Exhibit 10.5
EMPLOYMENT AGREEMENT
     This Employment Agreement (this “Agreement”) is entered into as of
September 12, 2008, by and between The Advisory Board Company (the “Company”)
and Robert W. Musslewhite (“Executive”).
     1. Duties and Scope of Employment.
          (a) Positions and Duties. Effective as of September 1, 2008 (the
“Commencement Date”), the Company shall employ Executive as Chief Executive
Officer of the Company. Executive shall report directly to the Board of
Directors of the Company (the “Board”). Executive shall perform all the duties
and obligations reasonably associated with the position of Chief Executive
Officer and consistent with the Bylaws of the Company as in effect from time to
time, subject to the supervision of the Board, and such other executive duties
consistent with the foregoing as are mutually agreed upon from time to time by
Executive and the Board.
          (b) Board Membership. Executive continued to serve as a member of the
Board as of the Commencement Date. Thereafter, at each annual meeting of the
Company’s stockholders during the Term (as defined in Section 2), the Board
shall nominate Executive to serve as a member of the Board. Executive’s service
as a member of the Board shall be subject to any required stockholder approval.
Upon the termination of Executive’s employment for any reason, unless otherwise
requested by the Board, Executive shall tender his resignation from the Board
(and all other positions held at the Company and its affiliates) effective as of
the end of Executive’s employment, and Executive shall, at the Board’s request,
execute and deliver any documents necessary to reflect his resignation.
          (c) Obligations. Executive shall devote substantially all his business
time and efforts to the rendition of services to the Company, and he shall use
good faith efforts to discharge Executive’s obligations under this Agreement to
the best of Executive’s ability. During the Term, Executive agrees not to
actively engage in any other employment, occupation, or consulting activity for
any direct or indirect remuneration without the prior approval of the Board;
provided, however, that (i) Executive may, without the approval of the Board,
serve in any capacity with any civic, educational, or community organization and
(ii) Executive may, with the prior approval of the Board (which approval shall
not be unreasonably withheld), serve as a director of any company that is not
directly or indirectly in competition with the Company, in each case as long as
such activities or service do not materially interfere with his duties and
obligations to the Company.
     2. Term. The term of employment of Executive by the Company pursuant to
this Agreement shall commence on the Commencement Date and, unless earlier
terminated pursuant to Section 7, shall end on August 31, 2012 (the “Initial
Term”); provided, however, that the term of Executive’s employment under this
Agreement shall be extended automatically for one additional year as of the
fourth anniversary and each subsequent anniversary of the Commencement Date
(each such additional year, an “Extended Term”; together with the Initial Term,
the “Term”), unless no later than one year prior to the last day of the
then-current Term either the Board, on behalf of the Company, or Executive gives
written notice to the other that the Term shall not be so extended. For example,
notice of nonrenewal would need to be provided prior to September 1, 2011 for
the Term not to renew automatically on September 1, 2012 for an additional one
year. Following a Change of Control (as defined in Section 11(b)), the Term
shall continue for the longer of (x) the remainder of the Initial Term or
(y) the first anniversary of the Change of Control, and thereafter shall be
extended automatically for one additional year, unless no later than one year
prior to the last day of the then-current Term either the Board, on behalf of
the Company, or Executive gives written notice to the other that the Term shall
not be so extended.
     3. Compensation.
          (a) Base Salary. As of the Commencement Date, the Company shall pay
Executive an annual salary of $500,000 as compensation for his services (such
annual salary, as is then effective, “Base Salary”), payable in installments in
accordance with the Company’s payroll schedule from time to time

 

--------------------------------------------------------------------------------

 

(less any deductions required for Social Security, state, federal and local
withholding taxes, and any other authorized or mandated similar withholdings).
The Base Salary shall be reviewed by the Board and/or the Compensation Committee
of the Board (the “Committee”) no less frequently than annually and may be
increased from its then-existing level at the discretion of the Board or the
Committee.
          (b) Annual Incentive Bonus. Executive shall be eligible to earn
bonuses with respect to each fiscal year (or partial fiscal year) during the
Term based upon Executive’s achievement of performance objectives set by the
Committee after consultation with Executive. Executive’s initial annual
incentive bonus target is $225,000. The actual incentive bonus payable to
Executive for any fiscal year (or partial fiscal year) shall be based upon
criteria established and approved by the Board and/or the Committee in its sole
discretion, which need not be objective performance criteria, and may be less
than (including zero) or greater than the annual incentive bonus target for such
fiscal year (or partial fiscal year). Executive may also receive special bonuses
in additional to his annual bonus eligibility at the discretion of the
Committee.
          (c) Additional Compensation. Executive confirms and acknowledges that
any element of compensation other than Base Salary (which shall be determined in
accordance with Section 3(a)), including, without limitation, grants of
equity-based compensation, are provided at the sole discretion of the Board
and/or the Committee, which also shall have the sole discretion to determine the
terms, amount and frequency of any such other elements of compensation.
          (d) Board Service. Unless otherwise specifically approved by the
Board, Executive shall not receive separate or additional compensation for
service on the Board or for service in any other capacity to the Company and/or
its subsidiaries.
     4. Employee Benefits. During the Term, Executive shall be eligible to
participate in all benefit plans, policies and arrangements that are applicable
to other senior executives of the Company, as such plans, policies and
arrangements may exist from time to time.
     5. Expenses. The Company shall reimburse Executive for all reasonable and
necessary business expenses incurred by him in the performance of his duties
hereunder, in accordance with its policies, and provided they are documented in
a form satisfactory to the Internal Revenue Service and consistent with Company
policy with respect to such expenses. In addition, the Company agrees, subject
to the Board’s approval, to reimburse Executive for membership fees and other
reasonable expenses incurred with respect to Executive’s participation in
professional development, community and business-related organizations.
     6. Compliance With Other Agreements. Executive and the Company are parties
to an Employer Protection Agreement dated December 30, 2003, a copy of which is
attached to this Agreement as Appendix A, which is hereby affirmed and
incorporated herein in its entirety by this reference (as such may be amended
from time to time, the “Employer Protection Agreement”), except that the
definition of “Cause” in the Employer Protection Agreement shall have the same
meaning as “Cause” as defined in this Agreement.
     7. Termination.
          (a) Death or Disability. Executive’s employment shall terminate
immediately upon his death or Disability. For purposes of this Agreement,
“Disability” means any physical or mental disability or incapacity that can be
expected to result in Executive’s death or that has rendered Executive unable to
carry out Executive’s duties and obligations to the Company for a period of 90
consecutive days or for shorter periods aggregating to 120 days (whether or not
consecutive) during any consecutive 12 months of the Term. The Company, at its
expense, may retain a physician reasonably acceptable to Executive to confirm
the existence of such disability or incapacity.
          (b) Termination by the Company With Cause. The Board, on behalf of the
Company, may

