Document:

CRM-EX10.3-2014.4.30-Q1

Exhibit 10.3
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement (“Agreement”) is made by and between Graham Smith (“Executive”) and salesforce.com, Inc. (the “Company”) (collectively referred to as the “Parties” or individually referred to as a “Party”).
RECITALS
WHEREAS, Executive intends to retire from his employment with the Company no later than March 31, 2015 (Executive’s actual termination date within this period, the “Retirement Date”); and
WHEREAS, Executive and Company both wish to ensure an orderly transition of Executive’s duties and responsibilities throughout the Transition Period (as defined below);
NOW, THEREFORE, in consideration of the mutual promises made herein, the Company and Executive hereby agree as follows:
COVENANTS
1.Consideration.
a.    Executive’s Retirement.  Executive will retire from his employment with the Company as of the Retirement Date, and the Company shall process his voluntary termination accordingly.  Executive agrees to execute any documentation deemed reasonably necessary by the Company to confirm Executive’s resignation from employment.
b.    Continued Employment; Transition Services.  The Company agrees to continue to employ Executive until the Retirement Date.  Beginning on the Effective Date of this Agreement and through March 31, 2015 (the “Transition Period”), Executive agrees to (1) continue to serve as the Company’s Chief Financial Officer until such time as the Board of Directors of the Company determines that Executive shall no longer serve in such capacity and (2) provide reasonable transition services to the Company, or such other services as the Company may request, including, but not limited to, the transitioning of Executive’s responsibilities and assistance in the hiring of a new Chief Financial Officer of the Company.  Executive agrees to continue to provide such services to the Company in good faith, to the best of his ability and in the best interests of the Company.  Executive’s employment during the Transition Period shall continue to be “at-will,” meaning the Company and Executive are both free to terminate Executive’s employment with or without cause or notice, subject to any limitations in this Section 1.  During the Transition Period, Executive shall continue to receive his salary at the same rate that he was receiving his salary immediately prior to the Transition Period, and shall continue to be eligible to participate in then-available Company benefit programs at the same level as he would have been eligible to participate in such programs as of immediately prior to the Transition Period, subject to the terms and conditions, including eligibility requirements, of such programs.  If, at any time during the Transition 

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Period, the Company appoints a new Chief Financial Officer (“CFO”), Executive will take all steps necessary at the Company’s request to relinquish the title of CFO and continue providing such transition services as will be determined by the Company in its sole discretion.  Notwithstanding the foregoing, the hiring of a new CFO will not diminish Executive’s right to continue his employment during the Transition Period and receive the compensation and benefits to which he is otherwise entitled under this Agreement during such employment.
c.    Base Salary and Continued Health Coverage Severance Upon Qualifying Termination.  If prior to the end of the Transition Period, Executive’s employment with the Company is terminated by the Company other than for Cause (as defined below) or Executive resigns his employment at the request of the Company if such request is not for Cause (each, a “Qualifying Termination”), Executive will nevertheless be entitled to (1) a lump sum payment, less any applicable withholding, of all unpaid base salary compensation to which he would otherwise be entitled under this Agreement from the Retirement Date through the end of the Transition Period, and (2) if Executive is covered under the Company’s group health plan as of the Retirement Date, the Company will continue to pay for healthcare premiums for Executive and his eligible dependents and cover Executive and his eligible dependents under the Company’s healthcare plans that are in place at the time of the Retirement Date, from the Retirement Date through the end of the Transition Period (or if required by law or necessary to avoid a violation of the non-discrimination rules of Section 105(h) of the Internal Revenue Code of 1986, as amended (the “Code”), pay an amount equal to such premiums (based on cost as of immediately prior to the Qualifying Termination) in one lump sum payment).  Subject to any delay required by Section 5 of this Agreement, any payment of base salary or premium equivalents due to Executive pursuant to the prior sentence shall be made to Executive, less any applicable withholding, within 10 calendar days following Executive’s Qualifying Termination, provided, however, that if the Retirement Date occurs in 2014 but on or after November 1 of 2014, any cash severance payable under this paragraph will be paid in arrears on the first payroll date to occur during calendar year 2015.
d.    Bonus and Bonus Severance Upon Qualifying Termination.  Executive will be entitled to receive 100% of his target bonus opportunity for the 2015 fiscal year (ending January 31, 2015) with 25% of his target bonus opportunity for the 2015 fiscal year paid on September 30, 2014, or such time as the Company makes its first fiscal 2015 bonus installment payment to all of its similarly situated employees under the same bonus program, regardless of Executive’s or Company’s performance, provided that Executive remains employed through the payment date of such bonus.  Alternatively, if prior to such date, Executive has a Qualifying Termination, subject to any delay required by Section 5 of this Agreement, any payment that, but for such Qualifying Termination, otherwise would have been due to Executive pursuant to the foregoing sentence shall be made to Executive, less any applicable withholding, at the same time as provided for cash severance payments under Section 1(c) above.  If Executive resigns his employment at any time prior to the end of the Transition Period, for any reason other than as provided in the prior sentence, or his employment is terminated by the Company for Cause, he shall not be entitled to any bonus payment, other than any amounts already paid.

