BETWEEN

EXHIBIT 2.4

EXHIBIT C

EMPLOYEE MATTERS AGREEMENT

BETWEEN

AMBASSADORS INTERNATIONAL, INC.

AND

AMBASSADORS GROUP, INC.

EFFECTIVE AS OF

_________________, 2001

TABLE OF CONTENTS

PAGE

1. DEFINITIONS................................................................................ 1
1.1 Ambassadors....................................................................... 1
1.2 Ambassadors Business.............................................................. 1
1.3 Ambassadors Group................................................................. 1
1.4 Ambassadors Employee.............................................................. 1
1.5 Ambassadors Equity Participation Plan............................................. 1
1.6 Ambassadors Stock Options......................................................... 1
1.7 Affiliate......................................................................... 1
1.8 Agreement......................................................................... 1
1.9 Ancillary Agreements.............................................................. 1
1.10 California State Disability Insurance............................................. 2
1.11 COBRA............................................................................. 2
1.12 Code.............................................................................. 2
1.13 Distribution...................................................................... 2
1.14 Distribution Date................................................................. 2
1.15 Education......................................................................... 2
1.16 Education Business................................................................ 2
1.17 Education Group................................................................... 2
1.18 Education Employee................................................................ 2
1.19 Education Equity Participation Plan............................................... 2
1.20 Education Stock Options........................................................... 2
1.21 ERISA............................................................................. 2
1.22 FMLA.............................................................................. 2
1.23 Health and Welfare Plans.......................................................... 2
1.24 Health Plans...................................................................... 2
1.25 Intrinsic Value................................................................... 2
1.26 Liabilities....................................................................... 2
1.27 NASDAQ............................................................................ 3
1.28 Participating Company............................................................. 3
1.29 Person............................................................................ 3
1.30 Plan.............................................................................. 3
1.31 Separation........................................................................ 3
1.32 Separation Agreement.............................................................. 3
1.33 Separation Date................................................................... 3
1.34 Subsidiary........................................................................ 3
1.35 401(k) Plan....................................................................... 3

2. GENERAL PRINCIPLES......................................................................... 3
2.1 Liabilities....................................................................... 3
2.2 Establishment of Education Plans.................................................. 4
2.3 Education Under No Obligation to Maintain Plans................................... 4
2.4 Education's Participation in Ambassadors Plans.................................... 4
2.5 Terms of Participation by Education Employees in Education Plans.................. 4

3. DEFINED CONTRIBUTION PLAN.................................................................. 5
3.1 401(k) Plan....................................................................... 5

PAGE

4. HEALTH AND WELFARE PLANS................................................................... 5
4.1 Health Plans as of the Distribution Date.......................................... 5
4.2 Health Plans through the Distribution Date........................................ 6
4.3 Section 125 Plans................................................................. 6
4.4 COBRA............................................................................. 6
4.5 Workers' Compensation Plan........................................................ 6

5. EQUITY AND OTHER COMPENSATION.............................................................. 6
5.1 Equity Participation Plan......................................................... 6
5.2 Issuance of Education Stock Options............................................... 7
5.3 Exercise Price and Number of Shares of Common Stock Underlying
Education Stock Options........................................................... 7
5.4 Adjustment of Exercise Price and Number of Shares of Common
Stock Underlying Ambassadors Stock Options........................................ 7
5.5 Key Employees Education Options................................................... 7

6. ADMINISTRATIVE PROVISIONS.................................................................. 7
6.1 Sharing of Participant Information................................................ 7
6.2 Costs and Expenses................................................................ 7

7. EMPLOYMENT-RELATED MATTERS................................................................. 7
7.1 Non-Solicitation of Employees..................................................... 7
7.2 Employment Litigation............................................................. 8

8. GENERAL PROVISIONS......................................................................... 8
8.1 Authority......................................................................... 8
8.2 Amendment and Execution........................................................... 8
8.3 Counterparts...................................................................... 8
8.4 Effectiveness..................................................................... 8
8.5 Effect If Separation And/or Distribution Does Not Occur........................... 8
8.6 Termination....................................................................... 8
8.7 Binding Effect; Assignment........................................................ 8
8.8 Performance....................................................................... 9
8.9 Additional Assurances............................................................. 9
8.10 Entire Agreement.................................................................. 9
8.11 Attachments....................................................................... 9
8.12 Descriptive Headings.............................................................. 9
8.13 Gender and Number................................................................. 9
8.14 Severability...................................................................... 9
8.15 Survival of Agreements............................................................ 9
8.16 Governing Law..................................................................... 9
8.17 Notices........................................................................... 9
8.18 Waivers; Remedies................................................................. 10
8.19 Dispute Resolution................................................................ 10
8.20 Force Majeure..................................................................... 10

EMPLOYEE MATTERS AGREEMENT

This Employee Matters Agreement (this "Agreement") is entered into as of
__________, 2001, between Ambassadors International, Inc., a Delaware
corporation ("Ambassadors"), and Ambassadors Group, Inc., a Delaware corporation
("Education"). Ambassadors and Education are sometimes referred to herein
individually as a "party" or collectively as the "parties." Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed to such
terms in Article 1 hereof.

