exv10w3



 






Exhibit 10.3




EXECUTION COPY




FIRST AMENDMENT TO PARTICIPATION AGREEMENT




     THIS FIRST AMENDMENT TO PARTICIPATION AGREEMENT (this
“Amendment”), dated as of May 13, 2002, is entered into by and
among:




     (1) ELECTRONIC ARTS REDWOOD, INC., a Delaware corporation (the
“Lessee”) ;




     (2) ELECTRONIC ARTS, INC., a Delaware corporation (the
“Guarantor”); 




     (3) FLATIRONS FUNDING, LIMITED PARTNERSHIP, a Delaware limited
partnership (the “Lessor”);




     (4) VICTORY RECEIVABLES CORPORATION, a Delaware corporation,
(the “Note Purchaser”);




     (5) THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as the
agent for the Note Purchaser and the administrative agent for the
Liquidity Banks (in such capacities, together with its permitted
successors and assigns, the “Conduit Agent” );




     (6) Each of the financial institutions denoted as
“Liquidity Banks” which are parties to the Participation Agreement
(referred to in Recital A below) and the Liquidity Documentation from
time to time (referred to in Recital B below) (such financial
institutions to be referred to collectively as the “Liquidity
Banks”);




     (7) KEYBANK NATIONAL ASSOCIATION, as the Tranche B Bank under
the Participation Agreement (in such capacity, the “Tranche B
Bank”);




     (8) KEYBANK NATIONAL ASSOCIATION, as the agent for the Lessor,
the Note Purchaser, the Conduit Agent, the Liquidity Banks and the
Tranche B Bank (in such capacity, the “Agent”);




     (9) SELCO SERVICE CORPORATION, and SELCO REDWOOD, LLC (the
“New Partners”); and




     (10) THE BANK OF NOVA SCOTIA, as a new liquidity bank
(“Scotia Bank”) and as documentation agent (in such capacity,
the “Documentation Agent”).



RECITALS




     A. The Lessee, the Guarantor, the Lessor, SELCO Service
Corporation, SELCO Redwood, LLC, the Note Purchaser, the Conduit Agent,
the Liquidity Banks, the Tranche B



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Bank and the Agent are parties to that certain Participation
Agreement dated as of July 16, 2001 (the “Participation
Agreement”). 




     B. In connection with the Participation Agreement, (i) the Lessor
executed that certain Promissory Note dated July 16, 2001, payable to
the order of Auer & Co. f/b/o the Note Purchaser (the “Note”),
(ii) the Lessee, the Guarantor, the Lessor, SELCO Service Corporation,
SELCO Redwood, LLC, the Note Purchaser and the Conduit Agent executed
that certain Note Purchase Agreement dated as of July 16, 2001 (the
“Note Purchase Agreement”), (iii) the Note Purchaser, the
Liquidity Banks, Bankers Trust Company, and Conduit Agent executed that
Liquidity Agreement dated as of July 16, 2001 (the “Liquidity
Agreement”), and (iv) Bankers Trust Company, the Note Purchaser and
the Liquidity Banks executed that certain Asset Purchase Agreement dated
as of July 16,2001 (the “Asset Purchase Agreement”) (the
Liquidity Agreement and the Asset Purchase Agreement, collectively, the
“Liquidity Documentation”).



     C. Scotia Bank desires to become a Liquidity Bank and the
Documentation Agent under the Participation Agreement, the Liquidity
Documentation and the other applicable Operative Documents.



     D. The Lessor desires to prepay in full to the Tranche B Bank the
Tranche B Loan funded pursuant to the Participation Agreement and the
other Operative Documents, and all of the parties hereto are willing to
consent to such prepayment of the Tranche B Loan by the Lessor to the
Tranche B Bank.



     E. KeyBank National Association, as a Liquidity Bank, desires to
reduce its Commitment under the Liquidity Documentation and to fund a
new “Residual Risk Tranche” among the Liquidity Banks.



     F. To effectuate such matters, the parties hereto now wish to amend
the Participation Agreement, the Liquidity Documentation, and certain other
Operative Documents.



     G. The parties hereto are willing to so amend the Participation
Agreement, the Liquidity Documentation and certain other Operative
Documents upon the terms and subject to the conditions set forth below.



