Exhibit 10.2

FIRST AMENDMENT

FIRST AMENDMENT, dated as of October 15, 2007 (this “Amendment”), to the CREDIT
AGREEMENT, dated as of April 26, 2007 (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), among ACA CAPITAL HOLDINGS,
INC., a Delaware corporation (the “Borrower”), the several banks and other
financial institutions or entities from time to time parties thereto (the
“Lenders”), and JPMORGAN CHASE BANK, N.A., as administrative agent for the
Lenders (in such capacity, the “Administrative Agent”).

W I T N E S S E T H :

WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to
the Credit Agreement; and

WHEREAS, the Borrower has requested that the Administrative Agent and Lenders
agree to amend certain provisions of the Credit Agreement on the terms set forth
herein, and the Lenders are willing to agree to such amendments;

NOW THEREFORE, in consideration of the premises and mutual covenants contained
herein and in the Credit Agreement, the parties hereby agree as follows:

 

1.                                       DEFINED TERMS.  UNLESS OTHERWISE
DEFINED HEREIN, CAPITALIZED TERMS THAT ARE DEFINED IN THE CREDIT AGREEMENT ARE
USED HEREIN AS DEFINED THEREIN.

2.                                       AMENDMENTS TO THE CREDIT AGREEMENT. 
EFFECTIVE ON AND AS OF THE FIRST AMENDMENT EFFECTIVE DATE (AS DEFINED IN SECTION
3 BELOW), THE CREDIT AGREEMENT IS HEREBY AMENDED AS FOLLOWS:

(A)                                  AMENDMENTS TO SECTION 1.01 OF THE CREDIT
AGREEMENT.

(I)    THE DEFINITION OF “AVAILABILITY PERIOD” IS HEREBY AMENDED BY ADDING THE
FOLLOWING PROVISO AT THE END OF SAID DEFINITION:

“; provided that the Availability Period shall not be in effect during the First
Amendment Suspension Period”

 

(II)   THE FOLLOWING DEFINITIONS OF “FIRST AMENDMENT EFFECTIVE DATE” AND “FIRST
AMENDMENT SUSPENSION PERIOD” SHALL BE ADDED TO SECTION 1.01 FOLLOWING THE
DEFINITION OF “FINANCIAL OFFICER”:

“First Amendment Effective Date” has the meaning set forth in the First
Amendment, dated as of October 15, 2007, to this Agreement.

 

“First Amendment Suspension Period” means the period from the First Amendment
Effective Date to the first day thereafter on which the Net Worth of the
Borrower is at least $500,000,000 and the Borrower has delivered to the
Administrative Agent a certificate in reasonable detail evidencing such Net
Worth.”

 

 

--------------------------------------------------------------------------------

 

 

(B)           AMENDMENT TO SECTION 2.01 OF THE CREDIT AGREEMENT.  SECTION 2.01
OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY ADDING THE FOLLOWING TO THE END OF
THE FIRST SENTENCE:

“or (c) at any time when the Net Worth of the Borrower is less than
$600,000,000, the sum of the total Revolving Credit Exposures plus the aggregate
principal amount of outstanding Competitive Loans exceeding $75,000,000”

 

(C)           AMENDMENT TO SECTION 2.05 OF THE CREDIT AGREEMENT.  SECTION
2.05(A)(I) OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY DELETING “$20,000,000”
AND SUBSTITUTING “$0” THEREFOR.

(D)           AMENDMENT TO SECTION 2.11 OF THE CREDIT AGREEMENT.  SECTION
2.11(A) OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY ADDING THE FOLLOWING
SENTENCE AT THE END OF SAID SECTION:

“In the event that, at any time after the end of the First Amendment Suspension
Period when the sum of the total Revolving Credit Exposures plus the aggregate
principal amount of the outstanding Competitive Loans exceeds $75,000,000, the
Net Worth of the Borrower is less than $600,000,000, the Borrower shall promptly
make a prepayment of the Revolving Loans (and, to the extent necessary, cash
collateralize the total LC Exposure in a manner reasonably satisfactory to the
Administrative Agent) as necessary to reduce such sum to not more than
$75,000,000.”

 

(E)           AMENDMENT TO SECTION 5.09 OF THE CREDIT AGREEMENT.  SECTION 5.09
OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY DELETING “A-” IN THE FIRST SENTENCE
AND REPLACING IT WITH “A”.  FOR THE AVOIDANCE OF DOUBT, THE FIRST SENTENCE OF
SECTION 5.09 SHALL READ:

                                “THE BORROWER WILL CAUSE ACA FINANCIAL GUARANTY
CORPORATION TO MAINTAIN A MINIMUM FINANCIAL STRENGTH RATING FROM S&P OF A OR
BETTER.”

