<PAGE>   1


                                                                     EXHIBIT 4.2

The following document is a form of Nonqualified Stock Option Agreement entered
into between the Registrant and various officers and employees of subsidiaries.
The agreements are identical in all material respects except as to the identity
of the parties, the dates of execution and the number of options granted.

NONQUALIFIED STOCK OPTION AGREEMENT



         THIS STOCK OPTION AGREEMENT (the "Agreement") is entered into this
               ,      (the "Grant Date"), by and between Champion Enterprises,
Inc., a Michigan corporation ("the Company"), and               (the
"Optionee").
                                   WITNESSETH:

         WHEREAS, Optionee is employed by the Company or one of its
Subsidiaries; and

         WHEREAS, the Company wishes to provide additional incentive to
Optionee, to encourage stock ownership by Optionee, and to encourage Optionee to
remain in the employ of the Company and its subsidiaries; and

         WHEREAS, the Company desires that Optionee keep certain information
that Optionee has acquired during Optionee's employment with the Company
confidential.
         NOW, THEREFORE, the Company and Optionee hereby agree as follows:

         1. DEFINITIONS. For the purposes of this Agreement, certain words and
phrases shall have the following definitions:

            a)  "Code" means the Internal Revenue Code of 1986, as amended;

            b)  "Committee" means the Compensation Committee of the Company;

            c)  "Common Stock" means the common stock of the Company, par value
                $1.00; d) "Disability" means "disability" as defined under
                Section 22(e) of the Code;

            e)  "Employment" or "Employed" (whether or not capitalized) means
                employment with the Company or any Parent or Subsidiary of the
                Company;

            f)  "Parent" means any "parent corporation" as defined in Section
                424(e) of the Code;

            g)  "Plan" means the Company's 1995 Stock Option and Incentive Plan,
                as amended; h) "Subsidiary" means any "subsidiary corporation"
                as defined in Section 424(f) of the Code.

         2. FIRST PART. The Company grants Optionee the right and option to
purchase from the Company       shares of the Company's Common Stock at a price
of $     per share, which equals 40% of the closing price of the Company's
Common Stock on the New York Stock Exchange, as reported in The Wall Street
Journal for the Grant Date (the "First Part"). The First Part must be exercised
in its entirety on or before             ,     . This grant of the First Part is
conditioned upon the agreement by Optionee not to sell or otherwise transfer the
shares acquired under this First Part until at least two (2) years from the date
of exercise. In addition, if prior to               ,      Optionee terminates
employment with the Company or the Optionee is terminated for "good cause" (as
defined below), Optionee shall retain only the following shares:
<TABLE>
<CAPTION>
         Date Employment Terminated         Shares Retained
         --------------------------         ---------------
<S>                                          <C>
         prior to August 22, 1999               0

         prior to February 22, 2000
                                                ----
         prior to August 22, 2000
                                                ----
</TABLE>

<PAGE>   2

<TABLE>
<S>                                             <C>
         prior to February 22, 2001
                                                ----
         on or after February 22, 2001
                                                ----
</TABLE>

Shares not retained by Optionee above shall be forfeited and returned to the
Company in exchange for the exercise price paid by Optionee for the forfeited
shares. "Good Cause" shall mean Optionee's gross misconduct, material breach of
his duties, failure to follow the reasonable instructions of his superior, or an
act of fraud or dishonesty by the Optionee.

         3. SECOND PART. If Optionee exercises the First Part on or before
       ,     , the Company grants Optionee the right and option to purchase from
the Company        shares of the Company's Common Stock at a price equal to
$     per share, which is 100% of the closing price of the Company's Common
Stock on the New York Stock Exchange, as reported in The Wall Street Journal,
for the Grant Date (the "Second Part"). The Options granted under this Second
Part shall not be immediately exercisable, but shall be exercisable according to
the following schedule:
<TABLE>
<CAPTION>
         Number of Option Shares                                       Date Exercisable
         -----------------------                                       ----------------
<S>                                                                    <C>
                                                                       February 22, 2000
                  -----
                                                                       February 22, 2001
                  -----
                                                                       February 22, 2002
                  -----
                                                                       February 22, 2003
                  -----
                                                                       February 22, 2004
                  -----
</TABLE>

This grant of the Second Part is conditioned upon the agreement by Optionee not
to sell or otherwise transfer the shares acquired under this Second Part until
at least six (6) months from the date of exercise. No portion of this Second
Part shall be exercisable after              ,     . The Second Part may be
exercised in installments. This Second Part is not intended to be an incentive
stock option within the meaning of Section 422 of the Code.

