CREDIT AGREEMENT
THIS
CREDIT AGREEMENT (this
"Agreement") is entered into as of May 30, 2008, by and between AMBASSADORS
GROUP, INC., a Delaware corporation ("Borrower"), and XXXXX FARGO BANK, NATIONAL
ASSOCIATION ("Bank").
Borrower
has requested that Bank
extend or continue credit to Borrower as described below, and Bank has agreed
to
provide such credit to Borrower on the terms and conditions contained
herein.
ARTICLE
I
(a)
Line of
Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time up to and
including May 31, 2011, not to exceed at any time the aggregate principal amount
of Twenty Million Dollars ($20,000,000.00) ("Line of Credit"), the proceeds
of
which shall be used for Borrower’s general corporate
purposes. Borrower's obligation to repay advances under the Line of
Credit shall be evidenced by a promissory note dated as of May 30, 2008 ("Line
of Credit Note"), all terms of which are incorporated herein by this
reference.
(b)
Letter of Credit
Subfeature. As a subfeature under the Line of Credit, Bank
agrees from time to time during the term thereof to issue or cause an affiliate
to issue standby letters of credit for the account of Borrower to finance
Borrower’s working capital requirements (each, a "Letter of Credit" and
collectively, "Letters of Credit"); provided, however,
that the
aggregate undrawn amount of all outstanding Letters of Credit shall not at
any
time exceed Two Million Five Hundred Thousand Dollars
($2,500,000.00). The form and substance of each Letter of Credit
shall be subject to approval by Bank, in its sole discretion. No
Letter of Credit shall have an expiration date subsequent to the maturity date
of the Line of Credit. The undrawn amount of all Letters of Credit
shall be reserved under the Line of Credit and shall not be available for
borrowings thereunder. Each Letter of Credit shall be subject to the
additional terms and conditions of the Letter of Credit agreements (each, a
"Letter of Credit Agreement" and collectively, "Letter of Credit Agreements"),
applications and any related documents required by Bank in connection with
the
issuance thereof. Each drawing paid under a Letter of Credit shall be
deemed an advance under the Line of Credit and shall be repaid by Borrower
in
accordance with the terms and conditions of this Agreement applicable to such
advances; provided however, that if advances under the Line of Credit are not
available, for any reason, at the time any drawing is paid, then Borrower shall
immediately pay to Bank the full amount drawn, together with interest thereon
from the date such drawing is paid to the date such amount is fully repaid
by
Borrower, at the rate of interest applicable to advances under the Line of
Credit. In such event Borrower agrees that Bank, in its sole
discretion, may debit any account maintained by Borrower with Bank for the
amount of any such drawing.
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(c)
Borrowing and
Repayment. Borrower may from time to time during the term of
the Line of Credit borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions contained
herein or in the Line of Credit Note; provided, however,
that the
total outstanding borrowings under the Line of Credit shall not at any time
exceed the maximum principal amount available thereunder, as set forth
above.
(a)
Interest. The
outstanding principal balance of each credit subject hereto shall bear interest
at the rate of interest set forth in each promissory note or other instrument
or
document executed in connection therewith.
(b)
Computation and
Payment. Interest with respect to all interest rates other
than the Prime Rate shall be computed on the basis of a 360-day year, actual
days elapsed. Interest based on the Prime Rate shall be computed on
the basis of the actual days in a year of 365 (or in a leap year,
366). Interest shall be payable at the times and place set forth in
each promissory note or other instrument or document required
hereby.
(c)
Commitment
Fee. Borrower shall pay to Bank a non-refundable commitment
fee for the Line of Credit equal to Ten Thousand Dollars ($10,000.00), which
fee
shall be due and payable in full on the date of this Agreement.
(d)
Letter of Credit
Fees. Borrower shall pay to Bank (i) for each Letter of
Credit, fees equal to sixty hundredths percent (0.60%) per annum (computed
on
the basis of a 360-day year, actual days elapsed) of the face amount thereof,
which shall be due and payable upon: (A) the issuance of such Letter of Credit
and (B) each annual renewal date of such Letter of Credit thereafter, and
(ii) fees upon the payment or negotiation of each drawing under any Letter
of Credit and fees upon the occurrence of any other activity with respect to
any
Letter of Credit (including without limitation, the transfer, amendment or
cancellation of any Letter of Credit) determined in accordance with Bank's
standard fees and charges then in effect for such activity.