AGREEMENT




     NOW, THEREFORE, in consideration of the above recitals and for
other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Lessee, the Guarantor, the Lessor, the Note
Purchaser, the Conduit Agent, the Liquidity Banks, the Tranche B Bank, the
Agent, the New Partners, Scotia Bank and the Documentation Agent hereby
agree as follows:



     1. Definitions. Interpretation. All capitalized terms defined
above and elsewhere in this Amendment shall be used herein as so defined.
Unless otherwise defined herein, all other capitalized terms used herein
shall have the respective meanings given to those terms in the
Participation Agreement, as amended by this Amendment. The rules of
construction set forth in Appendix A of the Participation
Agreement shall, to the extent not inconsistent with the terms of this
Amendment, apply to this Amendment and are hereby incorporated by
reference.



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     2. Amendment to Participation Agreement. Subject to
the satisfaction of the conditions set forth in Paragraph 7
below, the Participation Agreement is hereby amended as follows:




     (a) Section 3.1(b) is hereby amended to read in its
entirety as follows:




     (b) The maximum aggregate principal amount outstanding
under the Notes at any time shall not exceed $132,279,411.18
(such amount, the “Aggregate Note Purchase
Commitment”); provided, however, in the event that
additional allocated portions of the “Commitments” (as defined
in the Liquidity Agreement) of the Liquidity Banks are obtained
from time to time in accordance with Section 3.7
hereof, the Aggregate Note Purchase Commitment shall increase
to an amount calculated by dividing the then aggregate
Liquidity Bank “Commitments” by 1.02 (one and two
one-hundredths); and, provided, further, that
in no event shall the Aggregate Note Purchase Commitment exceed
$134,925,000, which shall consist of two portions, one portion
in the amount of$123,891,514.07 (such amount, the
“Non-Residual Risk Tranche”) and the second portion in
the amount of $11,033,485.93 (such amount, the “Residual
Risk Tranche”). In the event that any such increase in the
Liquidity Bank “Commitments” are effected by the inclusion of
an additional Liquidity Bank, each such additional Liquidity
Bank must be an “Eligible Assignee” under, and comply with the
provisions with respect to assignee “Banks” and “Purchasers”
in, both the Liquidity Agreement and the Asset Purchase
Agreement, respectively. Whether or not any such increase in
the Liquidity Bank “Commitments” are effected by an increase in
the allocated portion of the “Commitments” of existing
Liquidity Banks, appropriate amendments to the schedules to the
Liquidity Documentation to reflect the changed percentages of
the Liquidity Banks shall be agreed to by the Liquidity Banks
as one of the conditions to the increase. For accounting
purposes, all funds advanced to the Lessor under the Notes
pursuant to the Note Purchase Agreement shall constitute debt.




     (b) Section 3.7 is hereby amended to read in its
entirety as follows:




     Section 3.7 Commitment of the Liquidity
Banks. Subject to the terms and conditions set forth herein
and in the other Operative Documents, (a) the Liquidity Banks
shall severally, but not jointly, make available Loans (as
defined in the Liquidity Agreement) in an aggregate principal
amount not to exceed (x) as of the Initial Funding Date,
$107,425,000 and (y) at any time during which the allocated
portion of the “Commitment” (as defined in the Liquidity
Agreement) of one or more existing Liquidity Banks shall have
been increased and/or one or additional financial institutions
shall have agreed to become a Liquidity Bank in accordance with
Section 15.5 hereof, $134,925,000 (consisting of the Non
Residual Risk Tranche and the Residual Risk Tranche),
plus all accrued discount on all related Commercial
Paper (as such amount may be adjusted pursuant to the Liquidity
Agreement) less the aggregate principal amount of
outstanding Percentage Interest purchased by the Liquidity
Banks pursuant to the Asset Purchase Agreement, and (b) each of
the Liquidity Banks shall, at the times set



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forth thereby, duly perform their respective obligations
set forth herein and under the applicable Operative Documents
to which such Person is a party.




     (c) Section 11.4 is hereby amended to read in its
entirety as follows:




     Section 11.4 Application of Funds Upon Exercise of
the Remarketing Option. If the Lessee shall have exercised
the Remarketing Option, moneys received by the Lessor (or by
the Agent on behalf of the Lessor) shall be paid to the Person
or Persons entitled thereto after being applied as follows:
first to repay, in full, the Non-Residual Risk Tranche
of the Notes (together with any other amounts payable to the
Note Purchaser or the Liquidity Banks holding such interest,
as applicable, pursuant to the Operative Documents), ratably
in accordance with their respective interests, second,
if any amounts remain, to repay, in full, the Residual Risk
Tranche of the Notes (together with any other amounts payable
to the Note Purchaser or the Liquidity Banks holding such
interest, as applicable, pursuant to the Operative Documents),
ratably in accordance with their respective interests,
third, if any amounts remain, to repay, in full, the
Tranche B Loan (together with any other amounts payable to the
Tranche B Banks pursuant to the Operative Documents), ratably
in accordance with their respective interests, fourth,
if any amounts remain, to redeem, in full, the Equity
Investment (together with any other amounts payable to the
Lessor pursuant to the Operative Documents), and
fifth, if any amounts remain, to the Lessee or any
other Person as the Lessee’s and/or such Person’s interest may
appear.