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e.    Definition of Cause.  For purposes of this Agreement, Cause shall mean (i) an act of personal dishonesty taken by the Executive in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Executive, (ii) Executive being convicted of a felony, (iii) a willful act by the Executive which constitutes gross misconduct and which is injurious to the Company, (iv) following delivery to the Executive of a written demand for performance from the Company which describes the basis for the Company’s reasonable belief that the Executive has not substantially performed his duties, continued violations by the Executive of the Executive’s obligations to the Company which are demonstrably willful and deliberate on the Executive’s part.
f.    Equity Awards and Equity Severance Upon Qualifying Termination.  Executive will continue to vest in Executive’s outstanding Company stock options and restricted stock unit awards in accordance with their terms through and including the Retirement Date, and no more.  Should Executive have a Qualifying Termination before the end of the Transition Period, then the vesting of Executive’s then-outstanding stock options and restricted stock unit awards will accelerate such that Executive will vest in the number of shares of Company common stock subject to each such equity award that would have vested had Executive remained employed through the Transition Period, and no further Shares subject to such awards will vest.  Any options (or portion thereof) that vest pursuant to the prior sentence will be immediately vested as of the Retirement Date and shall be exercisable pursuant to the terms of the applicable award; any restricted stock units that vest pursuant to the prior sentence will be immediately vested as of the Retirement Date and will be settled, subject to any delay required under Section 5 of this Agreement, (1) if granted under the 2004 Equity Incentive Plan, in accordance with the original vesting schedule as provided under the restricted stock unit agreement, and (2) if granted under the 2013 Equity Incentive Plan, as soon as practicable upon or following the Retirement Date.  Any equity awards that are unvested on the Retirement Date will be forfeited permanently on that date and never will become vested (except as may be provided pursuant to the Change of Control and Retention Agreement between the Company and Executive dated as of December 22, 2008 (the “Retention Agreement”) if a “Change of Control” (as defined under the Retention Agreement) occurs prior to the Retirement Date, as further discussed under Section 2 below).  In all other respects, the exercise of Executive’s vested options and Shares shall continue to be governed by the terms and conditions of the applicable award agreement and the Company’s equity plan under which the award was granted.

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2.    Impact on Other Arrangements.  Executive understands and agrees that except as expressly provided for in this Agreement, Executive shall not be entitled to any other consideration or separation benefits, including, but not limited to, any severance payments, equity benefits, or other severance benefits provided for in the offer letter between Executive and the Company on August 8, 2007 (the “Offer Letter”).  However, if, during Executive’s employment during the Transition Period, the Company completes a “Change of Control” (as defined in the Retention Agreement) and Executive becomes entitled to receive benefits under his Retention Agreement, Executive will not receive any severance payments, equity benefits, or other severance benefits provided in this Agreement and instead will receive only the benefits provided under the Retention Agreement under the terms and conditions provided thereunder, and any severance payments and benefits already provided under this Agreement will reduce the like-kind payments and benefits provided under the Retention Agreement.  If, during Executive’s employment during the Transition Period, the Company completes a Change of Control but Executive does not become entitled to receive benefits under his Retention Agreement, he will remain entitled to receive benefits under this Agreement.  If no Change of Control occurs prior to the Retirement Date, the Retention Agreement will, as of the Retirement Date, be of no further force and effect, except with respect to Section 4 (“Golden Parachute Excise Tax Best Results”) of the Retention Agreement, which Section 4 shall remain in full force and effect, and Executive will not be entitled to receive any severance benefits, equity benefits or other benefits thereunder.  Notwithstanding the foregoing, if the benefits under this Agreement would be greater in the aggregate than the benefits under the Retention Agreement in the aggregate, Executive shall receive the applicable benefits under this Agreement.  For purposes of clarity, Section 4 of the Retention Agreement applies to payments under this Retention Agreement.
3.    Benefits.  Except as provided in Section 1(c) above, Executive’s health insurance benefits shall cease on the Retirement Date occurs, subject to Executive’s right to continue his health insurance under COBRA.  Except as provided in this Agreement, Executive’s participation in all benefits and incidents of employment, including, but not limited to, vesting in stock options, and the accrual of bonuses, vacation, and paid time off, will cease as of the Retirement Date.
4.    Payment of Salary and Receipt of All Benefits.  Executive acknowledges and represents that, other than the consideration specified in this Agreement, Executive has received and is not entitled to any additional salary, wages, bonuses, accrued vacation/paid time off, premiums, leaves, housing allowances, relocation costs, interest, severance, outplacement costs, fees, commissions, stock, stock options, vesting, and any and all other benefits and compensation due to Executive.