WHEREAS, Ambassadors currently owns all of the issued and outstanding
capital stock of Education; and,

WHEREAS, the Board of Directors of Ambassadors has determined that it is
appropriate and desirable to separate the business of the parties (the
"Separation") and to distribute all of the shares of Education common stock pro
rata to the holders of Ambassadors common stock (the "Distribution"), all on the
terms and conditions contemplated by a Master Separation and Distribution
Agreement dated _____________, 2001 (the "Separation Agreement");

WHEREAS, in connection with the Separation and Distribution, Ambassadors
and Education have agreed to enter into this Agreement to allocate between them
Assets, Liabilities and responsibilities with respect to certain employee
compensation, benefit plans, programs and arrangements, and certain employment
matters;

NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below, the parties hereto agree as follows:

1. DEFINITIONS. For the purposes of this Agreement, the following terms shall
have the following meanings. Any capitalized terms which are not defined in this
Agreement shall have the meaning assigned to them in the Separation Agreement.

1.1. "AMBASSADORS" means the Ambassadors Business and the Ambassadors
Group.

1.2. "AMBASSADORS BUSINESS" means the business and operations of
Ambassadors as they currently exist, exclusive of the Education Business.

1.3. "AMBASSADORS GROUP" has the meaning set forth in Section 6.1 of the
Separation Agreement.

1.4. "AMBASSADORS EMPLOYEE" means an individual who is actively employed
by, or on leave of absence from, Ambassadors on the Distribution Date.

1.5. "AMBASSADORS EQUITY PARTICIPATION PLAN" means the Amended and
Restated 1995 Equity Participation Plan of Ambassadors International,
Inc., as amended.

1.6. "AMBASSADORS STOCK OPTIONS" means all stock options issued by
Ambassadors under to the Ambassadors Equity Participation Plan.

1.7. "AFFILIATE" means, with respect to any specified Person, any entity
that Controls, is Controlled by, or is under common Control with such
Person. For this purpose, "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such entity, whether through ownership of
voting securities or other interests, by control, or otherwise.

1.8. "AGREEMENT" means this Employee Matters Agreement, including all
amendments made hereto from time to time.

1.9. "ANCILLARY AGREEMENTS" has the meaning set forth in Section 6.3 of
the Separation Agreement.

1.10. "CALIFORNIA STATE DISABILITY INSURANCE" means the disability
insurance made available and administered by the State of California to
employers and employees.

1.11. "COBRA" means the continuation coverage requirements for "group
health plans" under Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended from time to time, and as codified
in Code Section 4980B and ERISA Sections 601 through 608.

1.12. "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.

1.13. "DISTRIBUTION" has the meaning set forth in Section 6.8 of the
Separation Agreement.

1.14. "DISTRIBUTION DATE" has the meaning set forth in Section 6.10 of
the Separation Agreement.

1.15. "EDUCATION" means the Education Business and the Education Group.

1.16. "EDUCATION BUSINESS" has the meaning as set forth in Section 6.12
of the Separation Agreement.

1.17. "EDUCATION GROUP" has the meaning as set forth in Section 6.13 of
the Separation Agreement.

1.18. "EDUCATION EMPLOYEE" means an individual who is actively employed
by, or on leave of absence from, Education on the Distribution Date.

1.19. "EDUCATION EQUITY PARTICIPATION PLAN" means the Education Equity
Participation Plan adopted pursuant to Section 5 of this Agreement.

1.20. "EDUCATION STOCK OPTIONS" means stock options issued by Education
under the Education Equity Participation Plan pursuant to Section 5 of
this Agreement.

1.21. "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.

1.22. "FMLA" means the Family and Medical Leave Act of 1993, as amended
from time to time.

1.23. "HEALTH AND WELFARE PLANS," when immediately preceded by
"Ambassadors," means the Ambassadors Health Plans, the Ambassadors
Employee Assistance Plan, the Ambassadors Code Section 125/Flexible
Spending Plan (the "Ambassadors 125 Plan"), established and maintained by
Ambassadors for the benefit of eligible employees of Ambassadors, and
such other welfare plans or programs as may apply to such employees
through the Distribution Date. When immediately preceded by "Education,"
Health and Welfare Plans means the Education Health Plans, the Education
Employee Assistance Plan, the Education Code Section 125/Flexible
Spending Plan (the "Education 125 Plan"), established and maintained by
Education for the benefit of eligible employees of Education, and such
other welfare plans or programs that Education may establish.

