CLAYTON HOLDINGS INC
EX-10.42
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<p align="right" style="margin:0pt 0pt 12.0pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit
10.42</font></b></p>

<p style="font-weight:bold;margin:0pt 0pt 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">CLAYTON
HOLDINGS, INC.</font></b></p>

<p style="font-weight:bold;margin:0pt 0pt 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;">2006
STOCK OPTION AND INCENTIVE PLAN</font></b></p>

<p style="font-weight:bold;margin:0pt 0pt 12.0pt;text-align:center;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;">First
Amendment</font></u></b></p>

<h1 style="font-weight:normal;margin:0pt 0pt 12.0pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The
Clayton Holdings, Inc. 2006 Stock Option and Incentive Plan (the &#147;Plan&#148;), is
amended by deleting Section 3(b) in its entirety and replacing it with the
following:</font></h1>

<p style="margin:0pt 36.0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Changes in Stock</u>.&#160; Subject to Section 3(c) hereof, if, as a
result of any reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar change in the
Company&#146;s capital stock, the outstanding shares of Stock are increased or
decreased or are exchanged for a different number or kind of shares or other
securities of the Company, or additional shares or new or different shares or
other securities of the Company or other non-cash assets are distributed with
respect to such shares of Stock or other securities, or, if, as a result of any
merger or consolidation, sale of all or substantially all of the assets of the
Company, the outstanding shares of Stock are converted into or exchanged for
securities of the Company or any successor entity (or a parent or subsidiary
thereof), the Administrator shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the
Plan, including the maximum number of shares that may be issued in the form of
Incentive Stock Options, (ii) the number of Stock Options or Stock Appreciation
Rights that can be granted to any one individual grantee and the maximum number
of shares that may be granted under a Performance-based Award, (iii) the number
and kind of shares or other securities subject to any then outstanding Awards
under the Plan, (iv) the repurchase price, if any, per share subject to each
outstanding Restricted Stock Award, (v) the number of Stock Options automatically
granted to Non-Employee Directors, and (vi) the price for each share subject to
any then outstanding Stock Options and Stock Appreciation Rights under the
Plan, without changing the aggregate exercise price (i.e., the exercise price
multiplied by the number of Stock Options and Stock Appreciation Rights) as to
which such Stock Options and Stock Appreciation Rights remain exercisable.&#160; The Administrator shall also make equitable
or proportionate adjustments in the number of shares subject to outstanding
Awards and the exercise price and the terms of outstanding Awards to take into
consideration cash dividends paid other than in the ordinary course or any
other extraordinary corporate event.&#160;
Notwithstanding the foregoing, no adjustment shall be made under this
Section 3(b) if the Administrator determines that such action could </font></p>


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<p style="margin:0pt 36.0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">cause any Award to fail to satisfy the conditions of
any applicable exception from the requirements of Section 409A or otherwise
could subject the grantee to the additional tax imposed under Section 409A in
respect of an outstanding Award or constitute a modification, extension or
renewal of an Incentive Stock Option within the meaning of Section 424(h) of
the Code.&#160;&#160; The adjustment by the Administrator
shall be final, binding and conclusive.&#160;
No fractional shares of Stock shall be issued under the Plan resulting
from any such adjustment, but the Administrator in its discretion may make a
cash payment in lieu of fractional shares.&#148;</font></p>

<h1 style="font-weight:normal;margin:0pt 0pt 12.0pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">B.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; This
Amendment shall be effective on the date of execution.</font></h1>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">C.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Except as amended herein, the Plan is confirmed in all
other respects.</font></p>

<p style="line-height:normal;margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN WITNESS
WHEREOF, Clayton Holdings, Inc. has caused this Amendment to be executed by its
duly authorized officer this 28th day of February, 2007.</font></p>

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  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CLAYTON HOLDINGS, INC.</font></p>
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  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
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  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/s/ Frederick C. Herbst</font></p>
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  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
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  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Frederick C. Herbst</font></p>
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  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
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  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial Officer</font></p>
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