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5.    Tax Consequences.
a.    General.  The Company makes no representations or warranties with respect to the tax consequences of the payments provided to Executive or made on his behalf under the terms of this Agreement.  Executive agrees and understands that he is responsible for payment, if any, of personal local, personal state, and/or personal federal taxes on the payments and any other consideration provided hereunder by the Company and any penalties or assessments thereon.  Executive further agrees to indemnify and hold the Company harmless from any claims, demands, deficiencies, penalties, interest, assessments, executions, judgments, or recoveries by any government agency against the Company for any amounts claimed due on account of (a) Executive’s failure to pay or Executive’s delayed payment of Executive’s personal federal or personal state taxes, or (b) damages sustained by the Company by reason of any claims, specifically set forth in (a) above, including attorneys’ fees and costs.
b.    Notwithstanding anything in this Agreement to the contrary, no severance payments or benefits under that become payable under this Agreement will be paid to Executive until he has a “separation from service” within the meaning of Section 409A of the Code and the final treasury regulations (the “Treasury Regulations”) and official guidance thereunder (collectively, as each may be amended from time to time, “Section 409A”).  References to Retirement Date or termination date or similar terms are intended to refer to Executive’s separation from service within the meaning of Section 409A.  At no time during his employment during the Transition Period shall Executive’s duties constitute any less than twenty-percent (20%) of the services provided by Executive to the Company, on average, during the 36 months of employment immediately preceding the start of the Transition Period.  Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii).  Payments under this Agreement are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to any additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to so comply or to otherwise be exempt from Section 409A.  Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s separation from service, then any severance payments or separation benefits to the extent that the same constitute deferred compensation under Section 409A, otherwise due to Executive on or within the six (6) month period following Executive’s separation from service (whether under this Agreement or otherwise) will accrue during such six (6) month period and will become payable in a lump sum payment on the date six (6) months and one (1) day following the date of Executive’s separation from service.  All subsequent payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit.  Notwithstanding anything herein to the contrary, if Executive dies following his separation from service but prior to the six (6) month anniversary of his date of separation from service, then any payments delayed in accordance with this section shall be payable in a lump sum as soon as administratively practicable after the date of Executive’s death and all other payments and benefits shall be payable in accordance with the payment schedule applicable to each payment or benefit.  The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, 