1.24. "HEALTH PLANS," when immediately preceded by "Ambassadors," means
the medical, vision, and dental plans and any similar or successor Plans.
When immediately preceded by "Education," "Health Plans" means the
medical, vision and dental plans that may be established by Education.

1.25. "LIABILITIES" means all debts, liabilities, guarantees, assurances,
commitments, and obligations, whether fixed, contingent or absolute,
asserted or unasserted, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, known or unknown, due or to become due, whenever
or however arising (including, without limitation, whether arising out of
any Contract or tort based on negligence or strict liability) and whether
or not the same would be required by generally accepted accounting
principles to be reflected in financial statements or disclosed in the
notes thereto. For this purpose, "Contract" means any contract,
agreement, lease, license, sales order, purchase order, instrument or
other commitment that is binding on any Person or any part of its
property

under applicable law.

1.26. "NASDAQ" means the NASDAQ National Market.

1.27. "PARTICIPATING COMPANY" means: (i) Ambassadors; (ii) any Person
(other than an individual) that Ambassadors has approved for
participation in, has accepted participation in, and which is
participating in, a Plan sponsored by Ambassadors; and (iii) any Person
(other than an individual) which, by the terms of such Plan, participates
in such Plan or any employees of which, by the terms of such Plan,
participate in or are covered by such Plan.

1.28. "PERSON" has the meaning as set forth in Section 6.21 of the
Separation Agreement.

1.29. "PLAN" means any plan (including any of the Health and Welfare
plans), policy, program, payroll practice, arrangement, contract, trust,
insurance policy, or any agreement or funding vehicle providing
compensation or benefits to employees, former employees, directors or
consultants of Ambassadors or Education.

1.30. "SEPARATION" has the meaning set forth in the Recitals of the
Separation Agreement.

1.31. "SEPARATION AGREEMENT" means the Master Separation and Distribution
Agreement, dated as of _____________, 2001 between Ambassadors and
Education.

1.32. "SEPARATION DATE" has the meaning set forth in Section 6.25 of the
Separation Agreement.

1.33. "SUBSIDIARY" has the meaning set forth in Section 6.26 of the
Separation Agreement.

1.34. "401(K) PLAN," when immediately preceded by Ambassadors means the
qualified retirement plan of Ambassadors. When immediately preceded by
Education, "401(k) Plan" shall mean the qualified retirement plan that
Education shall establish, sponsor, and maintain effective as of the
Distribution Date or such other date as Ambassadors and Education may
mutually agree.

2. GENERAL PRINCIPLES.

2.1. LIABILITIES. Except as specified otherwise in this Agreement or as
mutually agreed upon by Education and Ambassadors, any Liability incurred
with respect to Ambassadors Plans by Education as a Participating Company
up to the Distribution Date shall be borne solely by Ambassadors, and any
Liability incurred with respect to Education Plans, as then, or in the
future, may be established, from the Distribution Date forward will be
borne solely by Education.

2.2. ESTABLISHMENT OF EDUCATION PLANS.

2.2.1. HEALTH AND WELFARE PLANS. Effective as of the Distribution
Date, Education shall have in place and will have adopted the
Education Health and Welfare Plans.

2.2.2. 401(K) PLAN. Effective as of the Distribution Date (or such
other date as Ambassadors and Education may mutually agree),
Education shall establish, or cause to be established, a separate
trust, which is intended to be tax-qualified under Code Section
401(a), to be exempt from taxation under Code Section 501(a)(1),
and to form the Education 401(k) Plan.

2.2.3. EQUITY AND OTHER COMPENSATION. Except as specified
otherwise in this Agreement, effective on or before the Separation
Date (or such other date(s) as Ambassadors and Education may
mutually agree), Education shall adopt the Education Equity
Participation Plan.

2.2.4. OTHER PLANS. Except as otherwise specified in this
Agreement, effective as of the Distribution Date Education shall
adopt certain Education Plans that are specifically tied to its
payroll practices, including, without limitation, such Plans that
Education deems appropriate.

2.3. EDUCATION UNDER NO OBLIGATION TO MAINTAIN PLANS. Except as specified
otherwise in this Agreement, nothing in this Agreement shall preclude
Education, at any time after the Distribution Date, from amending,
merging, modifying, terminating, eliminating, reducing, or otherwise
altering in any respect any Education Plan, any benefit under any
Education Plan or any trust, insurance policy or funding vehicle related
to any Education Plans, or any employment or other service arrangement
with Education Employees, consultants or vendors (to the extent permitted
by law).

