swhi10k063008.htm

Exhibit 10.2

SONOMAWEST HOLDINGS INC

SECOND AMENDED AND RESTATED 2002 STOCK INCENTIVE PLAN

ARTICLE ONE

GENERAL PROVISIONS

I. PURPOSE OF THE PLAN

This Second Amended And Restated 2002 Stock Incentive Plan is intended to promote the interests of SonomaWest Holdings, Inc. (the “Corporation”) by providing eligible persons with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to remain in the Service of the Corporation.

Capitalized terms shall have the meanings assigned to such terms in the attached Appendix.

II. STRUCTURE OF THE PLAN

A. The Plan shall be divided into two separate equity programs:

the Discretionary Option Grant Program under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock and stock appreciation rights; and

the Stock Issuance Program under which eligible persons may, at the discretion of the Plan Administrator, be issued shares of Common Stock directly, either through the immediate purchase of such shares or as a bonus for services rendered the Corporation (or any Parent or Subsidiary).

B. The provisions of Articles One and Four shall apply to all equity programs under the Plan and shall govern the interests of all persons under the Plan.

III. ADMINISTRATION OF THE PLAN

A. The Plan shall be administered by the Board or an Option Committee appointed by the Board. Should administration of the Plan be vested in an Option Committee, any discretionary option grants or stock issuances to members of the Option Committee must be authorized and approved by a disinterested majority of the Board.

B. Members of the Option Committee shall serve for such period of time as the Board may determine and may be removed by the Board at any time.

C. Each Plan Administrator shall, within the scope of its administrative functions under the Plan, have full power and authority (subject to the provisions of the Plan) to establish such rules and regulations as it may deem appropriate for proper administration of the Discretionary Option Grant and Stock Issuance Programs and to make such determinations under, and issue such interpretations of, the provisions of such programs and any outstanding options or stock issuances thereunder as it may deem necessary or advisable. Decisions of the Plan Administrator within the scope of its administrative functions under the Plan shall be final and binding on all parties who have an interest in the Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or any option or stock issuance thereunder.

D. Service on the Option Committee shall constitute service as a Board member, and members of such committee shall accordingly be entitled to full indemnification and reimbursement as Board members for their service on such committee. No member of the Option Committee shall be liable for any act or omission made in good faith with respect to the Plan or any option grants or stock issuances under the Plan.

IV. ELIGIBILITY

A. The persons eligible to participate in the Discretionary Option Grant and Stock Issuance Programs are as follows:

(i) Employees,

(ii) Officers, members of the Board or the board of directors of any Parent or Subsidiary, and

(iii) consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary).

B. Each Plan Administrator shall, within the scope of its administrative jurisdiction under the Plan, have full authority to determine: (i) with respect to the option grants or stock appreciation rights under the Discretionary Option Grant Program, which eligible persons are to receive grants, the time or times when such grants are to be made, the number of shares to be covered by each such grant, the status of a granted option as either an Incentive Option or a Non-Statutory Option, the time or times when each option is to become exercisable, the vesting schedule (if any) applicable to the option shares and the maximum term for which the option is to remain outstanding; and (ii) with respect to stock issuances under the Stock Issuance Program, which eligible persons are to receive stock issuances, the time or times when such issuances are to be made, the number of shares to be issued to each Participant, the vesting schedule (if any) applicable to the issued shares and the consideration for such shares.

C. The Plan Administrator shall have the absolute discretion either to grant options or stock appreciation rights in accordance with the Discretionary Option Grant Program or to effect stock issuances or grant share right awards in accordance with the Stock Issuance Program.

V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Corporation on the open market. The maximum number of shares of Common Stock initially reserved for issuance over the term of the Plan shall not exceed one hundred and fifty thousand (150,000) shares. No one person participating in the Plan may receive stock options, direct stock issuances and share right awards for more than fifteen thousand (15,000) shares of Common Stock in the aggregate per calendar year.

B. Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent (i) those options expire or terminate for any reason prior to exercise in full or (ii) the options are canceled in accordance with the cancellation-regrant provisions of Article Two. Unvested shares issued under the Plan and subsequently canceled or repurchased by the Corporation at the original exercise or issue price paid per share, pursuant to the Corporation’s repurchase rights under the Plan, shall be added back to the number of shares of Common Stock reserved for issuance under the Plan and shall accordingly be available for reissuance through one or more subsequent option grants or direct stock issuances under the Plan. In addition, should the exercise price of an option under the Plan be paid with shares of Common Stock or should shares of Common Stock otherwise issuable under the Plan be withheld by the Corporation in satisfaction of the withholding taxes incurred in connection with the exercise of an option or the vesting of a stock issuance under the Plan, then the number of shares of Common Stock available for issuance under the Plan shall be reduced only by the net number of shares of Common Stock issued to the holder of such option or stock issuance, and not by the gross number of shares for which the option is exercised or which vest under the stock issuance. However, shares of Common Stock underlying one or more stock appreciation rights exercised under Section V of Article Two of the Plan shall not be available for subsequent issuance under the Plan.

C. If any change is made to the 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 maximum number and/or class of securities issuable under the Plan; (ii) the number and/or class of securities for which any one person may be granted stock options, direct stock issuances and share right awards under this Plan per calendar year; and (iii) the number and/or class of securities and the exercise price per share in effect under each outstanding option under the Plan. Such adjustments to the outstanding options are to be effected in a manner which shall preclude the enlargement or dilution of rights and benefits under such options. The adjustments determined by the Plan Administrator shall be final, binding and conclusive.

ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM

I. OPTION TERMS

Each option shall be evidenced by one or more documents in the form approved by the Plan Administrator; provided, however, that each such document shall comply with the terms specified below. Each document evidencing an Incentive Option shall, in addition, be subject to the provisions of the Plan applicable to Incentive Options.

A. EXERCISE PRICE.

1. The exercise price per share shall be fixed by the Plan Administrator but shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.

2. The exercise price shall become immediately due upon exercise of the option and may, subject to the provisions of Section I of Article Four and the documents evidencing the option, be payable in one or more of the forms specified below:

(i) cash or check made payable to the Corporation, or

(ii) shares of Common Stock held for the requisite period necessary to avoid a charge to the Corporation’s earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date, or

(iii) to the extent the sale complies with all applicable laws relating to the regulation and sale of securities, through a special sale and remittance procedure pursuant to which the Optionee shall concurrently provide irrevocable written instructions to: (a) 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 (b) the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale, or

(iv) subject to such additional terms and conditions as the plan administrator shall determine, to have the number of shares deliverable to the option holder as a result of the exercise reduced by a number of shares sufficient to pay the amount the Corporation determines to be necessary to withhold for federal, state, local and other taxes as a result of the exercise of the option and, as long as no additional accounting expenses would result to the Corporation, to pay the exercise price of the option.

Except to the extent such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.

B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable at such time or times, during such period and for such number of shares as shall be determined by the Plan Administrator and set forth in the documents evidencing the option. However, no option shall have a term in excess of ten (10) years measured from the option grant date.

C. EFFECT OF TERMINATION OF SERVICE.

1. The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death:

(i) Subject to subparagraph (iv) below, any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for such period of time thereafter as shall be determined by the Plan Administrator and set forth in the documents evidencing the option.

(ii) Any option held by the Optionee at the time of death and exercisable in whole or in part at that time may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or in accordance with the laws of descent and distribution or by the Optionee’s designated beneficiary or beneficiaries of that option.

(iii) Except as otherwise determined in the discretion of the Plan Administrator either at the time the option is granted or at any time the option remains outstanding, should the Optionee’s Service be terminated for Misconduct or should the Optionee otherwise engage in Misconduct while one or more options granted to the Optionee under this Article Two are outstanding, then all those options shall terminate immediately and cease to be outstanding.

(iv) During the applicable post-Service exercise period, the option may not be exercised in the aggregate for more than the number of vested shares for which the option is exercisable on the date of the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, the option shall terminate and cease to be outstanding for any vested shares for which the option has not been exercised. However, the option shall, immediately upon the Optionee’s cessation of Service, terminate and cease to be outstanding to the extent the option is not otherwise at that time exercisable for vested shares.