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appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Section 409A.  In no event will the Company reimburse Executive for any tax obligations arising under Section 409A.
6.    Trade Secrets and Confidential Information/Company Property.  Executive reaffirms and agrees to observe and abide by the terms of his Employee Inventions and Proprietary Rights Assignment Agreement (the “Confidentiality Agreement”) (except as provided herein), specifically including the provisions therein regarding nondisclosure of the Company’s trade secrets and confidential and proprietary information.  Executive agrees that upon the Retirement Date, or date of termination, whichever comes first, he will return all documents and other items provided to Executive by the Company, developed or obtained by Executive in connection with his employment with the Company, or otherwise belonging to the Company.
7.    ARBITRATION.  THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING OUT OF THE TERMS OF THIS AGREEMENT, AND THEIR INTERPRETATION, SHALL BE SUBJECT TO ARBITRATION IN THE CITY AND COUNTY OF SAN FRANCISCO, BEFORE JUDICIAL ARBITRATION & MEDIATION SERVICES (“JAMS”), PURSUANT TO ITS EMPLOYMENT ARBITRATION RULES & PROCEDURES (“JAMS RULES”).  THE ARBITRATOR MAY GRANT INJUNCTIONS AND OTHER RELIEF IN SUCH DISPUTES.  THE ARBITRATOR SHALL ADMINISTER AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW, INCLUDING THE CALIFORNIA CODE OF CIVIL PROCEDURE, AND THE ARBITRATOR SHALL APPLY SUBSTANTIVE AND PROCEDURAL CALIFORNIA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO ANY CONFLICT-OF-LAW PROVISIONS OF ANY JURISDICTION.  TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH CALIFORNIA LAW, CALIFORNIA LAW SHALL TAKE PRECEDENCE.  THE DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE, AND BINDING ON THE PARTIES TO THE ARBITRATION.  THE PARTIES AGREE THAT THE PREVAILING PARTY IN ANY ARBITRATION SHALL BE ENTITLED TO INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT JURISDICTION TO ENFORCE THE ARBITRATION AWARD.  THE PARTIES TO THE ARBITRATION SHALL EACH PAY AN EQUAL SHARE OF THE COSTS AND EXPENSES OF SUCH ARBITRATION, AND EACH PARTY SHALL SEPARATELY PAY FOR ITS RESPECTIVE COUNSEL FEES AND EXPENSES; PROVIDED, HOWEVER, THAT THE ARBITRATOR SHALL AWARD ATTORNEYS’ FEES AND COSTS TO THE PREVAILING PARTY, EXCEPT AS PROHIBITED BY LAW.  THE PARTIES HEREBY AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTE BETWEEN THEM RESOLVED IN A COURT OF LAW BY A JUDGE OR JURY.  NOTWITHSTANDING THE FOREGOING, THIS SECTION WILL NOT PREVENT EITHER PARTY FROM SEEKING INJUNCTIVE RELIEF (OR ANY OTHER PROVISIONAL REMEDY) FROM ANY COURT HAVING JURISDICTION OVER THE PARTIES AND THE SUBJECT MATTER OF THEIR DISPUTE RELATING TO THIS AGREEMENT AND THE AGREEMENTS INCORPORATED HEREIN BY REFERENCE.  SHOULD ANY PART OF THE ARBITRATION AGREEMENT CONTAINED IN THIS PARAGRAPH CONFLICT WITH ANY OTHER ARBITRATION AGREEMENT BETWEEN THE PARTIES, THE PARTIES AGREE THAT THIS ARBITRATION AGREEMENT SHALL GOVERN.

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8.    Authority.  The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement.  Executive represents and warrants that he has the capacity to act on his own behalf and on behalf of all who might claim through him to bind them to the terms and conditions of this Agreement.  Each Party warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein.
9.    No Representations.  Executive represents that he has had an opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement.  Executive has not relied upon any representations or statements made by the Company that are not specifically set forth in this Agreement.
10.    Severability.  In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without said provision or portion of provision.
11.    Entire Agreement.  This Agreement represents the entire agreement and understanding between the Company and Executive concerning the subject matter of this Agreement and Executive’s employment with and retirement from the Company and the events leading thereto and associated therewith, and supersedes and replaces any and all prior agreements and understandings concerning the subject matter of this Agreement and Executive’s relationship with the Company, with the exception of the Confidentiality Agreement, the equity plans and equity agreements under which Executive’s Company equity awards are granted, and the Retention Agreement, in each case as modified herein.  For the sake of clarity, Executive specifically acknowledges that the Offer Letter’s provisions with respect to receipt of any severance payments or benefits in the event of his termination without cause or otherwise are expressly superseded by this Agreement and that the Executive shall receive no compensation or consideration of any sort under the Offer Letter.  Executive further acknowledges that if no Change of Control occurs prior to the Retirement Date, the Retention Agreement will, as of the Retirement Date, be of no further force and effect, except with respect to Section 4 (“Golden Parachute Excise Tax Best Results”) of the Retention Agreement, which Section 4 shall remain in full force and effect, and Executive will not be entitled to receive any severance benefits, equity benefits or other benefits thereunder.
12.    No Oral Modification.  This Agreement may only be amended in a writing signed by Executive and the Company’s Chief Legal Officer.
13.    Governing Law.  This Agreement shall be governed by the laws of the State of California, without regard for choice-of-law provisions.  Executive consents to personal and exclusive jurisdiction and venue in the State of California.
14.    Effective Date.  This Agreement will become effective on the date it has been signed by both Parties (the “Effective Date”).

