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                                                                   EXHIBIT 10.12


                             STOCK OPTION AGREEMENT

                                   PURSUANT TO

                           THE ADVISORY BOARD COMPANY

                  1997 STOCK-BASED INCENTIVE COMPENSATION PLAN

         THIS STOCK OPTION AGREEMENT (this "Option Agreement") is made effective
as of ____________, 19__ (the "Effective Date"), between The Advisory Board
Company, a Maryland corporation (the "Company"), and ____________________ (the
"Optionee"), granting to the Optionee Options to purchase ________ Option Shares
at a purchase price of _________ per Option Share, as further described in
Section 2 hereinbelow.

                                 R E C I T A L S

         A.       The Company has adopted the 1997 Stock-Based Incentive
Compensation Plan (the "Plan"), a copy which is attached hereto as Exhibit "A".

         B.       In accordance with the Plan, the Committee is granting to the
Optionee, as of the Effective Date, Options to purchase shares of Stock (as
hereinafter defined), subject to the terms and conditions of the Plan and this
Option Agreement.

         C.       The Optionee acknowledges that he or she is an employee of the
Company with substantial knowledge concerning the performance, operations and
future opportunities relating to the Company. The Optionee further acknowledges
that he or she has been briefed on the past and potential future performance of
the Company by Jeffrey D. Zients, Michael D'Amato and/or other senior executives
of the Company, and that the Optionee had the opportunity to ask Jeffrey D.
Zients, Michael D'Amato and/or other senior executives of the Company whatever
questions the Optionee desired concerning the financial and operational
performance and expectations of the Company. Finally, the Optionee acknowledges
that all future operating results are impossible to predict and that no
representation is being made by the Company with respect to the accuracy or
completeness of any forecast regarding the future.

         D.     The Optionee acknowledges and agrees that (i) as of the
Effective Date, the Company is an S Corporation as defined in Section 1361 of
the Internal Revenue Code of 1986, as amended, and (ii) that the capitalization
of the Company will be as described below immediately following the Reverse
Stock Split:

                (1)     1,000 authorized shares of Class A Voting Common Stock,
                        par value $0.01 per share, of which 1,000 shares will be
                        issued to David G. Bradley;

                (2)     1,399,000 authorized shares of Class B Nonvoting Common
                        Stock (the "Stock"), par value $0.01 per share, of which
                        829,000 shares will be issued to David G. Bradley;



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                (3)     The maximum number of shares of Stock that may be
                        subject to Options granted pursuant to the Plan is
                        400,000.

Changes in the above capitalization (including increases or decreases in the
number of authorized shares of capital stock) and available options with respect
to the Company's capital stock may be made in the future. To the extent
applicable, Sections 8 and 9 of this Option Agreement may apply to further
adjustments to the above capitalization.

                                   AGREEMENTS

         1.     DEFINITIONS.  Capitalized terms used herein shall have the
following meanings:


         "Act" is defined in Section 6(a).

         "Approved Sale" means a transaction or a series of related sale
transactions that result in a bona fide unaffiliated change of economic
beneficial ownership of the Company (disregarding for this purpose any disparate
voting rights attributable to the outstanding stock of the Company) whether
pursuant to the sale of the stock of the Company, the sale of the assets of the
Company, or a merger or consolidation involving the Company. However, an
Approved Sale shall not include (i) an issuance by the Company of its own Stock,
or (ii) a gift of the stock of the Company.

         "Cash Shortage" is the condition that exists when, in the judgment of
the Company, the Company's cash reserves may prove insufficient to (i) cover the
Company's working capital and other obligations as they come due, including
obligations pursuant to any stock option agreement, stockholders' agreement,
agreement not to compete, substitution agreement or liquid markets agreement
entered into by the Company and any other obligation of the Company to its
employees; (ii) maintain sufficient cash reserves to pay unforeseeable costs
that may arise; and at the same time (iii) make payments to Optionee pursuant to
this Option Agreement.

         "Cause" for termination is the commission of an act of fraud, theft or
dishonesty against the Company; arrest or conviction for any felony; arrest or
conviction for any misdemeanor involving moral turpitude which might, in the
Company's opinion, cause embarrassment to the Company; misconduct; substance
abuse; insubordination; violation of Company policy; willful or repeated
non-performance or substandard performance of duties; violation of any District
of Columbia, state or federal laws, rules or regulations in connection with or
during performance of work; or Performance Inconsistent with Past Levels of
Contribution, as defined below.