2. The Plan Administrator shall have complete discretion, either at the time an option is granted or at any time while the option remains outstanding, to:

(i) extend the period of time for which the option is to remain exercisable following the Optionee’s cessation of Service from the limited exercise period otherwise in effect for that option to such greater period of time as the Plan Administrator shall deem appropriate, but in no event beyond the latest date upon which the option could have expired by its original terms under any circumstances or, if earlier, the tenth (10th) anniversary of the option grant date, and/or

(ii) permit the option to be exercised, during the applicable post-Service exercise period, not only with respect to the number of vested shares of Common Stock for which such option is exercisable at the time of the Optionee’s cessation of Service but also with respect to one or more additional installments in which the Optionee would have vested had the Optionee continued in Service.

D. STOCKHOLDER RIGHTS. The holder of an option shall have no stockholder rights with respect to the shares subject to the option until such person shall have exercised the option, paid the exercise price and become a holder of record of the purchased shares.

E. REPURCHASE RIGHTS. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Service while holding such unvested shares, the Corporation shall have the right to repurchase, at the purchase price paid per share, any or all of those unvested shares. The terms upon which such repurchase right shall be exercisable (including the period and procedure for exercise and the appropriate vesting schedule for the purchased shares) shall be established by the Plan Administrator and set forth in the document evidencing such repurchase right.

F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, Incentive Options shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or by the laws of descent and distribution following the Optionee’s death. Non-Statutory Options shall be subject to the same limitation, except that a Non-Statutory Option may 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 Optionee or one or more members of the Optionee’s Immediate Family or to the Optionee’s former spouse, to the extent such assignment is in connection with Optionee’s estate plan or pursuant to a domestic relations order. 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 and shall be set forth in such documents issued to the assignee as the Plan Administrator may deem appropriate. Notwithstanding the foregoing, the Optionee may also designate one or more persons as the beneficiary or beneficiaries of his or her outstanding options under this Article Two, and those options shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferred option subject to all the terms and conditions of the applicable agreement evidencing each such transferred option, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death.

II. INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section II, all the provisions of Articles One, Two and Four shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options when issued under the Plan shall NOT be subject to the terms of this Section II.

A. ELIGIBILITY. Incentive Options may only be granted to Employees.

B. EXERCISE PRICE. The exercise price per share shall not be less than one hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.

C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares of Common Stock (determined as of the respective date or dates of grant) for which one or more options granted to any Employee under the Plan (or any other option plan of the Corporation or any Parent or Subsidiary) may for the first time become exercisable as Incentive Options during any one calendar year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee holds two (2) or more such options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted.

D. FAILURE TO QUALIFY AS INCENTIVE OPTION. To the extent that any option governed by this Plan does not qualify as an Incentive Option by reason of the dollar limitation described in Section II.C of Article Two or for any other reason, such option shall be exercisable as a Non-Statutory Option under the Federal tax laws.

E. 10% STOCKHOLDER. If any Employee to whom an Incentive Option is granted is a 10% Stockholder, then the exercise price per share shall not be less than one hundred ten percent (110%) of the Fair Market Value per share of Common Stock on the option grant date, and the option term shall not exceed five (5) years measured from the option grant date.

III. CANCELLATION AND REGRANT OF OPTIONS

The Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected option holders, the cancellation of any or all outstanding options under the Discretionary Option Grant Program and to grant in substitution new options covering the same or different number of shares of Common Stock but with an exercise price per share based on the Fair Market Value per share of Common Stock on the new grant date.

IV. CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. No option outstanding at the time of a Change in Control shall become exercisable on an accelerated basis if and to the extent: (i) that option is, in connection with the Change in Control, 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, (ii) such option is 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 shares of Common Stock for which the option is not otherwise at that time exercisable and provides for subsequent payout in accordance with the same exercise/vesting schedule applicable to those option shares or (iii) the acceleration of such option is subject to other limitations imposed by the Plan Administrator at the time of the option grant. However, if none of the foregoing conditions are satisfied, then each option outstanding at the time of the Change in Control but not otherwise exercisable for all the shares of Common Stock at that time subject to such option shall automatically accelerate so that each such option shall, immediately prior to the effective date of the Change in Control, become exercisable for all the shares of Common Stock at the time subject to such option and may be exercised for any or all of those shares as fully vested shares of Common Stock.

B. All of the Corporation’s outstanding repurchase rights under the Discretionary Option Grant Program shall also terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control, except to the extent: (i) those repurchase rights are assigned to 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) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.

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

D. Each option which is assumed in connection with a Change in Control or otherwise continued in effect shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities which would have been issuable to the Optionee in consummation of such Change in Control had the option been exercised immediately prior to such Change in Control. Appropriate adjustments to reflect such Change in Control shall also be made to: (i) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same; (ii) the maximum number and/or class of securities available for issuance over the remaining term of the Plan; and (iii) the maximum number and/or class of securities for which any one person may be granted options, direct stock issuances and share right awards under the Plan per calendar year. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control transaction, the successor corporation may, in connection with the assumption of the outstanding options under the Discretionary Option Grant Program, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control transaction.

E. The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall, immediately prior to the effective date of a Change in Control, become exercisable for all the shares of Common Stock at that time subject to such options on an accelerated basis and may be exercised for any or all of such shares as fully vested shares of Common Stock, whether or not those options are to be assumed or otherwise continued in full force and effect or replaced with a cash incentive program pursuant to the express terms of the Change in Control transaction. In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Discretionary Option Grant Program so that those rights shall immediately terminate at the time of such Change in Control and shall not be assignable to the successor corporation (or parent thereof), and the shares subject to those terminated rights shall accordingly vest in full at the time of such Change in Control.

F. The Plan Administrator shall have full power and authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall vest and become exercisable for all the shares of Common Stock at that time subject to such options on an accelerated basis in the event the Optionee’s Service is subsequently terminated by reason of an Involuntary Termination within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control in which those options do not otherwise accelerate. Any options so accelerated shall remain exercisable for fully vested shares of Common Stock until the expiration or sooner termination of the option term. In addition, the Plan Administrator may structure one or more of the Corporation’s repurchase rights under the Discretionary Option Grant Program so that those rights shall immediately terminate with respect to any shares of Common Stock held by the Optionee at the time of his or her Involuntary Termination, and the shares subject to those terminated repurchase rights shall accordingly vest in full at that time.

G. The Plan Administrator shall have the discretionary authority to structure one or more outstanding options under the Discretionary Option Grant Program so that those options shall, immediately prior to the effective date of a Hostile Take-Over, vest and become exercisable for all the shares of Common Stock at that time subject to such options on an accelerated basis and may be exercised for any or all of such shares as fully vested shares of Common Stock. In addition, the Plan Administrator shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Discretionary Option Grant Program so that those rights shall terminate automatically upon the consummation of such Hostile Take-Over, and the shares subject to those terminated rights shall thereupon immediately vest in full. Alternatively, the Plan Administrator may condition the automatic acceleration of one or more outstanding options under the Discretionary Option Grant Program and the termination of one or more of the Corporation’s outstanding repurchase rights under such program upon the Involuntary Termination of the Optionee’s Service within a designated period (not to exceed eighteen (18) months) following the effective date of such Hostile Take-Over. Each option so accelerated shall remain exercisable for fully vested shares of Common Stock until the expiration or sooner termination of the option term.

H. The portion of any Incentive Option accelerated in connection with a Change in Control or Hostile Take-Over shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws.

I. The grant of options under the Discretionary Option Grant Program shall in no 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.

V. STOCK APPRECIATION RIGHTS

The Plan Administrator may, subject to such conditions as it may determine, grant to selected Optionees stock appreciation rights which will allow the holders of those rights to elect between the exercise of the underlying option for shares of Common Stock and the surrender of that option in exchange for a distribution from the Corporation in an amount equal to the excess of: (A) the Option Surrender Value of the number of shares for which the option is surrendered; over (B) the aggregate exercise price payable for such shares, which shall not be less than one hundred percent (100%) of the Fair Market Value per share on the grant date. The distribution may be made in shares of Common Stock valued at Fair Market Value on the option surrender date, in cash, or partly in shares and partly in cash, as the Plan Administrator shall in its sole discretion deem appropriate.

