Document:

ex10_1.htm

    CREDIT
      AGREEMENT

    

    THIS
      CREDIT AGREEMENT (this
      "Agreement") is entered into as of May 30, 2008, by and between AMBASSADORS
      GROUP, INC., a Delaware corporation ("Borrower"), and WELLS FARGO BANK, NATIONAL
      ASSOCIATION ("Bank").

    

    RECITALS

    

    Borrower
      has requested that Bank
      extend or continue credit to Borrower as described below, and Bank has agreed
      to
      provide such credit to Borrower on the terms and conditions contained
      herein.

    

    NOW,
      THEREFORE, for valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      Bank and Borrower hereby agree as follows:

    

    ARTICLE
      I

    CREDIT
      TERMS

    

    SECTION
      1.1.                                   
LINE OF CREDIT.

    

    (a)             
      Line of
      Credit.  Subject to the terms and conditions of this Agreement,
      Bank hereby agrees to make advances to Borrower from time to time up to and
      including May 31, 2011, not to exceed at any time the aggregate principal amount
      of Twenty Million Dollars ($20,000,000.00) ("Line of Credit"), the proceeds
      of
      which shall be used for Borrower’s general corporate
      purposes.  Borrower's obligation to repay advances under the Line of
      Credit shall be evidenced by a promissory note dated as of May 30, 2008 ("Line
      of Credit Note"), all terms of which are incorporated herein by this
      reference.

    

    (b)             
      Letter of Credit
      Subfeature.  As a subfeature under the Line of Credit, Bank
      agrees from time to time during the term thereof to issue or cause an affiliate
      to issue standby letters of credit for the account of Borrower to finance
      Borrower’s working capital requirements (each, a "Letter of Credit" and
      collectively, "Letters of Credit"); provided, however,
      that the
      aggregate undrawn amount of all outstanding Letters of Credit shall not at
      any
      time exceed Two Million Five Hundred Thousand Dollars
      ($2,500,000.00).  The form and substance of each Letter of Credit
      shall be subject to approval by Bank, in its sole discretion.  No
      Letter of Credit shall have an expiration date subsequent to the maturity date
      of the Line of Credit.  The undrawn amount of all Letters of Credit
      shall be reserved under the Line of Credit and shall not be available for
      borrowings thereunder.  Each Letter of Credit shall be subject to the
      additional terms and conditions of the Letter of Credit agreements (each, a
      "Letter of Credit Agreement" and collectively, "Letter of Credit Agreements"),
      applications and any related documents required by Bank in connection with
      the
      issuance thereof.  Each drawing paid under a Letter of Credit shall be
      deemed an advance under the Line of Credit and shall be repaid by Borrower
      in
      accordance with the terms and conditions of this Agreement applicable to such
      advances; provided however, that if advances under the Line of Credit are not
      available, for any reason, at the time any drawing is paid, then Borrower shall
      immediately pay to Bank the full amount drawn, together with interest thereon
      from the date such drawing is paid to the date such amount is fully repaid
      by
      Borrower, at the rate of interest applicable to advances under the Line of
      Credit.  In such event Borrower agrees that Bank, in its sole
      discretion, may debit any account maintained by Borrower with Bank for the
      amount of any such drawing.

    

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    (c)             
      Borrowing and
      Repayment.  Borrower may from time to time during the term of
      the Line of Credit borrow, partially or wholly repay its outstanding borrowings,
      and reborrow, subject to all of the limitations, terms and conditions contained
      herein or in the Line of Credit Note; provided, however,
      that the
      total outstanding borrowings under the Line of Credit shall not at any time
      exceed the maximum principal amount available thereunder, as set forth
      above.

    

    SECTION
      1.2.                                   
INTEREST/FEES.

    

    (a)             
      Interest.  The
      outstanding principal balance of each credit subject hereto shall bear interest
      at the rate of interest set forth in each promissory note or other instrument
      or
      document executed in connection therewith.

    

    (b)             
      Computation and
      Payment.  Interest with respect to all interest rates other
      than the Prime Rate shall be computed on the basis of a 360-day year, actual
      days elapsed.  Interest based on the Prime Rate shall be computed on
      the basis of the actual days in a year of 365 (or in a leap year,
      366).  Interest shall be payable at the times and place set forth in
      each promissory note or other instrument or document required
      hereby.

    

    (c)             
      Commitment
      Fee.  Borrower shall pay to Bank a non-refundable commitment
      fee for the Line of Credit equal to Ten Thousand Dollars ($10,000.00), which
      fee
      shall be due and payable in full on the date of this Agreement.

    

    (d)             
      Letter of Credit
      Fees.  Borrower shall pay to Bank (i) for each Letter of
      Credit, fees equal to sixty hundredths percent (0.60%) per annum (computed
      on
      the basis of a 360-day year, actual days elapsed) of the face amount thereof,
      which shall be due and payable upon: (A) the issuance of such Letter of Credit
      and (B) each annual renewal date of such Letter of Credit thereafter, and
      (ii) fees upon the payment or negotiation of each drawing under any Letter
      of Credit and fees upon the occurrence of any other activity with respect to
      any
      Letter of Credit (including without limitation, the transfer, amendment or
      cancellation of any Letter of Credit) determined in accordance with Bank's
      standard fees and charges then in effect for such activity.

    

    (e)             
      Facility
      Fee.  Borrower shall pay to Bank a non-refundable facility fee
      for the Line of Credit equal to Twenty Thousand Dollars ($20,000.00), which
      fee
      shall be due and payable in full as of each May 1.

    

    SECTION
      1.3.                                   
COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all interest and
      fees due under the Line of Credit by charging Borrower's deposit account number
      96-000-83688 with Bank, or any other deposit account maintained by Borrower
      with
      Bank, for the full amount thereof when due. Should there be insufficient funds
      in any such deposit account to pay all such sums when due, the full amount
      of
      such deficiency shall be immediately due and payable by Borrower.

    

    ARTICLE
      II

    REPRESENTATIONS
      AND
      WARRANTIES

    

    Borrower
      makes the following
      representations and warranties to Bank, which representations and warranties
      shall survive the execution of this Agreement and shall continue in full force
      and effect until the full and final payment, and satisfaction and discharge,
      of
      all obligations of Borrower to Bank subject to this Agreement.

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    SECTION
      2.1.                                   
LEGAL STATUS. Borrower is a corporation, duly organized and existing and in
      good
      standing under the laws of the state of Delaware, and is qualified or licensed
      to do business (and is in good standing as a foreign corporation, if applicable)
      in all jurisdictions in which such qualification or licensing is required or
      in
      which the failure to so qualify or to be so licensed could have a material
      adverse effect on Borrower.

    

    SECTION
      2.2.                                   
AUTHORIZATION AND VALIDITY. This Agreement, the Line of Credit Note, the Letters
      of Credit, the Letter of Credit Agreement and any other instrument or document
      required hereby or at any time hereafter delivered to Bank in connection
      herewith (collectively, the "Loan Documents") have been duly authorized, and
      upon their execution and delivery in accordance with the provisions hereof
      will
      constitute legal, valid and binding agreements and obligations of Borrower
      or
      the party which executes the same, enforceable in accordance with their
      respective terms.