2.4. EDUCATION'S PARTICIPATION IN AMBASSADORS PLANS.

2.4.1. PARTICIPATION IN AMBASSADORS PLANS. Except as specified
otherwise in this Agreement or as Ambassadors and Education may
mutually agree, Education shall, until the Distribution Date,
continue to be a Participating Company in the Ambassadors Plans.

2.4.2. AMBASSADORS'S GENERAL OBLIGATIONS AS PLAN SPONSOR. To the
extent that Education is a Participating Company in any
Ambassadors Plan, Ambassadors shall continue to administer, or
cause to be administered, in accordance with its terms and
applicable law, such Ambassadors Plan, and shall have the sole and
absolute discretion and authority to interpret the Ambassadors
Plan, as set forth therein. Notwithstanding the foregoing,
Ambassadors may at any time amend, merge, modify, terminate,
eliminate, reduce, or otherwise alter any Ambassadors Plan to the
extent permitted by law and the terms of such Ambassadors Plan.

2.4.3. EDUCATION'S GENERAL OBLIGATIONS AS PARTICIPATING COMPANY.
Education shall perform, with respect to its participation in the
Ambassadors Plans, the duties of a Participating Company as set
forth in each such Plan or any procedures adopted pursuant
thereto, including (without limitation): (i) assistance in the
administration of claims, to the extent requested by the claims
administrator of the applicable Ambassadors Plan; (ii) full
cooperation with Ambassadors Plan auditors, benefit personnel and
benefit vendors; (iii) preservation of the confidentiality of all
financial arrangements Ambassadors has or may have with any
vendors, claims administrators, trustees, service providers or any
other entity or individual with whom Ambassadors has entered into
an agreement relating to the Ambassadors Plans; and (iv)
preservation of the confidentiality of participant information
(including, without limitation, health information in relation to
leaves) to the extent not specified otherwise in this Agreement.

2.4.4. TERMINATION OF PARTICIPATING COMPANY STATUS. Except as
specified otherwise in this Agreement or as mutually agreed upon
by Education and Ambassadors, effective as of the Distribution
Date, Education shall automatically cease to be a Participating
Company in any and all Ambassadors Plans.

2.5. TERMS OF PARTICIPATION BY EDUCATION EMPLOYEES IN EDUCATION PLANS.

2.5.1. NON-DUPLICATION OF BENEFITS. Except as specified otherwise
in this Agreement or as mutually agreed upon by Education and
Ambassadors, effective as of the Distribution Date, Ambassadors
and Education shall agree on methods and procedures, including
amending the respective Plan documents, to prevent Education
Employees from receiving duplicate benefits from the Ambassadors
Plans and the Education Plans, except as may be set forth in
Section 5.3 of this Agreement.

2.5.2. SERVICE CREDIT. Except as specified otherwise in this
Agreement, with respect to Education Employees, Education shall
make reasonable efforts to provide that all service and all other
benefit-affecting determinations that, as of the Distribution
Date, were recognized under the corresponding Ambassadors Plan
shall, as of the Distribution Date, receive full recognition and
credit and be taken into account under such Education Plan to the
same extent as if such items occurred under such Education Plan,
except to the extent that duplication of benefits would result.

3. DEFINED CONTRIBUTION PLAN.

3.1. 401(K) PLAN.

3.1.1. 401(K) PLAN TRUST. Effective as of the Distribution Date
(or such other date as Ambassadors and Education may mutually
agree), Education shall establish, or cause to be established, a
separate trust, which is intended to be tax-qualified under Code
Section 401(a), to be exempt from taxation under Code Section
501(a)(1), and to form the Education 401(k) Plan.

3.1.2. 401(K) PLAN: ASSUMPTION OF LIABILITIES AND TRANSFER OF
ASSETS. Effective as of the Distribution Date (or such other date
as Ambassadors and Education may mutually agree): (i) the
Education 401(k) Plan shall assume and be solely responsible for
all Liabilities relating to, arising out of, or resulting from
Education Employees under the Ambassadors 401(k) Plan; and (ii)
Ambassadors shall cause the accounts of the Education Employees
under the Ambassadors 401(k) Plan that are held by its related
trust to be transferred to the Education 401(k) Plan and its
related trust, and Education shall cause such transferred accounts
to be accepted by such Plan and its related trust. Education and
Ambassadors each agree to use their reasonable best efforts to
accomplish this 401(k) Plan and related trust spin-off.

3.1.3. NO DISTRIBUTION TO EDUCATION EMPLOYEES. The Ambassadors
401(k) Plan and the Education 401(k) Plan shall provide that no
distribution of account balances shall be made to any Education
Employee on account of Education ceasing to be an Affiliate of
Ambassadors as of the Distribution Date.