ARTICLE THREE

STOCK ISSUANCE PROGRAM

I. STOCK ISSUANCES

Shares of Common Stock may be issued under the Stock Issuance Program through direct and immediate issuances without any intervening option grants. Each such stock issuance shall be evidenced by a Stock Issuance Agreement which complies with the terms specified below. Shares of Common Stock may also be issued under the Stock Issuance Program pursuant to share right awards which entitle the recipients to receive those shares upon the attainment of designated performance goals.

II. STOCK ISSUANCE TERMS

A. PURCHASE PRICE.

1. The purchase price per share shall be fixed by the Plan Administrator, but shall not be less than eighty-five percent (85%) of the Fair Market Value per share of Common Stock on the issuance date.

2. Subject to the provisions of Section I of Article Four, shares of Common Stock may be issued under the Stock Issuance Program for any of the following items of consideration which the Plan Administrator may deem appropriate in each individual instance:

(i) cash or check made payable to the Corporation, or

(ii) past services rendered to the Corporation (or any Parent or Subsidiary).

B. VESTING PROVISIONS.

1. Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, be fully and immediately vested upon issuance or may vest in one or more installments over the Participant’s period of Service or upon attainment of specified performance objectives. The elements of the vesting schedule applicable to any unvested shares of Common Stock issued under the Stock Issuance Program shall be determined by the Plan Administrator and incorporated into the Stock Issuance Agreement. Shares of Common Stock may also be issued under the Stock Issuance Program pursuant to share right awards which entitle the recipients to receive those shares upon the attainment of designated performance goals. Upon the attainment of such performance goals, fully vested shares of Common Stock shall be issued upon satisfaction of those share right awards no later than two and one-half (2 ½) months after the last day of the year in which such shares are no longer subject to substantial risk of forfeiture within the meaning of Section 409A of the Code.

2. Any new, substituted or additional securities or other property (including money paid other than as a regular cash dividend) which the Participant may have the right to receive with respect to the Participant’s unvested shares of Common Stock by reason of any stock dividend, stock split, 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 shall be issued subject to: (i) the same vesting requirements applicable to the Participant’s unvested shares of Common Stock; and (ii) such escrow arrangements as the Plan Administrator shall deem appropriate.

3. The Participant shall have full stockholder rights with respect to any shares of Common Stock issued to the Participant under the Stock Issuance Program, whether or not the Participant’s interest in those shares is vested. Accordingly, the Participant shall have the right to vote such shares and to receive any regular cash dividends paid on such shares.

4. Should the Participant cease to remain in Service while holding one or more unvested shares of Common Stock issued under the Stock Issuance Program or should the performance objectives not be attained with respect to one or more such unvested shares of Common Stock, then those shares shall be immediately surrendered to the Corporation for cancellation, and the Participant shall have no further stockholder rights with respect to those shares. To the extent the surrendered shares were previously issued to the Participant for consideration paid in cash or cash equivalent (including the Participant’s purchase-money indebtedness but not including services rendered by the Participant), the Corporation shall repay to the Participant the cash consideration paid for the surrendered shares and shall cancel the unpaid principal balance of any outstanding purchase-money note of the Participant attributable to the surrendered shares.

5. The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock which would otherwise occur upon the cessation of the Participant’s Service or the non-attainment of the performance objectives applicable to those shares. Such waiver shall result in the immediate vesting of the Participant’s interest in the shares as to which the waiver applies. Such waiver may be effected at any time, whether before or after the Participant’s cessation of Service or the attainment or non-attainment of the applicable performance objectives.

6. Outstanding share right awards under the Stock Issuance Program shall automatically terminate, and no shares of Common Stock shall actually be issued in satisfaction of those awards, if the performance goals or Service requirements established for such awards are not attained. The Plan Administrator, however, shall have the discretionary authority to issue shares of Common Stock under one or more outstanding share right awards as to which the designated performance goals or Service requirements have not been attained.

III. CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. All of the Corporation’s outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and all the shares of Common Stock subject to those terminated rights shall immediately vest in full, in the event of any Change in Control, except to the extent (i) those repurchase rights are assigned to the successor corporation (or parent thereof) or otherwise continued in full force and effect pursuant to the express terms of the Change in Control transaction or (ii) such accelerated vesting is precluded by other limitations imposed in the Stock Issuance Agreement.

B. The Plan Administrator shall have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Stock Issuance Program so that those rights shall automatically terminate in whole or in part upon the occurrence of a Change in Control and shall not be assignable to the successor corporation (or parent thereof), and the shares of Common Stock subject to those terminated rights shall immediately vest in full at the time of such Change in Control.

C. The Plan Administrator shall also have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Stock Issuance Program so that those rights shall automatically terminate in whole or in part, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, upon the Involuntary Termination of the Participant’s Service within a designated period (not to exceed eighteen (18) months) following the effective date of any Change in Control in which those repurchase rights do not otherwise terminate.

D. The Plan Administrator shall also have the discretionary authority to structure one or more of the Corporation’s repurchase rights under the Stock Issuance Program so that those rights shall automatically terminate in whole or in part upon the occurrence of a Hostile Take-Over, and the shares of Common Stock subject to those terminated rights shall immediately vest in full at the time of such Hostile Take-Over.

ARTICLE FOUR

MISCELLANEOUS

I. FINANCING

To the extent permissible under applicable state and federal laws, the Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Discretionary Option Grant Program or the purchase price of shares issued under the Stock Issuance Program by delivering a full-recourse, interest bearing promissory note payable in one or more installments. The terms of any such promissory note (including the interest rate and the terms of repayment) shall be established by the Plan Administrator in its sole discretion. In no event may the maximum credit available to the Optionee or Participant exceed the sum of (i) the aggregate option exercise price or purchase price payable for the purchased shares plus (ii) any Federal, state and local income and employment tax liability incurred by the Optionee or the Participant in connection with the option exercise or share purchase.

II. SHARE ESCROW/LEGENDS

Unvested shares issued under the Plan may, in the Plan Administrator’s discretion, be held in escrow by the Corporation until the Participant’s interest in such shares vests or may be issued directly to the Participant with restrictive legends on the certificates evidencing those unvested shares.

III. TAX WITHHOLDING

A. The Corporation’s obligation to deliver shares of Common Stock upon the exercise of options or the issuance or vesting of such shares under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.

B. The Plan Administrator may, in its discretion, provide any or all holders of Non-Statutory Options or unvested shares of Common Stock under the Plan with the right to use shares of Common Stock in satisfaction of all or part of the Taxes incurred by such holders in connection with the exercise of their options or the vesting of their shares. Such right may be provided to any such holder in either or both of the following formats:

1. Stock Withholding: The election to have the Corporation withhold, from the shares of Common Stock otherwise issuable upon the exercise of such Non-Statutory Option or the vesting of such shares, a portion of those shares with an aggregate Fair Market Value equal to the amount of the Taxes (not to exceed one hundred percent (100%) of such Taxes) to be satisfied in such manner as designated by the holder in writing; or

2. Stock Delivery: The election to deliver to the Corporation, at the time the Non-Statutory Option is exercised or the shares vest, one or more shares of Common Stock previously acquired by such holder (other than in connection with the option exercise or share vesting triggering the Taxes) with an aggregate Fair Market Value equal to the amount of the Taxes (not to exceed one hundred percent (100%) of such Taxes) to be satisfied in such manner as designated by the holder in writing.

IV. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan shall become effective immediately upon the Plan Effective Date. Options may be granted under the Discretionary Option Grant at any time on or after the Plan Effective Date. However, no options granted under the Plan may be exercised, and no shares shall be issued under the Plan, until the Plan is approved by the Corporation’s stockholders. If such stockholder approval is not obtained within twelve (12) months after the Plan Effective Date, then all options previously granted under this Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan.