         "Chairman of the Board" means the Chairman of the Board of Directors of
the Company.

         "Committee" is defined in the Plan.

         "Company" is defined in the preamble.

         "Disability" shall mean a serious and permanent medical incapacity or
disability that precludes the Optionee from performing professional work. The
Company, at its option and expense, shall be entitled to retain a physician
reasonably acceptable to the Optionee to confirm




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the existence of such incapacity or disability. The Chairman of the Board
reserves the right to define Disability in a more liberal manner.

         "Distribution" means distributions to Stockholders with respect to the
capital stock of the Company in the form of dividends, redemption payments,
liquidation payments, or other similar payment types.

         "Effective Date" is defined in the preamble.

         "Exercisability Date" is defined in Section 3.

         "Exercise Date" is defined in Section 5(a).

         "Exercise Price" is defined in Section 2.

         "Expiration Date" is defined in Section 4(a).

         "Expiration Event" is defined in Section 4.

         "Fair Market Value" means the fair market value determined by an
investment bank selected by the Company, in its sole and absolute discretion.
The investment bank shall use customary criteria generally employed within the
investment banking community for valuing the assets or capital stock of an
entity similar to the Company. With respect to the Options and the Option
Shares, Fair Market Value will be determined by applying such minority,
liquidity, or other discounts as may be applicable to minority shares of capital
stock of this type.

         "Fiscal Year" means the Company's fiscal year ending March 31 of each
year or such other date as shall be designated by the Company in its sole and
absolute discretion.

         "Full Recourse" means the right of the Company to recover against all
of the assets of the Optionee in the event of a default by the Optionee with
respect to the Note.

         "Initial Public Offering" means the effectiveness of a registration
statement under the Act covering any of the capital stock of the Company and the
completion of a sale of such stock thereunder, if as a result of such sale (i)
the issuer becomes a reporting company under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and (ii) such stock is traded on
the New York Stock Exchange or the American Stock Exchange, or is quoted on the
NASDAQ National Market System.

         "Majority Shareholder" means a holder of more than fifty percent (50%)
of the outstanding stock of the Company, or if no person holds more than fifty
percent (50%) of the outstanding stock of the Company, the holder of a plurality
of the outstanding stock of the Company.

         "Market Rate" is a floating rate equal to the Prime Rate as quoted in
The Wall Street Journal and as adjusted from time to time but not to exceed 10%
per annum.

         "Net Proceeds" is defined in Section 3(b)(ii).



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         "Non-Competition Agreement" means that certain Agreement Concerning
Exclusive Services, Confidential Information, Business Opportunities,
Non-Competition, Non-Solicitation, and Work Product between the Optionee and the
Company.

         "Note" is defined in Section 5(a)(iii).

         "Option" or "Options" is defined in Section 2.

         "Option Agreement" is defined in the preamble.

         "Option Number" is defined in Section 2.

         "Optionee" is defined in the preamble.

         "Option Shares" means Stock subject to the Option.

         "Performance Inconsistent with Past Levels of Contribution" is any
neglect of, or refusal or inability to, perform the Optionee's duties or
responsibilities with respect to the Company with the same level of contribution
as in past periods of employment; or any insubordination, dishonesty, negligence
or malfeasance in the performance of such duties and responsibilities; or the
taking of actions which impair the Optionee's ability to perform such duties and
responsibilities; or any material violation of Company rules or regulations.

         "Plan" is defined in Recital A.

         "Redemption Date" is defined in Section 10(a).

         "Redemption Payment" is defined in Section 10(a).

         "Redemption Payment Period" is defined in Section 10(a).

         "Reverse Stock Split" means only the transaction or series of related
transactions following the grant of the Options in which the number of shares of
Stock issued to David G. Bradley will be reduced from 999,000 shares to 829,000
shares. Notwithstanding the foregoing, a Reverse Stock Split shall not mean any
stock issuances, reorganizations, recapitalizations, mergers, acquisitions,
stock splits, reverse stock splits, stock dividends or similar events in which
the number of shares of Stock issued to David G. Bradley shall be increased
above 829,000 shares or below 829,000 shares.

         "Spin-off Transaction" is defined in Recital B.

         "Stock" is defined in Recital D.

         "Stockholder" means a record holder of one or more shares of capital
stock of the Company.