2

--------------------------------------------------------------------------------

 

terminate Executive’s employment with Cause upon written notice to Executive of
the alleged act or omission constituting Cause, which notice shall set forth in
reasonable detail the reason or reasons that the Board believes Executive is to
be terminated for Cause. For purposes of this Agreement, “Cause” means the
occurrence of any one or more of the following events: (i) any willful act or
willful omission (other than as a result of Disability) that represents a breach
of any of the terms of this Agreement to the material detriment of the Company;
(ii) Executive’s conviction of, or plea of nolo contendere to, a felony (other
than a traffic infraction); or (iii) the commission by Executive of a material
act of fraud, theft or dishonesty against the Company. If an event described in
clause (i) of the preceding sentence is reasonably capable of being cured,
(A) Executive shall be given 45 days from the date of such notice to effect a
cure of such alleged act or omission constituting Cause which, upon such cure to
the reasonable satisfaction of the Board, shall no longer constitute a basis for
Cause, and (B) Executive shall be given an opportunity to make a presentation to
the Board (accompanied by counsel or other representative, if Executive so
desires) at a meeting of the Board held promptly following such 45-day cure
period if the Board intends to determine that no cure has occurred. At or
following such meeting, the Board shall determine whether or not to terminate
Executive with Cause and shall notify Executive of its determination and the
effective date of such termination (which date may be no earlier than the date
of the aforementioned Board meeting). For purposes hereof, no act or omission
shall be deemed “willful” if it was done with a good faith belief that it was in
the best interests of the Company.
          (c) Termination by Executive With Good Reason. Executive may terminate
Executive’s employment with the Company with Good Reason upon written notice to
the Company of the alleged act or omission constituting Good Reason, which
notice shall set forth in reasonable detail the reason or reasons that Executive
believes his employment is to be terminated for Good Reason. For purposes of
this Agreement, “Good Reason” means, without Executive’s written consent, (i) a
reduction of Executive’s Base Salary, (ii) a reduction in Executive’s annual
incentive bonus target below Executive’s initial annual incentive bonus target,
(iii) Executive is no longer the Chief Executive Officer of (A) the Company, or
(B) in the event of a Change of Control, the successor to the Company’s business
or assets, (iv) Executive is no longer serving on (A) the Board or (B) in the
event of a Change of Control, the board of directors or similar governing body
of successor to the Company’s business or assets, except in each case on account
of removal from the Board for cause pursuant to the vote of the stockholders of
the Company or due to Executive’s resignation from, or refusal to stand for
reelection to, the Board, (v) any material breach by the Company of any of the
material terms of this Agreement, or (vi) during the one-year period following a
Change of Control, Executive is required to relocate his place of employment to
a location that is more than 35 miles from the location of the Company’s
headquarters as of the date first set forth above; provided, however, that for
any of the foregoing to constitute Good Reason, Executive must provide written
notification of such event or condition constituting Good Reason within 90 days
after Executive knows of the occurrence of any such event or condition, and the
Company shall have 60 days from the date of receipt of such written notice to
effect a cure of the event or condition constituting Good Reason, and, upon cure
thereof by the Company, such event or condition shall no longer constitute Good
Reason.
          (c) Termination by the Company Without Cause or by Executive Without
Good Reason. The Company may terminate Executive’s employment without Cause at
any time upon 60 days’ written notice to Executive. Executive may terminate
Executive’s employment without Good Reason upon 60 days’ written notice to the
Company. Nonrenewal of the Term by the Company shall not constitute a
termination without Cause, except that notice of nonrenewal by the Company shall
constitute termination without Cause if the notice of nonrenewal is provided to
Executive during the period commencing on (i) the earlier of (x) the date that
the Board recommends to the Company’s stockholders approval of a transaction or
series of transactions that would effect a Change of Control, (y) the date that
the Board approves the execution and delivery by the Company of a definitive
agreement for a transaction or series of transactions that would effect a Change
of Control, or (z) a Change of Control, and continuing through (ii) the close of
business on the day following a Change of Control (such period, the “Change of
Control Period”).