B. The Plan shall terminate upon the EARLIEST of (i) the tenth anniversary of the Plan Effective Date, (ii) the date on which all shares available for issuance under the Plan shall have been issued as fully-vested shares or (iii) the termination of all outstanding options in connection with a Change in Control. Upon such plan termination, all outstanding option grants and unvested stock issuances shall thereafter continue to have force and effect in accordance with the provisions of the documents evidencing such grants or issuances.

V. AMENDMENT OF THE PLAN

A. The Board shall have complete and exclusive power and authority to amend or modify the Plan in any or all respects. However, no such amendment or modification shall adversely affect the rights and obligations with respect to stock options or unvested stock issuances at the time outstanding under the Plan unless the Optionee or the Participant consents to such amendment or modification. In addition, certain amendments may require stockholder approval pursuant to applicable laws or regulations.

B. Options to purchase shares of Common Stock may be granted under the Discretionary Option Grant Program and shares of Common Stock may be issued under the Stock Issuance Program that are in each instance in excess of the number of shares then available for issuance under the Plan, provided any excess shares actually issued under those programs shall be held in escrow until there is obtained any required approval of an amendment sufficiently increasing the number of shares of Common Stock available for issuance under the Plan. If such approval is not obtained within twelve (12) months after the date the first such excess issuances are made, then (i) any unexercised options granted on the basis of such excess shares shall terminate and cease to be outstanding and (ii) the Corporation shall promptly refund to the Optionees and the Participants the exercise or purchase price paid for any excess shares issued under the Plan and held in escrow, together with interest (at the applicable Short Term Federal Rate) for the period the shares were held in escrow, and such shares shall thereupon be automatically canceled and cease to be outstanding.

VI. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares of Common Stock under the Plan shall be used for general corporate purposes.

VII. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any stock option under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any granted option or (ii) under the Stock Issuance Program shall be subject to the Corporation’s procurement of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the stock options granted under it and the shares of Common Stock issued pursuant to it.

B. No shares of Common Stock or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all applicable requirements of Federal and state securities laws, including the filing and effectiveness of the Form S-8 registration statement for the shares of Common Stock issuable under the Plan, and all applicable listing requirements of the Nasdaq SmallCap Market (or any stock exchange , if applicable) on which Common Stock is then quoted for trading.

VIII. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee or the Participant 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 such person) or of the Optionee or the Participant, which rights are hereby expressly reserved by each, to terminate such person’s Service at any time for any reason, with or without cause.

IX. SECTION 162(M)

It is the intent of the Corporation that any options granted under the Plan to a “covered employee” (as that term is defined in Section 162(m) of the Code) with an exercise price of not less than the Fair Market Value per share of Common Stock on the date of grant shall qualify as “qualified performance-based compensation” (within the meaning of Treas. Reg. § 1.162-27(e)) and the Plan shall be interpreted consistently with such intent. In furtherance of the foregoing, if and to the extent that the Corporation intends that an option granted under the Plan to any covered employee shall qualify as qualified performance-based compensation, all decisions regarding the grant of such option shall be made only by members of the Committee who qualify as “outside directors” within the meaning of Treas. Reg. § 1.162-27(e)(3).

X. CONFORMANCE TO SECTION 409A

It is the intent of the Corporation that Options awarded pursuant to the Plan qualify as Incentive Options or Non-Statutory Options not providing for the deferral of compensation under Treasury Regulations §§ 1.409A-1(b)(5)(ii) and 1.409A-1(b)(5)(i)(A), respectively. It is also intended that stock appreciation rights awarded pursuant to the Plan qualify as stock appreciation rights not providing for the deferral of compensation under Treasury Regulations § 1.409A-1(b)(5)(ii)(B) and that Common Stock issued pursuant to the Stock Issuance Program be issued no later than two and one-half (2 ½) months after the last day of the year in which such Common Stock is no longer subject to substantial risk of forfeitures, within the meaning of Section 409A of the Code. However, if at any time, tax advisors to the Company determine that the terms of any outstanding Option, stock appreciation right or Stock Issuance Agreement result in additional tax or interest to the holder under Section 409A of the Code, the Board shall have the authority to enter into an amendment of such Option, stock appreciation right or Stock Issuance Agreement, consistent with this Plan, that is designed to avoid such additional tax or interest. If any Option, stock appreciation right or Stock Issuance Agreement nevertheless constitutes deferred compensation within the meaning of Section 409A of the Code, any acceleration of the payment of such Option, stock appreciation right or Stock Issuance Agreement upon a Change in Control as provided under this Plan shall occur only if the Change in Control constitutes, in the good-faith determination of the Board, a change in the ownership or effective control of the Corporation, or in the ownership of a substantial portion of the assets of the Corporation, under Section 409A of the Code. If any other payment under this Plan constitutes deferred compensation within the meaning of Section 409A of the Code and if the Plan fails to satisfy the requirements of Section 409A(a)(2), (3) or (4) of the Code with respect to such payment, such provision shall be operated in a manner that, in the good-faith determination of the Board, seeks to bring the provision into compliance with those requirements while preserving as closely as possible the original intent of the provision.

APPENDIX

The following definitions shall be in effect under the Plan:

A. BOARD shall mean the Corporation’s Board of Directors.

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

(i) a stockholder-approved 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) a sale, transfer or other disposition of all or substantially all of the Corporation’s assets; 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 which the Board recommends such stockholders accept;

provided, however, the Plan Administrator shall have the discretionary authority to determine that a transaction or series of transactions does not constitute a Change in Control. Such determination by the Plan Administrator shall govern notwithstanding the fact that the determination is contrary to paragraphs (i) through (iii) set forth above.

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

D. COMMON STOCK shall mean the Corporation’s common stock.

E. CORPORATION shall mean SonomaWest Holdings, Inc., a California corporation, and its successors.

F. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option grant program in effect under the Plan.

G. EMPLOYEE shall mean an “employee” of the Corporation (or any Parent or Subsidiary), within the meaning of Section 3401(c) of the Code and the regulations thereunder.

H. EXERCISE DATE shall mean the date on which the Corporation shall have received written notice of the option exercise.

I. FAIR MARKET VALUE per share of Common Stock on any relevant date shall mean, with respect to Common Stock or other property, as of any date, the value of such Common Stock in accordance with Section 409A of the Code, or such other property, as applicable, in either case as determined in good faith by the Plan Administrator. In determining the fair market value, the Plan Administrator may consider the following items:

(i) the closing selling price per share of common stock on the date of grant.

This closing selling price shall be determined as follows:

a. If the Common Stock is at the time traded on the Nasdaq SmallCap Market, then the closing selling price per share of Common Stock on the date in question shall be used, as such price is reported on the Nasdaq SmallCap Market or any successor system.

b. If the Common Stock is at the time listed on any other Stock Exchange, then the plan administrator shall use the closing selling price per share of Common Stock on the date in question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such exchange.

(ii) the average trading volume of the Common Stock and the trading volume on the date of the grant;

(iii) the closing selling price per share of Common Stock on recent dates;

(iv) the spread between the “bid” and “ask” prices on the date of grant and on recent dates;

(v) the financial statements of the Company; and

(vi) any other information the plan administrator determines is applicable in determining the fair market value.

J. HOSTILE TAKE-OVER shall mean:

(i) 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 which the Board does not recommend such stockholders to accept; or

(ii) 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.

K. IMMEDIATE FAMILY shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships.

L. INCENTIVE OPTION shall mean an option which satisfies the requirements of Code Section 422.

M. INVOLUNTARY TERMINATION shall mean the termination of the Service of any individual which occurs by reason of:

(i) such individual’s involuntary dismissal or discharge by the Corporation for reasons other than Misconduct, or

(ii) such individual’s voluntary resignation following (A) a change in his or her position with the Corporation which materially reduces his or her level of responsibility or the level of management to which Optionee reports, (B) a reduction in his or her level of compensation (including base salary, fringe benefits and participation in any corporate-performance based bonus or incentive programs) by more than fifteen percent (15%) or (C) a relocation of such individual’s place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Corporation without the individual’s consent.

N. MISCONDUCT shall mean the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by such person 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 dismissal or discharge of any Optionee, Participant or other person 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 Code Section 422.