4. HEALTH AND WELFARE PLANS.

4.1. HEALTH PLANS AS OF THE DISTRIBUTION DATE.

4.1.1. EDUCATION HEALTH PLANS. As of the Distribution Date (or
such other date(s) as Ambassadors and Education may mutually
agree), Education shall have established Education Health Plans
that will provide coverage for Education Employees (and their
eligible dependents). Effective as of the last day of the month in
which the Distribution Date occurs, Education Employees shall
cease to be covered under the Ambassadors Health Plans, and
Education shall be solely responsible for (i) all Liabilities
incurred with respect to such Education Health Plans; and (ii) the
administration of the Education Health Plans, including, without
limitation, the payment of all employer-related costs in
establishing and maintaining the Education Health Plans, and for
the collection and remittance of employee premiums from such date
forward.

4.1.2. PENDING TREATMENTS. Notwithstanding Subsection 4.1.1 above,
all courses of treatment that have begun prior to the Distribution
Date with respect to Education Employees (or their eligible
dependents) under the applicable Ambassadors Health Plan shall be
provided without interruption under the applicable Ambassadors
Health Plan until the earlier of: (i) such course of treatment is
concluded or discontinued or (ii) 90 days from the date medical
attention was first received with respect to such course of
treatment ("Uninterrupted Treatment"). For purposes of this
Section 4.1.2 only, courses of treatment means that a Education
Employee, prior to the Distribution Date, has received, and at the
Distribution Date is still receiving, medical treatment for a
specific illness or injury and such Uninterrupted Treatment is
applicable only to that specific illness or injury.

4.1.3. VENDOR ARRANGEMENTS. If requested by Education and if
agreed to by Ambassadors, Ambassadors shall use reasonable efforts
in assisting Education to procure, effective as of the
Distribution Date (or such other date(s) as Ambassadors and
Education may mutually agree), Education Health Plans.

4.1.4. NO STATUS CHANGE. The transfer or other movement of
employment between Ambassadors to Education at any time upon or
before the Distribution Date shall neither constitute nor be
treated as a "status change" or termination of employment under
the Ambassadors Health Plans or the Education Health Plans.

4.2. HEALTH PLANS THROUGH THE DISTRIBUTION DATE. Except as otherwise
agreed by Ambassadors and Education, for the period beginning with the
Separation Date and ending on the last day of the month in which the
Distribution Date falls (or such other period as Ambassadors and
Education may mutually agree), Education Employees shall continue to
participate in the Ambassadors Health Plans. Ambassadors shall administer
and be responsible for claims incurred under the Ambassadors Health Plans
by Education Employees until the last day of the month in which the
Distribution Date occurs, subject to the limitations as set forth in
Section 4.1.2. Any determination made or settlements entered into by
Ambassadors with respect to such claims shall be final and binding.
Ambassadors shall retain financial and administrative ("run-out")
Liability and all related obligations and responsibilities for all claims
incurred by Education Employees until the last day of the month in which
the Distribution Date occurs, subject to the limitations as set forth in
Section 4.1.2.

4.3. SECTION 125 PLANS.

4.3.1. CAFETERIA PLAN. Education shall, until the Distribution
Date (or such other date as Education and Ambassadors may mutually
agree), continue to be a Participating Company in the Ambassadors
125 Plan. Effective as of the Distribution Date, Education may
establish, in its sole discretion, an Education 125 Plan for the
benefit of Education Employees.

4.3.2. FLEXIBLE SPENDING ACCOUNT PLAN. Until the Distribution
Date, Education shall continue to be a Participating Company in
the health care spending account and dependent care spending
account (the "Ambassadors Flexible Spending Accounts") of the
Ambassadors 125 Plan. Effective as of the Distribution Date,
Education shall cause to be implemented and shall sponsor a
Education health care spending account and dependent care spending
account (the "Education Flexible Spending Accounts") for the
benefit of Education Employees that is substantially similar to
that of the Ambassadors Flexible Spending Accounts.

4.4. COBRA. Ambassadors shall be responsible for providing COBRA
continuation coverage (for the applicable period of time as required by
law) to Education Employees and their eligible dependents who become
eligible for such coverage prior to the Distribution Date. Effective as
of the Distribution Date, Education shall be responsible for providing
COBRA continuation coverage to Education Employees and their eligible
dependents who become eligible for such coverage on and following the
Distribution Date.

4.5. WORKERS' COMPENSATION PLAN. Effective as of the Distribution Date,
or such other date as Ambassadors and Education may mutually agree,
Ambassadors shall establish a workers' compensation plan for the benefit
of Education Employees.

5. EQUITY AND OTHER COMPENSATION.

5.1. EQUITY PARTICIPATION PLAN. It is the intent of the parties that, as
part of the Distribution, Education Employees exchange their Ambassadors
Options for Education Options and that all other holders of Ambassadors
Options keep such options subject to the adjustment below. Effective on
or before the Separation Date (or such other date as Ambassadors and
Education may mutually agree), Education shall establish and sponsor an
Equity Participation Plan for the benefit of Education Employees,
directors and consultants, which Plan shall be similar in terms to the
Ambassadors Equity Participation Plan.