3

--------------------------------------------------------------------------------

 

     8. Effect of Termination.
          (a) Accrued Obligations. The Company shall pay all Accrued Obligations
(as defined in Section 11(a)) to Executive (or Executive’s estate, in the case
of termination of Executive’s employment on account of death) within 30 days
following the effective date of the termination of Executive’s employment (the
“Termination Date”).
          (b) Equity Awards.
          (i) Death or Disability. In the event Executive’s employment is
terminated due to Executive’s death or Disability, all restricted stock units,
shares of restricted Company common stock, options to purchase Company common
stock, and other equity awards granted to Executive by the Company
(collectively, “Equity Awards”) shall become vested in full as of the day
immediately preceding the Termination Date (and, in the case of options, shall
be exercisable until the earlier of the expiration of such Equity Awards or the
first anniversary of the Termination Date).
          (ii) Termination by the Company Without Cause or by Executive with
Good Reason. In the event Executive’s employment is terminated by the Company
without Cause or by Executive with Good Reason, all Equity Awards that were
granted to Executive on May 20, 2008 and after the date first written above (the
May 20, 2008 Equity Awards, together with any such subsequent awards, the
“Subsequent Equity Awards”) shall become vested as of the day immediately
preceding the Termination Date to the extent they would have vested on or prior
to the first anniversary of the Termination Date (and, in the case of options,
shall be exercisable until the earlier of the expiration of such Subsequent
Equity Awards or the first anniversary of the Termination Date), unless the
Board or the Committee determines in its sole discretion to accelerate vesting
of additional portions of any Equity Awards. For purposes of the preceding
sentence, any Subsequent Equity Award that has “cliff vesting” (i.e., other than
pro rata annual vesting) shall become vested pro rata based on the total vesting
period of such Subsequent Equity Award and the period commencing on the grant
date of such Subsequent Equity Award and the first anniversary of the
Termination Date. Notwithstanding the foregoing, in the event Executive’s
employment is terminated by the Company without Cause or by Executive with Good
Reason during the Change of Control Period or prior to the first anniversary of
a Change of Control, all Equity Awards shall become vested in full as of the day
immediately preceding the Termination Date (and, in the case of options,
exercisable until the earlier of the expiration of such Equity Awards or the
first anniversary of the Termination Date).
          (c) Severance. In the event of Executive’s “separation from service”
with the Company (as defined in Treas. Reg. § 1.409A-1(h)) due to a termination
of Executive’s employment by the Company without Cause or by Executive with Good
Reason, Executive shall receive an amount equal to two hundred percent (200%) of
Executive’s then-current Base Salary for 12 full calendar months in a single
lump sum within 38 days after the date of such separation from service. In
addition, for a period of 18 months after the date of Executive’s separation
from service, the Company shall continue to provide medical, dental and vision
care and life insurance benefits to Executive and/or Executive’s family at least
equal to those which would have been provided to them in accordance with
Section 4, provided that Executive agrees to elect COBRA coverage to the extent
available under the Company’s health insurance plans (and the Company shall
reimburse the cost of any premiums for such coverage on an after-tax basis).
          (d) Required Delay. In the event that any compensation with respect to
Executive’s termination is “deferred compensation” within the meaning of
Section 409A of the Internal Revenue

4

--------------------------------------------------------------------------------

 

