AMENDMENT NO. 2 TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

Exhibit 4.3.2

AMENDMENT NO. 2

TO

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

This AMENDMENT NO. 2, dated as of June 9, 2006 (this “Amendment No. 2”), to the AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as of September 30, 2004 (the “Registration Rights Agreement”), is among ACA Capital Holdings, Inc., a Delaware corporation (the “Company”), and the stockholders of the Company listed on the signature pages hereto.

WHEREAS, pursuant to Section 9(d) of the Registration Rights Agreement, the Registration Rights Agreement may be amended if the amendment is approved in writing by the Company and the holders of at least a majority of the Registrable Securities;

WHEREAS, the Company and the parties hereto wish to amend the Registration Rights Agreement to, among other things, clarify the parties to the Registration Rights Agreement and the holders of Registrable Securities;

NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.             Amendment.

(a)           Section 2(b)(i)(y) of the Registration Rights Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:

“(y) third, the number of other Registrable Securities held by each of the persons listed on Schedule IV hereto (the “Other Registrable Securities”) and”

(b)           Section 9(m) of the Registration Rights Agreement is hereby amended by deleting the heading to such section and replacing it with the following:

“Joinder Agreement; Series B Preferred and Series C Preferred.”

(c)           The Registration Rights Agreement is hereby amended to add a new Section 9(n) to read as follows:

“(n)         Joinder Agreement; Common Stock.  Any person who becomes a holder of common stock of the Company may become a party to this Agreement with the consent of the Company by executing a Joinder Agreement in the form attached hereto as Exhibit C and delivering such Joinder Agreement to the Company.  Upon such execution and delivery by the holder and acceptance by the Company as indicated by its countersignature on the Joinder Agreement, Schedule IV of the Agreement shall be amended to include such holder.”

(d)           The Registration Rights Agreement is hereby amended to add a new Section 9(o) to read as follows:

“(o)         Holders of Registrable Securities.  Only those parties listed on Schedule I, Schedule II, Schedule III and Schedule IV have rights under this Agreement unless a person executes a joinder agreement in a form consistent with Exhibit B to Amendment No. 1 to this Agreement or a joinder agreement in a form consistent with Exhibit C to Amendment No. 2 to this Agreement; provided, that the Company may grant rights to other Persons as set forth in Section 1(g) above.”

(e)           The Registration Rights Agreement is hereby amended to add a new Schedule IV reflecting holders of other Registrable Securities as set forth in Section 2(b)(i)(y) in the form attached hereto.

(f)            The parties hereto confirm that the notice in the form attached hereto as Exhibit D regarding the Registration Statement representing the form of Piggyback Notice pursuant which is mailed to holders within __ days of this Amendment No. 2 is deemed to comply with the notice requirement of Section 2(a) and such notice will be deemed to have been delivered when given in accordance with the provisions of Section 9(k).

2.             Governing Law.

This Amendment No. 2 shall be governed in all respects by the laws of the State of Delaware, without reference to the conflict of laws principles thereof.

3.             Counterparts.

This Amendment No. 2 may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

2

ACA CAPITAL HOLDINGS, INC.

By:

Name: Xxxx X. Xxxxxxx

Title: General Counsel & Secretary

						Shares of Capital Stock
Stockholder						of the Company Owned
BSMB/ACA LLC
						Series B Senior Convertible Preferred—1,685,663.8305
By:		Bear Xxxxxxx Merchant Manager II, LLC,
		its Manager
			By:	JDH Management, LLC, its Manager
By:
Name:
Title:
THE XXXXXXXX GROUP, INC.
						Common—237,623.8
						Convertible Preference—273.4
By:						Senior Convertible Preferred—25.8
Name:						Series B Senior Convertible Preferred—267,565.6819
Title:
THIRD AVENUE TRUST ON BEHALF OF THE
THIRD AVENUE VALUE FUND SERIES						Common—118,811.9
						Convertible Preference—258.7
						Senior Convertible Preferred—103.4
By:						Series B Senior Convertible Preferred—133,782.8436
Name:
Title:
THIRD AVENUE TRUST ON BEHALF OF THE						Common—118,811.9
THIRD AVENUE VALUE FUND SERIES						Convertible Preference—258.7
						Senior Convertible Preferred—103.4
By:						Series B Senior Convertible Preferred—133,782.8436
Name: Xxxxx X. Xxxxx
Title: President
CHESTNUT HILL ACA, LLC
						Common—237,623.8
						Convertible Preference—163.5
By:						Senior Convertible Preferred—103.4
Name:						Series B Senior Convertible Preferred—267,565.6983
Title