         4. TERMINATION OF EMPLOYMENT.

                  a) Before Option Becomes Exercisable. If Optionee's employment
with the Company shall terminate for any reason prior to Optionee's exercise in
full of the First Part, Optionee's right to exercise any option under this
Agreement shall terminate and all exercise rights hereunder shall cease. If
Optionee exercises in full the First Part but Optionee's employment with the
Company shall terminate for any reason before all or any portion of the Second
Part becomes exercisable, Optionee's right to exercise that portion of the
Second Part shall terminate and all exercise rights relating thereto shall
cease.

                  b) Termination Other Than Death or Disability. If, on or after
the first anniversary of this Agreement, Optionee's employment is terminated for
any reason other than death or Disability, Optionee shall have the right, within
the earlier of (1) the expiration of the option, or (2) three months after the
termination of employment, to exercise any options pursuant to this Agreement to
the extent that they are exercisable and unexercised on the date of Optionee's
termination of employment, subject to any other limitation on exercise contained
in this Agreement.

                  c) Death or Disability. If, on or after the first anniversary
of this Agreement, Optionee's employment is terminated due to Optionee's death
or Disability, Optionee, or the person or persons whom the option shall have
transferred by will or the laws of descent and distribution, shall have the
right within the earlier of (1) the expiration of the option, or (2) one year
after the termination of employment, to exercise any options pursuant to this
Agreement to the extent that they are exercisable and unexercised on the date of
Optionee's termination of employment, subject to any other limitation on
exercise contained in this Agreement.

                  d) Events Not Constituting a Termination. The transfer of
Optionee from one corporation to another among the Company and any of its
Subsidiaries, or a leave of absence under the leave policy of the Company or any
of its Subsidiaries shall not be a termination of employment for purposes of
this Agreement.

         5. EXERCISE OF OPTION. Optionee may exercise any exercisable option
granted pursuant to this Agreement by completing the following steps.

                  (a) Written Notice. Delivery to the Company of a written
notice signed by the Optionee: (1) for the First Part, in the form attached as
EXHIBIT A; or (2) for the Second Part, in the form attached as EXHIBIT B. In


<PAGE>   3

addition, at the request of the Company, Optionee may be required to provide a
written representation that Optionee is acquiring the shares for investment
purposes only, and not for resale.

                  (b) Purchase Price. Delivery to the Company of cash, a
personal check, bank draft, money order, or Common Stock (or any combination
thereof) equal to the purchase price of the shares then to be purchased. Any
Common Stock tendered shall be valued at the closing price of the Company's
Common Stock on the first business day prior to the exercise date, as reported
in The Wall Street Journal. After receipt of the above and subject to Section 8
below, the company shall issue the shares in the name of Optionee.

         6. CONFIDENTIALITY. As consideration for the options granted by this
Agreement, Optionee hereby agrees as follows:

                  a) Confidentiality Agreement. Except with the prior written
consent of the Company, Optionee shall not during or after the term of this
Agreement: (a) disclose, publish, or in any other manner reveal to any third
party any Confidential Information (as defined below) relating to the business
or assets of the Company or its Subsidiaries; or (b) make use of any
Confidential Information (as hereinafter defined) for the Optionee's own
purposes, or for the benefit of any person or entity other than the Company and
its Subsidiaries.

                  b) Confidential Information Defined. "Confidential
Information" shall include any and all information and documentation relating to
the Company and its Subsidiaries, including but not limited to information
relating to the operations, services, trade secrets, dealer, distributor and
customer lists, promotion and pricing practices, operational methods, market
plans, studies, and forecasts, product development plans, acquisition plans,
design and design projects, inventions and research projects, compensation
information, procurement and sales activities and procedures, the existence or
substance of any agreements between Company (or any Subsidiary) and any third
party, and any and all other information and documentation relating to the plans
and operations of the Company or its Subsidiaries.

                  c) Disclosure of Proprietary Information. Optionee shall
promptly disclose to the Company, in such form and manner as the Company may
reasonably require, all operations, systems, services, methods, developments,
inventions, improvements and other information or data pertaining to the
business or activities of the Company as are conceived, originated, discovered
or developed by Optionee (whether or not copyrighted or patented) during the
term of Optionee's employment with the Company, whether before or after the
execution of this Agreement. It is understood that such information is
proprietary in nature and shall be, as between the Company and Optionee, for the
exclusive use and benefit of the Company and shall be and remain the property of
the Company. If so requested by the Company, Optionee shall execute and deliver
to the Company any instrument as the Company may reasonably request to
effectuate the assignment of any such proprietary information to the Company.