Code of 1986, as amended (the “Code”) and the regulations promulgated thereunder
(“Section 409A”), the stock of the Company (or any of its affiliates) is
publicly traded on an established securities market or otherwise, and Executive
is determined to be a “specified employee,” as defined in
Section 409A(a)(2)(B)(i) of the Code, payment of such compensation shall be
delayed as required by Section 409A. Such delay shall last six (6) months from
the date of Executive’s termination, except in the event of Executive’s death.
Within 30 days following the end of such six-month period, or, if earlier,
Executive’s death, the Company shall make a catch-up payment to Executive equal
to the total amount of such payments that would have been made during the
six-month period but for this Section 8(e). Such catch-up payment shall bear
simple interest at the prime rate of interest as published by the Wall Street
Journals’ bank survey as of the first day of the six month period, which such
interest shall be paid with the catch-up payment. Wherever payments under this
Agreement are to be made in installments, each such installment shall be deemed
to be a separate payment for purposes of Section 409A.
     9. Conditions to Receipt of Severance; No Duty to Mitigate; Non-Exclusivity
of Rights.
          (a) Waiver and Release Agreement. In consideration of the severance
payments and other benefits described in Section 8(c), to which severance
payments and benefits Executive would not otherwise be entitled, and as a
precondition to Executive becoming entitled to such severance payments and other
benefits under this Agreement (other than on account of Executive’s death),
Executive agrees to execute and deliver to the Company within 30 days after the
applicable date of Executive’s separation of service a Waiver and Release
Agreement in the form attached hereto as Appendix B (the “Release”) and not
revoking it during the revocation period provided therein. The timing of
severance payments under Section 8(c) shall be further governed by the following
provisions:
          (i) In any case in which the Release (and the expiration of any
revocation rights provided therein) could only become effective in a particular
tax year of Executive, payments conditioned on execution of the release shall be
made within 10 days after the Release becomes effective and such revocation
rights have lapsed.
          (ii) In any case in which the Release (and the expiration of any
revocation rights provided therein) could become effective in one of two taxable
years of Executive depending on when Executive executes and delivers the
Release, payments conditioned on execution of the Release shall be made within
10 days after the Release becomes effective and such revocation rights have
lapsed, but not earlier than the first business day of the later of such tax
years.
If Executive fails to execute and deliver the Release within 30 days after
Executive’s separation from service, or if Executive revokes such Release as
provided therein, the Company shall have no obligation to provide any of the
severance payments or other benefits provided in Section 8(c).
          (b) No Duty to Mitigate. Executive shall not be required to mitigate
the amount of any payment contemplated by this Agreement, nor shall any earnings
that Executive may receive from any other source reduce any such payment.
          (c) Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive’s continuing or future participation in any plan, program,
policy or practice provided by the Company and for which Executive may qualify,
nor shall anything herein limit or otherwise affect such rights as Executive may
have under any other contract or agreement with the Company at or subsequent to
the Termination Date, which shall be payable in accordance with such plan,
policy, practice or program or contract or agreement, except as excplicitly
modified by this Agreement.
     10. Certain Additional Severance Payments.
          (a) In the event it shall be determined that any payment, benefit or
distribution by the Company (or any other payor described in Treas. Reg. Sec.
1.280G-1, Q&A 10) to Executive or for Executive’s benefit (a “Payment”) would be
subject to the excise tax (the “Excise Tax”) imposed under

5

--------------------------------------------------------------------------------

 

Section 4999 of the Code, Executive shall be entitled to receive an additional
payment (a “Gross-Up Payment”) in an amount such that, after payment by
Executive of all taxes (and any interest or penalties imposed with respect to
such taxes), including any income and employment taxes and Excise Taxes imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon such Payments. Notwithstanding the
foregoing provisions of this Section, if it shall be determined that Executive
is entitled to a Gross-Up Payment, but that the portion of the Payments that
would be treated as “parachute payments” under Section 280G of the Code does not
exceed $50,000, then no Gross-Up Payment shall be made to Executive and the
amounts payable under Section 8(c) shall be reduced so that the Payments, in the
aggregate, are reduced to the Safe Harbor Amount. The “Safe Harbor Amount” is
the greatest amount of payments in the nature of compensation that are
contingent on a Change in Control for purposes of Section 280G of the Code that
could be paid to Executive without giving rise to any Excise Tax. If the
reduction of the amounts payable under Section 8(c) would not result in a
reduction of the Payments to the Safe Harbor Amount, no amounts payable under
this Agreement shall be reduced pursuant hereto and a Gross-Up Payment shall be
made to Executive.
          (b) All determinations required to be made under this Section 10,
including whether a Gross-Up Payment or reduction is required and the amount of
any Gross-Up Payment or reductions of Payments, shall be made by a nationally
recognized certified public accounting firm that shall be designated by the
Company and reasonably acceptable to Executive (the “Accounting Firm”). The
Accounting Firm shall provide detailed supporting calculations both to the
Company and Executive within 15 business days of the receipt of notice from
Executive that there has been a Payment or such earlier time as is requested by
the Company or Executive. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section, shall be paid by the Company to Executive within five (5) business
days of the receipt of the Accounting Firm’s determination and in any event not
later than the last day of the calendar year after the calendar year in which
the applicable Excise Tax is paid. If the Accounting Firm determines that no
Excise Tax is payable by Executive or that a reduction is required, it shall so
indicate to Executive in writing.
          (c) Any determination by the Accounting Firm shall be binding upon the
Company and Executive (absent manifest error), provided that, in the event that
Executive’s tax advisor delivers to the Accounting Firm and the Company a
written opinion that the actual Excise Tax payable by Executive is greater than
the Excise Tax amount initially determined by the Accounting Firm by reason of
(i) manifest error, (ii) any Payment the existence or amount of which could not
have been, or was not, determined or known at the time the Excise Tax was
initially determined or (iii) any determination, claim or assertion made by any
tax authority that the actual Excise Tax is greater than the amount initially
determined by the Accounting Firm, then, in any such case, the Accounting Firm
shall recalculate the amount of the Excise Tax and any required (or additional)
Gross-Up Payment. Any such additional calculation or determination shall be
performed consistent with this Section 10.
          (d) Executive shall notify the Company in writing of any written claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Executive shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which Executive gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies Executive in writing prior to the
expiration of such period that the Company desires to contest such claim,
Executive shall (i) give the Company any information reasonably requested by the
Company relating to such claim, (ii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company, (iii) cooperate with
the Company in good faith in order effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings relating to such
claim; provided, however, that (A) the Company shall bear and pay directly

