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                               GUARANTEE AGREEMENT

                                     between

                          TEMECULA VALLEY BANCORP INC.,
                                  As Guarantor,

                                       and

                            WILMINGTON TRUST COMPANY,
                              As Guarantee Trustee

                         Dated as of September 27, 2006

                        TEMECULA VALLEY STATUTORY TRUST V

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<PAGE>

                                TABLE OF CONTENTS

ARTICLE I     INTERPRETATION AND DEFINITIONS...................................2
SECTION 1.1   Interpretation...................................................2
SECTION 1.2   Definitions......................................................2

ARTICLE II    REPORTS..........................................................6
SECTION 2.1   List of Holders..................................................6
SECTION 2.2   Periodic Reports to the Guarantee Trustee........................6
SECTION 2.3   Event of Default; Waiver.........................................6
SECTION 2.4   Event of Default; Notice.........................................7

ARTICLE III   POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
              .................................................................7
SECTION 3.1   Powers and Duties of the Guarantee Trustee.......................7
SECTION 3.2   Certain Rights of the Guarantee Trustee..........................8
SECTION 3.3   Compensation....................................................10
SECTION 3.4   Indemnity.......................................................10
SECTION 3.5   Securities......................................................11

ARTICLE IV    GUARANTEE TRUSTEE...............................................11
SECTION 4.1   Guarantee Trustee; Eligibility..................................11
SECTION 4.2   Appointment, Removal and Resignation of the Guarantee Trustee...12

ARTICLE V     GUARANTEE.......................................................12
SECTION 5.1   Guarantee.......................................................12
SECTION 5.2   Waiver of Notice and Demand.....................................13
SECTION 5.3   Obligations Not Affected........................................13
SECTION 5.4   Rights of Holders...............................................14
SECTION 5.5   Guarantee of Payment............................................14
SECTION 5.6   Subrogation.....................................................14
SECTION 5.7   Independent Obligations.........................................15
SECTION 5.8   Enforcement.....................................................15

ARTICLE VI    COVENANTS AND SUBORDINATION.....................................15
SECTION 6.1   Dividends, Distributions and Payments...........................15
SECTION 6.2   Subordination...................................................16
SECTION 6.3   Pari Passu Guarantees...........................................16

ARTICLE VII   TERMINATION.....................................................17
SECTION 7.1   Termination.....................................................17

ARTICLE VIII  MISCELLANEOUS...................................................17
SECTION 8.1   Successors and Assigns..........................................17
SECTION 8.2   Amendments......................................................17

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SECTION 8.3   Notices.........................................................17
SECTION 8.4   Benefit.........................................................18
SECTION 8.5   Governing Law...................................................19
SECTION 8.6   Submission to Jurisdiction......................................19
SECTION 8.7   Counterparts; Facsimile.........................................19

                                       ii

<PAGE>

     GUARANTEE AGREEMENT, dated as of September 27, 2006, executed and delivered
by Temecula  Valley  Bancorp Inc., a California  corporation  (the  "Guarantor")
having its principal office at 27710 Jefferson Avenue #A100, Temecula, CA 92590,
and WILMINGTON  TRUST COMPANY,  a Delaware banking  corporation,  as trustee (in
such  capacity,  the  "Guarantee  Trustee"),  for the benefit of the Holders (as
defined  herein)  from  time to time of the  Preferred  Securities  (as  defined
herein) of Temecula Valley  Statutory  Trust V, a Delaware  statutory trust (the
"Issuer").

                              W I T N E S S E T H :

     WHEREAS,  pursuant to an Amended and Restated Trust Agreement,  dated as of
the date hereof (the "Trust Agreement"),  among the Guarantor, as Depositor, the
Property  Trustee,  the Delaware Trustee and the  Administrative  Trustees named
therein  and the  holders  from  time to time of the  Preferred  Securities  (as
hereinafter  defined),  the Issuer is issuing $12,000,000  aggregate Liquidation
Amount (as  defined  in the Trust  Agreement)  of its  Floating  Rate  Preferred
Securities  (Liquidation  Amount $1,000 per preferred  security) (the "Preferred
Securities") representing preferred undivided beneficial interests in the assets
of the Issuer and having the terms set forth in the Trust Agreement;

     WHEREAS,  the  Preferred  Securities  will be issued by the  Issuer and the
proceeds  thereof,  together with the proceeds from the issuance of the Issuer's
Common  Securities  (as defined  below),  will be used to purchase the Notes (as
defined in the Trust Agreement) of the Guarantor; and

     WHEREAS, as incentive for the Holders to purchase Preferred  Securities the
Guarantor desires  irrevocably and  unconditionally  to agree, to the extent set
forth herein,  to pay to the Holders of the Preferred  Securities  the Guarantee
Payments (as defined herein) and to make certain other payments on the terms and
conditions set forth herein.

     NOW,  THEREFORE,  in  consideration  of the  purchase  by  each  Holder  of
Preferred  Securities,  which purchase the Guarantor hereby agrees shall benefit
the Guarantor,  the Guarantor executes and delivers this Guarantee  Agreement to
provide  as follows  for the  benefit  of the  Holders  from time to time of the
Preferred Securities:

<PAGE>

                                   ARTICLE I

                         INTERPRETATION AND DEFINITIONS

     SECTION 1.1 Interpretation.

     In this Guarantee Agreement, unless the context otherwise requires:

          (a)    capitalized terms  used in  this  Guarantee  Agreement  but not
defined in the preamble hereto have the respective  meanings assigned to them in
Section 1.2;

          (b)    the words "include", "includes" and "including" shall be deemed
to be followed by the phrase "without limitation";

          (c)    all references to "the Guarantee Agreement" or "this  Guarantee
Agreement" are to this Guarantee Agreement as modified,  supplemented or amended
from time to time;

          (d)    all references  in this Guarantee  Agreement  to  Articles  and
Sections  are to  Articles  and  Sections  of this  Guarantee  Agreement  unless
otherwise specified;

          (e)    the  words  "hereby",  "herein",  "hereof"  and "hereunder" and
other words of similar import refer to this  Guarantee  Agreement as a whole and
not to any particular Article, Section or other subdivision;

          (f)  a reference to the  singular  includes the plural and vice versa;
and

          (g)  the  masculine,  feminine or neuter  genders  used  herein  shall
include the masculine, feminine and neuter genders.

     SECTION 1.2 Definitions.

     As used in this  Guarantee  Agreement,  the terms set  forth  below  shall,
unless the context otherwise requires, have the following meanings:

          "Affiliate" of any specified Person means any other Person directly or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control  with such  specified  Person;  provided,  that the Issuer  shall not be
deemed to be an Affiliate of the Guarantor. For the purposes of this definition,
"control"  when used with  respect to any  specified  Person  means the power to
direct the  management  and  policies of such  Person,  directly or  indirectly,
whether  through the ownership of voting  securities,  by contract or otherwise;
and the terms  "controlling" and "controlled"  have meanings  correlative to the
foregoing.

          "Beneficiaries"  means any Person to whom the  Issuer is or  hereafter
becomes indebted or liable.

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          "Board  of  Directors"  means  either  the board of  directors  of the
Guarantor or any duly authorized committee of that board.

          "Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.

          "Debt" means with respect to any Person, whether recourse is to all or
a portion of the assets of such Person,  whether currently existing or hereafter
incurred,  and  whether or not  contingent  and without  duplication,  (i) every
obligation  of such Person for money  borrowed;  (ii) every  obligation  of such
Person  evidenced  by bonds,  debentures,  notes or other  similar  instruments,
including  obligations  incurred in connection with the acquisition of property,
assets or businesses;  (iii) every reimbursement  obligation of such Person with
respect to letters of credit,  bankers' acceptances or similar facilities issued
for the account of such Person;  (iv) every  obligation of such Person issued or
assumed as the deferred  purchase  price of property or services (but  excluding
trade accounts  payable arising in the ordinary  course of business);  (v) every
capital lease  obligation of such Person;  (vi) all indebtedness of such Person,
whether  incurred  on or  prior  to the  date of  this  Guarantee  Agreement  or
thereafter  incurred,  for claims in respect of derivative  products,  including
interest rate, foreign exchange rate and commodity forward  contracts,  options,
swaps and similar  arrangements;  (vii) every obligation of the type referred to
in clauses  (i)  through  (vi) of another  Person and all  dividends  of another
Person the payment of which,  in either case,  such Person has  guaranteed or is
responsible or liable for, directly or indirectly,  as obligor or otherwise; and
(viii) any renewals, extensions,  refundings, amendments or modifications of any
obligation of the type referred to in clauses (i) through (vii).

          "Event of  Default"  means a default  by the  Guarantor  on any of its
payment or other  obligations  under this Guarantee  Agreement;  provided,  that
except  with  respect to a default in payment  of any  Guarantee  Payments,  the
Guarantor shall have received  notice of default from the Guarantee  Trustee and
shall not have cured such default  within thirty (30) days after receipt of such
notice.

          "Guarantee  Payments" means the following  payments or  distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by or on behalf  of the  Issuer:  (i) any  accumulated  and  unpaid
Distributions  (as  defined in the Trust  Agreement)  required to be paid on the
Preferred  Securities,  to the  extent  the  Issuer  shall  have  funds  on hand
available  therefor at such time,  (ii) the Redemption  Price (as defined in the
Trust  Agreement)  with respect to any  Preferred  Securities  to the extent the
Issuer shall have funds on hand available  therefor at such time, and (iii) upon
a voluntary or involuntary termination, winding up or liquidation of the Issuer,
unless Notes are distributed to the Holders,  the lesser of (a) the aggregate of
the  Liquidation  Amount of $1,000 per Preferred  Security plus  accumulated and
unpaid  Distributions on the Preferred Securities to the date of payment, to the

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extent that the Issuer shall have funds available  therefor at such time and (b)
the amount of assets of the  Issuer  remaining  available  for  distribution  to
Holders in  liquidation  of the Issuer  after  satisfaction  of  liabilities  to
creditors of the Issuer in accordance  with  applicable law (in either case, the
"Liquidation Distribution").