(e)
Facility
Fee. Borrower shall pay to Bank a non-refundable facility fee
for the Line of Credit equal to Twenty Thousand Dollars ($20,000.00), which
fee
shall be due and payable in full as of each May 1.
ARTICLE
II
Borrower
makes the following
representations and warranties to Bank, which representations and warranties
shall survive the execution of this Agreement and shall continue in full force
and effect until the full and final payment, and satisfaction and discharge,
of
all obligations of Borrower to Bank subject to this Agreement.
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SECTION
2.2.
AUTHORIZATION AND VALIDITY. This Agreement, the Line of Credit Note, the Letters
of Credit, the Letter of Credit Agreement and any other instrument or document
required hereby or at any time hereafter delivered to Bank in connection
herewith (collectively, the "Loan Documents") have been duly authorized, and
upon their execution and delivery in accordance with the provisions hereof
will
constitute legal, valid and binding agreements and obligations of Borrower
or
the party which executes the same, enforceable in accordance with their
respective terms.
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ARTICLE
III
(a)
Approval of Bank
Counsel. All legal matters incidental to the extension of
credit by Bank shall be satisfactory to Bank's counsel.
(b)
Documentation. Bank
shall have received, in form and substance satisfactory to Bank, each of the
following, duly executed:
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(i)
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This
Agreement and each promissory note or other instrument or document
required hereby.
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(ii)
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Corporate
Resolution: Borrowing.
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(iv)
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Such
other documents as Bank may require under any other Section of this
Agreement.
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(c)
Financial
Condition. There shall have been no material adverse change,
as determined by Bank, in the financial condition or business of Borrower,
nor
any material decline, as determined by Bank, in a substantial or material
portion of the assets of Borrower since December 31, 2007.
(d)
Insurance. Borrower
shall have delivered to Bank evidence of insurance coverage on all Borrower's
property, in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank.
(a)
Compliance. The
representations and warranties contained herein and in each of the other Loan
Documents shall be true on and as of the date of the signing of this Agreement
and on the date of each extension of credit by Bank pursuant hereto, with the
same effect as though such representations and warranties had been made on
and
as of each such date, and on each such date (unless by their terms, such
representations and warranties were made as of a specific date), no Event of
Default as defined herein, and no condition, event or act which with the giving
of notice or the passage of time or both would constitute such an Event of
Default, shall have occurred and be continuing or shall exist.
(b)
Documentation. Bank
shall have received all additional documents which may be required in connection
with such extension of credit.
(c)
Additional Letter
of
Credit Documentation. Prior to the issuance of each Letter of
Credit, Bank shall have received a Letter of Credit Agreement properly completed
and duly executed by Borrower.
ARTICLE
IV
Borrower
covenants that so long as
Bank remains committed to extend credit to Borrower pursuant hereto, or any
liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower to Bank under any of the Loan Documents remain outstanding and until
payment in full of all obligations of Borrower subject hereto, Borrower shall,
unless Bank otherwise consents in writing:
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(a)
not later than 90 days after and as of the end of each fiscal year, a
consolidated financial statement of Borrower, together with a copy of the 10K
report filed by Borrower with the Securities Exchange Commission, audited by
a
certified public accountant reasonably acceptable to Bank, to include a balance
sheet, an income statement and a statement of cash flows;
(b)
not later than 45 days after and as of the end of each fiscal quarter, a
consolidated financial statement of Borrower, together with a copy of the 10Q
report filed by Borrower with the Securities Exchange Commission, to include
a
balance sheet, an income statement and a statement of cash flows;
(c)
not later than 60 days prior to the last day of each fiscal year, Borrower’s
projections of consolidated financial statements for the immediately following
year, by fiscal quarter;
(d)
a Compliance Certificate: (i) contemporaneously with any request for an advance
under the Line of Credit when the outstanding principal balance of the Line
of
Credit at the time of such request is zero, and (ii) so long as there are
outstanding borrowings under the Line of Credit (excluding amounts reserved
under Section 1.1 (b)), contemporaneously with each annual and quarterly
financial statement of Borrower required hereby. As used herein, “Compliance
Certificate” shall mean a financial covenant compliance certificate (in form and
substance acceptable to Bank) of Borrower, together with a certificate of the
president or chief financial officer of Borrower that said financial statements
are accurate and that there exists no Event of Default nor any condition, act
or
event with which the giving of notice or the passage of time or both would
constitute an Event of Default;
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(e)
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from
time to time such other information as Bank may reasonably
request.
