**Exhibit10.42**

**CLAYTONHOLDINGS, INC.**

**2006STOCK OPTION AND INCENTIVE PLAN**

**FirstAmendment**

# A.            TheClayton Holdings, Inc. 2006 Stock Option and Incentive Plan (the “Plan”), isamended by deleting Section 3(b) in its entirety and replacing it with thefollowing:

“(b)         Changes in Stock.  Subject to Section 3(c) hereof, if, as aresult of any reorganization, recapitalization, reclassification, stockdividend, stock split, reverse stock split or other similar change in theCompany’s capital stock, the outstanding shares of Stock are increased ordecreased or are exchanged for a different number or kind of shares or othersecurities of the Company, or additional shares or new or different shares orother securities of the Company or other non-cash assets are distributed withrespect to such shares of Stock or other securities, or, if, as a result of anymerger or consolidation, sale of all or substantially all of the assets of theCompany, the outstanding shares of Stock are converted into or exchanged forsecurities of the Company or any successor entity (or a parent or subsidiarythereof), the Administrator shall make an appropriate or proportionateadjustment in (i) the maximum number of shares reserved for issuance under thePlan, including the maximum number of shares that may be issued in the form ofIncentive Stock Options, (ii) the number of Stock Options or Stock AppreciationRights that can be granted to any one individual grantee and the maximum numberof shares that may be granted under a Performance-based Award, (iii) the numberand kind of shares or other securities subject to any then outstanding Awardsunder the Plan, (iv) the repurchase price, if any, per share subject to eachoutstanding Restricted Stock Award, (v) the number of Stock Options automaticallygranted to Non-Employee Directors, and (vi) the price for each share subject toany then outstanding Stock Options and Stock Appreciation Rights under thePlan, without changing the aggregate exercise price (i.e., the exercise pricemultiplied by the number of Stock Options and Stock Appreciation Rights) as towhich such Stock Options and Stock Appreciation Rights remain exercisable.  The Administrator shall also make equitableor proportionate adjustments in the number of shares subject to outstandingAwards and the exercise price and the terms of outstanding Awards to take intoconsideration cash dividends paid other than in the ordinary course or anyother extraordinary corporate event. Notwithstanding the foregoing, no adjustment shall be made under thisSection 3(b) if the Administrator determines that such action could 

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cause any Award to fail to satisfy the conditions ofany applicable exception from the requirements of Section 409A or otherwisecould subject the grantee to the additional tax imposed under Section 409A inrespect of an outstanding Award or constitute a modification, extension orrenewal of an Incentive Stock Option within the meaning of Section 424(h) ofthe Code.   The adjustment by the Administratorshall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resultingfrom any such adjustment, but the Administrator in its discretion may make acash payment in lieu of fractional shares.”

# B.            ThisAmendment shall be effective on the date of execution.

C.            Except as amended herein, the Plan is confirmed in allother respects.

IN WITNESSWHEREOF, Clayton Holdings, Inc. has caused this Amendment to be executed by itsduly authorized officer this 28th day of February, 2007.
|        | CLAYTON HOLDINGS, INC. |                    |
|--------|------------------------|-------------------------|
|   |                   |                    |
|   |                   |                    |
|   | By:                    | /s/ Frederick C. Herbst |   |
|   | Name:                  | Frederick C. Herbst     |
|   | Title:                 | Chief Financial Officer |
|        |                        |                         |  |  |  |

 

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