6

--------------------------------------------------------------------------------

 

all costs and expenses (including additional income taxes, interest and
penalties) incurred in connection with such contest, and shall indemnify and
hold Executive harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest or penalties) imposed as a result of such representation and
payment of costs and expenses, and (B) Executive’s obligation to cooperate with
the Company shall not require Executive to take any action, or forego taking any
action, that would have an adverse effect on Executive’s overall tax position.
          (e) Notwithstanding anything in this Agreement to the contrary, in no
event shall any payment by the Company pursuant to this Section 10 be made later
than the end of Executive’s taxable year next following Executive’s taxable year
in which Executive remits the related taxes.
     11. Definitions.
          (a) “Accrued Obligations” means the sum of (i) Executive’s Salary
hereunder through the Termination Date, (ii) the amount of any incentive
compensation, deferred compensation and other cash compensation accrued by
Executive as of the Termination Date, and (iii) any expense reimbursements and
other cash entitlements accrued by Executive as of the Termination Date, in each
case to the extent not previously paid.
          (b) “Change of Control” means any of the following:
          (i) the “acquisition” by a “person” or “group” (as those terms are
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the rules promulgated thereunder), other than
by Permitted Holders (as defined in Section 11(d)), of beneficial ownership (as
defined in Exchange Act Rule 13d-3) directly or indirectly, of any securities of
the Company or any successor of the Company immediately after which such person
or group owns securities representing 50% or more of the combined voting power
of the Company or any successor of the Company;
          (ii) approval by the stockholders of the Company of any merger,
consolidation or reorganization involving the Company, unless either (A) the
stockholders of the Company immediately before such merger, consolidation or
reorganization own, directly or indirectly immediately following such merger,
consolidation or reorganization, at least 60% of the combined voting power of
the company(ies) resulting from such merger, consolidation or reorganization in
substantially the same proportion as their ownership immediately before such
merger, consolidation or reorganization, or (B) one or more Permitted Holders
are the only stockholders of the company(ies) resulting from such merger,
consolidation, or reorganization;
          (iii) approval by the stockholders of the Company of a transfer of 50%
or more of the assets of the Company or a transfer of assets that during the
current or either of the prior two fiscal years accounted for more than 50% of
the Company’s revenues or income, unless the person to which such transfer is
made is either (A) a Subsidiary (as defined in the Company’s 2005 Stock
Incentive Plan), (B) wholly owned by all of the stockholders of the Company, or
(C) wholly owned by Permitted Holders; or
          (iv) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
          (c) “Change of Control Period” means the period commencing on (i) the
earlier of (x) the date that the Board recommends to the Company’s stockholders
approval of a transaction or series of transactions that would effect a Change
of Control, (y) the date that the Board approves the execution and delivery by
the Company of a definitive agreement for a transaction or series of
transactions that would effect a Change of Control, or (z) a Change of Control,
and continuing through (ii) the close of business on the day following a Change
of Control.
          (d) “Permitted Holders” means (i) the Company, (ii) any Subsidiary, or
(iii) any employee

7

--------------------------------------------------------------------------------

 

benefit plan of the Company or any Subsidiary
     12. Arbitration. The parties shall endeavor to settle all disputes by
amicable negotiations. Any claim, dispute, disagreement or controversy that
arises among the parties relating to this Agreement that is not amicably settled
shall be resolved by arbitration, as follows:
          (a) Any such arbitration shall be heard in the District of Columbia,
before a panel consisting of one arbitrator, who shall be impartial. Except as
the parties may otherwise agree, the arbitrator shall be appointed in the first
instance by the appropriate official in the District of Columbia office of the
American Arbitration Association or, in the event of his or her unavailability
by reason of disqualification or otherwise, by the appropriate official in the
New York City office of the American Arbitration Association. In determining the
number and appropriate background of the arbitrator, the appointing authority
shall give due consideration to the issues to be resolved, but his or her
decision as to the identity of the arbitrator shall be final. Except as
otherwise provided in this Section 12, all of the arbitration proceedings shall
be conducted in accordance with the rules of the arbitrator.
          (b) An arbitration may be commenced by any party to this Agreement by
the service of a written request for arbitration upon the other affected
parties. Such request for arbitration shall summarize the controversy or claim
to be arbitrated, and shall be referred by the complaining party to the
appointing authority for appointment of arbitrator ten days following such
service or thereafter. If the arbitrator is not appointed by the appointing
authority within 30 days following such reference, any party may apply to any
court within the District of Columbia for an order appointing an arbitrator
qualified as set forth below.
          (c) The prevailing party in any arbitration under this Section 12
shall be entitled to reimbursement from the losing party of all reasonable
attorneys’ fees and costs in connection with such arbitration. The parties
hereby expressly waive punitive damages, and under no circumstances shall an
award contain any amount that in any way reflects punitive damages.
          (d) Judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof.
          (e) It is intended that controversies or claims submitted to
arbitration under this Section 12 shall remain confidential, and to that end it
is agreed by the parties that neither the facts disclosed in the arbitration,
the issues arbitrated, nor the views or opinions of any persons concerning them,
shall be disclosed to third persons at any time, except to the extent necessary
to enforce an award or judgment or as required by law or in response to legal
process or in connection with such arbitration.
     13. Notices. All notices, requests, demands, and other communications
called for hereunder shall be in writing and shall be deemed given (a) on the
date of delivery if delivered personally, (b) one day after being sent by a well
established commercial overnight service, or (c) four days after being mailed by
registered or certified mail, return receipt requested, prepaid and addressed to
the parties or their successors at the following addresses, or at such other
addresses as the parties may later designate in writing:

                  If to the Company:    
 
           
 
      The Advisory Board Company    
 
      Attn: Chairman of the Compensation Committee of the Board of Directors    
 
      2445 M Street, N.W.    
 
      Washington, D.C. 20037    
 
                If to Executive:    
 
                    at the last residential address known by the Company as
provided by Executive in writing.

