefit of two family members under the
Uniform Gifts for Minor's Act, and (iii) 20,000 shares of Common Stock subject
to currently exercisable options or options exercisable within 60 days.
(4) Includes (i) 3,747,231 shares of Common Stock owned by two grantor retained
annuity trusts, of which Lee Miller is a trustee and has shared voting and
investment power and (ii) 20,000 shares of Common Stock subject to currently
exercisable options or options exercisable within 60 days.
</TABLE>
UNDERWRITERS
6. UNDERWRITERS
(a) The name and complete mailing address of each person who, within
three years prior to the date of filing this application, acted as an
underwriter of any securities of the Applicant which are outstanding on the date
of filing this application and the title of each class of the securities
underwritten are as follows:
None.
(b) None.
CAPITAL SECURITIES
7. CAPITALIZATION
(a) The debt securities and capital stock of Delta as of October 17,
2000 were as follows:
AMOUNT AMOUNT
TITLE OF CLASS AUTHORIZED OUTSTANDING
-------------- ---------- ------------
Common Stock....................... 49,000,000 15,920,869
Preferred Stock.................... 1,000,000 0
9 1/2% Senior Notes due 2004....... $150,000,000 $150,000,000
principal amount principal amount (1)
(1) Does not include unpaid accrued interest in the amount of $2,375,000.
(b) Each share of Common Stock entitles its holder to one vote on all
matters upon which Delta stockholders are entitled or permitted to vote,
including the election of directors. There are no cumulative voting rights. The
Common Stock has no preemptive rights or conversion rights nor are there any
redemption or sinking fund provisions applicable to the Common Stock. There
currently are no shares of Delta Preferred Stock ("Preferred Stock")
outstanding. Delta's Certificate of Incorporation provides that the Delta board
of directors may authorize the issuance of one or more series of Preferred Stock
having such rights, including voting, conversion and redemption rights, and such
preferences, including dividend and liquidation preferences, as the Delta board
of directors may determine without any further action by the stockholders of
Delta.
INDENTURE SECURITIES
8. ANALYSIS OF INDENTURE PROVISIONS
The terms of the Secured Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "Act"). The following analysis of certain provisions of
the Indenture makes use of certain capitalized terms defined in the Indenture
and not herein, and such terms shall have the meanings given to them in the
Indenture and shall be incorporated by reference herein. The following analysis
does not purport to be a complete description of the Indenture provisions
discussed and is qualified in its entirety by reference to the Indenture, which
provisions are incorporated herein by reference as part of such analysis.
Section references are to the relevant provisions of the Indenture.
A. DEFAULT PROVISIONS
An "Event of Default" occurs if:
(i) Delta defaults in the payment when due of interest on
the Secured Notes and such default continues for a period of 30 days;
(ii) Delta defaults in the payment when due of principal of
or premium, if any, on the Secured Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an
offer to purchase) or otherwise;
(iii) Delta or any Restricted Subsidiary defaults in the
payment of interest or principal under any of the Warehouse Facility
(whether due at maturity, by acceleration or otherwise) and such
default continues beyond the grace period (if any) provided in the
applicable Warehouse Facility;
(iv) Delta fails to comply with any of the provisions of
Section 4.07 (Restricted Payments), 4.09 (Incurrence of Indebtedness
And Issuance Of Preferred Stock), 4.11 (Liens), 4.15 (Offer To
Repurchase Upon Change Of Control), 4.17 (Residual Receivable Coverage
Ratio), 4.18 (Liquidity Maintenance), 4.21 (Leverage Ratio (Total
Liabilities)), 4.22 (Leverage Ratio), 4.23 (Net Worth), 4.24 (Cash
Escrow Accounts), 4.25 (No Pledge or Sale of Residual Receivables or
other Assets After Default or Event of Default), 4.26 (Limitations on
Asset Sales), 4.27 (Flow of Residual Receivables) or 5.01 (Limitation
On Merger, Etc.) of the Indenture;
(v) Delta fails to observe or perform any other covenant,
representation, warranty or other agreement in the Indenture or the
Secured Notes and such failure to observe or perform remains uncured
for 30 days after (or, if Delta has failed to notify the Holders of a
Default or an Event of Default as required by Section 4.28 of the
Indenture, that number of days equal to 30 days minus the number of
days during which Delta is in Defualt of its obligation under Section
4.28 of the Indenture, but in no event less than five (5) days) notice
to Delta by the Trustee or the Holders or Beneficial Holders of at
least 25% in aggregate principal amount of the Secured Notes then
outstanding;
