<PAGE>
                                                                   EXHIBIT 10.42

                           RESTORATION HARDWARE, INC.
                         NOTICE OF GRANT OF STOCK OPTION

               Notice is hereby given of the following option grant (the
"Option") to purchase shares of Common Stock of Restoration Hardware, Inc. (the
"Corporation"):

        Optionee:

        Grant Date:

        Vesting Commencement Date:

        Exercise Price:

        Number of Option Shares:

        Expiration Date:

        Type of Option:      Non-Statutory Option

               Exercise Schedule: The Option shall become exercisable for
               thirty-three and one-third percent (33 1/3%) of the Option Shares
               upon Optionee's completion of each of the three (3) years of
               Service measured from and after the Vesting Commencement Date,
               with the first such installment to become exercisable on the
               first anniversary of the Vesting Commencement Date. In no event
               shall the Option become exercisable for any additional Option
               Shares after Optionee's cessation of Service.

               Optionee agrees to be bound by the terms of the Option as set
forth in the Stock Option Agreement attached hereto as Exhibit A.

               No Employment or Service Contract. Nothing in this notice or in
the attached Stock Option Agreement shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.




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<PAGE>

               Definitions. All capitalized terms in this notice shall have the
meaning assigned to them in this notice or in the attached Stock Option
Agreement.

DATED: ________________________, 2001


                                            RESTORATION HARDWARE, INC.

                                            By:_________________________________

                                            Title:______________________________


                                            ____________________________________
                                            OPTIONEE

                                            Address:____________________________

                                            ____________________________________

                                            ____________________________________




ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT




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<PAGE>

                           RESTORATION HARDWARE, INC.
                             STOCK OPTION AGREEMENT

        1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice subject to the terms and provisions of this Agreement and the
Grant Notice. The Option Shares shall be purchasable from time to time during
the option term specified in Paragraph 2 below at the Exercise Price. All
capitalized terms in this Agreement shall have the meaning assigned to them in
the attached Appendix.

        2. OPTION TERM. This option shall have a maximum term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6 below.

        3. LIMITED TRANSFERABILITY. This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee. However, this option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of the Optionee and/or one or more such
family members. The assigned portion shall be exercisable only by the person or
persons who acquire a proprietary interest in the option pursuant to such
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for this option immediately prior to such assignment.

        4. DATE OF EXERCISE. This option shall become exercisable for the Option
Shares in one or more installments as specified in the Grant Notice. As the
option becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6 below.

        5. CESSATION OF SERVICE. The option term specified in Paragraph 2 above
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

           (a) Should Optionee cease to remain in Service for any reason (other
than death, Permanent Disability or Misconduct) while this option is
outstanding, then the period for exercising this option shall be reduced to a
three (3)-month period commencing with the date of such cessation of Service,
but in no event shall this option be exercisable at any time after the
Expiration Date.

           (b) Should Optionee die while holding this option, then the personal
representative of Optionee's estate or the person or persons to whom the option
is transferred pursuant to Optionee's will or in accordance with the laws of
inheritance




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<PAGE>

shall have the right to exercise this option. Such right shall lapse, and this
option shall cease to be outstanding, upon the earlier of (i) the expiration of
the twelve (12)-month period measured from the date of Optionee's death or (ii)
the Expiration Date.

           (c) Should Optionee cease Service by reason of Permanent Disability
while this option is outstanding, then the period for exercising this option
shall be reduced to a twelve (12)-month period commencing with the date of such
cessation of Service, but in no event shall this option be exercisable at any
time after the Expiration Date.

           (d) During the limited period of post-Service exercisability, this
option may not be exercised in the aggregate for more than the number of vested
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding for any otherwise exercisable Option Shares for which the option has
not been exercised. However, this option shall, immediately upon Optionee's
cessation of Service for any reason, terminate and cease to be outstanding with
respect to any Option Shares for which this option is not otherwise at that time
exercisable.