Q. OFFICER shall mean any person serving as the president, chief executive officer, chief financial officer, chief operating officer, treasurer, secretary or in any other managerial or administrative capacity for the Corporation or a Parent or Subsidiary of the Corporation, as determined in the Administrator’s discretion.

R. OPTION COMMITTEE shall mean the committee of two (2) or more non-employee Board members appointed by the Board to administer the Discretionary Option Grant and Stock Issuance Programs.

S. OPTIONEE shall mean any person to whom an option is granted under the Discretionary Option Grant Program.

T. OPTION SURRENDER VALUE shall mean the Fair Market Value per share of Common Stock on the date the option is surrendered to the Corporation or, in the event of a Hostile Take-Over, effected through a tender offer, the highest reported price per share of Common Stock paid by the tender offer or in effecting such Hostile Take-Over, if greater. However, if the surrendered option is an Incentive Option, the Option Surrender Value shall not exceed the Fair Market Value per share.

U. 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.

V. PARTICIPANT shall mean any person who is issued shares of Common Stock under the Stock Issuance Program.

W. PLAN shall mean the Corporation’s Amended and Restated 2002 Stock Incentive Plan, as set forth in this document.

X. PLAN ADMINISTRATOR shall mean the particular entity, whether the Option Committee or the Board, which is authorized to administer the Discretionary Option Grant and Stock Issuance Programs with respect to one or more classes of eligible persons, to the extent such entity is carrying out its administrative functions under those programs with respect to the persons under its jurisdiction.

Z. SECTION 16 INSIDER shall mean an officer or director of the Corporation subject to the short-swing profit liabilities of Section 16 of the 1934 Act.

AA. SERVICE shall mean the performance of services for the Corporation (or any Parent or Subsidiary) by a person in the capacity of an Employee, Officer, member of the board of directors or a consultant or independent advisor, except to the extent otherwise specifically provided in the documents evidencing the option grant or stock issuance.

BB. SHORT TERM FEDERAL RATE shall mean the federal short-term rate in effect under Section 1274(d) of the Code for the period the shares were held in escrow.

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

DD. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the Corporation and the Participant at the time of issuance of shares of Common Stock under the Stock Issuance Program.

EE. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect under the Plan.

FF. 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.

GG. TAXES shall mean the Federal, state and local income and employment tax liabilities incurred by the holder of options or unvested shares of Common Stock in connection with the exercise of those options or the vesting of those shares.

HH. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code Section 424(d)) possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation (or any Parent or Subsidiary).

CONSULTING AGREEMENT

This Agreement ("Agreement") is made and effective as of July 1, 2008 ("Effective Date") by and between SONOMAWEST HOLDINGS, INC. a Delaware corporation ("Client") and BUGATTO INVESTMENT COMPANY ("Consultant").

1. Services and Deliverables. Consultant will perform (i) any strategic services related to the Client’s current and future portfolio of real estate assets, including possible acquisitions of additional real estate, (ii) services that Client reasonably requests relating to the Client’s properties, including without limitation assisting Client concerning interactions with Sonoma County zoning and land use authorities, and (iii) such other services as Client and Consultant may agree upon (collectively, the "Services"). During the term of this Agreement, Consultant will make David J. Bugatto available to perform the Services. Consultant will determine the method, details and means of performing the Services.

2. Fees and Payment.

a. Hourly Fee. In consideration for the Services to be performed by Consultant, Client will pay to Consultant an hourly fee of $250.00 per hour for all hours rendered on behalf of Client. Client and Consultant agree that only the Chief Executive Officer of Client (the “CEO”) is authorized to request or authorize Services, and Consultant shall not undertake Services at the request of any other employee of Client without the prior written approval of the CEO. Client will pay Consultant for its services within fifteen (15) days of delivery of a monthly invoice. Any amounts that Client may pay to Consultant for time spent in connection with litigation-related activities (such as in connection with testimony, depositions or expert witness activity) will be subject to a separate arrangement and rates mutually agreed upon between Client and Consultant.

b. No Additional Payments. No additional amounts shall be payable in connection with performance of the Services or in connection with any transaction involving a sale of any of Client’s properties, a sale of Client’s business (whether by merger, sale of assets or other transaction) or a transaction that results in Client no longer being a public company.

c. Deductions and Withholdings. All amounts payable or which become payable under any provision of this Agreement will be subject to any deductions and withholdings that Client reasonably determines are necessary or required by law.

3. Independent Consultant Status. It is the express intention of the parties that Consultant is an independent consultant and not an employee, agent, joint venturer or partner of Client. Nothing in this Agreement will be interpreted or construed as creating or establishing the relationship of employer and employee between Client and Consultant, or any employee or agent of Consultant.

4. Additional Obligations of Consultant.

a. Equipment. Consultant will supply all tools and instrumentalities required to perform the Services under this Agreement. Consultant is not required to purchase or rent any tools, equipment or services from Client.

b. Costs and Expenses. Consultant is responsible for all costs and expenses incident to performing services hereunder, including but not limited to costs of equipment provided by Consultant, fees, fines, licenses, bonds, or taxes required of or imposed against Consultant and its assistants, if any, as costs of doing business. Client is not responsible for any expenses incurred by Consultant in performing services for Client, except for those reasonable out-of-pocket travel expenses and miscellaneous expenses incurred by Consultant in performing the Services under this Agreement.

c. Assistants; Indemnification. Consultant may, at its option and at its own expense, employ such assistants as Consultant deems necessary to perform the Services. Consultant assumes full and sole responsibility for the payment of all compensation and expenses of these assistants and for any state and federal income tax, unemployment insurance, Social Security, disability insurance and other applicable withholdings of such assistants. Consultant will provide workers' compensation insurance coverage for its employees and agents, and agrees to hold harmless and indemnify Client for any and all claims arising out of any injury, disability, or death of any of Consultant's employees or agents. Consultant will indemnify and hold Client harmless against any and all liability imposed or claimed, including attorneys' fees and other legal expenses, arising directly or indirectly from any act or failure to act of Consultant or Consultant's assistants, employees or agents, including all claims relating to injury or death of any person or damage to property.

d. Compliance With Client Policies. Consultant specifically agrees to abide by Client's standards and rules of conduct and general operating procedures while on Client's premises or otherwise while performing services pursuant to this Agreement.

e. No Assignment By Consultants. Consultant may not assign any duties or obligations under this Agreement without Client's express written consent.

f. Independent Contractor. Consultant acknowledges that, as he is an independent consultant and not an employee, he is responsible for paying all required state and federal taxes. In particular, Client will not: (i) withhold FICA (Social Security) from Consultant's payments; (ii) make state or federal unemployment insurance contributions on Consultant's behalf; (iii) withhold state or federal income tax from payment to Consultant; (iv) make disability insurance contributions on behalf of Consultant; (v) obtain workers' compensation insurance on behalf of Consultant.

g. No Participation in Employee Benefit Plans. Consultant further acknowledges that he is not eligible for participation in any benefit plan or program available to Consultant's employees, and that the fee for services has been established in recognition of Consultant being responsible for maintaining such benefit coverage as it deems appropriate.