          "Guarantee  Trustee" means Wilmington Trust Company in its capacity as
trustee hereunder,  until a Successor  Guarantee Trustee,  as defined below, has
been appointed and has accepted such  appointment  pursuant to the terms of this
Guarantee Agreement, and thereafter means each such Successor Guarantee Trustee.

          "Holder"  means any holder,  as registered on the books and records of
the Issuer, of any Preferred Securities;  provided, that, in determining whether
the holders of the requisite  percentage of Preferred  Securities have given any
request,  notice,  consent or waiver  hereunder,  "Holder" shall not include the
Guarantor,  the  Guarantee  Trustee or any  Affiliate  of the  Guarantor  or the
Guarantee Trustee.

          "Indenture" means the Junior Subordinated  Indenture,  dated as of the
date hereof,  as supplemented and amended,  between the Guarantor and Wilmington
Trust Company, as trustee.

          "List of Holders" has the meaning specified in Section 2.1.

          "Majority in Liquidation  Amount of the Preferred  Securities" means a
vote by the Holder(s),  voting separately as a class, of more than fifty percent
(50%) of the  aggregate  Liquidation  Amount of all then  outstanding  Preferred
Securities issued by the Issuer.

          "Obligations"  means  any  costs,  expenses  or  liabilities  (but not
including liabilities related to taxes) of the Issuer, other than obligations of
the  Issuer to pay to  holders  of any Trust  Securities  the  amounts  due such
holders pursuant to the terms of the Trust Securities.

          "Officers'   Certificate"   means,  with  respect  to  any  Person,  a
certificate  signed by the Chief Executive  Officer,  Chief  Financial  Officer,
President or a Vice President of such Person, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of such Person, and delivered
to the Guarantee Trustee.  Any Officers'  Certificate  delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
(other than the certificate provided pursuant to Section 2.4) shall include:

          (a)    a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;

          (b)    a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers' Certificate;

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          (c)    a statement that  each officer  has made  such  examination  or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed  opinion as to whether or not such  covenant or condition
has been complied with; and

          (d)    a statement as to whether, in the opinion of each officer, such
condition or covenant has been complied with.

          "Person" means a legal person, including any individual,  corporation,
estate, partnership,  joint venture,  association,  joint stock company, limited
liability company, trust, unincorporated  association,  government or any agency
or political subdivision thereof or any other entity of whatever nature.

          "Responsible  Officer" means,  with respect to the Guarantee  Trustee,
any Senior Vice President, any Vice President, any Assistant Vice President, the
Secretary,  any Assistant Secretary, the Treasurer, any Assistant Treasurer, any
Financial Services Officer or Assistant  Financial Services Officer or any other
officer in the  Corporate  Trust  Office of the  Guarantee  Trustee  with direct
responsibility  for the  administration  of this  Guarantee  Agreement  and also
means, with respect to a particular corporate trust matter, any other officer to
whom  such  matter  is  referred  because  of that  officer's  knowledge  of and
familiarity with the particular subject.

          "Senior  Debt" means the  principal of and any premium and interest on
(including  interest  accruing  on or  after  the  filing  of  any  petition  in
bankruptcy or for  reorganization  relating to the Guarantor whether or not such
claim for post-petition  interest is allowed in such proceeding) all Debt of the
Guarantor,  whether  incurred  on or  prior  to the  date  of the  Indenture  or
thereafter  incurred,  unless  it is  provided  in the  instrument  creating  or
evidencing  the same or  pursuant  to which the same is  outstanding,  that such
obligations  are not superior in right of payment to the  Preferred  Securities;
provided,  however,  that if the  Guarantor  is  subject to the  regulation  and
supervision of an "appropriate  Federal banking agency" within the meaning of 12
U.S.C.  1813(q),  the  Guarantor  shall  have  received  the  approval  of  such
appropriate  Federal  banking agency prior to issuing any such obligation if not
otherwise  generally  approved;  provided  further,  that  Senior Debt shall not
include  any other  debt  securities,  and  guarantees  in  respect of such debt
securities,  issued to any trust  other  than the  Issuer  (or a trustee of such
trust),  partnership  or other entity  affiliated  with the Guarantor  that is a
financing  vehicle of the Guarantor (a "financing  entity"),  in connection with
the issuance by such financing  entity of equity  securities or other securities
that are treated as equity capital for regulatory capital purposes guaranteed by
the Guarantor  pursuant to an instrument that ranks pari passu with or junior in
right of payment to this Guarantee  Agreement,  including,  without  limitation,
securities  issued  by  Temecula  Valley  Statutory  Trust  I,  Temecula  Valley
Statutory  Trust II,  Temecula  Valley  Statutory  Trust III and Temecula Valley
Statutory Trust IV.

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<PAGE>

          "Successor  Guarantee  Trustee"  means a successor  Guarantee  Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.

          "Trust  Indenture  Act"  means the  Trust  Indenture  Act of 1939,  as
amended and as in effect on the date of this Guarantee Agreement.

Capitalized or otherwise defined terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Trust Agreement as in
effect on the date hereof.

                                   ARTICLE II

                                     REPORTS

     SECTION 2.1 List of Holders.

     The  Guarantor  shall  furnish or cause to be  furnished  to the  Guarantee
Trustee at such times as the  Guarantee  Trustee may request in writing,  within
thirty (30) days after the receipt by the Guarantor of any such request, a list,
in such form as the Guarantee Trustee may reasonably  require,  of the names and
addresses  of the  Holders  (the "List of  Holders")  as of a date not more than
fifteen (15) days prior to the time such list is furnished,  in each case to the
extent such  information is in the possession or control of the Guarantor and is
not identical to a previously supplied list of Holders or has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee
may destroy any List of Holders  previously given to it on receipt of a new List
of Holders.

     SECTION 2.2 Periodic Reports to the Guarantee Trustee.

     The Guarantor  shall deliver to the Guarantee  Trustee,  within one hundred
and twenty (120) days after the end of each fiscal year of the Guarantor  ending
after the date of this Guarantee  Agreement,  an Officers'  Certificate covering
the  preceding  fiscal  year,  stating  whether or not to the  knowledge  of the
signers  thereof the Guarantor is in default in the performance or observance of
any of the  terms  or  provisions  or any of the  conditions  of this  Guarantee
Agreement  (without  regard  to any  period  of grace or  requirement  of notice
provided  hereunder)  and,  if  the  Guarantor  shall  be  in  default  thereof,
specifying  all such  defaults  and the nature and status  thereof of which they
have knowledge.

     SECTION 2.3 Event of Default; Waiver.

     The Holders of a Majority in Liquidation Amount of the Preferred Securities
may,  on  behalf  of the  Holders,  waive  any  past  Event of  Default  and its
consequences.  Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default  arising  therefrom shall be deemed to have been cured,
for every purpose of this Guarantee  Agreement,  but no such waiver shall extend
to any  subsequent  or other  default  or Event of  Default  or impair any right
consequent therefrom.

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<PAGE>

     SECTION 2.4 Event of Default; Notice.

          (a)    The Guarantee Trustee  shall, within ninety (90) days after the
occurrence  of a  default,  transmit  to the  Holders  notices  of all  defaults
actually known to the Guarantee Trustee, unless such defaults have been cured or
waived before the giving of such notice, provided, that, except in the case of a
default in the payment of a Guarantee  Payment,  the Guarantee  Trustee shall be
protected in  withholding  such notice if and so long as the Board of Directors,
the executive  committee or a trust  committee of directors  and/or  Responsible
Officers of the Guarantee  Trustee in good faith  determine that the withholding
of such  notice is in the  interests  of the  Holders.  For the  purpose of this
Section 2.4, the term "default"  ------------  means any event that is, or after
notice or lapse of time or both would become, an Event of Default.

          (b)    The Guarantee Trustee shall not be deemed to have knowledge  of
any default or Event of Default unless the Guarantee Trustee shall have received
written notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have received written notice, of such default or Event
of Default from the Guarantor or a Holder.

                                  ARTICLE III

               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

     SECTION 3.1 Powers and Duties of the Guarantee Trustee.

          (a)    This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders,  and the  Guarantee  Trustee  shall not transfer
this  Guarantee  Agreement to any Person except a Holder  exercising  its rights
pursuant to Section 5.4(d) or to a Successor  Guarantee  Trustee upon acceptance
by such  Successor  Guarantee  Trustee of its  appointment  to act as  Successor
Guarantee Trustee.  The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor  Guarantee Trustee,  upon acceptance by such
Successor Guarantee Trustee of its appointment  hereunder,  and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been  executed  and  delivered  pursuant to the  appointment  of such  Successor
Guarantee Trustee.

          (b)    The rights, immunities,  duties  and  responsibilities  of  the
Guarantee  Trustee  shall be as provided by this  Guarantee  Agreement and there
shall be no other duties or  obligations,  express or implied,  of the Guarantee
Trustee.   Notwithstanding  the  foregoing,  no  provisions  of  this  Guarantee
Agreement shall require the Guarantee Trustee to expend or risk its own funds or
otherwise incur any financial  liability in the performance of any of its duties
hereunder,  or in the exercise of any of its rights or powers,  if it shall have
reasonable  grounds  for  believing  that  repayment  of such funds or  adequate
indemnity  against  such risk or  liability  is not  reasonably  assured  to it.