3

SCHEDULE IV

Name		Number of Shares of Common Stock		Number of Shares of Convertible Preference Stock		Number of Shares of Senior Convertible Preferred Stock
Chestnut Hill ACA, LLC GCC Investments, Inc.		237,623.8		163.45234901
00 Xxxxxxx Xxxxxx Xxxxx 000 Xxxxxxxxx, XX 00000 Attention: Demos Kouvaris/Xxxx X. Xxxxxxxx
Xxxxxxxx Group, Inc. The Xxxxxxxx Group, Inc.		237,623.8		273.39936313		25.84523836
000 Xxxxxx Xxxxxx Xxxxxx Xxxx, XX 00000 Attention: Xxxxxxx Xxxxxx
Insurance Partners, L.P. Capital Z Partners, Ltd.		151,961.6
00 Xxxxxxxx Xxxxxx. Xxx Xxxx, XX 00000 Attention: Xxxx Xxxxxx
Insurance Partners Offshore (Bermuda) L.P. Capital Z Partners, Ltd.		83,751.6
00 Xxxxxxxx Xxxxxx Xxx Xxxx, XX 00000 Attention: Xxxx Xxxxxx
IP/MCLP, L.L.C. Capital Z Partners, Ltd.		1,910.6
00 Xxxxxxxx Xxxxxx Xxx Xxxx, XX 00000 Attention: Xxxx Xxxxxx
Third Avenue Trust Third Avenue Value Fund		118,811.9		258.66749877		103.38095339
000 Xxxxx Xxxxxx Xxx Xxxx, XX 00000 Attention: Xxxxx Xxxxx

Life Investors Insurance Company of America Aegon		59,405.9		43.94368178
000 Xxxx Xxxxxx Xxxxxx Xxxxxxxxxx, XX 00000 Attention: Xxxx Xxxxxx With copies to: Aegon 000 X. Xxxxxx Xxxxxx, 00xx Xxxxx Xxxxxxxxxx, XX 00000 Attention: Xxxx Xxxxx and copies to: Aegon 000 X. Xxxxxx Xxxxxx, 0xx Xxxxx Xxxxxxxxxx, XX 00000 Attention: Xxxx Xxxx
Transamerica Life Insurance Company Aegon		59,405.9		43.94368178
000 Xxxx Xxxxxx Xxxxxx Xxxxxxxxxx, XX 00000 Attention: Xxxx Xxxxxx With copies to: Aegon 000 X. Xxxxxx Xxxxxx, 00xx Xxxxx Xxxxxxxxxx, XX 00000 Attention: Xxxx Xxxxx and copies to: Aegon 000 X. Xxxxxx Xxxxxx, 0xx Xxxxx Xxxxxxxxxx, XX 00000 Attention: Xxxx Xxxx
Xxxxxxx Xxxxxxxx		79.2
000 Xxxx 00xx Xxxxxx, #00 Xxx Xxxx, XX 00000

Xxxxx Xxxxxxx		396.0
000 Xxxxx Xxx Xxxxxx, #00X Xxx Xxxx, XX 00000
Xxxxxxx Xxxxxxx		396.0
000 Xxxxx Xxx Xxxxxx, #0X Xxx Xxxx, XX 00000
Xxxxxxx Xxxxx		79.2
000 Xxxx 0xx Xxxxxx Xxxxx Xxxxxx, XX 00000-0000
Xxxxxxx Xxxxxxxxx		1,980.2
0000 Xxxxxxxxx Xxxxx Xxxx Xxxxxxxxx, XX 00000 With copies to: Xxxxxxx Xxxxxxxxx c/o Xxxxxx and Xxxxxxx Xxxxxxxxx 0000 Xxxxx Xxxx Xxxxxxx, XX 00000
Xxxxx Xxxxxx		396.0
Xxx Xxxxxxxx Xxxxxx #0X Xxx Xxxx, XX 00000
Xxxxxxx Xxxxxx		1,188.1
0000 X. Xxxxx Xxxxx Xxxx Xxxx Xxxxxxxxx, XX 00000
Xxxx Xxxxx		792.1
000 Xxxxxxxxxx Xxxxxx Xxxxx 000 Xxxxx Xxxxx, XX 00000
Xxxxxxxx Xxxxx		514.9
000 Xxxxxxx Xxxxxx, Xxx. 00X Xxx Xxxx, XX 00000-0000
Xxxxxxx Xxxx		158.4
0000 Xxxxxxxxxx Xxx Xxxxxxxxx, XX 00000
Xxxxx Xxxxx		990.1
000 Xxxxx Xxx Xxxxxx #0X Xxx Xxxx, XX 00000

