EXHIBIT 10.42

AMENDMENT NO. 1

AMENDMENT AGREEMENT dated as of July 28, 2006 between AMBAC FINANCIAL GROUP,
INC., a Delaware corporation (“Ambac Financial”), AMBAC ASSURANCE CORPORATION, a
Wisconsin stock insurance corporation (“Ambac Assurance” and, together with
Ambac Financial, the “Borrowers”), certain banks, financial institutions and
other institutional lenders (the “Lenders”) and CITIBANK, N.A. (“Citibank”), as
administrative agent for the Lenders (in such capacity, the “Administrative
Agent”).

WHEREAS, the Borrowers, the Lenders and Citibank are parties to a Credit
Agreement dated as of July 28, 2005,(the “Credit Agreement”, terms defined
therein to have the same meanings when used herein), providing, subject to the
terms and conditions thereof, for the making of advances by the Lenders to the
Borrowers in an aggregate principal amount up to but not exceeding $400,000,000
at any one time outstanding; and

WHEREAS, the parties wish to extend the Commitment Termination Date by one year
as hereinafter provided and to amend the Minimum Net Assets Covenant as herein
provided;

NOW, THEREFORE, in consideration of the foregoing, the parties hereby agree as
follows, effective as of the date hereof:

Section 1. Amendments. The Credit Agreement is amended as follows:

1.1. General. References in the Credit Agreement to “this Agreement” (and
indirect references such as “hereunder”, “hereby”, “herein” and “hereof”) shall
be deemed to be references to the Credit Agreement as amended hereby.

1.2. Commitment Termination Date. Section 1.01 of the Credit Agreement is
amended by changing the definition of “Commitment Termination Date” to read in
its entirety as follows:

“Commitment Termination Date” means the earlier of (a) July 28, 2011, and
(b) the date of termination in whole of the Commitments pursuant to Section 2.04
or 6.01; provided, that if such day is not a Business Day, the Commitment
Termination Date shall be the immediately preceding Business Day.

1.3. Financial Covenants. Section 5.03(a) of the Credit Agreement is amended by
changing the amount of “$2,760,000,000” to read “$2,800,000,000” and by changing
the words “ending after the date of this Agreement” in clause (i) to read
“ending after 2005.”

 

Amendment No. 1

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Section 2. Representations and Warranties. Each Borrower represents and warrants
to the Lenders as follows (it being understood that it shall be deemed to be an
Event of Default under the Credit Agreement if any of the following
representations and warranties shall prove to have been incorrect in any
material respect when made):

(a) the representations and warranties contained in Section 4.01 of the Credit
Agreement are correct in all material respects on the date hereof as if made on
and as of the date hereof (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such specific
date) and as if each reference in said Section 4.01 to “this Agreement” included
reference to this Amendment No. 1 and the Credit Agreement as amended hereby;
and

(b) no event has occurred and is continuing that constitutes a Default or an
Event of Default.

Section 3. Miscellaneous. Except as herein provided, the Credit Agreement shall
remain unchanged and in full force and effect. This Amendment may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same amendatory instrument and any of the parties hereto may execute this
Amendment by signing any such counterpart. This Amendment shall be governed by,
and construed in accordance with, the law of the State of New York. The
Borrowers agree to reimburse the Administrative Agent on demand for all its
costs and expenses (including, without limitation, legal expenses) incurred in
connection with the preparation, execution and delivery of this Amendment.

 

Amendment No. 1

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to be
duly executed and delivered as of the day and year first above written.

 

AMBAC FINANCIAL GROUP, INC. By  

/s/ David Trick

Name:   David Trick Title:   First Vice President and Treasurer AMBAC ASSURANCE
CORPORATION By  

/s/ David Trick

Name:   David Trick Title:   First Vice President and Treasurer CITIBANK, N.A.,
as Administrative Agent By  

/s/ David A. Dodge

Name:   David A. Dodge Title:   Managing Director

 

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LENDERS CITIBANK, N.A. By  

/s/ David A. Dodge

Name:   David A. Dodge Title:   Managing Director

 

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THE BANK OF NEW YORK By  

/s/ Richard G. Shaw

Name:   Richard G. Shaw Title:   Vice President

 

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KEYBANK, NATIONAL ASSOCIATION By  

/s/ Mary K. Young

Name:   Mary K. Young Title:   Senior Vice President

 

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HSBC BANK USA, N.A. By  

/s/ Lawrence Karp

Name:   Lawrence Karp Title:   Senior Vice President

 

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MERRILL LYNCH BANK USA By  

/s/ Louis Alder

Name:   Louis Alder Title:   Director

 

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CAJA MADRID By  

/s/ Santiago Allue

Name:   Santiago Allue Title:   Director   Industrialized Markets By  

/s/ Miguel de las Barcenas

Name:   Miguel de las Barcenas Title:   Head of Iberian Peninsula and Portugal

 

Amendment No. 1

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WESTLB AG, NEW YORK BRANCH By  

/s/ Lillian Tung Lum

Name:   Lillian Tung Lum Title:   Executive Director By  

/s/ John H. Moorhead

Name:   John H. Moorhead Title:   Director

 

Amendment No. 1