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<PAGE>

Whether or not herein  expressly so provided,  every provision of this Guarantee
Agreement  relating to the conduct or  affecting  the  liability of or affording
protection to the Guarantee  Trustee shall be subject to the  provisions of this
Section 3.1. To the extent that, at law or in equity,  the Guarantee Trustee has
duties and liabilities  relating to the Guarantor or the Holders,  the Guarantee
Trustee shall not be liable to any Holder for the Guarantee Trustee's good faith
reliance on the provisions of this Guarantee  Agreement.  The provisions of this
Guarantee Agreement, to the extent that they restrict the duties and liabilities
of the Guarantee Trustee otherwise  existing at law or in equity,  are agreed by
the  Guarantor and the Holders to replace such other duties and  liabilities  of
the Guarantee Trustee.

          (c)    No provision of this Guarantee  Agreement shall be construed to
relieve the  Guarantee  Trustee from  liability  for its own  negligent  action,
negligent failure to act or own willful misconduct, except that:

               (i)  the  Guarantee  Trustee shall not be liable for any error of
     judgment  made in good  faith by a  Responsible  Officer  of the  Guarantee
     Trustee, unless it shall be proved that the Guarantee Trustee was negligent
     in ascertaining the pertinent facts upon which such judgment was made; and

               (ii) the  Guarantee  Trustee  shall not be liable with respect to
     any action  taken or omitted to be taken by it in good faith in  accordance
     with  the  direction  of  the  Holders  of not  less  than  a  Majority  in
     Liquidation Amount of the Preferred Securities relating to the time, method
     and place of  conducting  any  proceeding  for any remedy  available to the
     Guarantee  Trustee,  or exercising  any trust or power  conferred  upon the
     Guarantee Trustee under this Guarantee Agreement.

     SECTION 3.2 Certain Rights of the Guarantee Trustee.

          (a)    Subject to the provisions of Section 3.1:

               (i)  the  Guarantee  Trustee may  conclusively  rely and shall be
     fully  protected in acting or  refraining  from acting in good faith and in
     accordance  with  the  terms  hereof  upon  any  resolution,   certificate,
     statement,   instrument,   opinion,  report,  notice,  request,  direction,
     consent,  order, bond,  debenture,  note, other evidence of indebtedness or
     other paper or document reasonably believed by it to be genuine and to have
     been signed, sent or presented by the proper party or parties;

               (ii) any direction or act of the Guarantor  contemplated  by this
     Guarantee  Agreement  shall  be  sufficiently  evidenced  by  an  Officers'
     Certificate unless otherwise prescribed herein;

               (iii) the  Guarantee  Trustee may consult with  counsel,  and the
     advice  of such  counsel  shall  be full  and  complete  authorization  and
     protection in respect of any action taken,  suffered or omitted to be taken

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     by it  hereunder  in good faith and in reliance  thereon and in  accordance
     with such advice. Such counsel may be counsel to the Guarantee Trustee, the
     Guarantor or any of its  Affiliates  and may be one of its  employees.  The
     Guarantee  Trustee  shall  have the right at any time to seek  instructions
     concerning the administration of this Guarantee Agreement from any court of
     competent jurisdiction;

               (iv) the  Guarantee  Trustee  shall  be under  no  obligation  to
     exercise  any of the  rights  or  powers  vested  in it by  this  Guarantee
     Agreement  at the request or  direction  of any Holder,  unless such Holder
     shall  have  provided  to the  Guarantee  Trustee  reasonable  security  or
     indemnity against the costs, expenses (including reasonable attorneys' fees
     and  expenses)  and  liabilities  that might be incurred by it in complying
     with such request or direction,  including such reasonable  advances as may
     be requested by the Guarantee Trustee; provided, that, nothing contained in
     this Section  3.2(a)(iv)  shall be taken to relieve the Guarantee  Trustee,
     upon the  occurrence of an Event of Default,  of its obligation to exercise
     the rights and powers vested in it by this Guarantee Agreement;

               (v)  the  Guarantee  Trustee  shall  not be  bound  to  make  any
     investigation   into  the  facts  or  matters  stated  in  any  resolution,
     certificate,  statement,  instrument,  opinion,  report,  notice,  request,
     direction,  consent,  order,  bond,  debenture,  note,  other  evidence  of
     indebtedness or other paper or document,  but the Guarantee Trustee, in its
     discretion,  may make such further inquiry or investigation into such facts
     or matters as it may see fit, and if the Guarantee  Trustee shall determine
     to make such inquiry or investigation,  it shall be entitled to examine the
     books,  records and premises of the  Guarantor,  personally  or by agent or
     attorney;

               (vi) the  Guarantee  Trustee  may  execute  any of the  trusts or
     powers  hereunder or perform any duties  hereunder either directly or by or
     through its agents,  attorneys,  custodians  or nominees and the  Guarantee
     Trustee shall not be  responsible  for any  misconduct or negligence on the
     part of any such agent,  attorney,  custodian or nominee appointed with due
     care by it hereunder;

               (vii) whenever in the administration of this Guarantee  Agreement
     the Guarantee Trustee shall deem it desirable to receive  instructions with
     respect to enforcing any remedy or right hereunder,  the Guarantee  Trustee
     (A) may request  instructions from the Holders of a Majority in Liquidation
     Amount of the Preferred  Securities,  (B) may refrain from  enforcing  such
     remedy or right or taking such other  action  until such  instructions  are
     received  and (C) shall be  protected  in acting  in  accordance  with such
     instructions;

               (viii) except as otherwise  expressly  provided by this Guarantee
     Agreement,  the Guarantee Trustee shall not be under any obligation to take

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<PAGE>

     any action that is  discretionary  under the  provisions of this  Guarantee
     Agreement;

               (ix) whenever, in the administration of this Guarantee Agreement,
     the Guarantee  Trustee  shall deem it desirable  that a matter be proved or
     established  before  taking,  suffering  or  omitting  to take  any  action
     hereunder,   the  Guarantee   Trustee  (unless  other  evidence  is  herein
     specifically  prescribed)  may,  in the  absence  of bad faith on its part,
     request and rely upon an Officers'  Certificate which, upon receipt of such
     request  from the  Guarantee  Trustee,  shall be promptly  delivered by the
     Guarantor; and

               (x)  the  Guarantee  Trustee  shall  have  no  duty to see to any
     recording,  filing or  registration  of any instrument or other writing (or
     any rerecording, refiling or reregistration thereof).

          (b)    No provision  of this  Guarantee  Agreement  shall be deemed to
impose any duty or  obligation  on the  Guarantee  Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any  jurisdiction  in which it shall be  illegal,  or in which the  Guarantee
Trustee shall be unqualified or incompetent in accordance  with  applicable law,
to perform any such act or acts or to exercise  any such right,  power,  duty or
obligation.  No permissive power or authority available to the Guarantee Trustee
shall  be  construed  to be a duty to act in  accordance  with  such  power  and
authority.

     SECTION 3.3 Compensation.

     The  Guarantor  agrees to pay to the  Guarantee  Trustee  from time to time
reasonable  compensation  for  all  services  rendered  by it  hereunder  (which
compensation  shall not be  limited  by any  provisions  of law in regard to the
compensation  of a trustee of an express  trust) and to reimburse  the Guarantee
Trustee upon request for all  reasonable  expenses,  disbursements  and advances
(including  the  reasonable  fees and  expenses  of its  attorneys  and  agents)
incurred or made by the Guarantee  Trustee in accordance  with any provisions of
this Guarantee Agreement.

     SECTION 3.4 Indemnity.

     The Guarantor  agrees to indemnify and hold harmless the Guarantee  Trustee
(including  in its  individual  capacity) and any of its  Affiliates  and any of
their officers, directors,  shareholders,  employees,  representatives or agents
from and against any loss, damage,  liability, tax (other than income, franchise
or other  taxes  imposed on amounts  paid  pursuant  to Section  3.3),  penalty,
expense or claim of any kind or nature whatsoever  incurred without  negligence,
bad faith or willful  misconduct  on its part,  arising out of or in  connection
with the acceptance or administration of this Guarantee Agreement, including the
costs and  expenses  of  defending  itself  against  any claim or  liability  in
connection  with the  exercise or  performance  of any of its rights,  powers or
duties  hereunder.  The  Guarantee  Trustee  will not claim or exact any lien or

                                       10
<PAGE>

charge on any Guarantee  Payments as a result of any amount due to it under this
Guarantee  Agreement.  This  indemnity  shall  survive the  termination  of this
Agreement or the resignation or removal of the Guarantee Trustee.

     In no event  shall  the  Guarantee  Trustee  be  liable  for any  indirect,
special,  punitive  or  consequential  loss or  damage  of any kind  whatsoever,
including,  but not limited to, lost profits,  even if the Guarantee Trustee has
been advised of the likelihood of such loss or damage and regardless of the form
of action.

     In no event shall the Guarantee  Trustee be liable for any failure or delay
in the performance of its obligations  hereunder because of circumstances beyond
its control, including, but not limited to, acts of God, flood, war (declared or
undeclared),  terrorism, fire, riot, embargo or government action, including any
laws,  ordinances,  regulations,  governmental  action or the like which  delay,
restrict  or  prohibit  the  providing  of the  services  contemplated  by  this
Guarantee Agreement.

     SECTION 3.5 Securities.

     The Guarantee Trustee or any other agent of the Guarantee  Trustee,  in its
individual or any other  capacity,  may become the owner or pledgee of Common or
Preferred Securities.

                                   ARTICLE IV

                                GUARANTEE TRUSTEE

     SECTION 4.1 Guarantee Trustee; Eligibility.

          (a) There shall at all times be a Guarantee Trustee which shall:

               (i) not be an Affiliate of the Guarantor; and

               (ii) be a corporation organized and doing business under the laws
          of the United States or of any State  thereof,  authorized to exercise
          corporate  trust powers,  having a combined  capital and surplus of at
          least fifty million dollars  ($50,000,000),  subject to supervision or
          examination by Federal or State  authority and having an office within
          the United States. If such corporation  publishes reports of condition
          at least  annually,  pursuant  to law or to the  requirements  of such
          supervising  or examining  authority,  then,  for the purposes of this
          Section 4.1,  the  ------------  combined  capital and surplus of such
          corporation  shall be deemed to be its combined capital and surplus as
          set forth in its most recent report of condition so published.