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15.    Counterparts.  This Agreement may be executed in counterparts and by facsimile, and each counterpart and facsimile 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.
16.    Voluntary Execution of Agreement.  Executive understands and agrees that he executed this Agreement voluntarily, and without any duress or undue influence on the part or behalf of the Company or any third party.  Executive acknowledges that: (a) he has read this Agreement; (b) he has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of his own choice or has elected not to retain legal counsel; (c) he understands the terms and consequences of this Agreement; and (d) he is fully aware of the legal and binding effect of this Agreement.

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

	
			
	 
	 
	GRAHAM SMITH, an individual

	 
	 
	 

	Dated:  February 27, 2014
	 
	/s/ Graham Smith

	 
	 
	Graham Smith

	 
	 
	 

	
			
	 
	 
	SALESFORCE.COM, INC.

	 
	 
	 

	Dated:  February 27, 2014
	By
	/s/ Burke Norton

	 
	 
	Burke Norton

	 
	 
	Chief Legal Officer

-9-ABCO 03.31.2014 Exhibit 10.18

Exhibit 10.18

THE ADVISORY BOARD COMPANY 
AWARD AGREEMENT FOR 
NON-QUALIFIED STOCK OPTIONS 
FOR GOOD AND VALUABLE CONSIDERATION, The Advisory Board Company, a Delaware corporation (the “Company”), hereby grants to Optionee named below the stock option (the “Option”) to purchase any part or all of the number of shares of its common stock, par value $0.01 per share (the “Common Stock”), that are covered by this Option, as specified below, at the Exercise Price per share specified below and upon the terms and subject to the conditions set forth in this Award Agreement, the Plan specified below (as may be amended from time to time, the “Plan”) and the Standard Terms and Conditions for Non-Qualified Stock Options Granted, a copy of which is attached hereto, as may be amended from time to time. This Option is granted pursuant to the Plan and is subject to and qualified in its entirety by the Plan. 
	
	
	 

	Plan:

	 

	Name of Optionee:

	 

	Social Security Number:

	 

	Grant Date:

	 

	Number of Shares of Common Stock covered by Option:

	 

	Exercise Price Per Share:

	 

	Expiration Date:

	 

	Vesting Schedule:

	 

This Option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended. By executing and delivering this Award Agreement, Optionee acknowledges that he or she has received and read, and agrees that this Option shall be subject to, the terms of this Award Agreement, the Standard Terms and Conditions attached hereto and made a part hereof, and the Plan. 
	
			
	 
	 
	 

	THE ADVISORY BOARD COMPANY
	 
	THE OPTIONEE

	By:
	 
	 

	 
	 
	 

	Name:
	 
	Name:

	 
	 
	 

	Title:
	 
	Address:

	 
	 
	 

 

Exhibit 10.18

THE ADVISORY BOARD COMPANY 
STANDARD TERMS AND CONDITIONS 
FOR NON-QUALIFIED STOCK OPTIONS 
1.    TERMS OF OPTION
The Advisory Board Company, a Delaware corporation (the “Company”), has granted to the Optionee named in the Award Agreement to which these Standard Terms and Conditions are attached (the “Award Agreement”) options (the “Option”) to purchase any part or all of the number of shares of the Company’s common stock, $0.01 par value per share (the “Common Stock”), set forth in the Award Agreement, at the purchase price per share and upon the other terms and subject to the conditions set forth in the Award Agreement, these Standard Terms and Conditions, and the Plan specified in the Award Agreement (the “Plan”). For purposes of these Standard Terms and Conditions and the Award Agreement, any reference to the Company shall include a reference to any Subsidiary. Certain capitalized terms not otherwise defined herein are defined in the Plan. 
2.    EXERCISE OF OPTION
The exercise price (the “Exercise Price”) of the Option is set forth in the Award Agreement. To the extent not previously exercised (and subject to termination or acceleration as provided in these Standard Terms and Conditions or the Plan, or as determined or approved by the Administrator), the Option shall be exercisable on and after the date and to the extent it becomes vested, as described in the Award Agreement, to purchase up to that number of shares of Common Stock as set forth in the Award Agreement. 
To exercise the Option (or any part thereof), the Optionee shall deliver a “Notice of Exercise” to the Company specifying the number of whole shares of Common Stock the Optionee wishes to purchase and how the Optionee’s shares of Common Stock should be registered (in the Optionee’s name only or in the Optionee’s and the Optionee’s spouse’s names as community property or as joint tenants with right of survivorship). 
The Company shall not be obligated to issue any shares of Common Stock until the Optionee shall have paid the total Exercise Price for that number of shares of Common Stock. The Exercise Price may be paid: 
		