5. Term and Termination.

a. Terms. This Agreement begins on the Effective Date and continues until the earlier to occur of (i) the mutual written agreement of Consultant and Client to terminate the Agreement; (ii) termination in accordance with the provisions set forth below; or (iii) June 30, 2009.

b. Bankruptcy, Insolvency. Either party may terminate this Agreement upon notice to the other party if a court having jurisdiction shall enter a decree or order for relief in respect of the other party in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereinafter in effect, or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) for that other party or for any substantial part of that party’s property, or order the winding up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive business days; or if the other party shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in any involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or similar official) for any substantial part of that other party’s property, or make any general assignment for the benefit of creditors, or shall take any action in furtherance of any of the foregoing.

c. Personnel. Client may terminate this Agreement upon notice to Consultant if David J. Bugatto becomes no longer available to perform the Services.

d. Material Default. If Consultant materially defaults in the performance of the Agreement or materially breaches any of the provisions and does not cure the default or breach within ten (10) days of delivery of a notice thereof from Client to Consultant, Client at its sole option may terminate the Agreement by delivering a notice to Consultant. For purposes of this section, material default or breach includes, but is not limited to: (i) failure or refusal to perform in any material respect the Services when and as contemplated; (ii) repeated failure to provide timely invoices with appropriate descriptions and approved expenses as provided herein; and (iii) negligence, misconduct, an act of dishonesty, or taking an action or conducting itself in a manner contrary or inimical to Client's best business interests or reputation.

e. Payment Defaults. If Client fails to pay Consultant fees or payment as provided herein and fails to make any required payment within ten (10) days after delivery by Consultant to Client of a late payment notice, Consultant at its option may terminate the Agreement by delivering a notice to Client.

f. Return of Materials. Upon termination of this Agreement for any reason, Consultant shall return to Client all materials of any kind in Client’s possession relating to the Services or Client.

g. Survival. The provisions of Sections 2(b), 2(c), 3, 4, 5(f), 6 and 7 shall survive expiration or termination of the Agreement for any reason.

6. Confidentiality, Trade Secrets, Work for Hire and Non-Competition.

a. Nondisclosure. Consultant recognizes that during the term of this Agreement, and in preparation therefore, he will be privy to Client's trade secrets or proprietary or other confidential or privileged information (“Confidential Information”). Consultant agrees to keep all Confidential Information in strictest confidence and not to disclose it except for legitimate purposes of Client and with Client's express written consent, either during the term of this Agreement or at any time thereafter.

b. Delivery of Materials on Termination. On termination of this Agreement, Consultant will promptly deliver to Client all equipment belonging to Client, all code and computer programs of whatever nature, as well as all manuals, letters, reports, price lists, customer lists, sales information, analyses, recommendations, and all copies thereof, and all other materials of a confidential nature regarding Client's business that are in its possession or control. Consultant agrees that the remedy at law for any breach of the foregoing will be inadequate, and that Client is entitled to seek appropriate injunctive relief in addition to any remedy at law in case of any such breach.

c. Work For Hire; Assignment of Rights. Consultant agrees that all work Consultant performs pursuant to this Agreement, and all work which relates at the time of conception or reduction to Client's business, and all work which results from work Consultant performs for Client, whenever performed during the term of this Agreement, and whether or not utilizing Client's equipment, supplies, facilities or trade secret information, is considered work made for hire for Client as such term is defined in section 101 of the Copyright Act of 1976 and belongs to Client. Consultant further agrees that in the event that this Agreement is determined not to be a work for hire agreement, Consultant will assign to Client any and all rights retained by Consultant. All Inventions (as defined below) conceived of or made by Consultant or Agent, either alone or with others, during the term of this Agreement, which (i) are developed, in whole or part, in reliance upon or any of the Client equipment, supplies, facilities or Confidential Information, or (ii) relate to the business of the Client or the Client actual or demonstrably anticipated research or development, or (iii) result from any work performed by Consultant for the Client pursuant to this Agreement, are and shall be the sole property of the Client, whether as “works for hire” or otherwise. Consultant hereby irrevocably assigns and transfers to the Client all of its right, title and interest in and to all such Inventions, and Consultant agrees not to disclose any such Inventions to others without the express written consent of Client. Consultant agrees to execute such documents as Client may reasonably request reflecting such assignment and transfer. For the purpose of this Agreement, an Invention is deemed to have been made during the term of the Agreement if, during such period, the Invention was conceived or first actually reduced to practice. Notwithstanding anything to the contrary contained herein, this Section shall not apply to any Invention which fully qualifies under Section 2870 of the California Labor Code, to the extent that such section applies to the activities of Consultant. For the purposes of this Section, “Invention” means any new formulae, know-how, techniques, applications, combinations, machines, methods, processes, algorithms, routines, subroutines, apparatuses, compositions of matter, compounds, designs, uses, plans or configurations of any kind, discovered, conceived, developed, made or produced, or any improvements of them, and shall not be limited to the definition of an invention contained in the United States patent laws.

7. General Provisions.

a. Notices. Any notices given by either party may be effected by personal delivery in writing or by mail, registered or certified, postage prepaid, or by facsimile transmission or by electronic submission, if receipt is confirmed in a commercially acceptable manner. Mailed notices are to be addressed to the parties at the addresses below:

If to Client:	SonomaWest Holdings, Inc. 2064 Highway 116, North Sebastopol, CA 95472-2662
	Attn: Chief Executive Officer

If to Consultant:	Bugatto Investment Company
	c/o David J. Bugatto
	4425 I Street
	Sacramento, CA 95819

Notices will be deemed delivered: (a) upon receipt if hand delivered; (b) three (3) days after mailing if sent by mail; and (c) one (l) business day after transmission if sent by telecopier (with electronic acknowledgment of successful transmission) or express courier, to the addresses set forth above, or such other addresses as any party may notify the other parties in accordance with this Section.

b. Entire Agreement. This Agreement supersedes any and all agreements, oral or written, between the parties with respect to rendering services by Consultant for Client, and contains all agreements between the parties. This Agreement supersedes the consulting agreements dated August 10, 2005, July 1, 2006 and July 1, 2007, between Client and Consultant, and is intended by the parties to govern all services provided and to be provided by Consultant to Client on and after July 1, 2008. Without limiting the foregoing, Consultant agrees that neither Consultant nor any of its officers, directors or owners shall have any claim for payment of any amounts described in the Consulting Agreements dated as of August 10, 2005, July 1, 2006 and July 1, 2007, by and between Consultant and the Company for payment of any amounts contemplated therein, including upon the occurrence of a transaction involving the sale of any of the Company’s properties or as a result of which the Company is no longer a public company. Any modification of this Agreement is effective only if in writing signed by the party to be charged.

c. Governing Law; Consent to Jurisdiction. The provision of this Agreement shall be governed by and interpreted in accordance with the laws of the State of California, notwithstanding any application of any doctrine of conflicts of laws. Each party irrevocably consents to the exclusive jurisdiction and venue of the state and federal courts located in Sacramento, California, in connection with any action to enforce the provisions of this Agreement, to recover damages or other relief for breach or default of this Agreement, or otherwise arising under or by reason of this Agreement, and agrees that service of process in any such action may be effected by the means provided in this Agreement for delivery of notices.

d. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original but all of which taken together shall constitute one and the same agreement.

e. Successors and Assigns. This Agreement shall be binding upon the heirs, successors and assigns of the parties.

f. Severability. If any provision contained in this Agreement is determined to be void, invalid or unenforceable in whole or in part for any reason whatsoever, it shall be enforced and given effect to the extent possible, such determination shall not affect or impair the validity of any other provision herein, nor the validity of this Agreement as a whole, and the remaining provisions will continue in full force provided that the essential purposes of the Agreement can be achieved without the invalid provision

g. Amendment. The provisions of this Agreement may be modified at any time by agreement of the parties. Any such agreement hereafter made shall be ineffective to modify this Agreement in any respect unless in writing and signed by the parties against whom enforcement of the modification or discharge is sought. Any of the terms or conditions of this Agreement may be waived in writing at any time by the party entitled to the benefit thereof, but no such waiver shall affect or impair the right of the waiving party to require observance, performance or satisfaction either of that term or condition as it applies on a subsequent occasion or of any other term or condition.

IN WITNESS WHEREOF, this Consulting Agreement has been entered into as of the date and year first above written.


	Consultant:

		BUGATTO INVESTMENT COMPANY

		By: /s/ David Bugatto
		David J. Bugatto, President


	Client:

Date: July 29, 2008		SONOMAWEST HOLDINGS, INC.