          (b)    If at any time the Guarantee Trustee shall cease to be eligible
     to so act under Section  4.1(a),  the Guarantee  Trustee shall  immediately
     resign in the manner and with the effect set out in Section 4.2(c).

          (c)    If the Guarantee Trustee has or shall acquire any  "conflicting
     interest"  within the meaning of Section 310(b) of the Trust Indenture Act,
     the Guarantee Trustee shall either eliminate such interest or resign in the
     manner and with the effect set out in Section 4.2(c).

                                       11
<PAGE>

     SECTION 4.2 Appointment, Removal and Resignation of the Guarantee Trustee.

          (a)    Subject  to  Section  4.2(b),  the  Guarantee  Trustee  may  be
     appointed or removed  without  cause at any time by the  Guarantor,  except
     during an Event of Default.

          (b)    The Guarantee Trustee shall not be  removed  until a  Successor
     Guarantee  Trustee has been appointed and has accepted such  appointment by
     written  instrument  executed  by  such  Successor  Guarantee  Trustee  and
     delivered to the Guarantor.

          (c)    The  Guarantee  Trustee  appointed  hereunder shall hold office
     until a Successor  Guarantee Trustee shall have been appointed or until its
     removal or  resignation.  The  Guarantee  Trustee  may resign  from  office
     (without  need for prior or  subsequent  accounting)  by an  instrument  in
     writing  executed by the Guarantee  Trustee and delivered to the Guarantor,
     which resignation shall not take effect until a Successor Guarantee Trustee
     has been  appointed  and has accepted  such  appointment  by  instrument in
     writing executed by such Successor  Guarantee  Trustee and delivered to the
     Guarantor and the resigning Guarantee Trustee.

          (d)    If no Successor Guarantee Trustee shall have been appointed and
     accepted  appointment  as provided in this  Section 4.2 within  thirty (30)
     days after delivery to the Guarantor of an instrument of  resignation,  the
     resigning Guarantee Trustee may petition,  at the expense of the Guarantor,
     any  court  of  competent  jurisdiction  for  appointment  of  a  Successor
     Guarantee Trustee. Such court may thereupon, after prescribing such notice,
     if any, as it may deem proper, appoint a Successor Guarantee Trustee.

                                    ARTICLE V

                                    GUARANTEE

     SECTION 5.1 Guarantee.

          (a)    The Guarantor irrevocably and unconditionally  agrees to pay in
     full to the Holders the Guarantee Payments (without  duplication of amounts
     theretofore  paid  by or on  behalf  of  the  Issuer),  as  and  when  due,
     regardless  of any  defense  (except  for the  defense  of  payment  by the
     Issuer),  right of  set-off  or  counterclaim  which the Issuer may have or
     assert.  The  Guarantor's  obligation  to make a  Guarantee  Payment may be
     satisfied by direct payment of the required amounts by the Guarantor to the

                                       12
<PAGE>

     Holders or by causing the Issuer to pay such  amounts to the  Holders.  The
     Guarantor shall give prompt written notice to the Guarantee  Trustee in the
     event it makes any direct payment to the Holders hereunder.

          (b)    The  Guarantor  hereby  also   agrees to  assume  any  and  all
     Obligations of the Issuer,  and, in the event any such Obligation is not so
     assumed,  subject to the terms and conditions  hereof, the Guarantor hereby
     irrevocably  and  unconditionally  guarantees to each  Beneficiary the full
     payment, when and as due, of any and all Obligations to such Beneficiaries.
     This  Guarantee is intended to be for the  Beneficiaries  who have received
     notice hereof.

     SECTION 5.2 Waiver of Notice and Demand.

     The Guarantor hereby waives notice of acceptance of the Guarantee Agreement
and of any liability to which it applies or may apply,  presentment,  demand for
payment,  any right to require a proceeding first against the Guarantee Trustee,
Issuer or any other Person before  proceeding  against the  Guarantor,  protest,
notice of  nonpayment,  notice of dishonor,  notice of redemption  and all other
notices and demands.

     SECTION 5.3 Obligations Not Affected.

     The  obligations,  covenants,  agreements and duties of the Guarantor under
this  Guarantee  Agreement  shall in no way be affected or impaired by reason of
the happening from time to time of any of the following:

          (a)    the release or waiver, by operation of law or otherwise, of the
     performance  or  observance  by  the  Issuer  of  any  express  or  implied
     agreement, covenant, term or condition relating to the Preferred Securities
     to be performed or observed by the Issuer;

          (b)    the  extension  of time for the payment by the Issuer of all or
     any  portion of the  Distributions  (other  than an  extension  of time for
     payment of  Distributions  that results from the  extension of any interest
     payment  period  on the Notes as  provided  in the  Indenture),  Redemption
     Price,  Liquidation  Distribution or any other sums payable under the terms
     of the Preferred Securities or the extension of time for the performance of
     any other  obligation  under,  arising out of, or in connection  with,  the
     Preferred Securities;

          (c)    any  failure, omission,  delay or lack of diligence on the part
     of the Holders to enforce, assert or exercise any right,  privilege,  power
     or remedy  conferred on the Holders  pursuant to the terms of the Preferred
     Securities,  or any action on the part of the Issuer granting indulgence or
     extension of any kind;

          (d)    the voluntary  or involuntary liquidation, dissolution, sale of
     any collateral,  receivership,  insolvency,  bankruptcy, assignment for the
     benefit  of  creditors,   reorganization,   arrangement,   composition   or
     readjustment of debt of, or other similar proceedings affecting, the Issuer
     or any of the assets of the Issuer;

                                       13
<PAGE>

          (e)    any invalidity of, or defect or deficiency  in,  the  Preferred
     Securities;

          (f)    the  settlement  or  compromise  of  any  obligation guaranteed
     hereby or hereby incurred; or

          (g)    any  other  circumstance   whatsoever  that    might  otherwise
     constitute  a legal or equitable  discharge  or defense of a guarantor,  it
     being the intent of this Section 5.3 that the  obligations of the Guarantor
     hereunder   shall  be  absolute  and   unconditional   under  any  and  all
     circumstances.

     There  shall be no  obligation  of the Holders to give notice to, or obtain
the  consent  of, the  Guarantor  with  respect to the  happening  of any of the
foregoing.

     SECTION 5.4 Rights of Holders.

     The Guarantor  expressly  acknowledges  that: (a) this Guarantee  Agreement
will be deposited  with the Guarantee  Trustee to be held for the benefit of the
Holders;  (b) the  Guarantee  Trustee  has the right to enforce  this  Guarantee
Agreement on behalf of the Holders; (c) the Holders of a Majority in Liquidation
Amount of the Preferred Securities have the right to direct the time, method and
place of conducting  any  proceeding  for any remedy  available to the Guarantee
Trustee in respect of this Guarantee  Agreement or exercising any trust or power
conferred upon the Guarantee Trustee under this Guarantee Agreement; and (d) any
Holder may  institute  a legal  proceeding  directly  against the  Guarantor  to
enforce its rights under this Guarantee  Agreement,  without first instituting a
legal proceeding against the Guarantee Trustee, the Issuer or any other Person.

     SECTION 5.5 Guarantee of Payment.

     This  Guarantee  Agreement  creates  a  guarantee  of  payment  and  not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without  duplication of amounts theretofore paid
by the Issuer) or upon distribution of Notes to Holders as provided in the Trust
Agreement.

     SECTION 5.6 Subrogation.

     The  Guarantor  shall be  subrogated  to all (if any) rights of the Holders
against  the  Issuer  in  respect  of any  amounts  paid to the  Holders  by the
Guarantor  under  this  Guarantee  Agreement  and shall  have the right to waive
payment by the Issuer  pursuant to Section 5.1;  provided,  that,  the Guarantor
shall not (except to the extent  required  by  mandatory  provisions  of law) be
entitled to enforce or exercise any rights it may acquire by way of  subrogation
or any indemnity,  reimbursement or other agreement, in all cases as a result of
payment under this Guarantee Agreement, if, at the time of any such payment, any
amounts are due and unpaid under this Guarantee  Agreement.  If any amount shall
be paid to the Guarantor in violation of the preceding  sentence,  the Guarantor
agrees to hold such  amount in trust for the Holders and to pay over such amount
to the Holders.

                                       14
<PAGE>

     SECTION 5.7 Independent Obligations.

     The Guarantor  acknowledges that its obligations  hereunder are independent
of the  obligations  of the Issuer with respect to the Preferred  Securities and
that the Guarantor shall be liable as principal and as debtor  hereunder to make
Guarantee   Payments   pursuant  to  the  terms  of  this  Guarantee   Agreement
notwithstanding  the  occurrence  of any event  referred to in  subsections  (a)
through (g), inclusive, of Section 5.3.

     SECTION 5.8 Enforcement.

     A Beneficiary  may enforce the  Obligations  of the Guarantor  contained in
Section  5.1(b)  directly  against the Guarantor,  and the Guarantor  waives any
right or remedy to require that any action be brought  against the Issuer or any
other person or entity before proceeding against the Guarantor.

                                   ARTICLE VI

                           COVENANTS AND SUBORDINATION

     SECTION 6.1 Dividends, Distributions and Payments.