(vi) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by Delta or
any of its Subsidiaries (or the payment of which is guaranteed by
Delta or any of its Subsidiaries), whether such Indebtedness or
Guarantee now exists, or is created after the date of the Indenture,
which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the
acceleration of such Indebtedness prior to its express maturity and,
in each case, the principal amount of any such Indebtedness under
which there has been a Payment Default or, together with the principal
amount of any other such Indebtedness the maturity of which has been
so accelerated, aggregates $5.0 million or more;
(vii) a final judgment or final judgments for the payment
of money are entered by a court or courts of competent jurisdiction
against Delta, any of its Restricted Subsidiaries (other than
Continental Property Management Corp.), any Significant Subsidiary or
any group of Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary and such judgment or judgments remain
undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all
such undischarged judgments exceeds $5.0 million;
(viii) Delta, any of its Restricted Subsidiaries (other than
Continental Property Management Corp.), any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary pursuant to or within the
meaning of Bankruptcy Law:
(1) commences a voluntary case,
(2) consents to the entry of an order for relief
against it in an involuntary case,
(3) consents to the appointment of a Custodian of
it or for all or substantially all of its property, or
(4) makes a general assignment for the benefit of
its creditors;
(ix) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(1) is for relief against Delta or any of its
Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary
in an involuntary case,
(2) appoints a Custodian of Delta or any of its
Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary
or for all or substantially all of the property of Delta or
any of its Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, or
(3) orders the liquidation of Delta or any of its
Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary;
(x) any Subsidiary Guarantee, Collateral Agreement or
Related Agreement shall be held in any judicial proceeding to be
invalid or unenforceable or shall cease for any reason to be in full
force and effect or Delta or any Subsidiary Guarantor or any Person
acting on behalf of Delta or any Subsidiary Guarantor shall deny or
disaffirm its obligations under its Subsidiary Guarantee, Collateral
Agreement or Related Agreement; or
(xi) Delta or any Restricted Subsidiary fails to observe or
perform any material covenant, representation, warranty or agreement
in any Collateral Agreement for 15 days after notice to Delta by the
Trustee, the Collateral Agent, the Warrant Agent, the Owner Trustee,
the Administrator, the Back-Up Servicer, or Holders or Beneficial
Holders of at least 25% in aggregate principal amount of the Secured
Notes then outstanding.
Any notice to Delta hereunder may be given to any or all of the
Collateral Agent, the Escrow Agent, the Warrant Agent, the Owner Trustee, the
Administrator and the Back-Up Servicer, provided that such notice has been
previously or simultaneously given to Delta.
If any Event of Default (other than an Event of Default specified in
clause (viii) or (ix) above) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Secured
Notes may declare all the Secured Notes to be due and payable immediately. Upon
any such declaration, the Secured Notes shall become due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
clause (viii) or (ix) above occurs, all outstanding Secured Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Secured Notes by
written notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
If an Event of Default occurs on or after August 1, 2001, by reason of
any willful action (or inaction) taken (or not taken) by or on behalf of Delta
with the intention of avoiding payment of the premium that Delta would have had
to pay if Delta then had elected to redeem the Secured Notes pursuant to Section
3.07 (Optional Redemption) of the Indenture, then, upon acceleration of the
Secured Notes, an equivalent premium shall also become and be immediately due
and payable, to the extent permitted by law, anything in the Indenture or in the
Secured Notes to the contrary notwithstanding. If an Event of Default occurs
prior to August 1, 2001, by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of Delta with the intention of avoiding the
prohibition on redemption of the Secured Notes prior to such date, then, upon
acceleration of the Secured Notes, an additional premium shall also become and
be immediately due and payable in an amount equal to 5.750% of the principal
amount to the date of payment that would otherwise be due but for the provisions
of this sentence.
