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Exhibit 10.5

 
CONSULTING AGREEMENT
 
 
This Agreement ("Agreement") is made and effective as of July 1, 2007
("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 $225.00 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.
 

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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.
 
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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, 2008.
 
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.
 

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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.
 

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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 and July 1, 2006,
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, 2007. 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 and July 1, 2006, 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.
 

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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 J. Bugatto                
 
David J. Bugatto, President 

 
 
 
 
 
Client:
Date: 
 
SONOMAWEST HOLDINGS, INC.
 
 
 
By: /s/ Walker R. Stapleton         
 
Walker R Stapleton, CEO 

 

 
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