5.2. ISSUANCE OF EDUCATION STOCK OPTIONS. On the Distribution Date,
Education shall issue Education Stock Options pursuant to the Education
Equity Participation Plan to each person: (i) who then holds Ambassadors
Stock Options pursuant to the Ambassadors Equity Participation Plan, and
(ii) who is then an Education Employee in exchange for the Ambassadors
Stock Options held by each such person. Once exchanged for Education
Options, Ambassadors Options held by Education Employees shall be
cancelled. The Education Stock Options so issued to each such person
shall be identical to the Ambassadors Stock Options held by such person
in every respect except as to issuer, number and exercise price. The
number and exercise price of the Education Stock Options, and the
Ambassadors Stock Options shall be adjusted in accordance with the
following provisions.

5.3 EXERCISE PRICE AND NUMBER OF SHARES OF COMMON STOCK UNDERLYING
EDUCATION STOCK OPTIONS. The exercise price of Education Options ("EEP")
shall be determined according to the following formula: the pre-
Distribution exercise price of the Ambassadors Option ("A") divided by
the pre-Distribution price per share of Ambassadors common stock ("B")
the quotient of which is multiplied by the post-Distribution price per
share of Education common stock ("E"). This formula is expressed
mathematically as follows: (A / B) x E. The number of Education Options
to be issued in exchange for Ambassadors Options shall be determined
according to the following formula: the number of shares of common stock
underlying pre-Distribution Ambassadors Options ("D") multiplied by the
pre-Distribution exercise price of the Ambassadors Option ("A") the
product of which is divided by EEP. This formula is expressed
mathematically as follows: (D x A) / EEP.

5.4 ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES OF COMMON STOCK
UNDERLYING AMBASSADORS OPTIONS. The exercise price of the Ambassadors
Options after the Distribution Date ("AEP") shall be determined according
to the following formula: the pre-Distribution exercise price of the
Ambassadors Option ("A") divided by the pre-Distribution price per share
of Ambassadors common stock ("B") the quotient of which is multiplied by
the post-Distribution price per share of Ambassadors common stock (C").
This formula is expressed mathematically as follows: (A / B) x C. The
number of shares of common stock underlying Ambassadors Options after the
Distribution Date shall be determined according to the following formula:
the number of shares of common stock underlying pre-Distribution
Ambassadors Options ("D") multiplied by the pre-Distribution exercise
price of the Ambassadors Option ("A") the product of which is divided by
AEP. This formula is expressed mathematically as follows: (D x A) / AEP.

5.5 KEY EMPLOYEES EDUCATION STOCK OPTIONS. In connection with the request
for the Tax Ruling, Education has designated certain persons to be "Key
Employees." Key Employees shall receive Education Options in addition to
those received pursuant to Section 5.4 above, according to the following
formula: the number of additional options granted to Key Employees, as a
group, shall be an amount equal to five (5%) percent of the outstanding
shares of common stock of Education at the Distribution Date ("X") less
an amount equal to the difference between the number of shares of common
stock underlying post-Distribution Date Education Options (calculated
according to Section 5.4 above) held by all Key Employees ("Y") and the
number of shares of common stock underlying pre-Distribution Date
Ambassadors Options held by all Key Employees ("Z"). This formula is
expressed mathematically as follows: X - (Y- Z).

6. ADMINISTRATIVE PROVISIONS.

6.1. SHARING OF PARTICIPANT INFORMATION. Ambassadors and Education shall
share, or cause to be shared, all participant information that is
necessary or appropriate for the efficient and accurate administration of
each of the Ambassadors Plans and the Education Plans during the
respective periods applicable to such Plans as Education and Ambassadors
may mutually agree. Ambassadors and Education and their respective
authorized agents shall, subject to applicable laws of confidentiality
and data protection, be given reasonable and timely access to, and may
make copies of, all information relating to the subjects of this
Agreement in the custody of the other party or its agents, to the extent
necessary or appropriate for such administration.

6.2. COSTS AND EXPENSES. Education shall bear all costs and expenses,
including but not limited to legal and actuarial fees, incurred from and
after the Distribution Date in the design, drafting and implementation of
any and all plans and compensation structures which it establishes or
creates and the amendment of its existing plans or compensation
structures.