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without
limitation federal and state income taxes and state and local property taxes
and
assessments, except (a) such as Borrower may in good faith contest or as to
which a bona fide dispute may arise, and (b) for which Borrower has made
provision, to Bank's satisfaction, for eventual payment thereof in the event
Borrower is obligated to make such payment.
(a)
Current Ratio not less than 1.10 to 1.0 for each fiscal quarter ending June
30
and not less than 1.50 to 1.0 for each fiscal quarter ending September 30,
with
“Current Ratio” defined as the sum of cash and cash equivalents, marketable
securities, prepaid program costs, and expenses divided by
the sum of
accounts payable, accrued expenses and other short-term liabilities (excluding
deferred taxes), participant deposits, the outstanding principal balance of
the
Line of Credit (including the reserve for outstanding Letters of Credit) and
the
current portion of capitalized lease payments and long-term debt.
(b)
Deployable Cash not less than zero at any time, with “Deployable Cash” defined
as cash and cash equivalents, available for sale securities, prepaid program
costs and expenses minus participant
deposits, accounts payable, accrued expenses, and other short-term liabilities
(excluding deferred taxes) and the current portion of long-term capitalized
lease payments.
(c)
Tangible Net Worth not less than $40,000,000.00 at any time, with "Tangible
Net
Worth" defined as the aggregate of total stockholders' equity less any
intangible assets.
(d)
Net income after taxes not less than $4,000,000.00 on a trailing 4-quarter
basis, determined as of each fiscal quarter end.
ARTICLE
V
Borrower
further covenants that so
long as Bank remains committed to extend credit to Borrower pursuant hereto,
or
any liabilities (whether direct or contingent, liquidated or unliquidated)
of
Borrower to Bank under any of the Loan Documents remain outstanding, and
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until
payment in full of all obligations of Borrower subject hereto, Borrower will
not
without Bank's prior written consent:
As
used herein, “Permitted
Acquisition” means the purchase by Borrower of all or substantially all of the
assets, business, stock, partnership interests or membership interests of any
person or entity, or the acquisition by Borrower of any corporation, partnership
or limited liability company through a merger or consolidation in which the
surviving entity is Borrower, and which satisfies the following conditions,
as
determined by Bank in its sole discretion: (a) the purpose of the acquisition
shall be to acquire a business in a similar or related line of business to
that
of Borrower; (b) Bank shall have received from Borrower such information
regarding the terms and conditions of the acquisition as it shall reasonably
require; (c) no later than thirty (30) days prior to the anticipated closing
of
such acquisition, Borrower shall deliver consolidated pro forma financial
statements to Bank, in form and substance satisfactory to Bank and certified
by
the president or chief financial officer of Borrower, evidencing that after
giving effect to the acquisition, no financial covenant of this Agreement shall
be violated; (d) at the time of such acquisition, no Event of Default (as
defined in Section 6.1 hereof), and no condition or event or act which with
the
giving of notice or the passage of time or both would constitute an Event of
Default, shall exist or shall have occurred and be continuing hereunder or
under
any of the other Loan Documents; and (e) the acquisition shall comply with
all
applicable laws.
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ARTICLE
VI
SECTION
6.1.
The occurrence of any of the following shall constitute an "Event of Default"
under this Agreement:
(a)
Borrower shall fail to pay within five (5) Business Days of the date when due
any principal, interest, fees or other amounts payable under any of the Loan
Documents.