                  d) Termination of Employment. Upon the termination of
Optionee's employment with the Company, Optionee shall deliver to the Company
all records, data and memoranda of every kind and character relating to the
Company and its Subsidiaries, including all copies thereof, which are in
Optionee's possession or control.

                  e) Remedies for Breach. Optionee acknowledges and agrees that
the Company's remedies at law for any breach of the agreements contained in this
Section 6 would be inadequate. Optionee therefore agrees that in the event of
Optionee's breach of the agreements contained in this Section 6, the Company
shall be entitled to equitable relief in the form of specific performance, a
temporary restraining order, a temporary or permanent injunction, or any other
equitable remedy or relief which may then be available. Nothing in this Section
shall be construed as prohibiting the Company from pursuing any other remedies
available to it for any such breach, whether in law, equity, or otherwise.

         7. NO RIGHT TO CONTINUED EMPLOYMENT. This Agreement does not give the
Optionee any right to be retained or to continued employment with the Company or
any Subsidiary of the Company.

         8. COMPLIANCE WITH SECURITIES LAWS. Company's obligations under this
Agreement are subject to compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities, and
any applicable stock exchange requirements, and Company may require Optionee to
provide proof of compliance with those laws, rules, and regulations. The
Optionee represents and warrants to the Company that he is acquiring all shares
of Common Stock under this option for investment purposes only and not with a
view to resale. The Optionee acknowledges and agrees that such shares of Common
Stock have not yet been registered under the Securities Act of 1933 (the "Act")
or the securities laws of any state and may not be sold, transferred, assigned,
offered, pledged or

<PAGE>   4


otherwise distributed unless there is an effective registration statement under
the Act and any applicable securities laws covering such shares or the Company
receives an opinion of counsel from Optionee (and concurred to by counsel for
the Company) stating that such sale, transfer, assignment, offer, pledge or
other distribution is exempt from registration and prospectus delivery
requirements of the Act, any applicable state securities laws, or the listing
requirements of any stock exchange. Optionee further acknowledges and agrees
that any certificate for such shares shall contain an appropriate legend to the
foregoing effect and that a stop transfer order shall be placed with the
Company's transfer agent. The Company represents and warrants that as soon as
practical after the Optionee exercises any of the options granted pursuant to
this Agreement, the Company shall take any and all steps that are necessary or
required in order to register the Common Stock pursuant to the Act.

         9. NON-ASSIGNABILITY. The options granted by this Agreement shall not
be transferable by Optionee, other than by will or the laws of descent and
distribution. Any transferee of these options by will or the laws of descent and
distribution shall take them subject to the terms and conditions of this
Agreement, and no such transfer shall be effective to bind the Company unless
the Company is furnished with written notice of the transfer and a copy of the
will or any other evidence the Company deems necessary to establish the validity
of the transfer. The term "Optionee", as used in this Agreement, shall include
any person or entity to whom any option is transferred.

         10. WITHHOLDING OF TAXES. If Optionee is employed with the Company or
any of its Subsidiaries on the date of an exercise, the Company will notify
Optionee of the required withholdings relating to that exercise and Optionee
shall pay such amount to the Company within the time stated in the notification.
If Option fails to pay the Company during such time period, the Company shall
have the right to offset the amounts owed from Optionee's compensation to
satisfy such withholdings. If Optionee is no longer employed with the Company or
any of its Subsidiaries on the date of an exercise, Optionee must pay to the
Company the required withholdings relating to that exercise at the time of
exercise.

         11. DISPUTES. As a condition to the granting the options contained in
this Agreement, Optionee and Optionee's successors and assigns agree that any
dispute or disagreement which shall arise under or as a result of this Agreement
shall be determined by the Committee in its sole discretion and judgment. Any
such determination or interpretation by the Committee of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.

         12. NOTICES. Every notice relating to this Agreement shall be in
writing, any notice given by mail shall be by registered or certified mail with
return receipt requested. All notices to the Company shall be delivered to the
following address:

                           Champion Enterprises, Inc.
                           2701 University Drive, Suite 320
                           Auburn Hills, MI 48326-9090
                           Attn:  Secretary of the Company

All notices by the Company to Optionee shall be delivered to Optionee
personally, or addressed to Optionee at Optionee's last residence address as
then contained in the records of the Company, or such other address as Optionee
may designate.