B. AUTHENTICATION AND DELIVERY OF NOTES; APPLICATION OF PROCEEDS
A Secured Note shall not be valid until two Officers, or an Officer
and a Secretary or an Assistant Secretary, shall sign, or one Officer shall sign
and one Officer or a Secretary or an Assistant Secretary of Delta (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Secured Notes for Delta by manual or facsimile
signature. Each Subsidiary Guarantor shall execute a Subsidiary Guarantee in the
manner set forth in Section 11.02 (Execution And Delivery of Subsidiary
Guarantee) of the Indenture.
If an Officer whose signature is on a Secured Note was an Officer at
the time of such execution but no longer holds that office at the time the
Trustee authenticates the Secured Note, the Secured Note shall be valid
nevertheless.
A Secured Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Secured Note.
The signature shall be conclusive evidence that the Secured Note has been
authenticated under the Indenture.
The Trustee shall authenticate Secured Notes for original issue in the
aggregate principal amount of up to $150,000,000 upon a written order of Delta
in the form of an Officers' Certificate. The Officers' Certificate shall specify
the amount of Secured Notes to be authenticated and the date on which the
Secured Notes are to be authenticated. The aggregate principal amount of Secured
Notes outstanding at any time may not exceed $150,000,000, except as provided in
Section 2.07 (Replacement Secured Notes) of the Indenture. Upon the written
order of Delta in the form of an Officers' Certificate, the Trustee shall
authenticate Secured Notes in substitution of Secured Notes originally issued to
reflect any name change of Delta.
The Trustee may appoint an authenticating agent reasonably acceptable
to Delta to authenticate Secured Notes. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Secured Notes whenever the
Trustee may do so. Each reference in the Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Delta and Affiliates of Delta.
The Secured Notes shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
There will be no proceeds from the issuance of the Secured Notes.
C. RELEASE OF COLLATERAL
Subject to the two succeeding paragraphs below, with the consent of
the holders of a majority in aggregate principal amount of outstanding Secured
Notes, Collateral may be released from the Lien and security interest created by
the Collateral Agreements. Such consent shall not be required with respect to
the release of the Remaining Earnings in accordance with the terms of the Escrow
Agreement.
At any time when a Default or Event of Default shall have occurred and
be continuing and the maturity of the Secured Notes shall have been accelerated
(whether by declaration or otherwise) and the Trustee shall have delivered a
notice of acceleration to the Collateral Agent, no release of Collateral
pursuant to the provisions of the Collateral Agreement shall be effective as
against the Holders of Secured Notes.
The release of the Remaining Earnings under the Escrow Agreement
shall not be deemed to impair the security under this Indenture in contravention
of the provisions hereof if and to the extent the Remaining Earnings are
released pursuant to the terms of the Escrow Agreement. The release of any
Collateral from the terms of this Indenture and the Collateral Agreements shall
not be deemed to impair the security under this Indenture in contravention of
the provisions hereof if and to the extent the Collateral is released pursuant
to the terms of such Collateral Agreements. To the extent applicable, Delta
shall cause Section 314(d) of the Act relating to the release of property or
securities from the Liens and security interest of the Collateral Agreements and
relating to the substitution therefor of any property or securities to be
subjected to the Liens and security interest of the Collateral Agreements to be
complied with. Any certificate or opinion required by Section 314(d) of the Act
may be made by an Officer of Delta except in cases where Section 314(d) of the
Act requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected or approved by the Trustee and the Collateral Agent in the exercise of
reasonable care.