(b)
Any financial statement or certificate furnished to Bank in connection with,
or
any representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.
(c)
Any default in the performance of or compliance with any obligation, agreement
or other provision contained herein or in any other Loan Document (other than
those referred to in subsections (a) and (b) above), and with respect to any
such default which by its nature can be cured, such default shall continue
for a
period of twenty (20) days from its occurrence.
(d)
Any default in the payment or performance of any obligation, or any defined
event of default, under the terms of any contract or instrument (other than
any
of the Loan Documents) pursuant to which Borrower, any guarantor hereunder
or
any general partner or joint venturer in Borrower if a partnership or joint
venture (with each such guarantor, general partner and/or joint venturer
referred to herein as a "Third Party Obligor") has incurred any debt or other
liability to any person or entity, including Bank.
(e)
Attachments, levies or other like process in excess of $1,000,000.00 in the
aggregate are made upon Borrower's or any Third Party Obligor's assets or a
judgment is rendered against the property of Borrower or any Third Party Obligor
involving a liability of more than $1,000,000.00 which shall not have been
vacated, discharged, stayed or bonded to Bank's satisfaction within thirty
(30)
days from the entity thereof.
(f)
Borrower or any Third Party Obligor shall become insolvent, or shall suffer
or
consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay
its
debts as they become due, or shall make a general assignment for the benefit
of
creditors; Borrower or any Third Party Obligor shall file a voluntary petition
in bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform
Act,
Title 11 of the United States Code, as amended or recodified from time to time
("Bankruptcy Code"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any Third Party Obligor which is
not
dismissed within sixty (60) days of the filing of such petition, or Borrower
or
any Third Party Obligor shall file an answer
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admitting
the jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or any Third Party Obligor shall be adjudicated a
bankrupt, or an order for relief shall be entered against Borrower or any Third
Party Obligor by any court of competent jurisdiction under the Bankruptcy Code
or any other applicable state or federal law relating to bankruptcy,
reorganization or other relief for debtors.
(g)
There shall exist or occur any event or condition which Bank in good faith
believes impairs, or is substantially likely to impair, the prospect of payment
or performance by Borrower of its obligations under any of the Loan
Documents.
(h)
The dissolution or liquidation of Borrower or any Third Party Obligor if a
corporation, partnership, joint venture or other type of entity; or Borrower
or
any such Third Party Obligor, or any of its directors, stockholders or members,
shall take action seeking to effect the dissolution or liquidation of Borrower
or such Third Party Obligor.
ARTICLE
VII
BORROWER: AMBASSADORS
GROUP, INC.
0000
Xxxxxxxxxx Xxx
Xxxxxxx,
Xxxxxxxxxx
00000-0000
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BANK: XXXXX
FARGO BANK, NATIONAL ASSOCIATION
000
Xxxx 0xx
Xxxxxx,
0xx
Xxxxx
Xxxxxxx,
Xxxxxxxxxx 00000
or
to
such other address as any party may designate by written notice to all other
parties. Each such notice, request and demand shall be deemed given
or made as follows: (a) if sent by hand delivery, upon delivery;
(b) if sent by mail, upon the earlier of the date of receipt or three (3)
days after deposit in the U.S. mail, first class and postage prepaid; and
(c) if sent by telecopy, upon receipt.
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the
extent of such prohibition or invalidity without invalidating the remainder
of
such provision or any remaining provisions of this Agreement.
SECTION
7.10.
GOVERNING LAW. This Agreement shall be governed by and construed in accordance
with the laws of the State of Washington.
(a)
Arbitration. The
parties hereto agree, upon demand by any party, to submit to binding arbitration
all claims, disputes and controversies between or among them (and their
respective employees, officers, directors, attorneys, and other agents), whether
in tort, contract or otherwise in any way arising out of or relating to (i)
any
credit subject hereto, or any of the Loan Documents, and their negotiation,
execution, collateralization, administration, repayment, modification,
extension, substitution, formation, inducement, enforcement, default or
termination; or (ii) requests for additional credit.