         "Stockholders' Agreement" means the Stockholders' Agreement of the
Company setting forth, inter alia, certain rights, preferences and privileges of
and restrictions on the Option Shares. The Optionee must execute a copy of the
Stockholders' Agreement prior to receiving his



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or her Option Shares pursuant to the exercise of the Option. Unless the Optionee
duly executes a Stockholders' Agreement at the time of grant or prior to
exercise of the Options or the Company provides otherwise, if the Optionee has
previously executed a stockholders' agreement with respect to the prior grant or
exercise of stock options underwritten by the Company, such stockholders'
agreement (i) shall apply to any Option Shares issued by the Company pursuant to
this Option Agreement and (ii) shall be deemed the Stockholders' Agreement for
purposes this Option Agreement.

         "Termination Date" means the date on which the Optionee ceases to be
employed by the Company for any reason other than (i) for Cause, (ii) for death
or a Disability, or (iii) upon a Voluntary Resignation Date.

         "Undistributed Earnings" means, on any given date, the greater of (but
not less than zero): (i) the retained earnings (or similar entry) shown on the
audited financial statements of the Company for the prior Fiscal Year plus an
estimate by the Company of additions to or subtractions from such retained
earnings through such date of computation, and (ii) the "accumulated adjustments
account" (or similar computation) of the Company for the prior taxable year of
the Company pursuant to Section 1368(e) of the Internal Revenue Code of 1986, as
amended, plus an estimate by the Company of additions to or subtractions from
this account through such date of computation.

         "Voluntary Notice Date" means the date the Optionee gives notice of his
or her Voluntary Resignation Date.

         "Voluntary Resignation Date" means the date on which the Optionee
ceases employment with the Company for voluntary reasons. Voluntary Resignation
Date shall not include the date on which the Optionee ceases to be employed by
the Company due to death or a Disability.

         "Withholding Taxes" is defined in Section 11.

         2.     GRANT OF OPTION. The Company grants to the Optionee the right
and option (the "Option" or "Options") to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate number of Option Shares
as described in the preamble (the outstanding amount of such unexercised and
unexpired Options herein referred to as the "Option Number"), at the purchase
price per Option Share as described in the preamble (as such amount may be
adjusted as herein provided, the "Exercise Price"), on the terms and conditions
set forth herein. These Options shall be treated as non-qualified stock options.

         3.     EXERCISABILITY.

         (a)    EXERCISABILITY DATE. Prior to an Initial Public Offering, the
Options shall be exercisable during the month of April beginning on ___________
(the "Exercisability Date") and during every month of July, October, January and
April thereafter, or at such other times after the Exercisability Date and prior
to an Initial Public Offering as determined by the Company in its sole and
absolute discretion. Prior to an Initial Public Offering and notwithstanding the
foregoing, if an investment bank is performing, or has performed, substantial
services for the Company to examine, investigate, and analyze the possibility,
feasibility, or viability of an Initial Public Offering within six (6) months of
a month during which the Options would otherwise



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become exercisable pursuant to this Section 3(a), the Chairman of the Board may,
in his sole and absolute discretion, make a determination that such Options
shall not be exercisable for such month and may designate some other month
(including the following month of January, April, July, or October, as
appropriate) for the exercise of the Options; provided, however, the Chairman of
the Board may not designate some other month for the exercise of the Options
pursuant to this Section 3(a) any later than the month of April beginning on
________________.

         (b)      OTHER EXERCISABLE EVENTS.  Notwithstanding anything to the
contrary in Section 3(a) above, the Options shall be exercisable upon the
occurrence of any of the following events prior to, on, or after, the
Exercisability Date:

                  (i) Approved Sale of Stock. Prior to an Initial Public
         Offering, in the event of an Approved Sale by the Majority Shareholder
         of one hundred percent (100%) of the Company's outstanding Stock held
         by such Majority Shareholder, the Options shall be exercisable on the
         date of such Approved Sale. However, if the Majority Shareholder sells
         less than one hundred percent (100%) of the Company's outstanding Stock
         held by such Majority Shareholder pursuant to an Approved Sale, the
         Optionee shall only be entitled to exercise the Options with respect to
         a number of Option Shares equal to the Option Number immediately prior
         to such Approved Sale multiplied by the fraction equal to the number of
         shares of the Company's outstanding Stock sold pursuant to the Approved
         Sale by such Majority Shareholder divided by the total number of shares
         of the Company's outstanding Stock held by such Majority Shareholder
         immediately prior to such Approved Sale.