    

    SECTION
      2.3.                                   
NO VIOLATION. The execution, delivery and performance by Borrower of each of
      the
      Loan Documents do not violate any provision of any law or regulation, or
      contravene any provision of the Articles of Incorporation or By-Laws of
      Borrower, and to the best of Borrower’s knowledge,  result in any
      breach of or default under any contract, obligation, indenture or other
      instrument to which Borrower is a party or by which Borrower may be
      bound.

    

    SECTION
      2.4.                                   
LITIGATION. There are no pending, or to the best of Borrower's knowledge
      threatened, actions, claims, investigations, suits or proceedings by or before
      any governmental authority, arbitrator, court or administrative agency involving
      a claim in excess of $500,000.00 (each, a "Litigation Matter") other than those
      identified on Schedule 2.4 hereto and incorporated herein by this
      reference.

    

    SECTION
      2.5.                                   
CORRECTNESS OF FINANCIAL STATEMENT. The consolidated annual financial statement
      of Borrower dated December 31, 2007, and all interim financial statements
      delivered to Bank since said date, true copies of which have been delivered
      by
      Borrower to Bank prior to the date hereof, (a) are complete and correct and
      present fairly the financial condition of the Ambassador Entities, (b) disclose
      all liabilities of Borrower that are required to be reflected or reserved
      against under generally accepted accounting principles, whether liquidated
      or
      unliquidated, fixed or contingent, and (c) have been prepared in accordance
      with
      generally accepted accounting principles consistently applied. To the best
      of
      Borrower's knowledge, since the dates of such financial statements there has
      been no material adverse change in the financial condition of Borrower, nor
      has
      Borrower mortgaged, pledged, granted a security interest in or otherwise
      encumbered any of its assets or properties except in favor of Bank or as
      otherwise permitted by Bank in writing.

    

    SECTION
      2.6.                                   
INCOME TAX RETURNS. To the best of Borrower's knowledge, there are no pending
      assessments or adjustments of its income tax payable with respect to any
      year.

    

    SECTION
      2.7.                                   
NO SUBORDINATION. There is no agreement, indenture, contract or instrument
      to
      which Borrower is a party or by which Borrower may be bound that requires the
      subordination in right of payment of any of Borrower's obligations subject
      to
      this Agreement to any other obligation of Borrower.

    

    SECTION
      2.8.                                   
PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, all
      permits, consents, approvals, franchises and licenses required and rights to
      all
      trademarks, trade names, patents, and fictitious names, if any, necessary to
      enable it to conduct the business in which it is now engaged in material
      compliance with applicable law.

    

    
      
        
        

      

      
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    SECTION
      2.9.                                   
ERISA. To the best of Borrower's knowledge, Borrower is in compliance in all
      material respects with all applicable provisions of the Employee Retirement
      Income Security Act of 1974, as amended or recodified from time to time
      ("ERISA"); Borrower has not violated any provision of any defined employee
      pension benefit plan (as defined in ERISA) maintained or contributed to by
      Borrower (each, a "Plan"); no Reportable Event as defined in ERISA has occurred
      and is continuing with respect to any Plan initiated by Borrower; Borrower
      has
      met its minimum funding requirements under ERISA with respect to each Plan;
      and
      each Plan will be able to fulfill its benefit obligations as they come due
      in
      accordance with the Plan documents and under generally accepted accounting
      principles.

    

    SECTION
      2.10.                                   
OTHER OBLIGATIONS. To the best of Borrower's knowledge, Borrower is not in
      default on any obligation for borrowed money, any purchase money obligation
      or
      any other material lease, commitment, contract, instrument or
      obligation.

    

    SECTION
      2.11.                                   
ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing prior
      to the date hereof, and to the best of Borrower's knowledge, Borrower is in
      compliance in all material respects with all applicable federal or state
      environmental, hazardous waste, health and safety statutes, and any rules or
      regulations adopted pursuant thereto, which govern or affect any of Borrower's
      operations and/or properties, including without limitation, the Comprehensive
      Environmental Response, Compensation and Liability Act of 1980, the Superfund
      Amendments and Reauthorization Act of 1986, the Federal Resource Conservation
      and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as
      any
      of the same may be amended, modified or supplemented from time to time. None
      of
      the operations of Borrower is the subject of any federal or state investigation
      evaluating whether any remedial action involving a material expenditure is
      needed to respond to a release of any toxic or hazardous waste or substance
      into
      the environment. Borrower has no material contingent liability in connection
      with any release of any toxic or hazardous waste or substance into the
      environment.

    

    ARTICLE
      III

    CONDITIONS

    

    SECTION
      3.1.                                   
CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend
      any
      credit contemplated by this Agreement is subject to the fulfillment to Bank's
      satisfaction of all of the following conditions:

    

    (a)             
      Approval of Bank
      Counsel.  All legal matters incidental to the extension of
      credit by Bank shall be satisfactory to Bank's counsel.

    

    (b)             
      Documentation.  Bank
      shall have received, in form and substance satisfactory to Bank, each of the
      following, duly executed:

    

    
      	
               

            	
              (i)

            	
            	
              This
                Agreement and each promissory note or other instrument or document
                required hereby. 

            

    

    
      	
               

            	
              (ii)

            	
            	
              Corporate
                Resolution: Borrowing. 

            

    

    
      	
               

            	
              (iii)

            	
            	
              Certificate
                of Incumbency. 

            

    

    
      	
               

            	
              (iv)

            	
            	
              Such
                other documents as Bank may require under any other Section of this
                Agreement. 

            

    

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    (c)             
      Financial
      Condition.  There shall have been no material adverse change,
      as determined by Bank, in the financial condition or business of Borrower,
      nor
      any material decline, as determined by Bank, in a substantial or material
      portion of the assets of Borrower since December 31, 2007.

    

    (d)             
      Insurance.  Borrower
      shall have delivered to Bank evidence of insurance coverage on all Borrower's
      property, in form, substance, amounts, covering risks and issued by companies
      satisfactory to Bank.

    

    SECTION
      3.2.                                   
CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to make each
      extension of credit requested by Borrower hereunder shall be subject to the
      fulfillment to Bank's satisfaction of each of the following
      conditions:

    

    (a)             
      Compliance.  The
      representations and warranties contained herein and in each of the other Loan
      Documents shall be true on and as of the date of the signing of this Agreement
      and on the date of each extension of credit by Bank pursuant hereto, with the
      same effect as though such representations and warranties had been made on
      and
      as of each such date, and on each such date (unless by their terms, such
      representations and warranties were made as of a specific date), no Event of
      Default as defined herein, and no condition, event or act which with the giving
      of notice or the passage of time or both would constitute such an Event of
      Default, shall have occurred and be continuing or shall exist.

    

    (b)             
      Documentation.  Bank
      shall have received all additional documents which may be required in connection
      with such extension of credit.