     So long as any Preferred Securities remain outstanding, if there shall have
occurred  and be  continuing  an Event of  Default or the  Guarantor  shall have
entered  into an  Extension  Period as provided  for in the  Indenture  and such
period, or any extension thereof,  shall have commenced and be continuing,  then
the Guarantor may not (a) declare or pay any dividends or  distributions  on, or
redeem, purchase,  acquire or make a liquidation payment with respect to, any of
the  Guarantor's  Equity  Interests (as defined in the  Indenture),  (b) vote in
favor of or permit or otherwise allow any of its Subsidiaries (as defined in the
Indenture)  to  declare or pay any  dividends  or  distributions  on, or redeem,
purchase,  acquire or make a  liquidation  payment  with respect to or otherwise
retire, any of such Subsidiary's  Equity Interests entitling the holders thereof
to a stated  rate of return  other than  dividends  or  distributions  on Equity
Interests payable to the Guarantor or any Subsidiary  thereof (for the avoidance
of doubt, whether such Equity Interests are perpetual or otherwise), or (c) make
any payment of principal  of or any interest or premium on or repay,  repurchase
or redeem  any debt  securities  of the  Guarantor  that rank pari  passu in all
respects with or junior in interest to the junior  subordinated  notes issued by
the Guarantor pursuant to the Indenture (other than (i) repurchases, redemptions
or other  acquisitions  of Equity  Interests of the Guarantor in connection with
(1) any employment  contract,  benefit plan or other similar arrangement with or
for  the  benefit  of  any  one  or  more  employees,   officers,  directors  or
consultants,  (2) a dividend  reinvestment  or  stockholder  stock  purchase  or
similar plan with respect to any Equity  Interests or (3) the issuance of Equity
Interests of the Guarantor (or securities  convertible  into or exercisable  for
such Equity  Interests) as consideration in an acquisition  transaction  entered
into  prior  to the  occurrence  of such  Event  of  Default  or the  applicable
Extension Period,  (ii) as a result of an exchange or conversion of any class or
series  of the  Guarantor's  Equity  Interests  (or any  Equity  Interests  of a
Subsidiary of the Guarantor) for any class or series of the  Guarantor's  Equity

                                       15

<PAGE>

Interests or any class of series of the Guarantor's  indebtedness  for any class
or series of the Guarantor's Equity Interests,  (iii) the purchase of fractional
interests in Equity  Interests of the  Guarantor  pursuant to the  conversion or
exchange  provisions of such Equity Interests or the security being converted or
exchanged,  (iv) any  declaration  of a dividend in  connection  with any rights
plan,  the  issuance of rights,  Equity  Interests or other  property  under any
rights plan or the redemption or repurchase of rights pursuant  thereto,  or (v)
any dividend in the form of Equity Interests,  warrants, options or other rights
where the  dividend  Equity  Interests  or the Equity  Interests  issuable  upon
exercise of such warrants, options or other rights are the same Equity Interests
as those on which the  dividend  is being paid or rank pari passu with or junior
to such Equity Interests).

     SECTION 6.2 Subordination.

     The  obligations  of the  Guarantor  under this  Guarantee  Agreement  will
constitute unsecured  obligations of the Guarantor and will rank subordinate and
junior in right of payment to all Senior Debt of the Guarantor.

     SECTION 6.3 Pari Passu Guarantees.

          (a)    The obligations of the Guarantor under this Guarantee Agreement
     shall rank pari  passu  with the  obligations  of the  Guarantor  under any
     similar  guarantee  agreements  issued by the  Guarantor  with  respect  to
     preferred securities (if any) similar to the Preferred  Securities,  issued
     by trusts other than the Issuer  established  or to be  established  by the
     Guarantor (if any), in each case similar to the Issuer, including,  without
     limitation,  the Guarantee  Agreement,  dated June 26, 2002,  issued by the
     Guarantor  with  respect to the  preferred  securities  issued by  Temecula
     Valley  Statutory  Trust I, the Guarantee  Agreement,  dated  September 17,
     2003,  issued by the  Guarantor  with respect to the  preferred  securities
     issued by Temecula  Valley  Statutory  Trust II, the  Guarantee  Agreement,
     dated  September  20,  2004,  issued by the  Guarantor  with respect to the
     preferred  securities issued by Temecula Valley Statutory Trust III and the
     Guarantee Agreement, dated September 29, 2005, issued by the Guarantor with
     respect to the preferred  securities  issued by Temecula  Valley  Statutory
     Trust IV.

          (b)    The right  of the Guarantor to participate in any  distribution
     of assets of any of its subsidiaries upon any such subsidiary's liquidation
     or  reorganization or otherwise is subject to the prior claims of creditors
     of that  subsidiary,  except to the  extent  the  Guarantor  may  itself be
     recognized as a creditor of that subsidiary.  Accordingly,  the Guarantor's
     obligations  under this Guarantee will be effectively  subordinated  to all
     existing  and  future  liabilities  of the  Guarantor's  subsidiaries,  and
     claimants  should  look only to the assets of the  Guarantor  for  payments
     hereunder.  This  Guarantee  does not limit the  incurrence  or issuance of
     other secured or unsecured debt of the Guarantor,  including Senior Debt of
     the  Guarantor,  under any  indenture or agreement  that the  Guarantor may
     enter into in the future or otherwise.

                                       16
<PAGE>

                                   ARTICLE VII

                                   TERMINATION

     SECTION 7.1 Termination.

     This  Guarantee  Agreement  shall  terminate and be of no further force and
effect  upon  (a)  full  payment  of  the  Redemption  Price  of  all  Preferred
Securities,  (b) the distribution of Notes to the Holders in exchange for all of
the  Preferred  Securities  or (c)  full  payment  of  the  amounts  payable  in
accordance   with  the  Trust   Agreement   upon   liquidation  of  the  Issuer.
Notwithstanding  the  foregoing,  this  Guarantee  Agreement will continue to be
effective or will be  reinstated,  as the case may be, if at any time any Holder
must restore  payment of any sums paid with respect to Preferred  Securities  or
this Guarantee  Agreement.  The  obligations of the Guarantor under Sections 3.3
and 3.4 shall survive any such termination or the resignation and removal of the
Guarantee Trustee.

                                  ARTICLE VIII

                                  MISCELLANEOUS

     SECTION 8.1 Successors and Assigns.

     All guarantees and agreements  contained in this Guarantee  Agreement shall
bind the successors,  assigns,  receivers,  trustees and  representatives of the
Guarantor  and  shall  inure to the  benefit  of the  Holders  of the  Preferred
Securities then outstanding.  Except in connection with a consolidation,  merger
or sale  involving  the  Guarantor  that is permitted  under Article VIII of the
Indenture and pursuant to which the  successor or assignee  agrees in writing to
perform the Guarantor's  obligations  hereunder,  the Guarantor shall not assign
its rights or delegate its obligations  hereunder  without the prior approval of
the Holders of a Majority in Liquidation Amount of the Preferred Securities.

     SECTION 8.2 Amendments.

     Except with respect to any changes that do not adversely  affect the rights
of the Holders in any material  respect (in which case no consent of the Holders
will be required),  this Guarantee  Agreement may only be amended with the prior
approval of the  Guarantor,  the  Guarantee  Trustee and the Holders of not less
than  a  Majority  in  Liquidation  Amount  of  the  Preferred  Securities.  The
provisions of Article VI of the Trust Agreement  concerning meetings or consents
of the Holders shall apply to the giving of such approval.

     SECTION 8.3 Notices.

     Any notice,  request or other  communication  required or  permitted  to be
given  hereunder  shall be in  writing,  duly  signed by the party  giving  such
notice, and delivered, telecopied or mailed by first class mail as follows:

                                       17
<PAGE>

          (a)    if  given  to the Guarantor, to the address or facsimile number
     set forth below or such other address, facsimile number or to the attention
     of such other Person as the  Guarantor  may give by notice to the Guarantee
     Trustee and the Holders:

                Temecula Valley Bancorp Inc.
                27710 Jefferson Avenue #A100
                Temecula, CA 92590
                Facsimile No.: (951) 694-9141
                Attention: Executive Vice President, Chief Financial Officer and
                           Secretary

          (b)    if given to the  Issuer, at the Issuer's  address or  facsimile
     number set forth below or such other  address,  facsimile  number or to the
     attention  of such  other  Person as the  Issuer  may give by notice to the
     Guarantee Trustee and the Holders:

                Temecula Valley Statutory Trust V
                c/o Temecula Valley Bancorp Inc.
                27710 Jefferson Avenue #A100
                Temecula, CA 92590
                Facsimile No.: (951) 694-9141
                Attention: Administrative Trustee

          (c)    if given to the Guarantee  Trustee, at the address or facsimile
     number set forth below or such other  address,  facsimile  number or to the
     attention of such other Person as the Guarantee  Trustee may give by notice
     to the Guarantor and the Holders:

                Wilmington Trust Company
                Rodney Square North, 1100 North Market Street
                Wilmington, Delaware 19890-0001
                Facsimile No.: (302) 636-4140
                Attention: Corporate Capital Markets

          (d)    if  given to any Holder,  at the address set forth on the books
     and records of the Issuer.

     All notices  hereunder  shall be deemed to have been given when received in
person,  telecopied  with  receipt  confirmed,  or mailed by first  class  mail,
postage  prepaid,  except that if a notice or other document is refused delivery
or cannot be  delivered  because  of a changed  address  of which no notice  was
given,  such notice or other  document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.

     SECTION 8.4 Benefit.

                                       18
<PAGE>

     This  Guarantee  Agreement  is solely for the benefit of the Holders and is
not separately transferable from the Preferred Securities.

     SECTION 8.5 Governing Law.

     This  Guarantee  Agreement  and the  rights and  obligations  of each party
hereto,  shall be construed and enforced in accordance  with and governed by the
laws  of the  State  of New  York  without  reference  to its  conflict  of laws
provisions (other than Section 5-1401 of the General Obligations Law).

     SECTION 8.6 Submission to Jurisdiction.