7. EMPLOYMENT-RELATED MATTERS.

7.1. NON-SOLICITATION OF EMPLOYEES. Ambassadors and Education each agree
that, effective as of the Distribution Date, Ambassadors and Education
shall not solicit or recruit, without the other party's express written
consent, the other party's employees for a period of one year following
the Distribution Date. To the extent this prohibition is waived by way of
each party's express written consent, any recruitment efforts by either
Ambassadors or Education during the period of one year after the
Distribution Date shall be coordinated with appropriate management
personnel, as Ambassadors and Education shall mutually agree, of
Ambassadors or Education. Notwithstanding the foregoing, this prohibition
on solicitation does not apply to actions taken by a party either: (i)
solely as a result of an employee's affirmative response to a general
recruitment effort carried out through a public solicitation or general
solicitation, or (ii) as a result of an employee's initiative.

7.2. EMPLOYMENT LITIGATION. CLAIMS. Education shall have sole
responsibility for all employment-related claims regarding Education
Employees that arise out of facts, acts or omissions occurring on or
after the Distribution Date relating to, arising out of, or resulting
from their employment with Education. Ambassadors shall have sole
responsibility for all employment-related claims by or regarding
Ambassadors employees and for all employment-related claims by or
regarding Education Employees that arise out of facts, acts or omissions
occurring prior to the Distribution Date.

8. GENERAL PROVISIONS.

8.1. AUTHORITY. Each of the parties hereto represents to the other that
(i) it has the corporate or other requisite power and authority to
execute, deliver and perform this Agreement, (ii) the execution, delivery
and performance of this Agreement by it have been duly authorized by all
necessary corporate or other actions, (iii) it has duly and validly
executed and delivered this Agreement, and (iv) this Agreement is a
legal, valid and binding obligation, enforceable against it in accordance
with its terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and general equity principles.

8.2. AMENDMENT AND EXECUTION. The Boards of Directors of Education and
Ambassadors may mutually agree to amend the provisions of this Agreement
at any time or times, for any reason, either prospectively or
retroactively, to such extent and in such manner as the Boards mutually
deem advisable. Each Board may delegate its amendment power, in whole or
in part, to one or more Persons or committees as it deems advisable. No
change or amendment will be made to this Agreement, except by an
instrument in writing signed by authorized individuals. This Agreement
and amendments hereto shall be in writing and executed on behalf of
Ambassadors and Education by their respective duly authorized officers
and representatives.

8.3. COUNTERPARTS. This Agreement, including any attachments hereto and
the other documents referred to herein, may be executed via facsimile or
otherwise in counterparts, each of which shall be deemed to be an
original but all of which shall constitute one and the same agreement.

8.4. EFFECTIVENESS. All covenants and agreements of the parties contained
in this Agreement shall be subject to and conditioned upon the
Distribution becoming effective.

8.5. EFFECT IF SEPARATION AND/OR DISTRIBUTION DOES NOT OCCUR. If the
Separation and/or Distribution does not occur, then all actions and
events that are, under this Agreement, to be taken or occur effective as
of the Separation Date and/or Distribution Date, or otherwise in
connection with the Separation and/or Distribution, shall not be taken or
occur except to the extent specifically agreed by Education and
Ambassadors.

8.6. TERMINATION. This Agreement may be terminated and the Distribution
abandoned at any time prior to the Time of Distribution by and in the
sole discretion of the Ambassadors Board of Directors without the
approval of Education or of Ambassadors's shareholders. In the event of
such termination, no party will have any liability of any kind to any
other party on account of such termination.

8.7. BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
legal representatives and successors, and nothing in this Agreement,
express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement. Except as herein specifically provided to the contrary,
neither party may assign this Agreement or any rights or obligations
hereunder, without the prior written consent of the other party, and any
such assignment shall be void; provided, however, either party (or its
permitted successive assignees or transferees hereunder) may assign or
transfer this Agreement as a whole without consent to an entity that
succeeds to all or substantially all of the business or assets of such
party to which this Agreement relates.

8.8. PERFORMANCE. Each party hereto will cause to be performed, and
hereby guarantees the performance of all actions, agreements and
obligations set forth herein to be performed by any subsidiary or any
member of such party's Group.

8.9. ADDITIONAL ASSURANCES. Except as may be specifically provided herein
to the contrary, the provisions of this Agreement shall be self-operative
and shall not require further agreement by the parties; provided,
however, at the request of either party, the other party shall execute
such additional instruments and take such additional acts as are
reasonable, and as the requesting party may reasonably deem necessary, to
effectuate this Agreement.

8.10. ENTIRE AGREEMENT. This Agreement, the Separation Agreement, all
other Transaction Agreements, including any annexes, schedules and
exhibits hereto or thereto, and other agreements and documents referred
to herein and therein, will together constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof
and shall supersede all prior negotiations, agreements and understandings
of the parties of any nature, whether oral or written, with respect to
such subject matter.

8.11. ATTACHMENTS. All attachments hereto are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Capitalized
terms used in the attachments hereto but not otherwise defined therein
will have the respective meanings assigned to such terms in this
Agreement.