    

    (c)             
      Additional Letter
      of
      Credit Documentation.  Prior to the issuance of each Letter of
      Credit, Bank shall have received a Letter of Credit Agreement properly completed
      and duly executed by Borrower.

    

    ARTICLE
      IV

    AFFIRMATIVE
      COVENANTS

    

    

    Borrower
      covenants that so long as
      Bank remains committed to extend credit to Borrower pursuant hereto, or any
      liabilities (whether direct or contingent, liquidated or unliquidated) of
      Borrower to Bank under any of the Loan Documents remain outstanding and until
      payment in full of all obligations of Borrower subject hereto, Borrower shall,
      unless Bank otherwise consents in writing:

    

    SECTION
      4.1.                                   
PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other
      liabilities due under any of the Loan Documents at the times and place and
      in
      the manner specified therein.

    

    SECTION
      4.2.                                   
ACCOUNTING RECORDS. Maintain adequate books and records in accordance with
      generally accepted accounting principles consistently applied, and permit any
      representative of Bank, at any reasonable time, to inspect, audit and examine
      such books and records, to make copies of the same, and to inspect the
      properties of Borrower; provided, however,
      that so long
      as no Event of Default exists and is continuing hereunder as of the date of
      such
      inspection, Bank shall provide Borrower with at least two (2) days' prior notice
      thereof.

    

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    SECTION
      4.3.                                   
FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and detail
      satisfactory to Bank:

    

    (a)             
      not later than 90 days after and as of the end of each fiscal year, a
      consolidated financial statement of Borrower, together with a copy of the 10K
      report filed by Borrower with the Securities Exchange Commission, audited by
      a
      certified public accountant reasonably acceptable to Bank, to include a balance
      sheet, an income statement and a statement of cash flows;

    

    (b)             
      not later than 45 days after and as of the end of each fiscal quarter, a
      consolidated financial statement of Borrower, together with a copy of the 10Q
      report filed by Borrower with the Securities Exchange Commission, to include
      a
      balance sheet, an income statement and a statement of cash flows;

    

    (c)             
      not later than 60 days prior to the last day of each fiscal year, Borrower’s
      projections of consolidated financial statements for the immediately following
      year, by fiscal quarter;

    

    (d)             
      a Compliance Certificate: (i) contemporaneously with any request for an advance
      under the Line of Credit when the outstanding principal balance of the Line
      of
      Credit at the time of such request is zero, and (ii) so long as there are
      outstanding borrowings under the Line of Credit (excluding amounts reserved
      under Section 1.1 (b)), contemporaneously with each annual and quarterly
      financial statement of Borrower required hereby. As used herein, “Compliance
      Certificate” shall mean a financial covenant compliance certificate (in form and
      substance acceptable to Bank) of Borrower, together with a certificate of the
      president or chief financial officer of Borrower that said financial statements
      are accurate and that there exists no Event of Default nor any condition, act
      or
      event with which the giving of notice or the passage of time or both would
      constitute an Event of Default;

    

    
      	
              (e)  

            	
              from
                time to time such other information as Bank may reasonably
                request.

            

    

    

    SECTION
      4.4.                                   
COMPLIANCE. Preserve and maintain all licenses, permits, governmental approvals,
      rights, privileges and franchises necessary for the conduct of its business;
      and
      comply with the provisions of all documents pursuant to which Borrower is
      organized and/or which govern Borrower's continued existence and with the
      requirements of all laws, rules, regulations and orders of any governmental
      authority applicable to Borrower and/or its business.

    

    SECTION
      4.5.                                   
INSURANCE. Maintain and keep in force, for each business in which Borrower
      is
      engaged, insurance of the types and in amounts customarily carried in similar
      lines of business, including but not limited to fire, extended coverage, public
      liability, flood, property damage and workers' compensation, with all such
      insurance carried with companies and in amounts satisfactory to Bank, and
      deliver to Bank from time to time at Bank's request schedules setting forth
      all
      insurance then in effect.

    

    SECTION
      4.6.                                   
FACILITIES. Keep all properties useful or necessary to Borrower's business
      in
      good repair and condition, and from time to time make necessary repairs,
      renewals and replacements thereto so that such properties shall be fully and
      efficiently preserved and maintained.

    

    SECTION
      4.7.                                   
TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
      indebtedness, obligations, assessments and taxes, both real or personal,
      including 

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

     

    without
      limitation federal and state income taxes and state and local property taxes
      and
      assessments, except (a) such as Borrower may in good faith contest or as to
      which a bona fide dispute may arise, and (b) for which Borrower has made
      provision, to Bank's satisfaction, for eventual payment thereof in the event
      Borrower is obligated to make such payment.

    

    SECTION
      4.8.                                   
LITIGATION. Promptly give notice in writing to Bank of any Litigation Matter
      pending or threatened against Borrower that is not disclosed on Schedule 2.4
      appended hereto.

    

    SECTION
      4.9.                                   
FINANCIAL CONDITION. Maintain Borrower's financial condition as follows using
      generally accepted accounting principles consistently applied and used
      consistently with prior practices (except to the extent modified by the
      definitions herein):

    

    (a)             
      Current Ratio not less than 1.10 to 1.0 for each fiscal quarter ending June
      30
      and not less than 1.50 to 1.0 for each fiscal quarter ending September 30,
      with
“Current Ratio” defined as the sum of cash and cash equivalents, marketable
      securities, prepaid program costs, and expenses divided by
      the sum of
      accounts payable, accrued expenses and other short-term liabilities (excluding
      deferred taxes), participant deposits, the outstanding principal balance of
      the
      Line of Credit (including the reserve for outstanding Letters of Credit) and
      the
      current portion of capitalized lease payments and long-term debt.

    

    (b)             
      Deployable Cash not less than zero at any time, with “Deployable Cash” defined
      as cash and cash equivalents, available for sale securities, prepaid program
      costs and expenses minus participant
      deposits, accounts payable, accrued expenses, and other short-term liabilities
      (excluding deferred taxes) and the current portion of long-term capitalized
      lease payments.

    

    (c)             
      Tangible Net Worth not less than $40,000,000.00 at any time, with "Tangible
      Net
      Worth" defined as the aggregate of total stockholders' equity less any
      intangible assets.

    

    (d)             
      Net income after taxes not less than $4,000,000.00 on a trailing 4-quarter
      basis, determined as of each fiscal quarter end.

    

    SECTION
      4.10.                                   
NOTICE TO BANK. Promptly (but in no event more than ten (10) days after the
      occurrence of each such event or matter) give written notice to Bank in
      reasonable detail of: (a) the occurrence of any Event of Default, or any
      condition, event or act which with the giving of notice or the passage of time
      or both would constitute an Event of Default; (b) any change in the name or
      the organizational structure of Borrower; (c) the occurrence and nature of
      any Reportable Event or Prohibited Transaction, each as defined in ERISA, or
      any
      funding deficiency with respect to any Plan; or (d) any termination or
      cancellation of any insurance policy which Borrower is required to maintain,
      or
      any uninsured or partially uninsured loss through liability or property damage,
      or through fire, theft or any other cause affecting Borrower's.