8

--------------------------------------------------------------------------------

 

     14. Miscellaneous.
          (a) This Agreement shall be governed by and construed in accordance
with the laws of the District of Columbia (other than its choice of laws rules).
          (b) The paragraph headings and captions contained in this Agreement
are for convenience only and shall not be construed to define, limit or affect
the scope or meaning of the provisions hereof.
          (c) This Agreement represents the entire agreement and understanding
between the parties, and supersedes all prior or contemporaneous agreements
whether written or oral, as to the subject matter hereof. No waiver, alteration,
or modification of any of the provisions of this Agreement shall be binding
unless in a writing signed by duly authorized representatives of the Company and
Executive.
          (d) If any provision hereof becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable, or void, this Agreement
shall continue in full force and effect without said provision.
          (e) The waiver of a breach of any term or provision of this Agreement,
which must be in writing, shall not operate as or be construed to be a waiver of
any other previous or subsequent breach of this Agreement.
          (f) All payments made pursuant to this Agreement shall be subject to
withholding of applicable taxes.
          (g) Executive acknowledges that he has had the opportunity to discuss
this matter with and obtain advice from his legal, tax and other professional
advisors, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
          (h) This Agreement may be executed in counterparts (including by fax
or PDF), and each counterpart shall have the same force and effect as an
original and shall constitute an effective, binding agreement on the part of
each of the undersigned.
          (i) The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement and Executive’s employment with
the Company to the extent necessary to preserve the intended rights and
obligations of the parties.
          (j) For purposes of Section 409A, each COBRA continuation
reimbursement payment shall be considered one of a series of separate payments.
          (k) Any amount that Executive is entitled to be reimbursed under this
Agreement shall be reimbursed to Executive as promptly as practical and in any
event not later than the last day of the calendar year after the calendar year
in which the expenses are incurred, and the amount of the expenses eligible for
reimbursement during any calendar year shall not affect the amount of expenses
eligible for reimbursement in any other calendar year.
          (l) This Agreement shall be binding upon and inure to the benefit of
(a) the heirs, executors, and legal representatives of Executive upon
Executive’s death and (b) any successor of the Company. Any such successor of
the Company shall be deemed substituted for the Company under the terms of this
Agreement for all purposes. For this purpose, “successor” means any person,
firm, corporation, or other business entity which at any time, whether by
purchase, merger, or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company.
[Remainder of page intentionally left blank.]

9

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first written above.

                  THE ADVISORY BOARD COMPANY            
 
               
By:
  /s/ Leon D. Shapiro
 
Leon D. Shapiro       /s/ Robert W. Musslewhite
 
Robert W. Musslewhite    
 
  Chairman, Compensation Committee            

10

--------------------------------------------------------------------------------

 

APPENDIX A
EMPLOYER PROTECTION AGREEMENT
     This Employer Protection Agreement (“Agreement”) is made this 30th day of
December , 2003, by and between The Advisory Board Company (including any and
all affiliates) (the “Company”) and Robert Musslewhite (the “Employee”).
RECITALS
     The Company is engaged in the business of providing research and advisory
services to individual members in various industries, including without
limitation such services as short-answer or custom research on demand, multiple
client or syndicated studies, benchmarking data and databases and conferences,
seminars, training and education. In order to remain competitive in this
business, the company must protect its goodwill, its base of members and
prospective members, its employees, its confidential and proprietary
information, and the work product of its employees. The Company has offered
employment or continued employment to the Employee. During the course of
employment, the Employee will develop important contacts with the members and
prospective members of the Company, and will also become aware of certain
methods, practices, information and procedures with which the Company conducts
its business. The employee may also prepare studies and other written materials
using the Company’s resources.
     NOW THEREFORE, in consideration of the recitals above, initial and/or
continued employment and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
1. Covenant Not to Compete: (a) If the Employee’s employment is terminated by
the Company with or without Cause, or if the Employee voluntarily resigns, the
Employee shall not, directly or indirectly, either individually or as a
stockholder, director, officer, partner, consultant, owner, employee, agent, or
in any other capacity, for a period of two (2) years following such termination,
(i) provide “Company Services” within a one hundred (100) mile radius of any
city in the United States or in any foreign country in which the Company has an
office or a member or in which the Company had a member or directly or
indirectly solicited a prospective member at any time during the two-year period
prior to the termination of the Employee’s employment; or (ii) solicit or offer
to provide or provide “Company Services” to any person or entity who was a
member of the Company or was directly or indirectly solicited to be a member of
the Company at any time during the two-year period prior to the termination of
the Employee’s employment with the Company. For the purposes of this Section
l(a), the term “Company Services” shall mean: (aa) providing short-answer or
custom research on demand, including without limitation literature or database
searches, telephone interviews, or other research of the same or substantially
similar type as that provided by the Company; or (bb) preparing published
multiple client or syndicated studies, including without limitation studies of
the same or substantially similar type provided by the Company; or (cc) selling
benchmarking data and databases of the same or substantially similar type
provided by the Company; or (dd) providing conferences, seminars, training or
education of the same or substantially similar type provided by the Company or
(ee) assisting individual members in implementing strategies arising from
multiple client or syndicated studies of the type described in (bb) above, or
(ff) providing any other services or products not described in (aa) through
(ee) above that the Company or its affiliates is providing, has provided or
proposes to provide as of the date of the Employee’s termination; where any of
the foregoing services described in (aa) through (ff) above are provided to any
of the following: physicians, hospitals, health plans, pharmaceutical companies,
insurance companies, managed care companies, commercial banks, brokerage houses,
mutual fund companies or Fortune 1000 companies. Notwithstanding the foregoing,
the Employee may upon termination in the situations described above (i) work as
a consultant or for a consulting firm, provided he/she complies with all of the
provisions of this Section 1(a), and (ii) be employed fay The Corporate
Executive Board Company, a Delaware corporation (“CEB”), if such employment is
permitted and consistent with the terms of any noncompetition agreement between
the Company and CEB (the “Other Noncompetition Agreement”). The Company may
release the Employee from some or all of the restrictions in this section only
in a written instrument signed by the Employee and the Chairman of the Company.
For purposes of this Agreement, so long as the Other Noncompetition Agreement is
in effect, CEB shall be deemed to be an affiliate of the Company.
For the purposes of this Section l(a), “Cause” for termination shall mean the
commission of an act of fraud, theft or dishonesty against the Company;
conviction for any felony; conviction for any misdemeanor involving moral
turpitude which might, in the Company’s reasonable opinion, cause embarrassment
to the Company; misconduct; tardiness or absenteeism; substance abuse in
violation of Company policy; insubordination; incompetence; violation