	A.
	in cash,

		
	B.
	by payment under an arrangement with a broker where payment is made pursuant to an irrevocable commitment by a broker to deliver all or part of the proceeds from the sale of the Option shares to the Company,

		
	C.
	by tendering (either physically or by attestation) shares of Common Stock owned by the Optionee that have a fair market value on the date of exercise equal to the total Exercise Price but only if such will not result in an accounting charge to the Company, or

		
	D.
	by any combination of the foregoing or in such other form(s) of consideration as the Administrator (as defined in the Plan) in its discretion shall specify.

Fractional shares may not be exercised. Shares of Common Stock will be issued as soon as practical after exercise. Notwithstanding the above, the Company shall not be obligated to deliver any shares of Common Stock during any period when the Company determines that the exercisability of the Option or the delivery of shares hereunder would violate any federal, state or other applicable laws. 

 

3.    EXPIRATION OF OPTION
Except as provided in this Section 3, the Option shall expire and cease to be exercisable as of the Expiration Date set forth in the Award Agreement. 
		
	A.
	Upon the death of the Optionee while in the employ of the Company or any Subsidiary or while serving as a member of the Board, or upon the date of a termination of the Optionee’s employment as a result of the Total and Permanent Disablement of the Optionee, the Option shall become fully exercisable on the date of death or termination, as the case may be, and shall expire on the earlier of twelve (12) months following such date and the Expiration Date of the Option.

		
	B.
	Upon Optionee’s Retirement, (i) any part of the Option that is unexercisable as of the date of his or her Retirement shall remain unexercisable and shall terminate as of such date and (ii) any part of the Option that is exercisable as of the date of his or her Retirement shall expire on the earlier of twelve (12) months following such date and the Expiration Date of the Option.

		
	C.
	Except as otherwise provided in this Section 3, upon the date of a termination of the Optionee’s employment with the Company, (i) any part of the Option that is unexercisable as of such termination date shall remain unexercisable and shall terminate as of such date, and (ii) any part of the Option that is exercisable as of such termination date shall expire the earlier of ninety (90) days following such date or the Expiration Date of the Option.

		
	D.
	Except as otherwise provided in paragraph A of this Section 3, upon the date of termination of service by a non-employee member of the Company’s Board of Directors for any reason, (i) any part of the Option that is unexercisable as of such termination date shall remain unexercisable and shall terminate as of such date, and (ii) any part of the Option that is exercisable as of such termination date shall expire the earlier of twelve (12) months following such date or the Expiration Date of the Option.

		
	E.
	If, within one year after a Change of Control (as defined in Section 14 hereof) of the Company, the Optionee’s employment with the Company is terminated for any reason other than for Cause (as defined in Section 14 hereof), death, Total and Permanent Disablement, Retirement, or voluntary resignation by the Optionee, the Option shall become fully exercisable on the date of such termination and shall expire on the earlier of ninety (90) days following the date of termination and the Expiration Date of the Option.

4.    RESTRICTIONS ON RESALES OF OPTION SHARES
The Company may impose such restrictions, conditions or limitations as it determines appropriate as to the timing and manner of any resales by the Optionee or other subsequent transfers by the Optionee of any shares of Common Stock issued as a result of the exercise of the Option, including without limitation (a) restrictions under an insider trading policy or pursuant to applicable law, (b) restrictions designed to delay and/or coordinate the timing and manner of sales by Optionee and other optionholders and (c) restrictions as to the use of a specified brokerage firm for such resales or other transfers. 
5.    INCOME TAXES; TAX WITHHOLDING OBLIGATIONS
The Optionee will be subject to federal and state income and other tax withholding requirements on the date determined by applicable law (generally, the date of exercise), based on the excess of the fair market value of the shares of Common Stock underlying the portion of the Option that is 