    

    ARTICLE
      V

    NEGATIVE
      COVENANTS

    

    

    Borrower
      further covenants that so
      long as Bank remains committed to extend credit to Borrower pursuant hereto,
      or
      any liabilities (whether direct or contingent, liquidated or unliquidated)
      of
      Borrower to Bank under any of the Loan Documents remain outstanding, and

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    until
      payment in full of all obligations of Borrower subject hereto, Borrower will
      not
      without Bank's prior written consent:

    

    SECTION
      5.1.                                   
USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except
      for the purposes stated in Article I hereof.

    

    SECTION
      5.2.                                   
OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any indebtedness
      or
      liabilities resulting from borrowings, loans or advances, whether secured or
      unsecured, matured or unmatured, liquidated or unliquidated, joint or several,
      except (a) the liabilities of Borrower to Bank, (b) liabilities not to exceed
      an
      aggregate of $2,500,000.00 outstanding at any time, (c) any other
      liabilities of Borrower existing as of, and disclosed to Bank prior to, the
      date
      hereof, (d) indebtedness of Borrower contractually subordinated to Borrower's
      obligations to Bank on terms and conditions acceptable to Bank, and (e)
      participant deposits.

    

    SECTION
      5.3.                                   
MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Except as identified on Schedule
      5.3
      hereto, incorporated herein by this reference, and Except in connection with
      a
      Permitted Acquisition, merge into or consolidate with any other entity; make
      any
      substantial change in the nature of Borrower's business as conducted as of
      the
      date hereof; acquire all or substantially all of the assets of any other entity
      except in connection with a Permitted Acquisition; nor sell, lease, transfer
      or
      otherwise dispose of all or a substantial or material portion of Borrower's
      assets except in the ordinary course of its business.

    

    As
      used herein, “Permitted
      Acquisition” means the purchase by Borrower of all or substantially all of the
      assets, business, stock, partnership interests or membership interests of any
      person or entity, or the acquisition by Borrower of any corporation, partnership
      or limited liability company through a merger or consolidation in which the
      surviving entity is Borrower, and which satisfies the following conditions,
      as
      determined by Bank in its sole discretion: (a) the purpose of the acquisition
      shall be to acquire a business in a similar or related line of business to
      that
      of Borrower; (b) Bank shall have received from Borrower such information
      regarding the terms and conditions of the acquisition as it shall reasonably
      require; (c) no later than thirty (30) days prior to the anticipated closing
      of
      such acquisition, Borrower shall deliver consolidated pro forma financial
      statements to Bank, in form and substance satisfactory to Bank and certified
      by
      the president or chief financial officer of Borrower, evidencing that after
      giving effect to the acquisition, no financial covenant of this Agreement shall
      be violated; (d) at the time of such acquisition, no Event of Default (as
      defined in Section 6.1 hereof), and no condition or event or act which with
      the
      giving of notice or the passage of time or both would constitute an Event of
      Default, shall exist or shall have occurred and be continuing hereunder or
      under
      any of the other Loan Documents; and (e) the acquisition shall comply with
      all
      applicable laws.

    

    SECTION
      5.4.                                   
GUARANTIES. Guarantee or become liable in any way as surety, endorser (other
      than as endorser of negotiable instruments for deposit or collection in the
      ordinary course of business), accommodation endorser or otherwise for, nor
      pledge or hypothecate any assets of Borrower as security for, any liabilities
      or
      obligations of any other person or entity, except any of the foregoing in favor
      of Bank.

    

    SECTION
      5.5.                                   
LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments
      in
      any person or entity, except (a) any of the foregoing existing as of, and
      disclosed to Bank prior to, the date hereof, and (b) intercompany loans and
      investments in other entities related to Permitted Acquisitions in an amount
      not
      to exceed an aggregate of $2,500,000.00 outstanding at any time.

    

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    SECTION
      5.6.                                   
PLEDGE OF ASSETS. Except as identified on Schedule 5.6 hereto, incorporated
      herein by this reference, mortgage, pledge, grant or permit to exist a security
      interest in, or lien upon, all or any portion of Borrower's assets now owned
      or
      hereafter acquired, except (a) purchase money security interests granted to
      secure debt permitted under Section 5.2 (b) hereof; and (b) any of the foregoing
      in favor of Bank.

    

    

    ARTICLE
      VI

    EVENTS
      OF
      DEFAULT

    

    SECTION
      6.1.                                   
The occurrence of any of the following shall constitute an "Event of Default"
      under this Agreement:

    

    (a)             
      Borrower shall fail to pay within five (5) Business Days of the date when due
      any principal, interest, fees or other amounts payable under any of the Loan
      Documents.

    

    (b)             
      Any financial statement or certificate furnished to Bank in connection with,
      or
      any representation or warranty made by Borrower or any other party under this
      Agreement or any other Loan Document shall prove to be incorrect, false or
      misleading in any material respect when furnished or made.

    

    (c)             
      Any default in the performance of or compliance with any obligation, agreement
      or other provision contained herein or in any other Loan Document (other than
      those referred to in subsections (a) and (b) above), and with respect to any
      such default which by its nature can be cured, such default shall continue
      for a
      period of twenty (20) days from its occurrence.

    

    (d)             
      Any default in the payment or performance of any obligation, or any defined
      event of default, under the terms of any contract or instrument (other than
      any
      of the Loan Documents) pursuant to which Borrower, any guarantor hereunder
      or
      any general partner or joint venturer in Borrower if a partnership or joint
      venture (with each such guarantor, general partner and/or joint venturer
      referred to herein as a "Third Party Obligor") has incurred any debt or other
      liability to any person or entity, including Bank.

    

    (e)             
      Attachments, levies or other like process in excess of $1,000,000.00 in the
      aggregate are made upon Borrower's or any Third Party Obligor's assets or a
      judgment is rendered against the property of Borrower or any Third Party Obligor
      involving a liability of more than $1,000,000.00 which shall not have been
      vacated, discharged, stayed or bonded to Bank's satisfaction within thirty
      (30)
      days from the entity thereof.

    

    (f)             
      Borrower or any Third Party Obligor shall become insolvent, or shall suffer
      or
      consent to or apply for the appointment of a receiver, trustee, custodian or
      liquidator of itself or any of its property, or shall generally fail to pay
      its
      debts as they become due, or shall make a general assignment for the benefit
      of
      creditors; Borrower or any Third Party Obligor shall file a voluntary petition
      in bankruptcy, or seeking reorganization, in order to effect a plan or other
      arrangement with creditors or any other relief under the Bankruptcy Reform
      Act,
      Title 11 of the United States Code, as amended or recodified from time to time
      ("Bankruptcy Code"), or under any state or federal law granting relief to
      debtors, whether now or hereafter in effect; or any involuntary petition or
      proceeding pursuant to the Bankruptcy Code or any other applicable state or
      federal law relating to bankruptcy, reorganization or other relief for debtors
      is filed or commenced against Borrower or any Third Party Obligor which is
      not
      dismissed within sixty (60) days of the filing of such petition, or Borrower
      or
      any Third Party Obligor shall file an answer 

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    admitting
      the jurisdiction of the court and the material allegations of any involuntary
      petition; or Borrower or any Third Party Obligor shall be adjudicated a
      bankrupt, or an order for relief shall be entered against Borrower or any Third
      Party Obligor by any court of competent jurisdiction under the Bankruptcy Code
      or any other applicable state or federal law relating to bankruptcy,
      reorganization or other relief for debtors.