 

--------------------------------------------------------------------------------

 

of Company policy; willful or repeated non-performance or substandard
performance of duties; violation of any applicable laws, rules or regulations in
connection with or during performance of work; or any other act(s) or omissions
to act which the Company deems to constitute reason for termination in its
judgment.
     (b)The Employee agrees that the restrictions imposed upon him/her by the
provisions of this section are fair and reasonable considering the nature of the
Company’s business, and are reasonably required for the protection of the
Company. The Employee further agrees that the provisions of Section l(a)
relating to areas of restriction, member limitations and time periods of
restriction were specifically discussed with and are acceptable to the Employee.
Nevertheless, to the extent that these restrictions exceed the maximum areas of
restriction, which a court of competent jurisdiction would enforce, such
restrictions shall be modified by such court to be the maximum restrictions
which such court would enforce. If any other part of Section 1 (a) is held to be
invalid or unenforceable, the remaining parts shall nevertheless continue to be
valid and enforceable as though the unenforceable portions were absent.
2. Solicitation of Employees: The Employee agrees that during the term of
his/her employment, and for a period of two (2) years after termination of such
employment for any reason, he/she shall not, except in the course of his/her
duties for the Company, directly or indirectly induce or attempt to induce or
otherwise counsel, advise, ask or encourage any person who at the time is a
current employee of the Company or its affiliates, or who left such employ
within the preceding six months, to leave the employ of the Company or to accept
employment with another employer besides the Company or as an independent
contractor.
3. Employment Statement: The Employee also agrees to abide by the restrictions
imposed in the “Employment Statement” addressing confidential information and
return of company property, which is attached hereto and incorporated by
reference herein.
4. Miscellaneous: If any provision of this Agreement shall be determined, by a
court having jurisdiction, to be unenforceable, the remainder of this Agreement
shall not be affected but shall continue in full force and effect as though such
unenforceable provision were not originally a part of this Agreement. The
Employee acknowledges that a breach of any of the provisions of this Agreement
may result in continuing and irreparable damages to the Company for which there
may be no adequate remedy at law and that the Company in addition to all other
relief available to it shall be entitled to the issuance of injunctive relief
restraining the Employee from committing or continuing to commit any breach of
this Agreement. If the Company is the prevailing party in any action for breach
of this Agreement, the Employee shall reimburse the Company for its reasonable
attorneys’ fees and costs incurred in such action. This Agreement shall be
construed in accordance with and governed by the laws of the District of
Columbia, irrespective of the principles of conflicts of law therein. This
Agreement does not constitute a contract of employment for a definite period of
time. Either party may terminate the employment relationship with or without
cause at any time for any lawful reason. The provisions of this Agreement shall
survive the termination of the employment relationship between the Company and
the Employee. This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and assigns.
Notwithstanding the foregoing, the Employee shall not assign his/her obligations
under this Agreement without the express written consent of the Company and its
successors and assigns.
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

             
EMPLOYEE
      THE ADVISORY BOARD COMPANY    
 
           
Robert Musslewhite
           
 
           
Print Name
      Witness    
 
           
/s/ Robert Musslewhite
           
 
           
Signature
      Title    
 
           
12/30/2003
           
 
           
Date
      Date    

 

--------------------------------------------------------------------------------

 