                  (ii) Approved Sale of Assets. Prior to an Initial Public
         Offering, in the event of a Distribution by the Company that is funded
         with one hundred percent (100%) of the proceeds, after payment of
         related expenses (the "Net Proceeds") from an Approved Sale of one
         hundred percent (100%) of the Company's assets, the Options shall be
         exercisable on the date of such Distribution. For purposes of this
         Section 3(b)(ii), a Distribution made by the Company shall not be
         treated as a Distribution funded with the Net Proceeds from an Approved
         Sale of the Company's assets to the extent of the Company's
         Undistributed Earnings as of the Distribution date. However, if less
         than one hundred percent (100%) of the Net Proceeds from an Approved
         Sale of one hundred percent (100%) of the Company's assets is so
         distributed, the Optionee shall only be entitled on the date of the
         Distribution to exercise Options with respect to a number of Option
         Shares equal to the Option Number immediately prior to such
         Distribution multiplied by the percentage of the Net Proceeds from such
         Approved Sale that is so distributed by the Company. If less than one
         hundred percent (100%) of the Company's assets is sold pursuant to an
         Approved Sale and all or some portion of the Net Proceeds from such
         Approved Sale is so distributed, the Optionee shall be entitled on the
         date of Distribution to exercise Options with respect to a number of
         Option Shares equal to the Option Number immediately prior to such
         Distribution multiplied by the product of (A) the percentage, based on
         Fair Market Value, of the Company's assets sold pursuant to such
         Approved Sale, and (B) the percentage of the Net Proceeds from such
         Approved Sale that is so distributed by the Company.




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                  (iii)  Initial Public Offering.  In the event of an Initial
         Public Offering of the Company's Stock, the Options shall be
         exercisable as follows:

                           (A) as of the date ___________ years after the
                  Initial Public Offering or such earlier date(s) as the
                  Chairman of the Board shall designate in his sole and absolute
                  discretion, ___________ of the Option Number as of the date of
                  the Initial Public Offering; and

                           (B) as of the date ___________ years after the
                  Initial Public Offering or such earlier date(s) as the
                  Chairman of the Board shall designate in his sole and absolute
                  discretion, ___________ of the Option Number as of the date of
                  the Initial Public Offering.

         (c)    DETERMINATION OF EXERCISABLE OPTIONS. The good faith
determination by the Company of the number of Options that may be exercisable by
the Optionee pursuant to Sections 3(b)(i), (ii) and (iii) above shall be binding
upon the Optionee.

         4.     EXPIRATION. The number of Option Shares that the Optionee is
entitled to purchase pursuant to the Options shall be decreased by the number of
Option Shares purchased by the Optionee on any given date. In addition, as
described below, some or all of the Options shall expire and shall no longer be
exercisable, at the end of the day upon which ANY of the following events occurs
(each an "Expiration Event"):

         (a)    EXPIRATION DATE. Upon _____________ (the "Expiration Date"), the
Options shall expire. Notwithstanding the foregoing, in the event of an Initial
Public Offering prior to Expiration Date, the Options shall expire the later of
three (3) years and thirty (30) days after the Initial Public Offering or the
Expiration Date.

         (b)    TERMINATION BY THE COMPANY. Prior to an Initial Public Offering,
(i) the Options shall all expire as of the date the Optionee ceases to be
employed by the Company for Cause; or (ii) the Options shall all expire as of
the Termination Date provided such date occurs prior to the Exercisability Date.

         (c)    VOLUNTARY RESIGNATION BY THE OPTIONEE. Prior to an Initial
Public Offering, the Options shall all expire on the Voluntary Notice Date if
(i) the Voluntary Notice Date occurs less than ten (10) months prior to the
Voluntary Resignation Date; or (ii) the Voluntary Resignation Date occurs prior
to ____________.

         (d)    APPROVED SALE OF STOCK. Prior to an Initial Public Offering, the
Options shall all expire upon an Approved Sale by the Majority Shareholder of
one hundred percent (100%) of the Company's outstanding stock held by such
Majority Shareholder. However, if the Majority Shareholder sells less than one
hundred percent (100%) of the Company's outstanding stock held by such Majority
Shareholder pursuant to an Approved Sale, the number of Options that shall
expire shall be equal to the amount by which the Option Number immediately prior
to such Approved Sale multiplied by the fraction equal to the number of shares
of the Company's outstanding Stock sold pursuant to the Approved Sale by such
Majority Shareholder divided by the total number of shares of the Company's
outstanding Stock held by such Majority



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Shareholder immediately prior to such Approved Sale exceeds the number of Option
Shares purchased by the Optionee on the date of such Approved Sale.