    

    (g)             
      There shall exist or occur any event or condition which Bank in good faith
      believes impairs, or is substantially likely to impair, the prospect of payment
      or performance by Borrower of its obligations under any of the Loan
      Documents.

    

    (h)             
      The dissolution or liquidation of Borrower or any Third Party Obligor if a
      corporation, partnership, joint venture or other type of entity; or Borrower
      or
      any such Third Party Obligor, or any of its directors, stockholders or members,
      shall take action seeking to effect the dissolution or liquidation of Borrower
      or such Third Party Obligor.

    

    SECTION
      6.2.                                   
REMEDIES. Upon the occurrence of any Event of Default: (a) all indebtedness
      of Borrower under each of the Loan Documents, any term thereof to the contrary
      notwithstanding, shall at Bank's option and without notice become immediately
      due and payable without presentment, demand, protest or notice of dishonor,
      all
      of which are hereby expressly waived by Borrower; (b) the obligation, if
      any, of Bank to extend any further credit under any of the Loan Documents shall
      immediately cease and terminate; and (c) Bank shall have all rights, powers
      and remedies available under each of the Loan Documents, or accorded by law,
      including without limitation the right to resort to any or all security for
      any
      credit subject hereto and to exercise any or all of the rights of a beneficiary
      or secured party pursuant to applicable law.  All rights, powers and
      remedies of Bank may be exercised at any time by Bank and from time to time
      after the occurrence of an Event of Default, are cumulative and not exclusive,
      and shall be in addition to any other rights, powers or remedies provided by
      law
      or equity.

    

    ARTICLE
      VII

    MISCELLANEOUS

    

    SECTION
      7.1.                                   
NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right,
      power or remedy under any of the Loan Documents shall affect or operate as
      a
      waiver of such right, power or remedy; nor shall any single or partial exercise
      of any such right, power or remedy preclude, waive or otherwise affect any
      other
      or further exercise thereof or the exercise of any other right, power or remedy.
      Any waiver, permit, consent or approval of any kind by Bank of any breach of
      or
      default under any of the Loan Documents must be in writing and shall be
      effective only to the extent set forth in such writing.

    

    SECTION
      7.2.                                   
NOTICES. All notices, requests and demands which any party is required or may
      desire to give to any other party under any provision of this Agreement must
      be
      in writing delivered to each party at the following address:

    

    BORROWER:            AMBASSADORS
      GROUP, INC.

    1956
      Ambassador Way

    Spokane,
      Washington
      99224-4009

    

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    BANK:                       WELLS
      FARGO BANK, NATIONAL ASSOCIATION

    601
      West 1st
      Avenue,
      9th
      Floor

    Spokane,
      Washington 99201

    

    or
      to
      such other address as any party may designate by written notice to all other
      parties.  Each such notice, request and demand shall be deemed given
      or made as follows:  (a) if sent by hand delivery, upon delivery;
      (b) if sent by mail, upon the earlier of the date of receipt or three (3)
      days after deposit in the U.S. mail, first class and postage prepaid; and
      (c) if sent by telecopy, upon receipt.

    

    SECTION
      7.3.                                   
COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Bank immediately
      upon
      demand the full amount of all payments, advances, charges, costs and expenses,
      including reasonable attorneys' fees (to include outside counsel fees and all
      allocated costs of Bank's in-house counsel), expended or incurred by Bank in
      connection with (a) Bank's continued administration of this Agreement and the
      other Loan Documents, and the preparation of any amendments and waivers hereto
      and thereto, (b) the enforcement of Bank's rights and/or the collection of
      any amounts which become due to Bank under any of the Loan Documents, and
      (c) the prosecution or defense of any action in any way related to any of
      the Loan Documents, including without limitation, any action for declaratory
      relief, whether incurred at the trial or appellate level, in an arbitration
      proceeding or otherwise, and including any of the foregoing incurred in
      connection with any bankruptcy proceeding (including without limitation, any
      adversary proceeding, contested matter or motion brought by Bank or any other
      person) relating to Borrower or any other person or entity.

    

    SECTION
      7.4.                                   
SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the
      benefit of the heirs, executors, administrators, legal representatives,
      successors and assigns of the parties; provided, however,
      that
      Borrower may not assign or transfer its interests or rights hereunder without
      Bank's prior written consent.  Bank reserves the right to sell,
      assign, transfer, negotiate or grant participations in all or any part of,
      or
      any interest in, Bank's rights and benefits under each of the Loan
      Documents.  In connection therewith, Bank may disclose all documents
      and information which Bank now has or may hereafter acquire relating to any
      credit subject hereto, Borrower or its business, or any collateral required
      hereunder.

    

    SECTION
      7.5.                                   
ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents
      constitute the entire agreement between Borrower and Bank with respect to each
      credit subject hereto and supersede all prior negotiations, communications,
      discussions and correspondence concerning the subject matter hereof. This
      Agreement may be amended or modified only in writing signed by each party
      hereto.

    

    SECTION
      7.6.                                   
NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the
      sole protection and benefit of the parties hereto and their respective permitted
      successors and assigns, and no other person or entity shall be a third party
      beneficiary of, or have any direct or indirect cause of action or claim in
      connection with, this Agreement or any other of the Loan Documents to which
      it
      is not a party.

    

    SECTION
      7.7.                                   
TIME. Time is of the essence of each and every provision of this Agreement
      and
      each other of the Loan Documents.

    

    SECTION
      7.8.                                   
SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
      prohibited by or invalid under applicable law, such provision shall be
      ineffective only to 

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    the
      extent of such prohibition or invalidity without invalidating the remainder
      of
      such provision or any remaining provisions of this Agreement.

    

    SECTION
      7.9.                                     
COUNTERPARTS. This Agreement may be executed in any number of counterparts,
      each
      of which when executed and delivered shall be deemed to be an original, and
      all
      of which when taken together shall constitute one and the same
      Agreement.

    

    SECTION
      7.10.                                   
GOVERNING LAW. This Agreement shall be governed by and construed in accordance
      with the laws of the State of Washington.

    

    SECTION
      7.11.                                   
ARBITRATION.

    

    (a)             
      Arbitration.  The
      parties hereto agree, upon demand by any party, to submit to binding arbitration
      all claims, disputes and controversies between or among them (and their
      respective employees, officers, directors, attorneys, and other agents), whether
      in tort, contract or otherwise in any way arising out of or relating to (i)
      any
      credit subject hereto, or any of the Loan Documents, and their negotiation,
      execution, collateralization, administration, repayment, modification,
      extension, substitution, formation, inducement, enforcement, default or
      termination; or (ii) requests for additional credit.