           (e) Should Optionee's Service be terminated for Misconduct, then this
option shall terminate immediately and cease to remain outstanding.

        6. SPECIAL ACCELERATION OF OPTION.

           (a) This option to the extent outstanding at the time of a Change in
Control transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Change in Control, become exercisable for all of the Option Shares at the
time subject to this option and may be exercised for any or all of those Option
Shares as fully vested shares of Common Stock. However, this option shall not
become exercisable on such an accelerated basis if and to the extent: (i) this
option is, in connection with the Change in Control, to be assumed by the
successor corporation (or parent thereof) or otherwise continued in full force
and effect pursuant to the terms of the Change in Control transaction; or (ii)
this option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing at the time of the Change in
Control on the Option Shares for which this option is not otherwise at that time
exercisable (the excess of the Fair Market Value of those Option Shares over the
aggregate Exercise Price payable for such shares) and provides for subsequent
payout in accordance with the same option exercise/vesting schedule set forth in
the Grant Notice.

           (b) Immediately following the Change in Control, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) or otherwise continued in full force
and effect pursuant to the terms of the Change in Control transaction.




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<PAGE>

           (c) If this option is assumed in connection with a Change in Control
(or otherwise continued in full force and effect), then this option shall be
appropriately adjusted, immediately after such Change in Control, to apply to
the number and class of securities or other property which would have been
issuable to Optionee in consummation of such Change in Control had the option
been exercised immediately prior to such Change in Control, and appropriate
adjustments shall also be made to the Exercise Price, provided the aggregate
Exercise Price shall remain the same.

           (d) This option may also be subject to acceleration in accordance
with the terms of any special addendum attached to this Agreement.

           (e) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

        7. ADJUSTMENT IN OPTION SHARES.

        Should any change be made to Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made to
(i) the total number and/or class of securities subject to this option and (ii)
the Exercise Price in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.

        8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

        9. MANNER OF EXERCISING OPTION.

           (a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable, Optionee
(or any other person or persons exercising the option) must take the following
actions:

               (i) Execute and deliver to the Corporation a Notice of Exercise
for the Option Shares for which the option is exercised;

               (ii) Pay the aggregate Exercise Price for the purchased shares in
one or more of the following forms:

                    (A) Cash or check made payable to the Corporation; or

                    (B) A promissory note payable to the Corporation, but only
to the extent authorized by the Board in accordance with Paragraph 13 below; or




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<PAGE>

                    (C) Shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting purposes
and valued at their Fair Market Value on the Exercise Date; or

                    (D) Through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising the option) shall
concurrently provide irrevocable instructions (I) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for the purchased
shares plus all applicable federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (II)
to the Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.

Except to the extent the sale and remittance procedure is utilized in connection
with the option exercise, payment of the Exercise Price must accompany the
Notice of Exercise delivered to the Corporation in connection with the option
exercise;

                (iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee) have the
right to exercise this option; and

                (iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the satisfaction of
all federal, state and local income and employment tax withholding requirements
applicable to the option exercise.

            (b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends, if any, affixed thereto.

            (c) In no event may this option be exercised for any fractional
shares of Common Stock.

        10. COMPLIANCE WITH LAWS AND REGULATIONS.

            (a) The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock may be listed for trading at the time of such
exercise and issuance.

            (b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the




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<PAGE>

Corporation of any liability with respect to the non-issuance or sale of Common
Stock as to which such approval shall not have been obtained. The Corporation,
however, shall use its best efforts to obtain all such approvals.

        11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraphs 3 and 6 above, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Corporation and its successors and assigns
and Optionee, Optionee's assigns and the legal representatives, heirs and
legatees of Optionee's estate.