D. SATISFACTION AND DISCHARGE OF THE INDENTURE.
(i) When (1) Delta delivers to the Trustee all outstanding Secured
Notes (other than Secured Notes replaced pursuant to Section 2.08 of the
Indenture) for cancellation or (2) all outstanding Secured Notes have become due
and payable, whether at maturity or as a result of the mailing of a notice of
redemption pursuant to Article 3 of the Indenture and Delta irrevocably deposits
with the Trustee funds sufficient to pay at maturity or upon redemption all
outstanding Secured Notes, including interest thereon to maturity or such
redemption date (other than Secured Notes replaced pursuant to Section 2.08 of
the Indenture), and if in either case Delta pays all other sums payable under
the Indenture by Delta, then the Indenture shall, subject to Section 8.04
(Conditions to Legal or Covenant Defeasance) of the Indenture cease to be of
further effect. The Trustee shall acknowledge satisfaction and discharge of the
Indenture on demand of Delta accompanied by an Officers Certificate and an
opinion of Counsel and at the cost and expense of Delta.
(ii) Option to Effect Legal Defeasance or Covenant Defeasance.
Delta may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either clause (iii) or (iv) below be applied to all outstanding Secured Notes
upon compliance with the conditions set forth below.
(iii) Legal Defeasance and Discharge.
Upon Delta's exercise under clause (ii) above of the option applicable
to this clause (iii), Delta shall, subject to the satisfaction of the conditions
set forth in clause (v) below, be deemed to have been discharged from its
obligations with respect to all outstanding Secured Notes on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that Delta shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Secured Notes,
which shall thereafter be deemed to be "outstanding" only for the purposes of
clause (vi) below and the other Sections of the Indenture referred to in (1)
through (4) of this clause (iii) below, and to have satisfied all its other
obligations under such Secured Notes and the Indenture (and the Trustee, on
demand of and at the expense of Delta, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (1) the rights of Holders of
such outstanding Secured Notes to receive, solely from the trust fund described
in clause (vi) below, payments in respect of the principal of, premium, if any,
and interest on such Secured Notes when such payments are due, (2) Delta's
obligations with respect to the Secured Notes under Article Two and Section 4.02
of the Indenture, (3) the rights, powers, trust, duties and immunities of the
Trustee, and Delta's obligations in connection therewith and (4) clauses (ii)
through (viii) of this section. Subject to compliance with clauses (ii) through
(viii) of this section, Delta may exercise its option under this paragraph
notwithstanding the prior exercise of its option hereof.
(iv) Covenant Defeasance.
Upon Delta's exercise under clause (ii) above of the option applicable
to this paragraph, Delta shall, subject to the satisfaction of the conditions
set forth in clause (v) below, be released from its obligations under the
covenants contained in Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14,
4.15, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24, 4.25, 4.26, 4.27 and
Article Five of the Indenture with respect to the outstanding Secured Notes on
and after the date the conditions set forth below are satisfied (hereinafter,
"Covenant Defeasance"), and the Secured Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Secured Notes shall not be deemed
outstanding for accounting purposes). For this purpose, such Covenant Defeasance
means that, with respect to the outstanding Secured Notes, Delta may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under Section 6.01 of the Indenture, but, except as specified above,
the remainder of this Indenture and such Secured Notes shall be unaffected
thereby. In addition, upon Delta's exercise under clause (ii) above of the
option applicable to this clause (iv), subject to the satisfaction of the
conditions set forth in clause (v) below, Sections 6.01(f) and 6.01(g) of the
Indenture shall not constitute Events of Default.