    

    (b)           
      Governing
      Rules.  Any arbitration proceeding will (i) proceed in a
      location in Washington selected by the American Arbitration Association (“AAA”);
      (ii) be governed by the Federal Arbitration Act (Title 9 of the United States
      Code), notwithstanding any conflicting choice of law provision in any of the
      documents between the parties; and (iii) be conducted by the AAA, or such other
      administrator as the parties shall mutually agree upon, in accordance with
      the
      AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
      is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
      costs in which case the arbitration shall be conducted in accordance with the
      AAA’s optional procedures for large, complex commercial disputes (the commercial
      dispute resolution procedures or the optional procedures for large, complex
      commercial disputes to be referred to herein as applicable, as the
“Rules”).  If there is any inconsistency between the terms hereof and
      the Rules, the terms and procedures set forth herein shall
      control.  Any party who fails or refuses to submit to arbitration
      following a demand by any other party shall bear all costs and expenses incurred
      by such other party in compelling arbitration of any dispute.  Nothing
      contained herein shall be deemed to be a waiver by any party that is a bank
      of
      the protections afforded to it under 12 U.S.C. §91 or any similar applicable
      state law.

    

    (c)           
      No Waiver of
      Provisional Remedies, Self-Help and Foreclosure.  The
      arbitration requirement does not limit the right of any party to (i) foreclose
      against real or personal property collateral; (ii) exercise self-help remedies
      relating to collateral or proceeds of collateral such as setoff or repossession;
      or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
      relief, attachment or the appointment of a receiver, before during or after
      the
      pendency of any arbitration proceeding.  This exclusion does not
      constitute a waiver of the right or obligation of any party to submit any
      dispute to arbitration or reference hereunder, including those arising from
      the
      exercise of the actions detailed in sections (i), (ii) and (iii) of this
      paragraph.

    

    (d)           
      Arbitrator
      Qualifications and Powers.  Any arbitration proceeding in which
      the amount in controversy is $5,000,000.00 or less will be decided by a single
      arbitrator selected according to the Rules, and who shall not render an award
      of
      greater than $5,000,000.00.  Any dispute in which the amount in
      controversy exceeds $5,000,000.00 shall be decided by majority 

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    vote
      of a
      panel of three arbitrators; provided, however,
      that all
      three arbitrators must actively participate in all hearings and
      deliberations.  The arbitrator will be a neutral attorney licensed in
      the State of Washington or a neutral retired judge of the state or federal
      judiciary of Washington, in either case with a minimum of ten years experience
      in the substantive law applicable to the subject matter of the dispute to be
      arbitrated.  The arbitrator will determine whether or not an issue is
      arbitratable and will give effect to the statutes of limitation in determining
      any claim.  In any arbitration proceeding the arbitrator will decide
      (by documents only or with a hearing at the arbitrator's discretion) any
      pre-hearing motions which are similar to motions to dismiss for failure to
      state
      a claim or motions for summary adjudication.  The arbitrator shall
      resolve all disputes in accordance with the substantive law of Washington and
      may grant any remedy or relief that a court of such state could order or grant
      within the scope hereof and such ancillary relief as is necessary to make
      effective any award.  The arbitrator shall also have the power to
      award recovery of all costs and fees, to impose sanctions and to take such
      other
      action as the arbitrator deems necessary to the same extent a judge could
      pursuant to the Federal Rules of Civil Procedure, the Washington Rules of Civil
      Procedure or other applicable law.  Judgment upon the award rendered
      by the arbitrator may be entered in any court having
      jurisdiction.  The institution and maintenance of an action for
      judicial relief or pursuit of a provisional or ancillary remedy shall not
      constitute a waiver of the right of any party, including the plaintiff, to
      submit the controversy or claim to arbitration if any other party contests
      such
      action for judicial relief.

    

    (e)           
      Discovery.  In
      any arbitration proceeding, discovery will be permitted in accordance with
      the
      Rules.  All discovery shall be expressly limited to matters directly
      relevant to the dispute being arbitrated and must be completed no later than
      20
      days before the hearing date.  Any requests for an extension of the
      discovery periods, or any discovery disputes, will be subject to final
      determination by the arbitrator upon a showing that the request for discovery
      is
      essential for the party's presentation and that no alternative means for
      obtaining information is available.

    

    (f)           
      Class Proceedings
      and
      Consolidations.  No party hereto shall be entitled to join or
      consolidate disputes by or against others in any arbitration, except parties
      who
      have executed any Loan Document, or to include in any arbitration any dispute
      as
      a representative or member of a class, or to act in any arbitration in the
      interest of the general public or in a private attorney general
      capacity.

    

    (g)           
      Payment Of Arbitration
      Costs And Fees.  The arbitrator shall award all costs and
      expenses of the arbitration proceeding.

    

    (h)           
      Miscellaneous.  To
      the maximum extent
      practicable, the AAA, the arbitrators and the parties shall take all action
      required to conclude any arbitration proceeding within 180 days of the filing
      of
      the dispute with the AAA.  No arbitrator or other party to an
      arbitration proceeding may disclose the existence, content or results thereof,
      except for disclosures of information by a party required in the ordinary course
      of its business or by applicable law or regulation.  If more than one
      agreement for arbitration by or between the parties potentially applies to
      a
      dispute, the arbitration provision most directly related to the Loan Documents
      or the subject matter of the dispute shall control.  This arbitration
      provision shall survive termination, amendment or expiration of any of the
      Loan
      Documents or any relationshipbetween the
      parties.

    

    ORAL
      AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
      ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
      WASHINGTON  LAW.

    

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

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

    

                
       WELLS FARGO BANK,

    AMBASSADORS
      GROUP,
      INC.                                                                                                                         
 NATIONAL ASSOCIATION

    

    By:
      ________________________________                                                                                                
By: ____________________________

          Chadwick
      J. Byrd, Chief Financial
      Officer                                                                                                          
Thomas Beil, Relationship Manager

            

    By:
      ________________________________
    
      Jeffrey D. Thomas, Chief Executive Officer and President

           

    

 

     

    

    

    
      
        
        

      

      
        -14-ex10_2.htm

    REVOLVING
      LINE OF CREDIT NOTE

    

    $20,000,000.00

     Spokane,
      Washington

    May
      30,
      2008

    

    FOR
      VALUE RECEIVED, the undersigned
      AMBASSADORS GROUP, INC. ("Borrower") promises to pay to the order of WELLS
      FARGO
      BANK, NATIONAL ASSOCIATION ("Bank") at its office at Inland RCBO, 601 West
      1st
      Avenue, 9th
      Floor,
      Spokane, Washington 99201, or at such other place as the holder hereof may
      designate, in lawful money of the United States of America and in immediately
      available funds, the principal sum of Twenty Million Dollars ($20,000,000.00),
      or so much thereof as may be advanced and be outstanding, with interest thereon,
      to be computed on each advance from the date of its disbursement as set forth
      herein.