(F)            AMENDMENT TO SECTION 6.01 OF THE CREDIT AGREEMENT.

(I)    SECTION 6.01(E) IS HEREBY AMENDED BY ADDING THE FOLLOWING PROVISO AT THE
END OF SAID SECTION:

“; provided that the maximum aggregate principal amount of all such Indebtedness
of the type referred to in clause (ii) of such definition (other than (x)
Indebtedness issued in connection with the warehousing of assets for
collateralized debt obligation transactions structured by and managed by any
Subsidiary in the ordinary course of business and (y) the Indebtedness referred
to in items 6 and 7 of Schedule 6.01) that may be covered by insurance policies
in the nature of financial guarantees or by financial guarantees by Regulated
Insurance Companies shall not at any time outstanding exceed $100,000,000 minus
the principal amount then outstanding of the Indebtedness referred to in item 5
of Schedule 6.01”

 

(II)   SECTION 6.01(L) IS HEREBY AMENDED BY ADDING THE FOLLOWING PARENTHETICAL
AT THE END OF SAID SECTION:

 

2

--------------------------------------------------------------------------------

 

“(it being understood that Indebtedness of the Borrower or any Subsidiary is not
third-party Indebtedness)”

 

(III)          AMENDMENT TO SECTION 6.04 OF THE CREDIT AGREEMENT.  SECTION 6.04
OF THE CREDIT AGREEMENT IS HEREBY AMENDED BY DELETING CLAUSE (B) AT THE END OF
SAID SECTION AND SUBSTITUTING THE FOLLOWING THEREFOR:

                                “(B) $15,000,000 (OR, IN THE CASE OF 2007,
$20,000,000, BUT ONLY $5,000,000 MAY BE UTILIZED AFTER THE FIRST AMENDMENT
EFFECTIVE DATE) FOR SUCH FISCAL YEAR, PROVIDED THAT AFTER THE 2007 FISCAL YEAR,
THE AMOUNT IN THIS CLAUSE (B) MAY NOT BE UTILIZED UNTIL AFTER THE END OF THE
FIRST AMENDMENT SUSPENSION PERIOD”

(H)           AMENDMENT TO SECTION 6.06 OF THE CREDIT AGREEMENT.  SECTION
6.06(A) OF THE CREDIT AGREEMENT IS HEREBY AMENDED TO READ AS FOLLOWS:

“The Borrower will not permit its Net Worth at any time after the First
Amendment Suspension Period to be less than the sum of (i) $500,000,000, (ii)
50% of cumulative Consolidated Net Income for each fiscal quarter of the
Borrower (beginning with the first full fiscal quarter commencing on or after
the First Amendment Suspension Period) for which Consolidated Net Income is
positive, and (iii) 50% of the Net Cash Proceeds of any offering by the Borrower
of common equity consummated after the end of the First Amendment Suspension
Period.”

 

3

--------------------------------------------------------------------------------

 

3.                                       WAIVER.  THE LENDER PARTIES HERETO
HEREBY WAIVE ANY DEFAULT OR EVENT OF DEFAULT THAT MAY HAVE BEEN IN EFFECT AT ANY
TIME DURING THE PERIOD FROM JULY 1, 2007 TO THE FIRST AMENDMENT EFFECTIVE DATE
IF SUCH DEFAULT OF EVENT OF DEFAULT WOULD NOT HAVE OCCURRED HAD THE AMENDMENT
BEEN IN EFFECT AS OF JULY 1, 2007.

4.                                       EFFECTIVENESS.  THE AMENDMENTS SET
FORTH HEREIN SHALL BE EFFECTIVE ON AND AS OF THE DATE (THE “FIRST AMENDMENT
EFFECTIVE DATE”) ON WHICH THIS AMENDMENT SHALL HAVE BEEN EXECUTED AND DELIVERED
BY THE BORROWER AND THE REQUIRED LENDERS.  UPON THIS AMENDMENT BECOMING
EFFECTIVE, THE BORROWER AGREES TO PAY TO THE ADMINISTRATIVE AGENT, FOR THE
ACCOUNT OF EACH LENDER THAT HAS EXECUTED AND DELIVERED THIS AMENDMENT BY 5:00
P.M. (NEW YORK CITY TIME) ON OCTOBER 15, 2007, AN AMENDMENT FEE IN AN AMOUNT
EQUAL TO 5 BASIS POINTS OF SUCH LENDER’S COMMITMENT.