(b)
Governing
Rules. Any arbitration proceeding will (i) proceed in a
location in Washington selected by the American Arbitration Association (“AAA”);
(ii) be governed by the Federal Arbitration Act (Title 9 of the United States
Code), notwithstanding any conflicting choice of law provision in any of the
documents between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with
the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to herein as applicable, as the
“Rules”). If there is any inconsistency between the terms hereof and
the Rules, the terms and procedures set forth herein shall
control. Any party who fails or refuses to submit to arbitration
following a demand by any other party shall bear all costs and expenses incurred
by such other party in compelling arbitration of any dispute. Nothing
contained herein shall be deemed to be a waiver by any party that is a bank
of
the protections afforded to it under 12 U.S.C. §91 or any similar applicable
state law.
(c)
No Waiver of
Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after
the
pendency of any arbitration proceeding. This exclusion does not
constitute a waiver of the right or obligation of any party to submit any
dispute to arbitration or reference hereunder, including those arising from
the
exercise of the actions detailed in sections (i), (ii) and (iii) of this
paragraph.
(d)
Arbitrator
Qualifications and Powers. Any arbitration proceeding in which
the amount in controversy is $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award
of
greater than $5,000,000.00. Any dispute in which the amount in
controversy exceeds $5,000,000.00 shall be decided by majority
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vote
of a
panel of three arbitrators; provided, however,
that all
three arbitrators must actively participate in all hearings and
deliberations. The arbitrator will be a neutral attorney licensed in
the State of Washington or a neutral retired judge of the state or federal
judiciary of Washington, in either case with a minimum of ten years experience
in the substantive law applicable to the subject matter of the dispute to be
arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in determining
any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator's discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to
state
a claim or motions for summary adjudication. The arbitrator shall
resolve all disputes in accordance with the substantive law of Washington and
may grant any remedy or relief that a court of such state could order or grant
within the scope hereof and such ancillary relief as is necessary to make
effective any award. The arbitrator shall also have the power to
award recovery of all costs and fees, to impose sanctions and to take such
other
action as the arbitrator deems necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the Washington Rules of Civil
Procedure or other applicable law. Judgment upon the award rendered
by the arbitrator may be entered in any court having
jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests
such
action for judicial relief.
(e)
Discovery. In
any arbitration proceeding, discovery will be permitted in accordance with
the
Rules. All discovery shall be expressly limited to matters directly
relevant to the dispute being arbitrated and must be completed no later than
20
days before the hearing date. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery
is
essential for the party's presentation and that no alternative means for
obtaining information is available.
(f)
Class Proceedings
and
Consolidations. No party hereto shall be entitled to join or
consolidate disputes by or against others in any arbitration, except parties
who
have executed any Loan Document, or to include in any arbitration any dispute
as
a representative or member of a class, or to act in any arbitration in the
interest of the general public or in a private attorney general
capacity.
(g)
Payment Of Arbitration
Costs And Fees. The arbitrator shall award all costs and
expenses of the arbitration proceeding.
(h)
Miscellaneous. To
the maximum extent
practicable, the AAA, the arbitrators and the parties shall take all action
required to conclude any arbitration proceeding within 180 days of the filing
of
the dispute with the AAA. No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results thereof,
except for disclosures of information by a party required in the ordinary course
of its business or by applicable law or regulation. If more than one
agreement for arbitration by or between the parties potentially applies to
a
dispute, the arbitration provision most directly related to the Loan Documents
or the subject matter of the dispute shall control. This arbitration
provision shall survive termination, amendment or expiration of any of the
Loan
Documents or any relationshipbetween the
parties.
ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER
WASHINGTON LAW.
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XXXXX FARGO BANK,
AMBASSADORS
GROUP,
INC.
NATIONAL ASSOCIATION
By:
________________________________
By: ____________________________
Xxxxxxxx
X. Xxxx, Chief Financial
Officer
Xxxxxx Xxxx, Relationship Manager
By:
________________________________
Xxxxxxx X. Xxxxxx, Chief Executive Officer and President
Xxxxxxx X. Xxxxxx, Chief Executive Officer and President
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