    

    DEFINITIONS:

    

    As
      used herein, the following terms
      shall have the meanings set forth after each, and any other term defined in
      this
      Note shall have the meaning set forth at the place defined:

    

    (a)           
      "Business Day" means any day except a Saturday, Sunday or any other day on
      which
      commercial banks in Washington are authorized or required by law to
      close.

    

    (b)           
      "Fixed Rate Term" means a period commencing on a Business Day and continuing
      for
      1, 2, 3 or 6 months, as designated by Borrower, during which all or a portion
      of
      the outstanding principal balance of this Note bears interest determined in
      relation to LIBOR; provided however, that no Fixed Rate Term may be selected
      for
      a principal amount less than One Million Dollars ($1,000,000.00); and provided
      further, that no Fixed Rate Term shall extend beyond the scheduled maturity
      date
      hereof. If any Fixed Rate Term would end on a day which is not a Business Day,
      then such Fixed Rate Term shall be extended to the next succeeding Business
      Day.

    

    (c)           
      "LIBOR" means the rate per annum (rounded upward, if necessary, to the nearest
      whole 1/16 of 1%) and determined pursuant to the following formula:

    

    
      	
              LIBOR
                =

            	
              Base
                LIBOR

            	 
	 	
              100%
                - LIBOR Reserve Percentage

            	 

    

    

                   (i)
      "Base LIBOR" means the
      rate per
      annum for United States dollar deposits quoted by Bank as the Inter-Bank Market
      Offered Rate, with the understanding that such rate is quoted by Bank for the
      purpose of calculating effective rates of interest for loans making reference
      thereto, on the first day of a Fixed Rate Term for delivery of funds on said
      date for a period of time approximately equal to the number of days in such
      Fixed Rate Term and in an amount approximately equal to the principal amount
      to
      which such Fixed Rate Term applies.  Borrower understands and agrees
      that Bank may base its quotation of the Inter-Bank Market Offered Rate upon
      such
      offers or other market indicators of the Inter-Bank Market as Bank in its
      discretion deems appropriate including, but not limited to, the rate offered
      for
      U.S. dollar deposits on the London Inter-Bank Market.

    

                   (ii)
      "LIBOR Reserve Percentage"
      means the reserve percentage prescribed by the Board of Governors of the Federal
      Reserve System (or any successor) for "Eurocurrency 

     

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    Liabilities"
      (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted
      by Bank for expected changes in such reserve percentage during the applicable
      Fixed Rate Term.

    

                   (d)
      "Prime Rate" means at any
      time
      the rate of interest most recently announced within Bank at its principal office
      as its Prime Rate, with the understanding that the Prime Rate is one of Bank's
      base rates and serves as the basis upon which effective rates of interest are
      calculated for those loans making reference thereto, and is evidenced by the
      recording thereof after its announcement in such internal publication or
      publications as Bank may designate.

    

    INTEREST:

    

    (a)           
      Interest.  The
      outstanding principal balance of this Note shall bear interest either (i) at
      a
      fluctuating rate per annum equal to Prime Rate in effect from time to time,
      or
      (ii) at a fixed rate per annum determined by Bank to be eight hundred
      seventy-five thousandths percent (0.875%) above LIBOR in effect on the first
      day
      of the applicable Fixed Rate Term.  Interest determined in relation to
      the Prime Rate shall be computed on the basis of a 365/366-day year, actual
      days
      elapsed, and interest determined in relation to the LIBOR rate shall be computed
      on the basis of a 360-day year, actual days elapsed.  When interest is
      determined in relation to the Prime Rate, each change in the rate of interest
      hereunder shall become effective on the date each Prime Rate change is announced
      within Bank.  With respect to each LIBOR selection hereunder, Bank is
      hereby authorized to note the date, principal amount, interest rate and Fixed
      Rate Term applicable thereto and any payments made thereon on Bank's books
      and
      records (either manually or by electronic entry) and/or on any schedule attached
      to this Note, which notations shall be prima facie evidence of the accuracy
      of
      the information noted.

    

    (b)           
      Selection of Interest
      Rate Options.  At any time any portion of this Note bears
      interest determined in relation to LIBOR, it may be continued by Borrower at
      the
      end of the Fixed Rate Term applicable thereto so that all or a portion thereof
      bears interest determined in relation to the Prime Rate or to LIBOR for a new
      Fixed Rate Term designated by Borrower.  At any time any portion of
      this Note bears interest determined in relation to the Prime Rate, Borrower
      may
      convert all or a portion thereof so that it bears interest determined in
      relation to LIBOR for a Fixed Rate Term designated by Borrower.  At
      such time as Borrower requests an advance hereunder or wishes to select a LIBOR
      option for all or a portion of the outstanding principal balance hereof, and
      at
      the end of each Fixed Rate Term, Borrower shall give Bank notice specifying:
      (i)
      the interest rate option selected by Borrower; (ii) the principal amount
      subject thereto; and (iii) for each LIBOR selection, the length of the
      applicable Fixed Rate Term. Any such notice may be given by telephone (or such
      other electronic method as Bank may permit) so long as, with respect to each
      LIBOR selection, (A) if requested by Bank, Borrower provides to Bank written
      confirmation thereof not later than three (3) Business Days after such notice
      is
      given, and (B) such notice is given to Bank prior to 10:00 a.m. on the first
      day
      of the Fixed Rate Term, or at a later time during any Business Day if Bank,
      at
      its sole option but without obligation to do so, accepts Borrower's notice
      and
      quotes a fixed rate to Borrower.  If Borrower does not immediately
      accept a fixed rate when quoted by Bank, the quoted rate shall expire and any
      subsequent LIBOR request from Borrower shall be subject to a redetermination
      by
      Bank of the applicable fixed rate.  If no specific designation of
      interest is made at the time any advance is requested hereunder or at the end
      of
      any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest
      selection for such advance or the principal amount to which such Fixed Rate
      Term
      applied.

    

    (c)           
      Taxes
      and Regulatory Costs.  Borrower shall pay to
      Bank
      immediately upon demand, in addition to any other amounts due or to become
      due
      hereunder, any and all (i) 

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    withholdings,
      interest equalization
      taxes, stamp taxes or other taxes (except income and franchise taxes) imposed
      by
      any domestic or foreign governmental authority and related in any manner to
      LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR
      Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance
      Corporation, or similar requirements or costs imposed by any domestic or foreign
      governmental authority or resulting from compliance by Bank with any request
      or
      directive (whether or not having the force of law) from any central bank or
      other governmental authority and related in any manner to LIBOR to the extent
      they are not included in the calculation of LIBOR.  In determining
      which of the foregoing are attributable to any LIBOR option available to
      Borrower hereunder, any reasonable allocation made by Bank among its operations
      shall be conclusive and binding upon Borrower.

    

    (d)           
      Payment of
      Interest.  Interest accrued on this Note shall be payable on
      the last day of each month, commencing June 30, 2008.

    

    (e)           
      Default
      Interest.  From and after the maturity date of this Note, or
      such earlier date as all principal owing hereunder becomes due and payable
      by
      acceleration or otherwise, the outstanding principal balance of this Note shall
      bear interest until paid in full at an increased rate per annum (computed on
      the
      basis of a 360-day year, actual days elapsed) equal to two percent (2%) above
      the rate of interest from time to time applicable to this Note.