5.                                       CONTINUING EFFECT OF CREDIT AGREEMENT. 
THIS AMENDMENT SHALL NOT BE CONSTRUED AS AN AMENDMENT OR WAIVER TO ANY FURTHER
OR FUTURE ACTION ON THE PART OF THE BORROWER THAT WOULD REQUIRE AN AMENDMENT OR
WAIVER OF THE ADMINISTRATIVE AGENT AND/OR THE LENDERS.  EXCEPT AS AMENDED OR
WAIVED HEREBY, THE PROVISIONS OF THE CREDIT AGREEMENT ARE AND SHALL REMAIN IN
FULL FORCE AND EFFECT.

6.                                       COUNTERPARTS.  THIS AMENDMENT MAY BE
EXECUTED IN COUNTERPARTS (INCLUDING COUNTERPARTS BY FACSIMILE), AND ALL OF THE
SAID COUNTERPARTS TAKEN TOGETHER SHALL BE DEEMED TO CONSTITUTE ONE AND THE SAME
INSTRUMENT.

7.                                       GOVERNING LAW.  THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
OF THE STATE OF NEW YORK.

8.                                       EXPENSES.  THE BORROWER AGREES TO PAY
OR REIMBURSE THE ADMINISTRATIVE AGENT FOR ALL OF ITS REASONABLE OUT-OF-POCKET
COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE PREPARATION, NEGOTIATION AND
EXECUTION OF THIS AMENDMENT, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES
AND DISBURSEMENTS OF COUNSEL TO THE ADMINISTRATIVE AGENT.

*   *   *   *   *

 

4

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.

 

 

ACA CAPITAL HOLDINGS, INC

 

 

 

 

By:

/s/ Edward U. Gilpin

 

 

Name: Edward U. Gilpin

 

 

Title: Chief Financial Officer

 

 

 

 

 

 

 

JPMORGAN CHASE BANK, N.A., as Administrative Agent

 

 

 

 

By

/s/ Erin O’Rourke

 

 

Name: Erin O’Rourke

 

 

Title: Executive Director

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

Credit Suisse, Cayman Islands Branch

 

 

 

 

 

 

 

By:

/s/ Jay Chall

 

 

Name: Jay Chall

 

 

Title: Director

 

 

 

 

 

 

 

 

 

 

By:

/s/ Alain Schmid

 

 

Name: Alain Schmid

 

 

Title: Assistant Vice President

 

 

 

--------------------------------------------------------------------------------

 

 

,

CHANG HWA COMMERCIAL BANK, LTD.

 

NEW YORK BRANCH

 

 

 

 

 

 

By:

/s/ Jim C.Y. Chen

 

 

Name: Jim C.Y. Chen

 

 

Title: VP and General Manager

 

 

 

--------------------------------------------------------------------------------

 

 

 

THE BANK OF NOVA SCOTIA

 

 

 

 

 

 

 

By:

/s/ David Mahmood

 

 

Name: David Mahmood

 

 

Title: Director

 

 

 

--------------------------------------------------------------------------------

 

 

 

Bear Stearns Corporate Lending, Inc.

 

 

 

 

 

 

 

By:

/s/ Bryan J. Carter

 

 

Name: Bryan J. Carter

 

 

Title: Authorized Signatory

 

 

 

--------------------------------------------------------------------------------

 

 

 

ABN AMRO Bank NV

 

 

 

 

 

 

By:

/s/ Bryan Manning

 

 

Name: Bryan Manning

 

 

Title: Senior Vice President

 

 

 

 

 

 

 

By:

/s/ Raymond Walsh

 

 

Name: Raymond Walsh

 

 

Title: Vice President

 

 

 

 

 

 

--------------------------------------------------------------------------------

 

 

 

Greenwich Capital Markets, Inc., as agent
for The Royal Bank of Scotland plc

 

 

 

 

 

 

 

 

 

By:

/s/ George Urban

 

 

Name: George Urban

 

 

Title: Vice President

 

 

 

--------------------------------------------------------------------------------

 

 

 

National Australia Bank Limited
ABN 12 00 044 937

 

 

 

 

 

 

 

 

 

By:

/s/ Clinton M. Johnson

 

 

Name: Clinton M. Johnson

 

 

Title: Managing Director

 

 

 

--------------------------------------------------------------------------------