8.12. DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. When a reference is made
in this Agreement to an Article or a Section, Exhibit or Schedule, such
reference shall be to an Article or Section of, or an Exhibit or Schedule
to, this Agreement unless otherwise indicated.

8.13. GENDER AND NUMBER. Whenever the context of this Agreement requires,
the gender of all words herein shall include the masculine, feminine and
neuter, and the number of all words herein shall include the singular and
plural.

8.14. SEVERABILITY. The parties hereto have negotiated and prepared the
terms of this Agreement in good faith with the intent that each and every
one of the terms, covenants and conditions herein be binding upon and
inure to the benefit of the respective parties. Accordingly, if any one
or more of the terms, provisions, promises, covenants or conditions of
this Agreement or the application thereof to any person or circumstance
shall be adjudged to any extent invalid, unenforceable, void or voidable
for any reason whatsoever by a court of competent jurisdiction, such
provision shall be as narrowly construed as possible, and each and all of
the remaining terms, provisions, promises, covenants and conditions of
this Agreement or their application to other persons or circumstances
shall not be affected thereby and shall be valid and enforceable to the
fullest extent permitted by law. To the extent this Agreement is in
violation of applicable law, then the parties agree to negotiate in good
faith to amend the Agreement, to the extent possible consistent with its
purposes, to conform to law and effect the original intent of the
parties.

8.15. SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement shall remain in full force and effect and shall survive the
time of Distribution.

8.16. GOVERNING LAW. This Agreement shall be construed in accordance with
and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sale of Goods. The Superior
Court of Los Angeles County and/or the United States District Court for
the Southern District of California shall have jurisdiction and venue
over all Disputes between the parties that are permitted to be brought in
a court of law pursuant to the Separation Agreement.

8.17. NOTICES. Any notice, demand, offer, request or other communication
required or permitted to be given by either party pursuant to the terms
of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally,
(iii) one Business Day after being delivered by facsimile (with receipt
of appropriate confirmation), (iv) one Business Day after being deposited
with a nationally recognized overnight courier service or (v) four days
after being deposited in the U.S. mail, First Class with postage prepaid,
and addressed to:

If to Ambassadors: With a copy to:

Ambassadors International, Inc. Xxxxxx X. Xxxxxxxx, Esq.
0000 Xxxxxxxxx Xxxxxx Richman, Mann, Chizever, Philips & Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000 0000 Xxxxxxxx Xxxx., Xxxxxxxxx Xxxxx
Xxxxxxxxx: Xxxxxxx Xxxxx, XX 00000
Facsimile: 000 000-0000

If to Education: With a copy to:

Ambassadors Group, Inc. Xxxxxx X. Xxxxxxxx, Esq.
Xxxxxx X. Xxxxxxxxxx Building Richman, Mann, Chizever, Philips & Xxxxxx
000 Xxxxx Xxxxxxx Xxxxxx 0000 Xxxxxxxx Xxxx., Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000 Xxxxxxx Xxxxx, XX 00000
Facsimile: Facsimile: 000 000-0000

Ambassadors and Education may substitute a different address or facsimile
number, from time to time, if such substitute is provided to the intended
notice recipient in writing by notice given in the manner provided in
this section.

8.18. WAIVERS; REMEDIES. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder will operate as a
waiver thereof, nor will any waiver on the part of any party hereto of
any right, power or privilege hereunder operate as a waiver of any other
right, power or privilege hereunder, nor will any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege hereunder. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which the
parties may otherwise have at law or equity.

8.19. DISPUTE RESOLUTION. Any and all controversies, disputes or claims
arising out of, relating to, in connection with or resulting from this
Agreement (or any amendment thereto or any transaction contemplated
hereby or thereby), including as to its existence, interpretation,
performance, non-performance, validity, breach or termination, including
any claim based on contract, tort, statute or constitution and any claim
raising questions of law, whether arising before or after termination of
this Agreement, shall be deemed a Dispute as defined in the Separation
Agreement and shall be resolved exclusively by, in accordance with, and
subject to the limitations set

forth in the Separation Agreement.

8.20. FORCE MAJEURE. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or
other interruption of service deemed to result, directly or indirectly,
from acts of God, civil or military authority, acts of public enemy, war,
accidents, explosions, earthquakes, floods, failure of transportation,
strikes or other work interruptions by either party's employees, or any
other similar cause beyond the reasonable control of either party unless
such delay or failure in performance is expressly addressed elsewhere in
this Agreement.

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties as of the date first written
above.

Ambassadors International, Inc., Ambassadors Group, Inc.,
a Delaware corporation a Delaware corporation

By: By:
------------------------------- -------------------------------------

Title: Title:
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