		By: /s/ Walker R. Stapleton
		Walker R Stapleton, CEO


		Page

PART I		2
Items 1 and 2.	Business and Properties	3
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	10
Item 3.	Legal Proceedings	10
Item 4.	Submission of Matters to a Vote of Security Holders	11
PART II		11
Item 5.	Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 8.	Financial Statements	20
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	40
Item 9A(T).	Controls and Procedures	40
Item 9B.	Other Information	41
PART III		41
Item 10.	Directors, Executive Officers and Corporate Governance
Item 11.	Executive Compensation	42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	42
Item 13.	Certain Relationships and Related Transactions, and Director Independence	42
Item 14.	Principal Accounting Fees and Services	42
PART IV		43
Item 15.	Exhibits and Financial Statement Schedules	43
SIGNATURES		45
Schedule III. Real Estate and Accumulated Depreciation EX-31.1 Certification of Chief Financial and Executive Officer
EX-32.2 Certification of Chief Financial and Executive Officer

Year ending June 30th	Number of Tenants Whose Leases Will Expire	Total Square Feet Covered by Remaining Long-term Leases	Annual Rent Represented by Remaining Long-term Leases
2009	0	85,335	$ 580,043
2010	1	85,335	$ 563,679
2011	2	76,733	$ 496,409
2012	1	59,238	$ 129,214
2013	0	5,417	$ 28,784
Thereafter	0	5.417	$ 124,731

Year ending June 30th	Number of Tenants Whose Leases Will Expire	Total Square Feet Covered by Remaining Long-term Leases	Annual Rent Represented by Remaining Long-term Leases
2009	3	325,435	$ 2,232,344
2010	2	267,518	$ 1,969,238
2011	1	250,801	$ 1,897,448
2012	6	247,182	$ 1,529,969
2013	2	112,843	$ 870,129
Thereafter	0	112,843	$ 2,296,314

Quarter Ending	Low		High		Adj Close*
9/30/2006	$	11.50	$	13.02	$	2.42
12/31/2006	$	10.45	$	14.00	$	2.57
3/31/2007	$	12.50	$	22.00	$	3.72
6/30/2007	$	20.00	$	29.45	$	4.93
9/30/2007	$	20.00	$	29.80	$	3.77
12/31/2007	$	13.00	$	21.25	$	3.26
3/31/2008	$	5.50	$	19.50	$	8.00
6/30/2008	$	5.00	$	8.00	$	7.00
* Closing price adjusted for dividends

Report of Independent Registered Public Account Firm	21
Balance Sheets at June 30, 2008 and 2007	22
Statements of Income for the years ended June 30, 2008 and 2007	23
Statements of Changes in Shareholders' Equity and Comprehensive Income for the years ended June 30, 2008 and 2007	24
Statements of Cash Flows for the years ended June 30, 2008 and 2007	25
Notes to Financial Statement	27
Schedule III. Real Estate and Accumulated Depreciation	46

ASSETS	June 30, 2008		June 30, 2007
CURRENT ASSETS:
Cash and cash equivalents	$	2,554	$	3,587
Restricted cash and equivalents		50		-
Marketable securities		2,673		32,819
Accounts receivable		9		39
Other receivables		7		21
Dividend claims receivable		49		-
Prepaid income taxes		47		85
Prepaid expenses and other assets		145		154
Total current assets		5,534		36,705
RENTAL PROPERTY, net		1,054		1,210
DEFERRED INCOME TAXES, net		248		222
PREPAID COMMISSIONS AND OTHER ASSETS		246		167
Total assets	$	7,082	$	38,304
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	119	$	111
Dividend claims payable		49		-
Accrued payroll and related liabilities		243		204
Income taxes payable		509		-
Accrued expenses		123		108
Unearned rents		136		102
Tenant deposits		470		376
Deferred income taxes, net		495		12,023
Total current liabilities		2,144		12,924
LONG-TERM DEBT, net of current maturities		2,500		-
Total liabilities		4,644		12,924
SHAREHOLDERS’ EQUITY:
Preferred stock: 2,500 shares authorized; no shares issued andoutstanding		-		-
Common stock: 5,000 shares authorized, par value of $0.0001; 1,241 and 1,188 shares issued and outstanding at June 30, 2008 and June 30, 2007, respectively		-		3,625
Accumulated other comprehensive income		1,389		18,301
Retained earnings		1,049		3,454
Total shareholders’ equity		2,438		25,380
Total liabilities and shareholders’ equity	$	7,082	$	38,304

	2008			2007
RENTAL REVENUE -NET	$	2,769		$	2,545
TENANT REIMBURSEMENTS		528			701
TOTAL REVENUE		3,297			3,246

OPERATING COSTS		2,704			2,676
OPERATING COSTS - RELATED PARTY EXPENSES		10			63
TOTAL OPERATING COSTS		2,714			2,739
OPERATING INCOME		583			507

INTEREST EXPENSE		(28	)		(7	)
INTEREST INCOME		153			153
GAIN ON DISTRIBUTION OF INVESTMENTS		12,666			-
OTHER INCOME		-			2
INCOME BEFORE INCOME TAX PROVISION		13,374			655
INCOME TAX PROVISION		5,383			206
NET INCOME	$	7,991		$	449

WEIGHTED AVERAGE COMMON SHARESOUTSTANDING
Basic		1,216			1,158
Diluted		1,228			1,204

INCOME PER COMMON SHARE:
Basic	$	6.57		$	0.39
Diluted	$	6.51		$	0.37

	Common Stock
	Number	Amount	Accumulated Other		Total
	Of		Comprehensive	Retained	Shareholders’
	Shares		Income	Earnings	Equity
BALANCE, JUNE 30, 2006	1,124	$2,912	$ -	$3,005	$5,917
Comprehensive income:
Net income	-	-	-	449	449
Net change in unrealized gains (loss), net of tax		-	18,301	-	18,301
Total comprehensive income					18,750
Exercise of stock options	64	403	-	-	403
Non-cash stock compensation	-	116	-	-	116
Tax benefit on exercised options	-	194	-	-	194
BALANCE, JUNE 30, 2007	1,188	3,625	18,301	3,454	25,380
Comprehensive income:
Net income	-	-	-	7,991	7,991
Net change in unrealized gains (loss), net of tax	-	-	(16,912)		(16,912
Total comprehensive loss					(8,921)
Property dividend	-	(4,306)	-	(10,396)	(14,702)
Stock compensation expense	-	64	-	-	64
Exercise of stock options	53	540	-	-	540
Tax benefit on exercise of options	-	77	-	-	77
BALANCE, JUNE 30, 2008	1,241	$ -	$ 1,389	$ 1,049	$ 2,438

	2008	2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 7,991	$ 449
Gain on distribution of investments	(12,666)	-
Loss on retirement of equipment	2	-
Stock compensation expense	64	116
Depreciation and amortization expense	193	216
Deferred income tax benefit	(356)	(71)
Changes in assets and liabilities:
Accounts receivable	30	121
Other receivables	14	(5)
Dividend claims receivable	(49)	-
Prepaid income taxes	38	(12)
Prepaid expenses and other assets	9	(20)
Prepaid commissions and other assets	(79)	14
Accounts payable	8	(137)
Dividend claims payable	49	-
Accrued expenses	15	(68)
Accrued payroll and related liabilities	39	127
Income taxes payable	509	-
Unearned rents	34	(91)
Tenant deposits	94	66
Net cash (used in) provided by operating activities	(4,061)	705
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures	(39)	(14)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt	-	(1,552)
Proceeds from loan	2,500	-
Tax benefit from exercise of stock options	77	194
Exercise of stock options	540	403
Net cash provided by (used in) financing activities	3,117	(955)
NET DECREASE IN CASH AND CASH EQUIVALENTS	$ (983)	$ (264)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	3,587	3,851
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$ 2,604	$ 3,587

SONOMAWEST HOLDINGS, INC. STATEMENTS OF CASH FLOWS CONTINUED FOR THE YEARS ENDED JUNE 30, 2008 and 2007 (AMOUNTS IN THOUSANDS) Supplemental Cash Flow Information
	2008	2007
Interest paid	$ 4	$ 95
Taxes paid	$ 5,117	$ 18

Buildings and improvements	5 to 45 years
Machinery and office equipment	3 to 15 years

	2008	2007
Land	$ 231,000	$ 231,000
Buildings, machinery and improvements	7,031,000	7,087,000
Office equipment, manuals and autos	95,000	92,000
Construction in progress	31,000	10,000
Total rental property	7,388,000	7,420,000
Accumulated depreciation	(6,334,000)	(6,210,000)
Net rental property	$1,054,000	$1,210,000