         (e)    APPROVED SALE OF ASSETS. Prior to an Initial Public Offering,
the Options shall all expire upon a Distribution by the Company that is funded
with one hundred percent (100%) of the Net Proceeds from an Approved Sale of one
hundred percent (100%) of the Company's assets. For purposes of this Section
4(e), a Distribution made by the Company shall not be treated as a Distribution
funded with the Net Proceeds from an Approved Sale of the Company's assets to
the extent of the Company's Undistributed Earnings as of the date of the
Distribution. However, if less than one hundred percent (100%) of the Net
Proceeds from an Approved Sale of one hundred percent (100%) of the Company's
assets is so distributed, the number of Options that shall expire shall be equal
to the amount by which the Option Number immediately prior to such Distribution
multiplied by the percentage of the Net Proceeds from such Approved Sale that is
so distributed by the Company exceeds the number of Option Shares purchased by
the Optionee on the date of such Distribution. If less than one hundred percent
(100%) of the Company's assets is sold pursuant to an Approved Sale and all or
some portion of the Net Proceeds from such Approved Sale is so distributed, the
number of Options that shall expire shall be equal to the amount by which the
Option Number immediately prior to such Distribution multiplied by the product
of (i) the percentage, based on Fair Market Value, of the Company's assets sold
pursuant to such Approved Sale, and (ii) the percentage of the Net Proceeds from
such Approved Sale that is so distributed by the Company, exceeds the number of
Option Shares purchased by the Optionee on the date of such Distribution.

         (f)    INITIAL PUBLIC OFFERING. In the event of an Initial Public
Offering, the Options shall expire as of the Voluntary Resignation Date or the
date on which the Optionee ceases to be employed by the Company for Cause. Any
portion of the Option that is unexercisable as of the expiration date shall
remain unexercisable and shall also terminate as of such date. If, within three
(3) years after an Initial Public Offering, the Optionee is terminated by the
Company other than for Cause or ceases employment as a result of death or a
Disability, the Options shall expire as of the date three (3) years and thirty
(30) days after the date of the Initial Public Offering. Notwithstanding
anything in this subsection (f) to the contrary and except as otherwise provided
in Section 4(a) above, if three (3) years has elapsed since the Initial Public
Offering, the Option shall expire as of the date thirty (30) days after the date
on which the Optionee ceases to be employed by the Company for any reason other
than death or a Disability.

         5.     EXERCISE OF THE OPTION.

         (a)    Prior to the expiration thereof, the Optionee may exercise the
Options from time to time in whole or in part as permitted hereunder (the
"Exercise Date"). On the Exercise Date, the Optionee shall deliver to the
Chairman of the Board the following:

                (i)  A copy of the Stockholders' Agreement duly executed by the
         Optionee;

                (ii) A written and signed notice of such election setting
         forth the number of Option Shares the Optionee has elected to purchase;


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                (iii) Payment in full of the aggregate Exercise Price of such
         Option Shares in one or a combination of the following: (A) cash or a
         cashier's or certified bank check payable to the order of the Company,
         or (B) prior to an Initial Public Offering, a Full Recourse promissory
         note, in a form determined by the Company in its sole and absolute
         discretion (the "Note"), secured by the number of Option Shares the
         Optionee has elected to purchase, bearing a Market Rate of interest,
         and due and payable the earlier of the date the Optionee disposes of
         all or a portion of his or her Stock securing the Note, or the date six
         (6) months after the Exercise Date or such later date as the Company
         determines in its sole and absolute discretion; and

                (iv)  The amount, if any, required pursuant to Section 11
         hereof.

         (b)    Notwithstanding anything in Section 5(a) to the contrary, the
Committee may, in its sole and absolute discretion, permit payment of the
Exercise Price in such form or in such manner as may be otherwise permissible
under the Plan and under any applicable law.

         (c)    If the Optionee provides payment as provided in Section
5(a)(iii)(B) above, the Optionee agrees to execute and deliver such other
documents as may be reasonably required by the Company to effectuate and secure
the Note. If a Voluntary Notice Date occurs less than ten (10) months prior to a
Voluntary Resignation Date, the Note, together with any accrued interest
thereon, shall be immediately payable upon the earlier of the due date of the
Note or the Voluntary Resignation Date.