Xxxxx Xxxxxx		237.6
000 Xxxxxxxx Xxxxxx Xxxxxx Xxxxx, XX 00000
Xxxx Xxxxxxxxx		435.6
000 Xxxxx Xxxxxxx Xxxxxxx, XX 00000-0000
Xxxxxxx Xxxx		2,376.2
000 Xxxxxxxxxxx Xxxx XX Xxx 000 Xxxxxxxxxx, XX 00000
Xxxxxxxxx Xxxx		396.0
00 Xxx Xxxx Xxxxx Xxxxxxxxx, XX 00000
Xxx Xxxxx		1,1881
000 Xxxxxxx Xxxxxx Xxxxxxxxx, XX 00000-0000
Xxxx Xxxxx		277.2
00 Xxxxxxxx Xxxxxx Xxxxx Xxxxx, XX 00000
Xxxxxx Xxxxx		792.1
0000 Xxxxxxxxxxxxx Xxxxxx, XX Xxxxxxxxxx, XX 00000
Xxxxx Xxxxxxx		792.1
00 Xxxx Xxxx Xxxxxxxxx, XX 00000
Xxxxxxx Xxxxxxx		396.0
00 Xxxxxxx Xxxxxx, Xxx. #0X Xxxxxxxx, XX 00000
Xxxxxxxx Xxxxxxx		1,188.1
000 Xxxxx Xxxxx Xxxxx Xxxxxxxxxx, XX 00000
Xxxxx Xxxxxxx		1,584.2
0000 Xxxx Xxxxx Xxxx Xxxxxxx, XX 00000
Rose Xxx Xxxxxxxxxx		118.8
0000 Xxxx 0xx Xxxxxx Xxxxxxxx, XX 00000

Xxxxx Xxxxxx		2,376.2
x/x Xxxxx Xxxxxxxx Xxxx 000 Xxxx Xxxxx Xxxxxx (POB 907) Xxxxxx, XX 00000
Xxxxxx Xxxxxxx		396.0
000 Xxxxxx Xxxxxx Xxxxxxxx, XX 00000-0000
Xxxxx Xxxxxxxx		792.1
00 Xxxxxxxxxx Xxxx Xxxxxxxx, XX 00000
Xxxxxx Xxxxx		792.1
0000 Xxxxxx Xxxx Xxxx Xxxxxxxx, XX 00000
BankAmerica Investment Corporation				87.88736355		-
000 Xxxxxxxxxx Xxxxxx XX0-000-00-00 Xxx Xxxxxxxxx, XX 00000 Attention: G X. Xxxxxxx
FW ACA Investors, L.P.				87.88736355		-
Attn: Xxxxx X. Xxxx 000 Xxxx Xxxxxx, Xxxxx 0000 Xxxxx Xxxxx, XX 00000
Xxxxxx Xxxxxx		8,788.8		-
00 Xxxxxx Xxxx Xxxxxxxxx, XX 00000
Xxxxxx Xxxxxxx		54,447.5*		-
000 Xxxx Xxxxxx Xxxx Xxxx, Xxxxxxxxxxx 00000
Xxxxxxx Xxxx		9,608.7		-
00 Xxxx 00xx Xxxxxx, Xxx. 00X Xxx Xxxx, XX 00000
Xxxxxxx Xxxxxxxxxxx		8,788.8		-
0 Xxxxxx Xxxxx Xxx Xxxxxx Xxxxxx, XX 00000

*36,870 of which obtained upon June 2006 exercise of options.

Exhibit C

JOINDER AGREEMENT

                This JOINDER AGREEMENT, dated as of _________, 200_ (this “Joinder Agreement”), is between ACA Capital Holdings, Inc., a Delaware corporation (the “Company”), and ________________ (the “Joining Party”).

                WHEREAS, the Company, BSMB/ACA LLC, a Delaware limited liability company, and other stockholders of the Company are parties to the Amended and Restated Registration Rights Agreement, dated as of September 30, 2004, as amended from time to time in accordance with its terms (the “Registration Rights Agreement”);

                WHEREAS, the Joining Party has become a holder of Common Stock of the Company;

                WHEREAS, the Joining Party wishes to join and become a party to the Registration Rights Agreement, and the Company wishes to accept the Joining Party as a party thereto, all on the terms of this Joinder Agreement; and

                WHEREAS, this Joinder Agreement is intended to modify the Registration Rights Agreement and is delivered pursuant to and conforms with the requirements of Section 9(n) of the Registration Rights Agreement;

                NOW THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

                1.             Joinder.

                The Joining Party hereby joins and becomes a party to, and the Company hereby accepts the Joining Party as a party to, the Registration Rights Agreement.  The Company and the Joining Party each acknowledge and agree that the Joining Party is entitled to the benefits, and is subject to the obligations, of a holder of Other Registrable Securities listed on Schedule IV of the Registration Rights Agreement.