         13. PROVISIONS OF PLAN CONTROLLING. Although the options granted
pursuant to this Agreement are not issued under the terms of Champion
Enterprises Inc.'s 1995 Stock Option and Incentive Plan (the "Plan"), Optionee
shall have the same rights and obligations under this Agreement as if these
options had been issued under the Plan, which is available upon written request
to the Company. If any provisions of this Agreement conflict with any provisions
of the Plan, the provisions of the Plan shall control.







<PAGE>   5


         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

         COMPANY:                           CHAMPION ENTERPRISES, INC.

                                            By:
                                                ---------------------------
                                                     Walter R. Young, Jr.
                                                     President and Chief
                                                     Executive Officer



         OPTIONEE:
                                            ------------------------------


<PAGE>   6


                                   EXHIBIT A
                        NOTICE OF EXERCISE OF FIRST PART
                       (NONQUALIFIED STOCK OPTION SHARES)

Secretary
Champion Enterprises, Inc.
2701 University Drive, Suite 320
Auburn Hills, Michigan 48326

Dear Sir:

         A stock option was granted to me on       ,    , which permits me to
purchase       shares of Champion Enterprises, Inc. Common Stock at a price of
$     per share.

         I elect to exercise this part of the option to purchase 4,000
nonqualified stock option shares. A personal check [or cash, bank draft, money
order, or common stock] for the purchase price is enclosed with this letter.

         If I choose to make an 83(b) election under the Code, I shall pay the
Company within fourteen (14) days from the date of that election the applicable
amount to the Company to satisfy any requirements for withholding of income and
employment taxes arising from this exercise. Otherwise, I understand that I
shall have ordinary income each six months as the shares vest, and I agree to
pay all applicable withholdings when notified.

         I acknowledge and agree that the shares of Common Stock that I am
purchasing may not currently be registered under the Securities Act of 1933 (the
"Act") or the securities laws of any state. I understand and agree that if these
shares are not currently registered, the Company is obligated to register these
shares under the Act as soon as practicable after this exercise. Notwithstanding
the foregoing, I acknowledge and agree that these shares may not be sold,
transferred, assigned, offered, pledged or otherwise distributed until they are
registered under the Act or unless the Company receives an opinion of counsel
from me (and concurred to by counsel for the Company) stating that such sale,
transfer, assignment, offer, pledge or other distribution is exempt from
registration and prospectus delivery requirements of the Act, any applicable
state securities laws, or the listing requirements of any stock exchange.

         I represent that I will not sell or otherwise transfer any shares that
I purchase pursuant to this letter for a period of two years. I also understand
that if my employment with the Company is terminated within two years of the
grant date of this option, a portion of the shares, pro-rated semi-annually,
shall be forfeited and returned to the Company in exchange for the exercise
price relating to those shares.

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


Address:
                 --------------------
                 --------------------
SSN:                   -     -
                 ------ ----- -------
Dated:                ,
         -------------  ----


<PAGE>   7


                                   EXHIBIT B
                          NOTICE OF EXERCISE OF SECOND
                       (NONQUALIFIED STOCK OPTION SHARES)


Secretary
Champion Enterprises, Inc.
2701 University Drive, Suite 320
Auburn Hills, Michigan 48326

Dear Sir:
         A stock option was granted to me on             ,     , which permits
me, upon the exercise of the first part of the option on or before
             ,     , and subject to a five-year graded vesting schedule, to
purchase 36,000 stock option shares of Champion Enterprises, Inc. Common Stock
at a price of $      per share.

         I hereby elect to exercise this part of the option to purchase
           stock option shares. A personal check [or cash, bank draft, money
order, or common stock] for the purchase price is enclosed with this letter.

         I acknowledge and agree that the shares of Common Stock that I am
purchasing may not currently be registered under the Securities Act of 1933 (the
"Act") or the securities laws of any state. I understand and agree that if these
shares are not currently registered, the Company is obligated to register these
shares under the Act as soon as practicable after this exercise. Notwithstanding
the foregoing, I acknowledge and agree that these shares may not be sold,
transferred, assigned, offered, pledged or otherwise distributed until they are
registered under the Act or unless the Company receives an opinion of counsel
from me (and concurred to by counsel for the Company) stating that such sale,
transfer, assignment, offer, pledge or other distribution is exempt from
registration and prospectus delivery requirements of the Act, any applicable
state securities laws, or the listing requirements of any stock exchange.

         I represent that I will not sell or otherwise transfer any shares that
I purchase pursuant to this letter for a period of six months.

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


Address:
                 --------------------
                 --------------------
SSN:                   -     -
                 ------ ----- -------
Dated:                , 200
         -------------     --