         (d)    At least ten (10) days prior to an Approved Sale, the Company is
obligated to notify each Optionee who is entitled to exercise his or her Options
upon such Approved Sale. In the event the Company fails to provide such notice
and an Optionee's Options have positive value, the Optionee shall be deemed to
have exercised his or her Options on the date of the Approved Sale pursuant to
this Section 5.

         6.     COMPLIANCE WITH LEGAL REQUIREMENTS.

         (a)    No Option Shares shall be issued or transferred pursuant to this
Option Agreement unless and until all legal requirements applicable to such
issuance or transfer have, in the opinion of counsel to the Company, been
satisfied. Such requirements may include, but are not limited to, registering or
qualifying such Option Shares under any state or federal law, satisfying any
applicable law relating to the transfer of unregistered securities or
demonstrating the availability of an exemption from applicable laws, placing a
legend on the Option Shares to the effect that they were issued in reliance upon
an exemption from registration under the Securities Act of 1933, as amended (the
"Act"), and may not be transferred other than in reliance upon Rule 144 or Rule
701 promulgated under the Act, if available, or upon another exemption from the
Act, or obtaining the consent or approval of any governmental regulatory body.

         (b)    The Optionee understands that the Company intends for the
offering and sale of Option Shares to be effected in reliance upon Rule 701 or
another available exemption from registration under the Act and intends to file
a Form 701 as appropriate, and that the Company is under no obligation to
register for resale the Option Shares issued upon exercise of the Option,
subject to the Stockholders' Agreement. In connection with any such issuance or
transfer, the




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person acquiring the Option Shares shall, if requested by the Company, provide
information and assurances satisfactory to counsel to the Company with respect
to such matters as the Company reasonably may deem desirable to assure
compliance with all applicable legal requirements.

         (c)    The Option Shares issued pursuant to this Option Agreement may
bear such legends with respect to their transferability that the Committee may
deem appropriate.

         7.     NONTRANSFERABILITY. Subject to Sections 8 and 10 hereof, the
Option shall not be transferable by the Optionee except, after the Optionee's
death, to his or her spouse, child, estate, personal representative, heir or
successor. More particularly (but without limiting the generality of the
foregoing), the Option may not be assigned, transferred (except as aforesaid),
pledged or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment or similar process. Any
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, and the levy of any attachment or similar
process upon the Option that would otherwise effect a change in the ownership of
the Option, shall terminate the Option; provided, however, that in the case of
the involuntary levy of any attachment or similar involuntary process upon the
Option, the Optionee shall have thirty (30) days after notice thereof to cure
such levy or process before the Option terminates. This Option Agreement shall
be binding on and enforceable against any person who is a permitted transferee
of the Option pursuant to the first sentence of this Section.

         8.     EFFECT OF MERGER; ADJUSTMENTS.

         (a)    In the event of an Approved Sale that is a merger or other form
of corporate reorganization (other than the Reverse Stock Split) and
notwithstanding any other provisions of this Option Agreement, the unexercised
portion of the Option shall be subject to the terms of the agreement or plan of
merger or reorganization effecting such merger or reorganization and shall be
converted, redeemed, exchanged, canceled or otherwise treated as provided in
such agreement or plan of merger or reorganization.

         (b)    Subject to Section 8(a) above, if the shares of the Stock are
changed into or exchanged for a different number or kind of shares or
securities, as the result of any one or more reorganizations, recapitalizations,
mergers, acquisitions, stock splits, reverse stock splits, stock dividends or
similar events (other than the Reverse Stock Split), an appropriate adjustment
shall be made in the number and kind of shares or other securities subject to
the Option, and the price for each share or other unit of any securities subject
to this Option Agreement, in accordance with Section 10 of the Plan. No
fractional interests shall be issued on account of any such adjustment unless
the Committee specifically determines to the contrary; provided, however, that
in lieu of fractional interests, the Optionee, upon the exercise of the Option
in whole or part, shall receive cash in an amount equal to the amount by which
the Fair Market Value of such fractional interests exceeds the Exercise Price
attributable to such fractional interests.