                2.             Acknowledgement.

                The Joining Party acknowledges that it has received a copy of the Registration Rights Agreement.

                3.             Schedule IV.

                For purposes of Schedule IV of the Registration Rights Agreement, the Joining Party’s address and number of shares of Common Stock are:

Address: [_______________________]

		Attention:	[_______________]
		[Number of shares]

                4.             Governing Law.

                This Joinder Agreement shall be governed in all respects by the laws of the State of Delaware, without reference to the conflict of laws principles thereof.

5. Counterparts.

This Joinder Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement.

[The remainder of this page intentionally has been left blank.]

                IN WITNESS WHEREOF, the parties hereto have executed and delivered this Joinder Agreement as of the date first above written.

ACA CAPITAL HOLDINGS, INC.:

By:____________________________

Name:

Title:

JOINING PARTY:

[______________________________]

By:____________________________

Name:

Title:

Exhibit D

ACA CAPITAL HOLDINGS, INC.

000 Xxxxxxxx

Xxx Xxxx, Xxx Xxxx 00000

Via Registered Mail

[DATE]

To                                      :

Reference is hereby made to the Registration Rights Agreement, dated as of September 23, 1997, the Registration Rights Agreement, dated as of February 28, 2001, and the Amended and Restated Registration Rights Agreement, dated as of September 30, 2004, and Amendment No. 1 to the Registration Rights Agreement, dated as of November 2, 2004 (collectively, the “Agreement”), by and among ACA Capital Holdings, Inc. (the “Company”) and certain of its stockholders that are parties thereto.  All capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement.

Pursuant to Section 2(a) of the Agreement, we hereby notify you that the Company is proposing the registration of shares of its Common Stock under the Securities Act (the “Registration”) for sale to the public in an underwritten offering and has filed a preliminary registration statement on Form S-1 with the Commission on May 10, 2006.

If you would like to include some or all of your Registrable Securities in the Registration, you are required under Section 2(a) of the Agreement to deliver a request for inclusion to the Company within 20 days of the receipt of this letter as determined in accordance with the Agreement.

We would like to remind you that, under Section 7(a) of the Agreement, your right to be included in the Registration is conditioned upon your agreement to sell your securities on the basis provided in any underwriting arrangements approved by the parties entitled to approve such arrangements.  In addition, if you elect to participate in the Registration, you will be required to complete and execute all questionnaires, powers of attorney, indemnities, escrow arrangements and underwriting agreements and deliver opinions required under the terms of such underwriting arrangements.  Notwithstanding the foregoing, if the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Company, the Company shall include in such offering (w) first, the number of securities which the Company proposes to sell, (x) second, the number of securities held by holders of Series B Senior Convertible Preferred Stock proposed to be sold, (y) third, the number of shares of registrable securities held by persons party to the Agreement described above and (z) fourth, the number of securities held by other persons with registration

rights, in each case as requested to be included which in the opinion of such underwriters can be sold in an orderly manner within the price range acceptable to the Company, pro rata among the specific persons in the relevant class, on the basis of the number of securities owned by each such holder.

We also remind you that the Company has the right to terminate or withdraw the Registration prior to the effectiveness of the Registration, whether or not any Holder has elected to include securities in the Registration.

As you should be aware, pursuant to Section 3(a) of the Agreement, you have agreed that no holder of Registrable Securities shall effect the sale, distribution or transfer of the Company’s securities during the seven days prior to and 180-day period beginning on the effective date of the initial public offering.  In addition as a condition to the underwriting by the underwriters and in accordance with Section 3(a), the Company’s stockholders who are party to the Agreement will be required to execute, prior to the initial marketing of the offering, a lock-up agreement with the underwriters relating to transfers, sales or distributions of the Company’s securities following the effective date of the Company’s registration statement.

Please feel free to contact Xxxx X. Xxxxxxx at (000) 000-0000 with any questions regarding these matters.

Very truly yours,

ACA CAPITAL HOLDINGS, INC.

Xxxx X. Xxxxxxx

President and Chief Executive Officer