X0202 3 2007-11-09 0 0000863821 RESTORATION HARDWARE INC RSTO 0001307492 Edwards William Leland 470 UNIVERSITY AVENUE PALO ALTO X1 94301 0 0 1 1 See (FN1) and (FN2) 0001306923 Palo Alto Investors, LLC 470 UNIVERSITY AVENUE PALO ALTO CA 94301 0 0 1 0 0001012084 PALO ALTO INVESTORS 470 UNIVERSITY AVENUE PALO ALTO CA 94301 0 0 1 0 Common Stock 5933 D Common Stock 4474800 I Footnote The reported securities are owned directly by Mr. Edwards. 3,356,900, 1,032,620 and 85,280 shares are owned directly by Palo Alto Small Cap Master Fund, L.P., (PASCF), Micro Cap Partners, L.P. (MC) and UBTI Free, L.P (UBTI), respectively. Palo Alto Investors, LLC (PAI LLC) is the general partner of PASCF, MC and UBTI and has the power to vote or direct voting, or dispose or direct the disposition of, the shares owned by PASCF, MC and UBTI. Palo Alto Investors, Inc. (PAI) is the managing member of PASCF, MC and UBTI and may be deemed to share the power to vote or direct voting, or dispose or direct the disposition of, the reported securities. William L. Edwards (Mr. Edwards) is the president of PAI LLC and president and sole stockholder of PAI and may be deemed to share the power to vote or direct voting, or dispose or direct the disposition of, the reported securities. Each of the reporting persons described above disclaims beneficial ownership of the reported securities except to the extent of their pecuniary interest therein. (FN1) This report is filed jointly by the following (each a "Reporting Person" and collectively, the "Reporting Persons"): (1) PAI LLC, (2) PAI and (3) Mr. Edwards. As a result of the execution of the Stockholder Voting Agreements, dated as of November 8, 2007, by and between the Issuer and each of PASCF, MC and UBTI, each of the Reporting Persons may be deemed a member of a Section 13(d) "group" that owns more than 10% of the outstanding common stock of the Issuer. (FN2) Please note that PASCF, MC and UBTI may also be deemed members of a Section 13(d) "group" that owns more than 10% of the outstanding common stock of the Issuer along with the Reporting Persons due to their execution of Stockholder Voting Agreements, dated as of November 8, 2007, by and between the Issuer and each of PASCF, MC and UBTI. /s/ William L. Edawards 2007-11-20 Palo Alto Investors, Inc. /s/ William L. Edwards 2007-11-20 Palo Alto Investors LLC /s/ William L. Edwards 2007-11-20