         9.       ADJUSTMENTS AND DILUTION.

         (a)    If the capitalization of the Company changes as the result of
one or more stock dividends, stock splits, reverse stock splits, combinations,
recapitalizations, reclassifications, mergers, consolidations or similar events
(other than the Reverse Stock Split), an appropriate



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adjustment shall be made in the number and kind of shares or other securities
subject to the Option, and the price for each share or other unit of any
securities subject to this Option Agreement, in accordance with Section 10 of
the Plan. No fractional interests shall be issued on account of any such
adjustment unless the Committee specifically determines to the contrary;
provided, however, that in lieu of fractional interests, the Optionee, upon the
exercise of the Option in whole or part, shall receive cash in an amount equal
to the amount by which the Fair Market Value of such fractional interests
exceeds the Exercise Price attributable to such fractional interests.

         (b)    Except as may be specifically provided in this Option Agreement,
nothing herein shall prohibit or restrict the Company from taking any corporate
action or engaging in any corporate transaction of any kind, including, without
limitation, the issuance and sale of additional shares of capital stock of the
Company, any merger, consolidation, liquidation or sale of assets, or create in
Optionee or his or her permitted transferee any rights to acquire or receive
additional shares of capital stock of the Company or otherwise be protected
against dilution.

         10.    RIGHT OF REDEMPTION OF OPTIONS.

         (a)    Prior to an Initial Public Offering of the Stock of the Company
and notwithstanding anything in Section 7 above to the contrary, the Company
shall have the right, on or after the Exercisability Date and in its sole and
absolute discretion, to redeem, in whole, the Option granted by this Option
Agreement, and the Optionee shall be obligated to sell, in whole, the Option as
required by the Company's exercise of this right. The redemption of the Option
shall be effective as of the date of such redemption (the "Redemption Date").
Payment for the redeemed Option (the "Redemption Payment") shall be made by
means of the payment to the Optionee by the Company of the Fair Market Value
(determined as of the Redemption Date) of such Option in cash or by check as of
the date one (1) year after the Redemption Date or such earlier date(s) as the
Company may designate in its sole and absolute discretion (the "Redemption
Payment Period"). No interest shall accrue on any portion of the Redemption
Payment due and outstanding during the Redemption Payment Period.

         (b)    Notwithstanding anything to the contrary in Section 10(a) above,
as of the end of the Redemption Payment Period, payment of any due and
outstanding portion of the Redemption Payment shall be delayed if the Company
determines it is suffering from a Cash Shortage. Any outstanding portion of a
Redemption Payment that would otherwise be due and payable during a period of
Cash Shortage shall be delayed for a period of six (6) months, after which time
the Company shall either make any payment that has been delayed, or determine
that the Company continues to suffer from a Cash Shortage. Interest shall accrue
at Market Rate during any period of delay due to this Section 10(b).

         (c)    Notwithstanding anything in this Section 10 to the contrary, if
a Voluntary Notice Date occurs less than ten months (10) prior to a Voluntary
Resignation Date, any portion of the Redemption Payment outstanding as of the
Voluntary Resignation Date, together with any accrued and unpaid interest
thereon, shall be forfeited by the Optionee, and the Company shall have no
further liability with respect to such outstanding portion and such accrued
interest, if any.



                                       11
<PAGE>   12

         11.    TAXES. The Committee may, in its discretion, make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of all federal, state, local and other taxes required by law to be
withheld with respect to the exercise of the Option or the redemption of the
Option (the "Withholding Taxes") including, but not limited to, deducting the
amount of any such withholding taxes from any other amount then or thereafter
payable to the Optionee, requiring the Optionee to pay to the Company the amount
required to be withheld or to execute such documents as the Committee deems
necessary or desirable to enable it to satisfy its obligations with respect to
the Withholding Taxes. With the consent of the Company, the Optionee may
authorize the Company to withhold a sufficient number of the shares of Stock
otherwise issuable to the Optionee on the Exercise Date as payment of his or her
obligation with respect to the Withholding Taxes (such shares to be valued on
the basis of the Fair Market Value of the Stock of the Company on the Exercise
Date).

         12.    NO INTEREST IN SHARES SUBJECT TO OPTION. Neither the Optionee
(individually or as a member of a group) nor any beneficiary or other person
claiming under or through the Optionee shall have any right, title, interest, or
privilege in or to any shares of Stock allocated or reserved for the purpose of
the Plan or subject to this Option Agreement except as to such Option Shares, if
any, as shall have been issued to such person upon exercise of the Option or
portion thereof.

         13.    SUBJECT TO STOCKHOLDERS' AGREEMENT.  The Optionee acknowledges
that the Option Shares are subject to the terms of the Stockholders' Agreement.

