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:


 


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“(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.


*   *  
*   *   *


 


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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