(v) Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
clause (iii) or (iv) above to the outstanding Secured Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Delta must irrevocably deposit with the Trustee or
Paying Agent, in trust, for the benefit of the Holders, U.S. Legal
Tender, U.S. Government Obligations, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Secured Notes on
the stated date for payment thereof or on the applicable Redemption
Date, as the case may be, of such principal or installment of
principal of, premium, if any, or interest on the Secured Notes;
(2) in the case of an election under clause (iii) above,
Delta shall have delivered to the Trustee an Opinion of Counsel who
shall be a nationally-recognized tax counsel reasonably acceptable to
the Trustee confirming that (A) Delta has received from, or there has
been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
Secured Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of an election under clause (iv) above,
Delta shall have delivered to the Trustee an Opinion of Counsel who
shall be a nationally-recognized tax counsel reasonably acceptable to
the Trustee confirming that the Holders of the Secured Notes will not
recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(4) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the incurrence of Indebtedness all or
a portion of the proceeds of which will be used to defease the Secured
Notes pursuant to this Article Eight concurrently with such
incurrence) or insofar as Sections 6.01(h) of the Indenture hereof are
concerned, at any time in the period ending on the 91st day after the
date of such deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a Default under,
this Indenture or a default under any other material agreement or
instrument to which Delta or any of its Subsidiaries is a party or by
which Delta or any of its Subsidiaries is bound;
(6) Delta shall have delivered to the Trustee an Opinion of
Counsel who shall be a nationally-recognized bankruptcy counsel to the
effect that after the 91st day following the deposit, the trust funds
will not be subject to avoidance under Section 547 of the Bankruptcy
Code, shall not be property of the estate under Section 541 of the
Bankruptcy Code and shall not be subject to avoidance under any
Bankruptcy Law or any proceeding applicable to Delta or to any
Subsidiary Guarantor;
(7) Delta shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by Delta with the
intent of preferring the Holders over any other creditors of Delta or
with the intent of defeating, hindering, delaying or defrauding any
other creditors of Delta; and
(8) Delta shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for or relating to the Legal Defeasance
or the Covenant Defeasance have been complied with.
(vi) Deposited U.S. Legal Tender and U.S. Government Obligations to
be Held in Trust; Other Miscellaneous Provisions.
(1) Subject to clause (vii) below, all U.S. Legal Tender and
U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for
purposes of this clause (vi), the "Trustee") pursuant to clause (v)
above in respect of the outstanding Secured Notes shall be segregated,
held in trust and applied by the Trustee, in accordance with the
provisions of such Secured Notes and this Indenture, to the payment,
either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of such Secured Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and
interest.
(2) Delta shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Legal
Tender or U.S. Government Obligations deposited pursuant to clause (v)
above or the principal and interest received in respect thereof other
than any such tax, fee or other charge which by law is for the account
of the Holders of the outstanding Secured Notes.
(3) Anything in clauses (ii) through (vii) of this section
to the contrary notwithstanding, the Trustee shall deliver or pay to
Delta from time to time upon Delta's request any U.S. Legal Tender or
U.S. Government Obligations held by it as provided in clause (v) above
which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under
clause (v)(1) above), are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance in accordance with clause (v) above.
(vii) Repayment to Delta
Any U.S. Legal Tender or U.S. Government Obligations deposited with
the Trustee or any Paying Agent, in trust for the payment of the principal of,
premium, if any, or interest on any Secured Note and remaining unclaimed for two
years after such principal, and premium, if any, or interest has become due and
payable shall be paid to Delta on its request or shall be discharged from such
trust; and the Holder of such Secured Note shall thereafter, as an unsecured
general creditor, look only to Delta for payment thereof, and all liability of
the Trustee or such Paying Agent with respect to such trust money, and all
liability of Delta as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of Delta cause to be published once, in The New
York Times and The Wall Street Journal (national edition), notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to Delta.
(viii) Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with clause (v)(1) or
(vi)(1) above, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then Delta's obligations under the Indenture and the Secured
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to clause (v)(1) or (vi)(1) above until such time as the Trustee or Paying Agent
is permitted to apply all such U.S. Legal Tender and U.S. Government Obligations
in accordance with clause (v)(1) or (vi)(1) above hereof, as the case may be;
provided, however, that, if Delta makes any payment of principal of, premium, if
any, or interest on any Secured Note following the reinstatement of its
obligations, Delta shall be subrogated to the rights of the Holders of such
Secured Notes to receive such payment from the U.S. Legal Tender and U.S.
Government Obligations held by the Trustee or Paying Agent.