Year Ending June 30
2009	$ 2,812,000
2010	2,533,000
2011	2,394,000
2012	1,659,000
2013	899,000
Thereafter	2,421,000
Total	$ 12,718,000

(Amounts in thousands)	Cost	Gross unrealized gains	Gross unrealized losses	Fair value
June 30, 2008 – Available-for-sale securities	$ 365	$ 2,308	$ -	$ 2,673
June 30, 2007 – Available-for-sale securities	$ 2,401	$ 30,418	$ -	$ 32,819

	Scheduled principal payments
	2009	2010	2011
Note payable: term loan due May 1, 2011 interest rate equal to the Libor plus 2.25%, monthly payments of accrued interest only, secured by real property	-	-	$ 2,500,000
Less: Current maturities			(2,500,000)
Long-term debt	$ 2,500,000	$ 2,500,000	$ -

	2008	2007
Accrued payroll and related liabilities
Vacation accruals	$ 29,000	$ 17,000
Bonus accruals	214,000	187,000
	$ 243,000	$ 204,000

	2008	2007
Current:
Federal	$ 4,608,000	$ 254,000
State	1,130,000	25,000
Deferred:
Federal	$ (400,000)	$ (69,000)
State	45,000	(4,000)
Provision	$ 5,383,000	$ 206,000

	Options			Weighted Average Exercise Price		Average Remaining Contractual Term (years)	Aggregate Intrinsic Value

Balance, June 30, 2006		96,000		$	7.12
Granted		27,000		$	13.05
Cancelled		(1,000	)	$	10.00
Exercised		(65,000	)	$	6.16
Balance, June 30, 2007		57,000		$	10.42
Granted		27,000		$	6.10
Cancelled		-		$	-
Exercised		(53,000	)	$	10.09
Balance, June 30, 2008		31,000		$	7.53	9.42	$16,000
Exercisable, June 30, 2008		31,000		$	7.53	9.42	$16,000

	2008 %	2007 %
Federal statutory rate	34%	34%
State taxes, less federal tax benefit	6%	6%
Permanent difference – Stock option expense	(1)%	(4)%
Deferred tax adjustment allocated to APIC for tax windfall in excess of amount deferred	1%
Tax credits and other	-%	(5)%
	40%	31%

	2008	2007
Deferred taxes - current
Deferred tax assets:
Employee benefit accruals	$ 10,000	$ 6,000
Prepaid rents received	43,000	29,000
Stock compensation expense	25,000	49,000
State taxes deductible next year	380,000	-
State carryforward credits	-	44,000
Total deferred tax assets	458,000	128,000

Deferred tax liabilities:
Unrealized gain on available-for-sale marketable securities	(919,000)	(12,117,000)
Property taxes	(34,000)	(34,000)
Total deferred tax liabilities	(953,000)	(12,151,000)
Net deferred taxes - current	$ (495,000)	$ (12,023,000)

Deferred tax assets – long term:
Depreciation	$ 248,000	$ 222,000

	Options outstanding						Options exercisable
			Weighted
			average		Weighted				Weighted
			remaining		average				average
	Number of		contractual		exercise		Number of		exercise
Range of exercise prices	Shares		life (years)		price		shares		price
$ 5.00-7.00		26,000		9.90	$	6.10		26,000	$	6.10
$ over 10.00		5,000		8.50	$	13.05		5,000	$	13.05
Total		31,000		9.42	$	7.53		31,000	$	7.53

Exhibit No.	Description
3.1(1)	Certificate of Incorporation
3.2(2)	Bylaws
10.1(3)	1996 Stock Option Plan, as amended
10.2+	SonomaWest Holdings, Inc. Second Amended and Restated 2002 Stock Incentive Plan
10.3(5)	Form of Indemnification Agreement between the Company and its directors and officers
10.4(6)	Consulting Agreement effective as of July 1, 2007 between SonomaWest Holdings, Inc. and Bugatto Investment Company
10.5+	Consulting Agreement effective as of July 1, 2008 between SonomaWest Holdings, Inc. and Bugatto Investment Company
10.6(7)	Promissory Note dated May 21, 2008
10.7(8)	Deed of Trust dated May 21, 2008
10.8(9)	Environmental Indemnity Agreement dated May 21, 2008
11.1*	Computation of Per Share Earnings
23.1+	Consent of Independent Registered Public Accounting Firm
31.1+	Chief Executive Officer and Chief Financial Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+	Chief Executive Officer and Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES	TITLE	DATE
Principal Executive Officer and Principal Financial Officer: /s/ Walker R. Stapleton Walker R. Stapleton	President, Chief Executive Officer and Chief Financial Officer, Director	September 29, 2008
Directors:
/s/ David J. Bugatto David J. Bugatto	Director	September 29, 2008
/s/ David Janke David Janke	Director	September 29, 2008
/s/ Robert Davies Robert Davies	Director	September 29, 2008

SCHEDULE III
SonomaWest Holdings, Inc.
REAL ESTATE AND ACCUMULATED DEPRECIATION
June 30, 2008
(DOLLARS IN THOUSANDS)
Column A	Column B	Column C		Column D	Column E			Column F	Column G	Column H
				Costs
				Subsequently	Gross Amount at which Carried
		Initial Cost to Company		Capitalized	at Close of Year (Note 3)
			Buildings			Buildings
			And			And	Total	Accumulated	Year of	Year
Description	Encumbrances	Land	Improvements	Improvements	Land	Improvements	(Note 1)	Depreciation	Construction	Acquired
1365 Gravenstein Hwy. So., Sebastopol, CA	$ -	$ 72	$ 308	$ 939	$ 72	$ 1,247	$ 1,319	$ 1,118	N/A	1964
2064 Gravenstein Hwy. No., Sebastopol, CA	-	159	2,312	3,454	159	5,766	5,925	5,118	N/A	1983
	$ -	$ 231	$ 2,620	$ 4,393	$ 231	$ 7,013	$ 7,244	$ 6,236
Note 1. The changes in the total cost of land, buildings, and improvements for the two years ended June 30, are as follows:
	2008	2007
Balance at beginning of period	$ 7, 301	$ 7,301
Additions	13	-
Cost of disposed property	( 70)	( -)
Balance at end of period	$ 7,244	$ 7,301
Note 2. The changes in accumulated depreciation for the two years ended June 30, are as follows:
	2008	2007
Balance at beginning of period	$ 6,117	$ 5,911
Depreciation expense	187	206
Relief of accumulated balances related to disposed property	( 68)	( -)
Balance at end of period	$ 6,236	$ 6,117
Note 3: The gross amount at which Column E was held for Federal income tax purposes was the same as book.

Exhibit No.	Document Description
3.1(1)	Certificate of Incorporation
3.2(2)	Bylaws
10.1(3)	1996 Stock Option Plan, as amended
10.2+	SonomaWest Holdings, Inc. Second Amended and Restated 2002 Stock Incentive Plan
10.3(5)	Form of Indemnification Agreement between the Company and its directors and officers
10.4(6)	Consulting Agreement effective as of July 1, 2007 between SonomaWest Holdings, Inc. and Bugatto Investment Company
10.5+	Consulting Agreement effective as of July 1, 2008 between SonomaWest Holdings, Inc. and Bugatto Investment Company
10.6(7)	Promissory Note dated May 21, 2008
10.7(8)	Deed of Trust dated May 21, 2008
10.8(9)	Environmental Indemnity Agreement dated May 21, 2008
11.1*	Computation of Per Share Earnings
23.1+	Consent of Independent Registered Public Accounting Firm
31.1+	Chief Executive Officer and Chief Financial Officer Certification of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+	Chief Executive Officer and Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002


	YEAR ENDED JUNE 30,
	2008		2007
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING		1,216		1,158
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING		1,228		1,204
NET INCOME APPLICABLE TO COMMON STOCK	$	7,991	$	449
TOTAL INCOME PER COMMON SHARE:
Basic	$	6.57	$	0.39
Diluted	$	6.51	$	0.37