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exercised over the Exercise Price.  The Optionee will be solely responsible for the payment of all U.S. federal income and other taxes, including any state, local or non-U.S. income or employment tax obligation that may be related to the exercise of the Option, including any such taxes that are required to be withheld and paid over to the applicable tax authorities (the “Tax  Withholding Obligation”).  The Optionee will be responsible for the satisfaction of such Tax Withholding Obligation in a manner acceptable to the Company in its sole discretion. 
The Company may refuse to issue any shares of Common Stock to the Optionee until the Optionee satisfies the Tax Withholding Obligation.  The Optionee acknowledges that the Company has the right to retain without notice from shares issuable upon exercise of the Option (or any portion thereof) or from salary or other amounts payable to the Optionee, shares or cash having a value sufficient to satisfy the Tax Withholding Obligation. 
The Optionee is ultimately liable and responsible for all taxes owed by the Optionee in connection with the Option, regardless of any action the Company takes or any transaction pursuant to this Section 5 with respect to any tax withholding obligations that arise in connection with the Option. The Company makes no representation or undertaking regarding the treatment of any tax withholding in connection with the grant, issuance, vesting or exercise of the Option or the subsequent sale of any of the shares of Common Stock acquired upon exercise of the Option. The Company does not commit and is under no obligation to structure the Option to reduce or eliminate the Optionee’s tax liability. 
The Option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended, and will be interpreted accordingly. 
6.    NON-TRANSFERABILITY OF OPTION
Unless otherwise provided by the Administrator, the Optionee may not assign or transfer the Option to anyone other than by will or the laws of descent and distribution and the Option shall be exercisable only by the Optionee during his or her lifetime. Notwithstanding the foregoing, the Optionee may transfer the Option to any “family member” of the Optionee (as such term is defined in Section A.1(a)(5) of the General Instructions to Form S-8 under the Securities Act of 1933, as amended (“Form S-8”)), to trusts solely for the benefit of such family members and to partnerships in which such family members and/or trusts are the only partners; provided that, (a) the transfer is pursuant to a gift or a domestic relations order to the extent permitted under the General Instructions to Form S-8, and (b) as a condition thereof, the transferor and the transferee execute a written agreement, if so required by the Administrator, containing such terms as specified by the Administrator. Except to the extent specified otherwise in an agreement the Administrator provides for the Optionee and transferee to execute, all vesting, exercisability and forfeiture provisions that are conditioned on the Optionee’s continued employment or service shall continue to be determined with reference to the Optionee’s employment or service (and not to the status of the transferee) after any transfer of an Option pursuant to this Section 6, and the responsibility to pay any taxes in connection with an Option shall remain with the Optionee notwithstanding any transfer other than by will or the laws of descent and distribution. The Company may cancel the Optionee’s Option if the Optionee attempts to assign or transfer it in a manner inconsistent with this Section 6. 
7.    THE PLAN AND OTHER AGREEMENTS
The provisions of the Plan are incorporated into these Standard Terms and Conditions by this reference. In the event of a conflict between the terms and conditions of these Standard Terms and Conditions and the Plan, the Plan controls. 
The Award Agreement, these Standard Terms and Conditions, the Plan, and any written employment or similar written agreement entered into by Optionee and the Company prior to the date of the 