     ANY LEGAL  ACTION OR  PROCEEDING  BY OR  AGAINST  ANY PARTY  HERETO OR WITH
RESPECT  TO OR  ARISING  OUT OF THIS  GUARANTEE  AGREEMENT  MAY BE BROUGHT IN OR
REMOVED  TO THE  COURTS OF THE STATE OF NEW YORK,  IN AND FOR THE  COUNTY OF NEW
YORK, OR OF THE UNITED  STATES OF AMERICA FOR THE SOUTHERN  DISTRICT OF NEW YORK
(IN EACH CASE SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF
THIS GUARANTEE  AGREEMENT,  EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY,  GENERALLY  AND  UNCONDITIONALLY,  THE  JURISDICTION  OF THE AFORESAID
COURTS (AND COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR
IN CONNECTION WITH THIS GUARANTEE AGREEMENT.

     SECTION 8.7 Counterparts; Facsimile.

     This  instrument  may be  executed in any number of  counterparts,  each of
which so executed shall be deemed to be an original,  but all such  counterparts
shall  together  constitute  but one and the  same  instrument.  Delivery  of an
executed  signature page of this Guarantee  Agreement by facsimile  transmission
shall be effective as delivery of a manually executed counterpart hereof.

                      [THE NEXT PAGE IS THE SIGNATURE PAGE]

                                       19
<PAGE>

     IN WITNESS WHEREOF,  the undersigned have executed this Guarantee Agreement
as of the date first above written.

                                     TEMECULA VALLEY BANCORP INC.

                                     By:  /s/ Stephen H. Wacknitz
                                          --------------------------------------
                                          Stephen H. Wacknitz
                                          Chairman, Chief Executive Officer
                                          and President

                                     WILMINGTON TRUST COMPANY,
                                      not in its individual capacity, but solely
                                      as Guarantee Trustee

                                     By:  /s/ W. T. Morris II
                                          --------------------------------------
                                          W. Thomas Morris, II
                                          Assistant Vice PresidentExhibit 10.1

                                                                                                                
     
    Exhibit 10.1
    EMPLOYMENT
      AGREEMENT

     

     

    THIS
      EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into this 27th day
      of September, 2006, by and between AMBASSADORS GROUP, INC. (“Company”), a
      Delaware corporation, and JEFFREY D. THOMAS (“Executive”), with reference to the
      following facts:

     

    A. Executive
      has been serving Company as President and Chief Executive Officer in a
      satisfactory and capable manner.

     

    B. Company
      has requested that Executive enter into an employment agreement with Company
      with respect to matters relating to continued employment with Company, and
      Executive has agreed to do so, upon the terms and conditions set forth
      herein.

     

    NOW,
      THEREFORE, in consideration of the terms and conditions and the mutual
      agreements and covenants set forth herein, the parties hereto agree as
      follows:

     

    1.  SCOPE
      OF EMPLOYMENT.

     

    1.1  Capacity.
      Company
      hereby continues to employ Executive, and Executive hereby accepts continued
      employment, as President and Chief Executive Officer of Company. Executive
      shall
      report to the Board of Directors of Company (“Board”) and perform the services
      and duties customarily incident to such titles.

     

    1.2  Devotion
      of Services.
      Executive shall devote his entire business time, ability and attention
      exclusively to the business of Company during the Term of Employment (as defined
      below), except for passive investments, charitable and non-profit enterprises
      and any other business investments which do not interfere with his duties
      hereunder and which are not competitive with Company’s activities (including,
      without limitation, as the owner of less than 1% of the issued and outstanding
      capital stock of a publicly traded corporation). Executive shall perform and
      discharge well and faithfully those duties assigned him by the Board. Executive
      shall perform his services under this Agreement primarily at Company’s offices
      in or about the Spokane area, or such other location as is acceptable to
      Executive.

     

    2.  TERM
      OF EMPLOYMENT.
      The
      term of Executive’s employment under this Agreement shall commence as of the
      date first set forth above and, unless sooner terminated pursuant to Paragraph
      4
      of this Agreement, shall terminate upon the close of business eighteen (18)
      months following the date that either party notifies the other in writing that
      the notifying party elects to terminate such employment (“Term of Employment”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.  COMPENSATION.

     

    3.1  Salary
      and Bonus.
      In
      consideration of the services to be rendered by Executive hereunder including,
      without limitation, any services rendered as an officer or director of Company
      and/or any subsidiary thereof, Company shall pay to Executive the following
      during the Term of Employment:

     

    (a)  A
      base
      salary in the amount of $400,000.00 per annum, which salary shall be reviewed
      no
      less frequent than annually by Company’s Board or Compensation Committee. The
      Board or Compensation Committee may increase Executive’s base salary but, in no
      event, may Executive’s base salary be reduced during the Term of
      Employment.

     

    (b)  Company
      presently intends to continue its annual cash incentive plan with respect to
      Executive; provided, however, the amount of the annual cash incentive, if any,
      shall be at the discretion of Company’s Board or Compensation
      Committee.

     

    (c)  All
      payments to Executive shall be subject to the applicable withholding
      requirements of all appropriate governmental authorities.

     

    (d)  Company
      presently intends to continue its annual stock option and restricted stock
      grants with respect to Executive; provided, however, the number of options
      and/or restricted stock granted, if any, shall be at the discretion of Company’s
      Board or such committee. 

     

    3.2  Other
      Benefits.
      During
      the Term of Employment, Executive shall be entitled to participate in all
      employee pension and welfare benefit plans and programs made available to
      Company’s senior members of management, as such plans or programs may be in
      effect from time to time including, without limitation, pension, profit sharing,
      savings and other retirement plans or programs, accidental death and
      dismemberment protection, and health and medical plans.

     

    3.3  Expenses.
      Company
      will advance to or reimburse Executive for all reasonable travel and
      entertainment required by Company and other reasonable expenses incurred by
      Executive in connection with the performance of his services under this
      Agreement in accordance with Company policy as established from time to time.
      

     

    3.4  Vacation.
      Executive shall be entitled to not less than twenty-five (25) days of vacation
      during each fiscal year of Company, during which time Executive’s compensation
      shall be paid in full. Executive’s vacation allowance shall be applied and
      extended under the same terms and conditions as are generally applicable to
      other senior members of Company’s management.

     

    4.  TERMINATION
      OF EMPLOYMENT.

     

    4.1  Termination
      by Company for Cause; Termination by Executive Without Good
      Reason.
      Notwithstanding the provisions of Paragraph 2 of this Agreement, (i) Company
      may
      terminate Executive’s employment at any time for Cause (as 

    
      
        
        

      

      
        2

        
          

        

      

      
        
        
defined
        below) by delivering written notice to Executive, and such termination shall
        be
        effective upon the date such notice is deemed received by Executive or such
        later date if specified in the notice, and (ii) Executive may terminate his
        employment without Good Reason (as defined below) by delivering written notice
        to Company, and such termination shall be effective eighteen (18) months
        after
        the date such notice is received by Company, or sooner at the election of
        the
        Board (but in no event less than six (6) months after Company’s receipt of the
        notice). In the event that Company terminates Executive’s employment for Cause
        or Executive terminates his employment without Good Reason, then Executive
        shall
        only be entitled to the compensation, unpaid expenses, unpaid vacation days
        and
        other benefits provided for in Paragraph 3 of this Agreement through the
        date of
        such termination. As used herein, “Cause” shall mean any of the following
        events: (a) Executive is convicted, or pleads guilty or nolo contendre to,
        a
        felony or a crime involving moral turpitude; (b) Executive engages in gross
        negligence or gross or willful misconduct in connection with the performance
        of
        his responsibilities under this Agreement; (c) after written notice to
        Executive, Executive repeatedly fails to comply materially with any material
        Company policy; or (d) Executive materially breaches any material term or
        provision of this Agreement and fails to cure such breach within thirty (30)
        days after he receives written notice thereof from Company.

    

     

    4.2  Termination
      by Executive With Good Reason; Termination by Company Without
      Cause.
      Notwithstanding the provisions of Paragraph 2 of this Agreement, (i) Executive
      may terminate his employment with Good Reason (as defined below) by delivering
      written notice to Company, and such termination shall be effective thirty (30)
      days after the date such notice is deemed received by Company or such later
      date
      (not to exceed three (3) months) as may be selected by the Board, and (ii)
      Company may terminate Executive’s employment without Cause by delivering written
      notice to Executive and such termination shall be effective upon the date that
      such notice is deemed received by Executive or such later date (not to exceed
      three (3) months) as may be specified in the notice. In the event that Executive
      terminates his employment with Good Reason, or Company terminates Executive’s
      employment without Cause, then Company shall pay to Executive all of the
      following upon the following terms and conditions: 

     

    (i) All
      of
      the unpaid compensation, unpaid expenses, unpaid vacation days, prorated bonuses
      and other benefits provided for in Paragraph 3 through the date of such
      termination; 

     

    (ii) An
      amount
      equal to the projected cost of Executive’s medical insurance under COBRA for the
      eighteen (18) month period immediately following the termination; 

     

    (iii) In
      the
      event that the notice of termination is given in anticipation of, or within
      the
      two (2) year period immediately following, a Change in Control (as defined
      below), an amount equal to the average annual base salary plus the average
      annual bonus paid to Executive for the two (2) full fiscal years immediately
      preceding termination (in determining the annual bonuses, there shall be
      included the cash amounts as well as that value ascribed for financial
      accounting purposes on the dates of the grants to any and all option and share
      grants given to Executive);

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (iv) All
      of
      Executive’s unvested stock options and stock grants shall fully vest upon the
      date that the termination becomes effective; 

     

    (v) The
      payments provided for in clauses (i), (ii) and (iii) of this Section 4.2 shall
      be paid in full on the effective date of the termination and all such payments
      shall be subject to the applicable withholding requirements of all appropriate
      governmental authorities; and

     

    (vi) Notwithstanding
      anything to the contrary contained herein, in the event that any payments and/or
      other consideration to be received by Executive under this Section 4.2 and
      Section 5.8 below are subject to the deduction limitations and tax imposed
      by
      Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended
      (“Code”), or to any similar tax imposed by state or local law, or to any
      interest or penalties with respect to such taxes (such taxes together with
      any
      such interest and penalties shall hereafter collectively be referred to as
      “Excise Tax”), then the total amount of such payments and value of the other
      consideration shall be reduced, or refunded, as the case may be, by the minimum
      amount necessary so as to avoid the application of any Excise Tax.