APPENDIX B
Form of Waiver and Release Agreement
     This WAIVER AND RELEASE AGREEMENT (this “Release”) is entered into as of
[TO BE DETERMINED AT TERMINATION OF EMPLOYMENT] (the “Effective Date”), by
Robert W. Musslewhite (the “Executive”) in consideration of severance pay and
benefits (the “Severance Payment”) provided to Executive by The Advisory Board
Company, a Delaware corporation (the “Company”), pursuant to Section 8(c) of the
Employment Agreement by and between the Company and Executive (the “Employment
Agreement”).
     1. Waiver and Release. Subject to the last sentence of the first paragraph
of this Section 1, Executive, on his own behalf and on behalf of his heirs,
executors, administrators, attorneys and assigns, hereby unconditionally and
irrevocably releases, waives and forever discharges the Company and each of its
affiliates, parents, successors, predecessors, and the subsidiaries, directors,
owners, members, shareholders, officers, agents, and employees of the Company
and its affiliates, parents, successors, predecessors, and subsidiaries
(collectively, all of the foregoing are referred to as the “Employer”), from any
and all causes of action, claims and damages, including attorneys’ fees, whether
known or unknown, foreseen or unforeseen, presently asserted or otherwise
arising through the date of his signing of this Release, concerning his
employment or separation from employment. Subject to the last sentence of the
first paragraph of this Section 1, this Release includes, but is not limited to,
any payments, benefits or damages arising under any federal law (including, but
not limited to, Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Employee Retirement Income Security Act of
1974, the Americans with Disabilities Act, Executive Order 11246, the Family and
Medical Leave Act, and the Worker Adjustment and Retraining Notification Act,
each as amended); any claim arising under any state or local laws, ordinances or
regulations (including, but not limited to, any state or local laws, ordinances
or regulations requiring that advance notice be given of certain workforce
reductions); and any claim arising under any common law principle or public
policy, including, but not limited to, all suits in tort or contract, such as
wrongful termination, defamation, emotional distress, invasion of privacy or
loss of consortium. Notwithstanding any other provision of this Release to the
contrary, this Release does not encompass, and Executive does not release, waive
or discharge, the obligations of the Company (a) to make the payments and
provide the other benefits contemplated by the Employment Agreement, or
(b) under any restricted stock agreement, option agreement or other agreement
pertaining to Executive’s equity ownership, or (c) under any indemnification or
similar agreement with Executive.
     Executive understands that by signing this Release, he is not waiving any
claims or administrative charges which cannot be waived by law. He is waiving,
however, any right to monetary recovery or individual relief should any federal,
state or local agency (including the Equal Employment Opportunity Commission)
pursue any claim on his behalf arising out of or related to his employment with
and/or separation from employment with the Company.
     Executive further agrees without any reservation whatsoever, never to sue
the Employer or become a party to a lawsuit on the basis of any and all claims
of any type lawfully and validly released in this Release.
     2. Acknowledgments. Executive is signing this Release knowingly and
voluntarily. He acknowledges that:
          (a) He is hereby advised in writing to consult an attorney before
signing this Release;
          (b) He has relied solely on his own judgment and/or that of his
attorney regarding the

 

--------------------------------------------------------------------------------

 

consideration for and the terms of this Release and is signing this Release
knowingly and voluntarily of his own free will;
          (c) He is not entitled to the Severance Payment unless he agrees to
and honors the terms of this Release;
          (d) He has been given at least twenty-one (21) calendar days to
consider this Release, or he expressly waives his right to have at least
twenty-one (21) days to consider this Release;
          (e) He may revoke this Release within seven (7) calendar days after
signing it by submitting a written notice of revocation to the Employer. He
further understands that this Release is not effective or enforceable until
after the seven (7) day period of revocation has expired without revocation, and
that if he revokes this Release within the seven (7) day revocation period, he
shall not receive the Severance Payment;
          (f) He has read and understands the Release and further understands
that, subject to the limitations contained herein, it includes a general release
of any and all known and unknown, foreseen or unforeseen claims presently
asserted or otherwise arising through the date of his signing of this Release
that he may have against the Employer; and
          (g) No statements made or conduct by the Employer has in any way
coerced or unduly influenced him or her to execute this Release.
     3. No Admission of Liability. This Release does not constitute an admission
of liability or wrongdoing on the part of the Employer, the Employer does not
admit there has been any wrongdoing whatsoever against Executive, and the
Employer expressly denies that any wrongdoing has occurred.
     4. Entire Agreement. There are no other agreements of any nature between
the Employer and Executive with respect to the matters discussed in this
Release, except as expressly stated herein, and in signing this Release,
Executive is not relying on any agreements or representations, except those
expressly contained in this Release.
     5. Execution. It is not necessary that the Employer sign this Release
following Executive’s full and complete execution of it for it to become fully
effective and enforceable.
     6. Severability. If any provision of this Release is found, held or deemed
by a court of competent jurisdiction to be void, unlawful or unenforceable under
any applicable statute or controlling law, the remainder of this Release shall
continue in full force and effect.
     7. Governing Law. This Release shall be governed by and construed in
accordance with the laws of the District of Columbia (other than its choice of
laws rules).
     8. Headings. Section and subsection headings contained in this Release are
inserted for the convenience of reference only. Section and subsection headings
shall not be deemed to be a part of this Release for any purpose, and they shall
not in any way define or affect the meaning, construction or scope of any of the
provisions hereof.
[Remainder of page intentionally left blank.]

2

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the undersigned has duly executed this Agreement as of
the day and year first herein above written.

           
 
 
 
Robert W. Musslewhite    

3