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Award Agreement that is in effect as of the date of the Award Agreement and that specifically addresses the treatment of Options (such employment or similar agreement, a “Prior Agreement”) constitute the entire understanding between the Optionee and the Company regarding the Option. Any other prior agreements, commitments or negotiations concerning the Option are superseded. In the event of a conflict between the terms and conditions of these Standard Terms and Conditions and the Prior Agreement, the Prior Agreement controls. 
8.    LIMITATION OF 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 (including without limitation dividend and voting rights), title, interest, or privilege in or to any shares of Common Stock allocated or reserved for the purpose of the Plan or subject to the Award Agreement or these Standard Terms and Conditions except as to such shares of Common Stock, if any, as shall have been issued to such person upon exercise of the Option or any part of it. 
9.     NOT A CONTRACT FOR EMPLOYMENT 
Nothing in the Plan, in the Award Agreement, these Standard Terms and Conditions or any other instrument executed pursuant to the Plan shall confer upon the Optionee any right to continue in the Company’s employ or service nor limit in any way the Company’s right to terminate the Optionee’s employment at any time for any reason. 
10.    NO LIABILITY OF COMPANY
The Company and any affiliate that is in existence or hereafter comes into existence shall not be liable to the Optionee or any other person as to: (a) the non-issuance or sale of shares of Common Stock as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares hereunder; and (b) any tax consequence expected, but not realized, by the Optionee or other person due to the receipt, exercise or settlement of any Option granted hereunder. 
11.    NOTICES
All notices, requests, demands and other communications pursuant to these Standard Terms and Conditions 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 at the following addresses (or at such other address as shall be given in writing by either party to the other): 
If to the Company to: 
The Advisory Board Company  
2445 M Street, N.W.  
Washington, D.C. 20037  
Attention: Administrator of Stock Incentive Plan 
If to the Optionee, to the address set forth below the Optionee’s signature on the Award Agreement. 
12.    GENERAL
In the event that any provision of these Standard Terms and Conditions is declared to be illegal, invalid or otherwise unenforceable by a court of competent jurisdiction, such provision shall be reformed, if possible, to the extent necessary to render it legal, valid and enforceable, or otherwise deleted, and the remainder of these Standard Terms and Conditions shall not be affected except to the extent necessary to reform or delete such illegal, invalid or unenforceable provision. 
The headings preceding the text of the sections hereof are inserted solely for convenience of reference, and shall not constitute a part of these Standard Terms and Conditions, nor shall they 

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affect its meaning, construction or effect. 
These Standard Terms and Conditions shall inure to the benefit of and be binding upon the parties hereto and their respective permitted heirs, beneficiaries, successors and assigns. 
13.     FURTHER ASSURANCES 
Participant shall cooperate and take such action as may be reasonably requested by the Company in order to carry out the provisions and purposes of these Standard Terms and Conditions. 
14.    DEFINITIONS
For purposes of this Agreement, the terms set forth below shall have the following meanings: 
		
	A.
	“Cause” means (i) the commission of an act of fraud or theft against the Company; (ii) conviction for any felony; (iii) conviction for any misdemeanor involving moral turpitude which might, in the Company’s reasonable opinion, cause embarrassment to the Company; (iv) significant violation of any material Company policy; (v) willful or repeated non-performance or substandard performance of material duties which is not cured within thirty (30) days after written notice thereof to the Optionee; (vi) or violation of any material District of Columbia, state or federal laws, rules or regulations in connection with or during performance of the Optionee’s work which, if such violation is curable, is not cured within thirty (30) days after notice thereof to the Optionee.

		
	B.
	“Change of Control” means any of the following:

		
	1.
	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, 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;

		
	2.
	the consummation of a 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) the stockholders of the Company immediately after such merger, consolidation or reorganization include Permitted Holders;

		
	3.
	the 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 of the Company, (B) wholly owned by all of the stockholders of the Company, or (C) wholly owned by Permitted Holders; or

		
	4.
	the complete liquidation or dissolution of the Company.

		
	C.
	“Permitted Holders” means:

5

		
	1.
	the Company,

		
	2.
	any Subsidiary,

		
	3.
	any employee benefit plan of the Company or any Subsidiary, and

		
	4.
	any group which includes or any person who is wholly or partially owned by a majority of the individuals who immediately prior to a Change of Control are executive officers (as defined in Exchange Act Rule 3b-7) of the Company or any successor to the Company; provided that immediately prior to and for six months following such Change of Control such executive officers of the Company are beneficial owners (as defined in Exchange Act Rule 16a-1(a)(2)) of the common stock of the Company or any successor to the Company; and provided further that such executive officers’ employment is not terminated by the Company or any successor to the Company (other than as a result of death or disability) during the six months following such Change of Control. If, as a result of a transaction, a Change of Control would have been deemed to have occurred but for the fact that the requirements of this paragraph C.4. had been satisfied at the time of such transaction and the requirements of this paragraph C.4. cease to be satisfied on a date within six-months of such transaction, a Change of Control shall be deemed to have occurred on such date.

15.    ELECTRONIC DELIVERY
The Company may, in its sole discretion, decide to deliver any documents related to any awards granted under the Plan by electronic means or to request the Optionee’s consent to participate in the Plan by electronic means. By accepting the Award, the Optionee consents to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company, and such consent shall remain in effect throughout the Participant’s term of employment or service with the Company and thereafter until withdrawn in writing by the Optionee. 

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