     

    As
      used
      herein, the term “Good Reason” shall mean any of the following
      events:

     

    (a)  Withdrawal
      by Company from Executive of any substantial part of his duties then being
      performed, or responsibility or authority then being carried by him, or a
      material change in Executive’s reporting lines;

     

    (b)  Assignment
      by Company to Executive of substantial additional duties or responsibilities
      which are inconsistent with the duties or responsibilities then being carried
      out by Executive;

     

    (c)  Material
      reduction in the level of Executive’s responsibility, authority, autonomy,
      title, compensation, executive perquisites, or other employee
      benefits;

     

    (d)  Failure
      to keep Executive in office as President and Chief Executive Officer of
      Company;

     

    (e)  Company
      materially breaches any material term or provision of this Agreement and fails
      to cure such breach within thirty (30) days after it receives written notice
      thereof from Executive;

     

    (f)  Fraud
      on
      the part of Company; or 

     

    (g)  Discontinuance
      of the active operation of business of Company.

     

    For
      purposes of this Agreement, “Change in Control” means the occurrence of any of
      the following events: (i) any sale, lease, license, exchange or other transfer
      to a party not affiliated with Company (in one transaction or a series of
      related transactions) of all, or substantially all, of the business and/or
      assets of Company; (ii) a merger or consolidation of Company and Company is
      not
      the surviving entity; (iii) a reorganization or liquidation of Company; or
      (iv)
      a merger, consolidation, tender offer or any other transaction involving Company
      if the equity holders of 

    
      
        
        

      

      
        4

        
          

        

      

      
        
        
Company
        immediately before such merger, consolidation, tender offer or other transaction
        do not own, directly or indirectly, immediately following such merger,
        consolidation, tender offer or other transaction, more than fifty percent
        (50%)
        of the combined voting power of the outstanding voting securities of the
        entity
        resulting from such merger, consolidation, tender offer or other transaction.
        

    

     

    4.3  Death
      or Permanent Disability.
      Executive’s employment shall terminate immediately upon the date of Executive’s
      death. In the event that Executive becomes physically or mentally disabled
      so as
      to become unable for more than one hundred eighty (180) days in the aggregate
      in
      any twelve (12) month period to perform his duties on a full-time basis with
      reasonable accommodations, Company may, at its sole discretion, terminate
      Executive’s employment. Upon the date of Executive’s death (if during the term
      of his employment) or upon Company’s termination of Executive’s employment due
      to a disability as provided above, then: (i) Executive shall be entitled to
      all
      of the unpaid compensation, unpaid expenses, unpaid vacation days, prorated
      bonuses and other benefits provided for in Paragraph 3 through the date of
      Executive’s death or termination for disability; and (ii) all of Executive’s
      unvested stock options and stock grants in Company shall fully vest on such
      date.

     

    4.4  Application
      of Section 409A.
      To the
      extent applicable, it is intended that this Agreement comply with the provisions
      of Section 409A of the Code, and shall be interpreted in accordance therewith.
      This Agreement shall be administered in a manner consistent with this intent,
      and any provision that would cause this Agreement to fail to satisfy Section
      409A of the Code shall have no force and effect until amended by the parties
      to
      comply with Section 409A (which amendment may be retroactive to the extent
      permitted by Section 409A). Notwithstanding the foregoing, if Executive is
      a
“specified employee” (as defined under Section 409A) and, to the extent that any
      payment or portion of a payment under Paragraph 4 of this Agreement is
      determined by Company to constitute a “deferral of compensation” under Section
      409A to which the “short-term deferral” exception does not apply, then such
      payment or portion of a payment shall be paid to Executive by Company in cash
      and in full, as soon as practicable following six (6) months after Executive’s
“separation from service” with Company (as such phrase is defined in Section
      409A). If Executive dies before such payment or portion of a payment has been
      paid, such unpaid amounts shall be paid as soon as practicable following
      Executive’s death to the personal representative of Executive’s
      estate.

     

    5.  NONCOMPETITION
      AND NONSOLICITATION.
      

     

    5.1  Noncompetition.
      Executive acknowledges and agrees that he has received and shall continue to
      receive valuable Confidential Information (as defined below) and Trade Secrets
      (as defined below) of Company and exposure to key suppliers, service providers,
      group leaders and educational tour customers of Company. Accordingly, because
      of
      Executive’s access to, and knowledge of, Company’s Confidential Information and
      Trade Secrets and key suppliers, service providers and customers, as well as
      Executive’s extraordinary position within Company, Executive would be in a
      unique position to divert business from Company and to commit irreparable damage
      to Company were Executive to be allowed to compete with Company or to commit
      any
      of the other acts prohibited below.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Executive
      therefore agrees that, in order to protect the legitimate business interests
      of
      Company, Executive shall not, during the Term of Employment and for the
      Noncompete Period (as defined below), directly or indirectly, own, organize,
      consult with, be employed by, advise, be a partner of or joint venturer with,
      be
      a director or managing member of, or otherwise assist or provide services to,
      any Competitor within the Restricted Area (as each is defined below) except
      to
      the extent Executive is acting on behalf of Company.

     

    5.2  Nonsolicitation
      of Employees.
      Executive acknowledges and agrees that Company has expended and will continue
      to
      expend significant time, effort and resources in the hiring, training and
      development of an unusual and extraordinary workforce whose identities and
      abilities Executive would not know of or learn but for his relationship with
      Company. Executive therefore agrees that, during the Term of Employment and
      for
      the Nonsolicitation Period (as defined below), Executive shall not, directly
      or
      indirectly, (a) solicit, or attempt to solicit, any employee of, consultant
      to
      or tour group leader associated with Company to work for, contract with, become
      a partner with or otherwise be retained by any Competitor of Company; (b) assist
      or advise any such Competitor in hiring, employing, retaining or soliciting
      such
      employees, consultants or tour group leaders; or (c) encourage any such
      employee, consultant or tour group leader to be hired, employed, retained or
      solicited by any Competitor.

     

    5.3  Nonsolicitation
      of Customers.
      Executive acknowledges and agrees that he possesses and will continue to receive
      valuable Confidential Information and Trade Secrets of Company and exposure
      to
      educational tour customers and potential customers of Company. Executive
      therefore agrees that, during the Term of Employment and for the Nonsolicitation
      Period, Executive shall not, directly or indirectly, solicit any educational
      tour customers or potential customers of Company with whom Executive had contact
      with or about whom Executive learned information during Executive’s employment
      with Company on behalf of any other entity or person. Executive further agrees
      that he shall not disparage Company, its officers and directors or educational
      tour programs to such customers or potential customers.

     

    5.4  Nonsolicitation
      of Suppliers and Service Providers.
      Executive acknowledges and agrees that Executive has received and shall continue
      to receive valuable Confidential Information and Trade Secrets of Company with
      respect to its relationships with its suppliers and service providers such
      as
      hotels and travel operators and that the ability to acquire services from such
      suppliers and service providers is limited. Accordingly, such relationships
      constitute valuable assets of Company. Executive therefore agrees that, during
      the Term of Employment and for the Nonsolicitation Period, Executive shall
      not,
      directly or indirectly, solicit any suppliers or service providers with whom
      Executive had contact with or about whom Executive learned information during
      Executive’s employment with Company on behalf of any other entity or person.
      Executive further agrees that he shall not disparage Company, its officers,
      directors or educational tour programs to such suppliers or service
      providers.

     

    5.5  Confidentiality
      of Information.
      Executive acknowledges and agrees that he has been and shall be exposed to
      Company’s Confidential Information and Trade Secrets. Executive agrees to keep
      all such information strictly confidential at all times. Except as required
      by
      Executive’s duties for Company or by virtue of a subpoena or other court order
      applicable to Executive, Executive agrees that, both during and after the Term
      of Employment, 

    
      
        
        

      

      
        6

        
          

        

      

      
        
        
not
        to
        make, use or disclose any Confidential Information or Trade Secrets to any
        person, company, firm, organization or other entity, or encourage any such
        person, company, firm, organization or other entity to make use of such
        Confidential Information or Trade Secrets.

    

     

    5.6  Return
      of Documents and Electronic Media.
      At the
      end of the Term of Employment, Executive agrees to promptly return to Company
      any and all documents and other tangible information and data, regardless of
      the
      form in which it is recorded, as well as any and all copies and reproductions
      of
      such documents or other tangible information and data (regardless of the form
      of
      such copies or reproductions), which Executive (i) received or obtained from
      or
      on behalf of Company or (ii) prepared, compiled or collected while employed
      by
      Company. Executive specifically agrees not to retain any copies of any
      Confidential Information or Trade Secrets.

     

    5.7  Ownership
      of Work Product.
      All
      work product, data, documentation, information or materials conceived,
      discovered, developed or created by Executive in the course of Executive’s work
      for Company (collectively, the “Work Product”) shall be owned exclusively by
      Company. To the greatest extent possible, any Work Product shall be deemed
      to be
      a “work made for hire” (as defined in the United States Copyright Act, 17
      U.S.C.A. §101 et seq., as amended) and owned exclusively by Company. Executive
      hereby unconditionally and irrevocably transfers and assigns to Company all
      right, title and interest in or to any such Work Product. Company and Executive
      acknowledge that, pursuant to Wash. Rev. Code § 49.44.140(e), any provision in
      this Agreement requiring an employee to assign his rights in any Work Product
      does not apply to an invention for which no equipment, supplies, facility,
      or
      trade secret information of the employer was used and which was developed
      entirely on the employee’s own time, unless (a) the invention relates (i)
      directly to the business of the employer, or (ii) to the employer’s actual or
      demonstrably anticipated research or development, or (b) the invention results
      from any work performed by the employee for the employer.