        12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

        13. FINANCING. The Board may, in its absolute discretion and without any
obligation to do so, permit Optionee to pay the Exercise Price for the purchased
Option Shares by delivering a full-recourse promissory note payable to the
Corporation. The terms of any such promissory note (including the interest rate,
the requirements for collateral and the terms of repayment) shall be established
by the Board in its sole discretion provided, however, that such promissory note
shall bear interest at a market rate based on the rate environment at the date
the Option is exercised and take into account the credit standing of the
Optionee. Further, such market rate shall be determined so as not to (i) be less
than the minimum rate required by the federal tax laws to avoid the imputation
of interest income to the Corporation and compensation income to the Optionee
and (ii) result in an accounting compensation charge to the Corporation.

        14. CONSTRUCTION. All decisions of the Board with respect to any
question or issue arising under this Agreement shall be conclusive and binding
on all persons having an interest in this option. For purposes of this
Agreement, whenever the context requires, the singular number shall include the
plural, and vice versa.

        15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.




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<PAGE>

                                    EXHIBIT I
                               NOTICE OF EXERCISE

               I hereby notify Restoration Hardware, Inc. (the "Corporation")
that I elect to purchase ____________ shares of the Corporation's common stock
(the "Purchased Shares") at the option exercise price of $___________ per share
(the "Exercise Price") pursuant to that certain option (the "Option") granted to
me on _____________, 200_.

               Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

_____________________, 20__
Date

                                            ____________________________________
                                            Optionee

                                            Address:____________________________

                                            ____________________________________


Print name in exact manner
it is to appear on the
stock certificate:                          ____________________________________

Address to which certificate
is to be sent, if different
from address above:                         ____________________________________

                                            ____________________________________

Social Security Number:                     ____________________________________

Employee Number:                            ____________________________________


<PAGE>

                                    APPENDIX

               The following definitions shall be in effect under the Agreement:

               A. AGREEMENT shall mean this Stock Option Agreement.

               B. BOARD shall mean the Corporation's Board of Directors and,
except with regard to the definition of Change in Control below, shall include
any committee of the Board of Directors or Officer of the Corporation to which
the Board of Directors has delegated its authority under this Agreement.

               C. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through any of the following transactions:

                  (i) A merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction; or

                  (ii) The sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation; or

                  (iii) The acquisition, directly or indirectly, by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's stockholders;
or

                  (iv) A change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time the Board approved such election or nomination.

               D. CODE shall mean the Internal Revenue Code of 1986, as amended.

               E. COMMON STOCK shall mean shares of the Corporation's common
stock.

               F. CORPORATION shall mean Restoration Hardware, Inc., a Delaware
corporation.




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<PAGE>
               G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

               H. EXERCISE DATE shall mean the date on which the option shall
have been exercised in accordance with Paragraph 9 of the Agreement.

               I. EXERCISE PRICE shall mean the exercise price per Option Share
as specified in the Grant Notice.

               J. EXPIRATION DATE shall mean the date on which the option
expires as specified in the Grant Notice.

               K. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:

                     (i) If Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for Common Stock on the
date in question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which a closing selling price is reported; or

                     (ii) If Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to the closing
selling price per share of Common Stock on the date in question on the Stock
Exchange determined by the Board to be the primary market for Common Stock, as
such price is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.

               L. GRANT DATE shall mean the date of grant of the option as
specified in the Grant Notice.

               M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

               N. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the Corporation (or any
Parent or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the




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<PAGE>

dismissal or discharge of Optionee or any other individual in the Service of the
Corporation (or any Parent or Subsidiary).

               O. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.

               P. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Section 422 of the Code.

               Q. NOTICE OF EXERCISE shall mean the notice of exercise in the
form attached hereto as Exhibit I.

               R. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option as specified in the Grant Notice.

               S. OPTIONEE shall mean the person to whom the option is granted
as specified in the Grant Notice.

               T. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

               U. PERMANENT DISABILITY shall mean the inability of Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result in death
or has lasted or can be expected to last for a continuous period of twelve (12)
months or more.

               V. SERVICE shall mean the Optionee's performance of services for
the Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.

               W. STOCK EXCHANGE shall mean the American Stock Exchange or the
New York Stock Exchange.

               X. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.




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