     (d) The last full paragraph of Section 15.5 is hereby amended
to read in its entirety as follows:




Notwithstanding the foregoing or any other provision to the
contrary contained in this Participation Agreement or the other
Operative Documents, the parties hereto acknowledge and agree
that the aggregate “Commitments” (as defined in the Liquidity
Agreement) of the Liquidity Banks may be increased without the
consent of the Transaction Parties (other than the Note
Purchaser) provided that (a) the Note Purchaser
agrees to such amendments as may be necessary to the Liquidity
Documents in order to allow for such increase, (b) the maximum
aggregate “Commitments” of the Liquidity Banks after giving
effect to any such increase does not exceed $134,925,000
plus all accrued discount on all related Commercial
Paper (as such amount may be adjusted pursuant to the Liquidity
Agreement) less the aggregate principal amount of
outstanding Percentage Interest purchased by the Liquidity Bank
pursuant to the Asset Purchase Agreement and (c) no allocated
portion (restricted to the dollar amount) of the “Commitment”
of any Liquidity Bank may be increased without the prior
express written consent of such Liquidity Bank.




     (e) Appendix A of the Participation Agreement is hereby
amended by adding thereto in alphabetical order the following defined
term:



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     “Documentation Agent” means The Bank of Nova
Scotia, and its permitted successors and assigns.”




     (f) Schedule I of the Participation Agreement is hereby
amended to add the following contact, address and wire account
information for Scotia Bank:


SCOTIA BANK 


Contact information for notices:


For credit related matters:


Ed Kofman

Scotia Capital

580 California Street, Suite 2100

San Francisco, CA 94104

Tel.: (415) 616-4152

Fax: (415) 397-0791


For operational, billing and administrative related matters:


Lily Hsieh

Scotiabanc Inc.

600 Peachtree Street, NE, Suite 2700

Atlanta, GA 30308

Tel.: (404) 877-1523

Fax: (404) 888-8998



Wiring Instructions:



The Bank of Nova Scotia

New York Agency

1 Liberty Plaza

New York, NY

ABA #026002532

Credit Account #0610135

BNS San Francisco -Loan Service

Reference -Victory Receivables Corp. (Electronic Arts) deal 2



     3. Repayment of Tranche B Loan and Issuance of New Promissory
Note. On the Effective Date (as defined below), the Lessee shall pay
any accrued and unpaid interest due under the Tranche B Loan to Lessor,
and Lessor shall use a portion of the proceeds from the issuance of the
New Promissory Note (as defined below) to repay to the Tranche B Bank the
Tranche B Loan in full, such that on the Effective Date, the amount of
the Tranche B Loan shall equal $-0-. Each party to this Amendment shall
evidence its acknowledgement and consent to such repayment of the Tranche
B Loan by its execution of this Amendment. The New Promissory Note shall
constitute a “Note” under the Operative Documents and the outstanding



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Principal amount of the New Promissory Note owing at any time shall
be included in the Outstanding Lease Balance as determined under the
Operative Documents.




     4. Addition of Scotia Bank as a Liquidity Bank. On or before
the Effective Date, Scotia Bank shall be added as a Liquidity Bank and as
Documentation Agent under the Participation Agreement and shall execute
this Amendment, amendments to the Liquidity Documentation and such other
necessary Operative Documents to evidence Scotia Bank’s Commitment (as
defined in the Liquidity Agreement) under the Liquidity Documentation of
Twenty Million Dollars ($20,000,000).



     5. Reduction of KeyBank’s Non-Residual Risk Tranche Commitment
as a Liquidity Bank and Acceptance of Residual Risk Tranche
Commitment. On or before the Effective Date, KeyBank, in its capacity
as a Liquidity Bank, shall execute amendments to the Liquidity
Documentation and such other necessary Operative Documents to evidence
KeyBank’s reduction of its Non-Residual Risk Tranche portion of its
Commitment under the Liquidity Documentation from $17,425,000 down to
$13,891,514.07, and its acceptance of the Residual Risk Tranche portion
of its Commitment under the Liquidity Documentation in the amount of
$11,033,485.93.