     

    5.8  Consideration.
      In
      consideration for the obligations and covenants to be performed and fulfilled
      by
      Executive under this Paragraph 5, and except for the termination of
      employment under Section 4.3, Company shall pay to Executive, upon the effective
      date of the termination of Executive’s employment (except as provided below), an
      amount equal to the average annual base salary plus the average annual bonus
      paid to Executive for the two (2) full fiscal years immediately preceding
      termination. In determining the annual bonuses, there shall be included the
      cash
      amounts as well as that value ascribed for financial accounting purposes on
      the
      dates of the grants to any and all option and share grants given to Executive.
      Notwithstanding anything to the contrary contained in this Section 5.8, in
      the event of the termination of Executive’s employment under Section 4.1
      above, the payment required to be made by Company to Executive under this
      Section 5.8 shall be paid as follows:

     

    (a)  $100,000.00
      upon the effective date of the termination of employment; and 

     

    (b)  The
      balance paid one (1) year after the effective date of the termination of
      employment, provided that Margaret Thomas is employed by Company during the
      entire said one (1) year period; in other words, if Margaret Thomas is not
      employed by Company

    
      
        
        

      

      
        7

        
          

        

      

      
        
        
 during
        the entire said one (1) year period, then Company shall have no obligation
        to
        pay said balance to Executive. 

    

     

    5.9  Definitions.

     

    (a)  A
      “Competitor,”
as
      used herein, shall mean any person, company (except Company), firm, organization
      or other entity which engages in the development, marketing, organizing,
      operation or conducting of student educational tours, including without
      limitation, those educational tours designed for primary and secondary school
      students. 

     

    (b)  The
      term
“Trade
      Secret”
shall
      be given its broadest possible interpretation and shall mean any and all
      documents, information or other data (whether recorded or otherwise) (as defined
      below), which concerns Company or its business and which (i) derives independent
      economic value, actual or potential, from not being generally known to the
      public or to other persons who can obtain economic value from its disclosure
      or
      use, and (ii) is the subject of efforts that are reasonable under the
      circumstances to maintain its secrecy. Such Trade Secret Information includes,
      without limitation, information related to Company’s student customers,
      potential student customers, suppliers, partners, service providers, travel
      operators, marketing plans, advertising, contracts, potential contracts, tour
      group leaders, potential tour group leaders, tour group leader training plans,
      strategies, forecasts, pricing, methods, practices, techniques, business plans,
      financial plans, research, development, purchasing, accounting, programming
      and/or tour development. 

     

    (c)  The
      term
“Confidential
      Information”
shall
      also be given its broadest possible interpretation and shall mean any and all
      information disclosed or made available by Company to Executive, including
      without limitation any information which is not publicly known or available
      upon
      which Company’s business or success depends.

     

    (d)  “Noncompete
      Period”
shall
      be the two (2) year period immediately following the end of the Term of
      Employment.

     

    (e)  “Nonsolicitation
      Period”
shall
      be the two (2) year period immediately following the end of the Term of
      Employment.

     

    (f)  “Restricted
      Area”
shall
      be any state, province, territory or foreign country in which Company markets,
      operates or conducts its educational tour programs during the Term of
      Employment.

     

    6.  EQUITABLE
      REMEDIES.

     

    6.1  Injunctive
      Relief.
      Executive acknowledges and agrees that the covenants set forth in Paragraph
      5
      herein are reasonable and necessary for protection of Company’s business
      interests, that irreparable injury will result to Company if Executive breaches
      any of the terms of said covenants and that, in the event of Executive’s actual
      or threatened breach of said covenants, Company will have no adequate remedy
      at
      law. Executive accordingly agrees that, in the event of actual or threatened
      breach of any of such covenants, Company shall be entitled to immediate
      injunctive and other equitable relief, without bond and without the necessity
      of
      showing actual monetary damages. Nothing contained herein shall be

    
      
        
        

      

      
        8

        
          

        

      

      
        
        
 construed
        as prohibiting Company from pursuing any other remedies available to it for
        such
        breach or threatened breach, including the recovering of any damages which
        it is
        able to prove. Each of the covenants in Paragraph 5 shall be construed as
        independent of any other covenants or provisions of this Agreement. In the
        event
        of any judicial determination that any of the covenants set forth in Paragraph
        5
        herein or any other provisions of the Agreement are not fully enforceable,
        it is
        the intention and desire of the parties that the court treat said covenants
        as
        having been modified to the extent deemed necessary by the court to render
        them
        reasonable and enforceable and that the court enforce them to such
        extent.

    

     

    6.2  Specific
      Enforcement.
      Executive agrees and acknowledges that he is obligated under this Agreement
      to
      render services of a special, unique, unusual, extraordinary and intellectual
      character, thereby giving this Agreement peculiar value, so that the loss
      thereof could not be reasonably or adequately compensated in damages in an
      action at law. Therefore, in addition to other remedies provided by law, Company
      shall have the right to obtain specific performance hereof by Executive and
      to
      obtain injunctive relief against the performance of service elsewhere by
      Executive during the Term of Employment.

     

    7.  GENERAL.

     

    7.1  Entire
      Agreement.
      This
      Agreement contains the entire under-standing between the parties hereto with
      respect to the subject matter herein and supersedes all other oral and written
      agreements or understandings that may exist between them concerning the subject
      matter herein.

     

    7.2  Amendment.
      This
      Agreement may not be modified, amended, altered or supplemented except by
      written agreement between Executive and Company.

     

    7.3  Counterparts;
      Facsimile Signature.
      This
      Agreement may be executed in two (2) or more counterparts, each of which shall
      be deemed an original but all of which together shall constitute one and the
      same instrument. This Agreement may be executed and delivered by facsimile
      signature.

     

    7.4  Jurisdiction.
      Each
      party hereby consents to the exclusive jurisdiction of the state and federal
      courts sitting in Spokane, Washington, in any action on a claim arising out
      of,
      under or in connection with this Agreement or the transactions contemplated
      by
      this Agreement. Each party further agrees that personal jurisdiction over him
      or
      it may be effected by service of process by registered or certified mail
      addressed as provided in Section 9.9 herein, and that when so made shall be
      as
      if served upon him or it personally within the State of Washington.

     

    7.5  Expenses.
      In the
      event an action at law or in equity is required to enforce or interpret the
      terms and conditions of this Agreement, the prevailing party shall be entitled
      to reasonable attorney’s fees and costs in addition to any other relief to which
      that party may be entitled.

     

    7.6  Interpretation.
      The
      headings herein are inserted only as a matter of convenience and reference,
      and
      in no way define, limit or describe the scope of this Agreement 

    
      
        
        

      

      
        9

        
          

        

      

      
        
        
or
        the
        intent of any provisions thereof. No provision of this document is to be
        interpreted for or against any party because that party or party’s legal
        representative drafted it.

    

     

    7.7  Successors
      and Assigns.
      This
      Agreement shall be binding upon, and inure to the benefit of, the parties hereto
      and their heirs, successors, assigns and personal representatives. As used
      herein, the successors of Company shall include, but not be limited to, any
      successor by way of merger, consolidation, sale of all or substantially all
      of
      its assets or similar reorganization. In no event may Executive assign any
      rights or duties under this Agreement.

     

    7.8  Controlling
      Law; Severability.
      The
      validity and construction of this Agreement or of any of its provisions shall
      be
      determined under the laws of the State of Washington. Should any provision
      of
      this Agreement be invalid either due to the duration thereof or the scope of
      the
      prohibited activity, such provision shall be limited by the court to the extent
      necessary to make it enforceable and, if invalid for any other reason, such
      invalidity or unenforceability shall not affect or limit the validity and
      enforceability of the other provisions hereof.

     

    7.9  Notices.
      Any
      notice required or permitted to be given under this Agreement shall be
      sufficient if in writing and if personally received by the party to whom it
      is
      sent or delivered, or if sent by registered or certified mail, postage prepaid,
      to Executive’s residence in the case of notice to Executive, or to its principal
      office if to Company. A notice is deemed received or delivered on the earlier
      of
      the day received or three (3) days after being sent by registered or certified
      mail in the manner described in this Section.

     

    7.10  Waiver
      of Breach.
      The
      waiver by any party hereto of a breach of any provision of this Agreement shall
      not operate or be construed as a waiver of any subsequent breach.

     

    7.11  Survival.
      Notwithstanding anything to the contrary contained in this Agreement, the rights
      and obligations of each party under Paragraphs 4, 5 and 6 shall survive the
      termination of Executive’s employment with Company.

     

    7.12  Key
      Man Life Insurance.
      At any
      time during the Term of Employment, Company may, but shall not be obligated
      to,
      take out and maintain, at Company’s sole cost and expense, one or more insurance
      policies on the life of Executive, with Company being the sole owner and sole
      beneficiary. Company shall have the right, at any time and from time to time
      during the Term of Employment, to increase or decrease the amount(s) of such
      insurance. Executive agrees to cooperate with Company in connection with such
      policies, including but not limited to the taking of medical
      examinations.

    

     

    [Signatures
      on next page]

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

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

     

    

    AMBASSADORS
      GROUP, INC.

    

    By:____________________________

    Chadwick
      J. Byrd

    Chief
      Financial Officer

    

    

    By: ____________________________ 

    Richard
      D. C. Whilden

    Chairman
      of Compensation Committee

    

    ________________________________

    JEFFREY
      D. THOMAS

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