    

    BORROWING
      AND REPAYMENT:

    

    (a)           
      Borrowing and
      Repayment.  Borrower may from time to time during the term of
      this Note borrow, partially or wholly repay its outstanding borrowings, and
      reborrow, subject to all of the limitations, terms and conditions of this Note
      and of any document executed in connection with or governing this Note; provided
      however, that the total outstanding borrowings under this Note shall not at
      any
      time exceed the principal amount stated above.  The unpaid principal
      balance of this obligation at any time shall be the total amounts advanced
      hereunder by the holder hereof less the amount of principal payments made hereon
      by or for Borrower, which balance may be endorsed hereon from time to time
      by
      the holder.  The outstanding principal balance of this Note shall be
      due and payable in full on May 31, 2011.

    

    (b)           
      Advances.  Advances
      hereunder, to the total amount of the principal sum stated above, may be made
      by
      the holder at the oral or written request of (i) Chadwick J. Byrd or Margaret
      M.
      Thomas, any one acting alone, who are authorized to request advances and direct
      the disposition of any advances until written notice of the revocation of such
      authority is received by the holder at the office designated above, or (ii)
      any
      person, with respect to advances deposited to the credit of any deposit account
      of Borrower, which advances, when so deposited, shall be conclusively presumed
      to have been made to or for the benefit of Borrower regardless of the fact
      that
      persons other than those authorized to request advances may have authority
      to
      draw against such account.  The holder shall have no obligation to
      determine whether any person requesting an advance is or has been authorized
      by
      Borrower.

    

    (c)           
      Application of
      Payments.  Each payment made on this Note shall be credited
      first, to any interest then due and second, to the outstanding principal balance
      hereof.  All payments credited to principal shall be applied first, to
      the outstanding principal balance of this Note which bears interest determined
      in relation to the Prime Rate, if any, and second, to the outstanding principal
      balance of this Note which bears interest determined in relation to LIBOR,
      with
      such payments applied to the oldest Fixed Rate Term first.

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    PREPAYMENT:

    

    (a)           
      Prime
      Rate.  Borrower may prepay principal on any portion of this
      Note which bears interest determined in relation to the Prime Rate at any time,
      in any amount and without penalty.

    

    (b)           
      LIBOR.  Borrower
      may prepay principal on any portion of this Note which bears interest determined
      in relation to LIBOR at any time and in the minimum amount of One Hundred
      Thousand Dollars ($100,000.00); provided however, that if the outstanding
      principal balance of such portion of this Note is less than said amount, the
      minimum prepayment amount shall be the entire outstanding principal balance
      thereof.  In consideration of Bank providing this prepayment option to
      Borrower, or if any such portion of this Note shall become due and payable
      at
      any time prior to the last day of the Fixed Rate Term applicable thereto by
      acceleration or otherwise, Borrower shall pay to Bank immediately upon demand
      a
      fee which is the sum of the discounted monthly differences for each month from
      the month of prepayment through the month in which such Fixed Rate Term matures,
      calculated as follows for each such month:

    

    
      	
               

            	
              (i)

            	
            	
              Determine
                the
                amount of interest which would have accrued each month on the amount
                prepaid at the interest rate applicable to such amount had it remained
                outstanding until the last day of the Fixed Rate Term applicable
                thereto.
                

            

    

    

    
      	
               

            	
              (ii)

            	
            	
              Subtract
                from
                the amount determined in (i) above the amount of interest which would
                have
                accrued for the same month on the amount prepaid for the remaining
                term of
                such Fixed Rate Term at LIBOR in effect on the date of prepayment
                for new
                loans made for such term and in a principal amount equal to the amount
                prepaid. 

            

    

    

    
      	
               

            	
              (iii)

            	
            	
              If
                the result obtained in (ii) for any month is greater than zero, discount
                that difference by LIBOR used in (ii) above.

            

    

    

    Borrower
      acknowledges that prepayment of such amount may result in Bank incurring
      additional costs, expenses and/or liabilities, and that it is difficult to
      ascertain the full extent of such costs, expenses and/or
      liabilities.  Borrower, therefore, agrees to pay the above-described
      prepayment fee and agrees that said amount represents a reasonable estimate
      of
      the prepayment costs, expenses and/or liabilities of Bank.  If
      Borrower fails to pay any prepayment fee when due, the amount of such prepayment
      fee shall thereafter bear interest until paid at a rate per annum two percent
      (2%) above the Prime Rate in effect from time to time (computed on the basis
      of
      a 360-day year, actual days elapsed).

    

    EVENTS
      OF
      DEFAULT:

    

    This
      Note is made pursuant to and is
      subject to the terms and conditions of that certain Credit Agreement between
      Borrower and Bank dated as of May 1, 2008, as amended from time to time (the
      "Credit Agreement").  Any default in the payment or performance of any
      obligation under this Note which continues unremedied for five (5) Business
      Days, or any defined event of default under the Credit Agreement, shall
      constitute an "Event of Default" under this Note.

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    MISCELLANEOUS:

    

    (a)           
      Remedies.  Upon
      the occurrence of any Event of Default, the holder of this Note, at the holder's
      option, may declare all sums of principal and interest outstanding hereunder
      to
      be immediately due and payable without presentment, demand, notice of
      nonperformance, notice of protest, protest or notice of dishonor, all of which
      are expressly waived by Borrower, and the obligation, if any, of the holder
      to
      extend any further credit hereunder shall immediately cease and
      terminate.  Borrower shall pay to the holder immediately upon demand
      the full amount of all payments, advances, charges, costs and expenses,
      including reasonable attorneys' fees (to include outside counsel fees and all
      allocated costs of the holder's in-house counsel), expended or incurred by
      the
      holder in connection with the enforcement of the holder's rights and/or the
      collection of any amounts which become due to the holder under this Note, and
      the prosecution or defense of any action in any way related to this Note,
      including without limitation, any action for declaratory relief, whether
      incurred at the trial or appellate level, in an arbitration proceeding or
      otherwise, and including any of the foregoing incurred in connection with any
      bankruptcy proceeding (including without limitation, any adversary proceeding,
      contested matter or motion brought by Bank or any other person) relating to
      Borrower or any other person or entity.

    

    (b)           
      Obligations Joint
      and
      Several.  Should more than one person or entity sign this Note
      as a Borrower, the obligations of each such Borrower shall be joint and
      several.

    

    (c)           
      Governing
      Law.  This Note shall be governed by and construed in
      accordance with the laws of the State of Washington.

    

    ORAL
      AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
      ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
      LAW.

    

    IN
      WITNESS WHEREOF, the undersigned has
      executed this Note as of the date first written above.

    

    AMBASSADORS
      GROUP, INC.

    

    By:
      _________________________________

          Chadwick
      J. Byrd, Chief Financial Officer

    

    By:
      ____________________________

          Jeffery
      D. Thomas, Chief Executive Officer

    
      
        
          
            	 	
                    -5-

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