     6. Representations and Warranties. The Lessee hereby
represents and warrants to the Lessor Parties that the following are true
and correct on the date of this Amendment and that, after giving effect to
the amendments set forth in Paragraphs 2, 3, 4 and 5 above, the
following will be true and correct on the Effective Date:




     (a) The representations and warranties of the Guarantor and the
Lessee set forth in Section 7.1 of the Participation
Agreement and in the other Operative Documents are true and
correct in all material respects (except for representations and
warranties expressly made as of a specific date, which shall be true
as of such date);




     (b) No Default or Event of Default has occurred and is
continuing; and




     (c) All of the Operative Documents are in full force and effect.


(Without limiting the scope of the term “Operative Documents,” the Lessee
and the Guarantor each expressly acknowledges in making the
representations and warranties set forth in this Paragraph 6 that,
on and after the date hereof, such term includes this Amendment.)




     7. Effective Date. The amendment effected by Paragraph
2 above shall become effective on May 13, 2002 (the “Effective
Date”), subject to receipt by Note Purchaser, Agent, and the Liquidity
Banks on or prior to the Effective Date of the following, each in form and
substance reasonably satisfactory to Note Purchaser, Agent, and the
Liquidity Banks:




     (a) This Amendment duly executed by the Lessee, the Guarantor,
the Lessor, the Note Purchaser, the Conduit Agent, each of the
Liquidity Banks, the Tranche B Bank, the Agent and Scotia Bank;



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     (b) New Promissory Note made by the Lessor and payable to
the Note Purchaser in the principal amount of $132,279,411.18, in
the form attached hereto as Exhibit A (the “New
Promissory Note”);




     (c) First Amendment to Note Purchase Agreement executed by the
Note Purchaser, the Lessee, the Guarantor, the Conduit Agent, SELCO
Service Corporation, SELCO Redwood, LLC, and the Lessor, in the
form attached hereto as Exhibit B (the “First
Amendment to Note Purchase Agreement”);




     (d) Amended and Restated Liquidity Agreement executed by the
Note Purchaser, the Liquidity Banks, Bankers Trust Company, Conduit
Agent, and KeyBank National Association, as the Residual Risk
Tranche Liquidity Provider, in the form attached hereto as
Exhibit C (the “Amended Liquidity Agreement”);




     (e) Amended and Restated Asset Purchase Agreement executed by
Bankers Trust Company, the Note Purchaser, and the Liquidity Banks,
in the form attached hereto as Exhibit D (the “Amended
Asset Purchase Agreement”);




     (f) A letter in the form attached hereto as Exhibit E,
dated the Effective Date and duly executed by the Guarantor;




     (g) Payment by Lessee of all fees and expenses of Lessor’s, Note
Purchaser’s, and Agent’s counsels incurred in connection with the
preparation and negotiation of the documents identified in clauses
(a) through (f) above and the consummation of the transactions
contemplated thereby; and




     (h) Such other evidence as the Note Purchaser, the Conduit
Agent, any of the Liquidity Banks, the Tranche B Bank, and the Agent
may reasonably request to establish the accuracy and completeness of
the representations and warranties and the compliance with the terms
and conditions contained in this Amendment and the other Operative
Documents.



     8. Effect of this Amendment. On and after the Effective
Date, each reference in the Participation Agreement and the other
Operative Documents to the Participation Agreement shall mean the
Participation Agreement as amended hereby. On and after the Effective
Date, the New Promissory Note, the First Amendment to Note Purchase
Agreement, the Amended Liquidity Agreement, and the Amended Asset
Purchase Agreement shall each constitute an Operative Document. Except as
specifically amended above, (a) the Participation Agreement and the other
Operative Documents shall remain in full force and effect and are hereby
ratified and confirmed and (b) the execution, delivery and effectiveness
of this Amendment shall not, except as expressly provided herein, operate
as a waiver of any right, power, or remedy of the Lessor Parties, nor
constitute a waiver of any provision of the Participation Agreement or
any other Operative Document.



     9. Miscellaneous.





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     (a) Counterparts. This Amendment may be executed in
any number of identical counterparts, any set of which signed by all
the parties hereto shall be deemed to constitute a complete,
executed original for all purposes.




     (b) Headings. Headings in this Amendment are for
convenience of reference only and are not part of the substance
hereof.




     (c) Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of California
without reference to conflicts of law rules.




     (d) Return of Original Promissory Note. Promptly
following the Effective Date, the Note Purchaser shall return the
original Promissory Note dated July 16, 2001 made by the Lessor in
the original amount of $105,318,627.45, marked cancelled, to the
Agent.



[signature page follows]




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     IN WITNESS WHEREOF, the Lessee, the Guarantor, the Lessor, the
Note Purchaser, the Conduit Agent, the Liquidity Banks, the Tranche B
Bank, the Agent, the New Partners, Scotia Bank and the Documentation Agent
have caused this Amendment to be executed as of the day and year first
above written.