         14.    THE PLAN CONTROLS. The Option hereby granted is subject to, and
the Company and the Optionee agree to be bound by, all of the terms and
conditions of the Plan as the same may be amended from time to time in
accordance with the terms thereof, but no such amendment shall be effective as
to the Option without the Optionee's consent insofar as it may adversely affect
the Optionee's rights under this Option Agreement.

         15.    NOT AN EMPLOYMENT CONTRACT. Nothing in the Plan, in this Option
Agreement or any other instrument executed pursuant thereto shall confer upon
the Optionee any right to continue in the employ of the Company nor shall affect
the right of the Company to terminate the employment of the Optionee with or
without Cause.

         16.    SUBJECT TO AGREEMENT NOT TO COMPETE.  The Optionee acknowledges
that the execution of the Agreement Not to Compete attached hereto is a
condition precedent to the receipt of any rights or benefits conferred on the
Optionee by this Option Agreement.

         17.    NOTICES. All notices, requests, demands and other communications
pursuant to this Option Agreement shall be in writing and shall be deemed to
have been duly given if personally delivered, telexed or telecopied to, or, if
mailed, when received by, the other party, if the Company at its principal
executive offices addressed to the attention of the Chairman of the Board, and
if to Optionee at his or her address as it appears on the books of the Company
(or at such other address as shall be given in writing by Optionee or his or her
permitted transferee to the Company).



                                       12
<PAGE>   13

         18.    BINDING EFFECT.  This Option Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective permitted
successors and assigns.

         19.    ENTIRE OPTION AGREEMENT. This Option Agreement, together with
the Plan, the Stockholders' Agreement and the Non-Competition Agreement, sets
forth the entire agreement and understanding between the parties as to the
subject matter hereof (including, but not limited to, any rights of the Optionee
to any value or appreciation in value of the Company or its capital stock) and
supersedes all prior oral and written and all contemporaneous oral discussions,
agreements and understandings of any kind or nature.

         20.    AMENDMENTS AND WAIVERS.  This Option Agreement may be amended,
and any provision hereof may be waived, only by a writing signed by the party to
be charged.

         21.    FURTHER ASSURANCES.  Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Option Agreement.

         22.    ACTIONS BY THE COMPANY. Any reference within this Option
Agreement to an action, judgment, conclusion, or determination by the Company
shall mean an action, judgment, conclusion, or determination of the Board of
Directors of the Company or its authorized representative(s).

         23.    HEADINGS.  The headings preceding the text of the sections
hereof are inserted solely for convenience of reference, and shall not
constitute a part of this Option Agreement, nor shall they affect its meaning,
construction or effect.

         24.    GOVERNING LAW.  All terms of and rights under this Option
Agreement shall be governed by and construed in accordance with the internal law
of the State of Maryland, without giving effect to principles of conflicts of
law.

         25.    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 Option Agreement (excluding
enforcement by the Company of its rights under the Non-Competition 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 (1) to three (3) arbitrators, each of whom
shall be impartial. Except as the parties may otherwise agree, all arbitrators
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 arbitrators, the appointing authority shall give due consideration to the
issues to be resolved, but his or her decision as to the number of arbitrators
and their identity shall be final. Except as otherwise provided in this Section
25, all of the arbitration proceedings shall be conducted in accordance with the
rules of the arbitrators.



                                       13
<PAGE>   14

         (b)    An arbitration may be commenced by any party to this Option
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 arbitrators ten (10) days following such
service or thereafter. If the panel of arbitrators is not appointed by the
appointing authority within thirty (30) days following such reference, any party
may apply to any court within the District of Columbia for an order appointing
arbitrators qualified as set forth below.

         (c)    All attorneys' fees and costs of the arbitration shall in the
first instance be borne by the respective party incurring such costs and fees,
but the arbitrators shall have the discretion to award costs and/or attorneys'
fees as they deem appropriate under the circumstances. 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 arbitrators may be entered
 in any court having jurisdiction thereof.

         (e)    It is intended that controversies or claims submitted to
arbitration under this Section 25 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.

         IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the dates set forth below.

                                            THE ADVISORY BOARD COMPANY



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

                                            Name:  -----------------------------

                                            Title: -----------------------------

                                            Date:  -----------------------------


                                            OPTIONEE



                                            Signature:
                                                      --------------------------

                                            Date:
                                                  ------------------------------



                                       14