E. EVIDENCE OF COMPLIANCE WITH CONDITIONS AND COVENANTS
(i) Delta shall deliver to the Trustee, within 90 days after the end
of each fiscal year of Delta (which ends on December 31 of each year),
commencing December 31, 2000, an Officers' Certificate stating that a review of
the activities of Delta and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether Delta and its Subsidiaries have kept, observed, performed
and fulfilled their obligations under the Indenture, and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge Delta and each of its Subsidiaries has kept, observed, performed and
fulfilled each and every covenant contained in the Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he may have knowledge
and what action Delta is taking or proposes to take with respect thereto) and
that, to the best of his knowledge, no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Secured Notes are prohibited or if such event has
occurred, a description of the event and what action Delta is taking or proposes
to take with respect thereto.
The information set forth in the section of the Offering Circular
captioned "Description of Secured Notes" is incorporated herein by reference in
response to this item. A copy of the Offering Circular is attached hereto as
Exhibit T3E(1).
9. OTHER OBLIGORS
Give the name and complete mailing address of any person, other than
the Applicant, who is an obligor upon the indenture securities.
The full performance of the Secured Notes and the indenture to be
qualified hereunder by the Applicant will be jointly and severally guaranteed by
the entities set forth below (collectively, the "Subsidiary Guarantors"), each
of which is a wholly owned direct or indirect operating subsidiary of the
Applicant. The complete mailing address of the Subsidiary Guarantors is c/o
Delta Financial Corporation, 1000 Woodbury Road, Woodbury, New York 11797.
Delta Funding Corporation
DF Special Holdings Corporation
Fidelity Mortgage Inc.
DFC Financial Corporation
DFC Financial of Canada Limited
DFC Funding of Canada Limited
Continental Property Management Corp.
Delta Funding Residual Holding Trust 2000-1
Delta Funding Residual Holding Trust 2000-2
CONTENTS OF APPLICATION FOR QUALIFICATION. This application for qualification
comprises:
(a) Pages numbered 1 to 18 consecutively.
(b) The statement of eligibility and qualification on Form T-1 of U.S.
Bank Trust National Association, as trustee under the indenture to be qualified.
(c) The following exhibits in addition to those filed as part of the
statement of eligibility and qualification of such trustee:
Exhibit T3A - Certificate of Incorporation of Delta. (1)
Exhibit T3B - Bylaws of Delta. (2)
Exhibit T3C - A copy of the indenture to be qualified.
Exhibit T3D - Not applicable.
Exhibit T3E(1) - Offering Circular. (3)
Exhibit T3E(2) - Letter of Transmittal accompanying the Offering
Circular. (3)
Exhibit T3E(3) - Letter to Clients. (3)
Exhibit T3E(4) - Letter to Broker-Dealers. (3)
Exhibit T3E(5) - Notice of Guaranteed Delivery. (3)
Exhibit T3E(6) - Guidelines for Certification of Taxpayer
Identification Number on substitute Form W-9. (3)
Exhibit T3F - Cross-reference sheet (included as part of Exhibit T3C).
Exhibit 99 - Statement of Eligibility on Form T-1
-------------------------------------
(1) Incorporated by reference to Delta's Registration Statement on Form S-1
(No. 333-11289) filed with the Commission on October 9, 1996.
(2) Incorporated by reference from Delta's Annual Report on Form 10-K for
the year ended December 31, 1998 (No. 1-12109) filed with the
Commission on March 31, 1999.
(3) To be filed by amendment.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, Delta Financial Corporation, a corporation organized and existing
under the laws of State of Delaware, has duly caused this application to be
signed on its behalf by the undersigned, thereunto duly authorized, and its seal
to be hereunto affixed and attested, all in the City of Woodbury, and State of
New York on the 19th day of October, 2000.
(SEAL)
DELTA FINANCIAL CORPORATION
By: /s/ Hugh Miller
----------------------------------
Hugh Miller
President and
Chief Executive Officer
By: /s/ Richard Blass
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Richard Blass
Executive Vice President and
Chief Financial Officer