	 	 	 	 	 
	 	 	ELECTRONIC ARTS REDWOOD, INC.,

as the Lessee
	 
	 	 	 	 
	 

	 	By: 	 	/s/ Khuyen Dang
	 

	 	 	 	 
	 	 	Name:	 	Khuyen Dang
	 	 	Title:	 	Chief Financial Officer





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	 	 	ELECTRONIC ARTS, INC.,

as the Guarantor
	 
	 	 	 	 
	 

	 	By:
	 	/s/ David L. Carbone
	 

	 	 	 	 
	 

	 	Name:
	 	David L.Carbone
	 

	 	Title:
	 	Senior Vice President — Finance






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	 	 	FLATIRONS FUNDING, LIMITED

PARTNERSHIP, as the Lessor
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	SELCO REDWOOD, LLC, its General

Partner
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	SELCO Service Corporation, an

Ohio corporation doing business

in California as Ohio SELCO

Service Corporation, its sole

member
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	/s/ Donald C. Davis
	 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:
	 	Donald C. Davis
	 

	 	 	 	 	 	Title:
	 	Vice President






	 	 	 	 	 
	 	 	SELCO SERVICE CORPORATION, doing

business in California as Ohio

SELCO Service Corporation, as a New

Partner
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Donald Davis
	 

	 	 	 	 
	 	 	Name:	 	Donald Davis
	 	 	Title:	 	Vice President
	 
	 	 	 	 
	 	 	SELCO REDWOOD LLC, as a New

Partner
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Donald David
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	Title:	 	 






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	 	 	VICTORY RECEIVABLES CORPORATION,

as the Note Purchaser
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Karen A. Granquist
	 

	 	 	 	 
	 

	 	Name:
	 	Karen A. Granquist
	 

	 	Title:
	 	Secretary






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	 	 	KEYBANK NATIONAL ASSOCIATION,

as the Agent
	 
	 

	 	By:
	 	/s/ Julien Michaels
	 

	 	 	 	 
	 

	 	Name:
	 	Julien Michaels
	 

	 	Title:
	 	Vice President






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	 	 	THE BANK OF TOKYO-MITSUBISHI, LTD.,

NEW YORK BRANCH, as the Conduit Agent
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Koji Baba
	 

	 	 	 	 
	 	 	Name:	 	Koji Baba
	 	 	Title:	 	Senior Vice President & Group Head






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	 	 	KEYBANK NATIONAL ASSOCIATION,

as a Liquidity Bank
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Julien Michaels
	 

	 	 	 	 
	 

	 	Name:
	 	Julien Michaels
	 

	 	Title:
	 	Vice President






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	 	 	FLEET NATIONAL BANK,

as a Liquidity Bank
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Greg Roux
	 

	 	 	 	 
	 

	 	Name:
	 	Greg Roux
	 

	 	Title:
	 	Director






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	 	 	WELLS FARGO BANK, NATIONAL

ASSOCIATION,

as a Liquidity Bank
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Jillian Richardson
	 

	 	 	 	 
	 

	 	Name:
	 	Jillian Richardson
	 

	 	Title:
	 	Vice President






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	 	 	JPMORGAN CHASE BANK.

as a Liquidity Bank
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Anne Biancardi
	 

	 	 	 	 
	 

	 	Name:
	 	Anne Biancardi
	 

	 	Title:
	 	Vice President







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	 	 	U.S. BANK NATIONAL ASSOCIATION,

as a Liquidity Bank
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Daniel W. Stevens
	 

	 	 	 	 
	 

	 	Name:
	 	Daniel W. Stevens
	 

	 	Title:
	 	Vice President






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	 	 	BNP PARIBAS,

as a Liquidity Bank	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Robert Mimaki
	 	/s/ Richard Ong Pho
	 	 	 	 	 
	 

	 	Name:
	 	Robert Mimaki
	 	Richard Ong Pho
	 

	 	Title:
	 	Vice President
	 	Associate






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	 	 	KEYBANK NATIONAL ASSOCIATION,

as a Tranche B Bank
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Julien Michaels
	 

	 	 	 	 
	 	 	Name:	 	Julien Michaels
	 	 	Title:	 	Vice President






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	 	 	THE BANK OF NOVA SCOTIA,

as a Liquidity Bank and as Documentation Agent
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Ed Kofman
	 

	 	 	 	 
	 	 	Name:	 	Ed Kofman
	 	 	Title:	 	Director





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EXHIBIT A




NEW PROMISORY NOTE



[See Attached]




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