Document:

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                                                                   EXHIBIT 10.18

                            EQUITY VALUE AGREEMENT

        THIS EQUITY VALUE AGREEMENT (the "Agreement") is made as of 31st day
of October, 1997 (the "Effective Date"), by and between The Advisory Board
Company, a Maryland corporation (the "Company"), and Richard Schwartz (the
"Employee").

                                R E C I T A L S

        A.      The Employee entered into the Continuing Stock Option
Agreements, made as of November 1, 1996 (the "Continuing Option Agreement"),
pursuant to which to the Company granted the Employee the right and option (the
"Continuing Options") to purchase shares of Class B Nonvoting Stock, $0.01 par
value per share, of the Company, subject to the terms and conditions of the
Continuing Stock-Based Incentive Compensation Plan, originally adopted by the
Company on March 1, 1994 (the "Continuing Plan").

        B.      The Company effected a spin-off transaction on October 31,
1997 (the "Spin-off Transaction") in which (i) its unincorporated division or
functional unit containing its corporate business was transferred to The
Corporate Advisory Board Company, a wholly-owned Delaware corporation ("Newco"),
and (ii) the shares of capital stock of Newco were transferred pro rata to the
Company's shareholder. Following the Spin-off Transaction, the Company continues
to be the employer of the Employee.

        C.      At the time of, and subsequent to, the Spin-off Transaction,
the Company and the Employee understood that the Employee would receive in
substitution for his or her Continuing Options (as well as any and all rights
derivative from such options) new options in the Company and other compensation
as outlined in this Agreement.

        D.      Pursuant to the terms and conditions of the Substitution
Agreement between the Company and the Employee (the "Substitution Agreement"),
the Employee has, among other things, agreed as of the Effective Date to
substitute the payment of the Equity Value Amount, subject to the terms and
conditions of this Agreement, for his or her right, title and interest in and to
the Continuing Options.

        E.      Therefore, in accordance with the Employee's agreement to
substitute the Equity Value Amount for Continuing Options as set forth in the
Substitution Agreement, the Company agrees to pay the Employee the Equity Value
Amount, subject to the terms and conditions of the Substitution Agreement and
this Agreement.

        F.      The Employee acknowledges and agrees that the receipt of the
Equity Value Amount and the grant of options pursuant to the Option Agreement in
substitution for the Continuing Options are fair, reasonable and appropriate
adjustments to the Continuing Options pursuant to Sections 8 and 9 of the
Continuing Option Agreement and Section 10 of the Continuing Plan as a result of
the Spin-off Transaction.

        G.      The Employee acknowledges that he or she is an employee
of the Company with substantial knowledge concerning the past, present and
potential future performance, operations and opportunities relating to the
Company and any of its businesses. The Employee further
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acknowledges that he or she has been briefed on the past, present and potential
future performance of the Company and any of its businesses by Jeffrey D.
Zients, Michael D'Amato and/or other senior executives of the Company, and that
the Employee had the opportunity to ask Jeffrey D. Zients, Michael D'Amato
and/or other senior executives of the Company whatever questions the Employee
desired concerning the past, present and future financial and operational
performance and expectations of the Company and any of its businesses. Finally,
the Employee 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.

        NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and the Employee hereby
agree as follows:

        SECTION 1. DEFINITIONS. Capitalized terms, not otherwise defined
herein, shall have the following meanings:

        "Agreement" is defined in the preamble.

        "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 or equity value 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 the Employee
pursuant to this 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.

        "Company" is defined in the preamble.

        "Continuing Option Agreement" is defined in Recital A.

        "Continuing Options" is defined in Recital A.

        "Continuing Plan" is defined in Recital A.

        "Disability" shall mean a serious and permanent medical incapacity or
disability that precludes the Employee from performing professional work. The
Company, at its option and expense, shall be entitled to retain a physician
reasonably acceptable to the Employee to confirm the existence of such
incapacity or disability. The Chairman of the Board of Directors of the Company
reserves the right to define Disability in a more liberal manner.

        "Effective Date" is defined in the preamble.

                                       2
<PAGE>   3
        "Employee" is defined in the preamble.

        "Equity Value Amount" is defined in Section 2.

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

        "Income from Operations" means the income from operations (or similar
entry) shown on the audited financial statements of the Company for each Fiscal
Year, not including any compensation income or expense relating to any payments
made pursuant to this Agreement.

        "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.

        "Newco" is defined in Recital B.

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

        "Option Agreement" means that certain Stock Option Agreement between
the Company and the Employee.

        "Payment Amount" means the portion of the Equity Value Amount
corresponding to each Payment Date identified on the schedule set forth in
Section 2 below.

        "Payment Date" means either March 31, 2000, March 31, 2001 or any other
date identified on the schedule set forth in Section 2 below.

        "Performance Inconsistent with Past Levels of Contribution" is any
neglect of, or refusal or inability to, perform the Employee'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 Employee's ability to perform such duties and
responsibilities; or any material violation of Company rules or regulations.

        "Plan" means The Advisory Board Company 1997 Stock-Based Incentive
Compensation Plan.

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

        "Stockholders' Agreement" means that certain Stockholders' Agreement
between the Company and the Employee.

        "Substitution Agreement" is defined in Recital D.

        "Violation Date" defined in Section 3(c).

                                       3
<PAGE>   4
        "Voluntary Notice Date" means the date the Employee gives notice of his
or her Voluntary Resignation Date.

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

        SECTION 2.  OBLIGATIONS OF THE COMPANY. Except as otherwise provided in
Section 3 below, as long as the Employee continues to be employed by the
Company, the Company agrees to pay to the Employee, in cash or by check, the
amount of $700,000 (the "Equity Value Amount") according to, and in the amounts
specified in, the following schedule:

<Table>
<Caption>
----------------------------------------------------------
      PAYMENT DATE                 AMOUNT PAYABLE
----------------------------------------------------------
<S>                            <C>
March 31, 2000                       50 percent (50%) of
                                   the Equity Value Amount
----------------------------------------------------------
March 31, 2001                       50 percent (50%) of
                                   the Equity Value Amount
----------------------------------------------------------
</Table>
        SECTION 3.  RESTRICTION ON PAYMENT OF THE EQUITY VALUE AMOUNT.  The
Equity Value Amount shall be paid as provided in Section 2 above as long as the
Employee continues to be employed by the Company, except as otherwise provided
below:

                (a)  Voluntary Resignation Date. If a Voluntary Notice Date
occurs less than ten (10) months prior to a Voluntary Resignation Date, the
Employee shall forfeit his or her right to any portion of the Equity Value
Amount that has not been paid to the Employee as of such Voluntary Notice Date
and the Employee shall be required to repay the Company immediately upon demand
any portion of the Equity Value Amount paid to the Employee within the ten (10)
months prior to the Voluntary Resignation Date, unless the Voluntary
Resignation Date occurs after March 31, 2001. If a Voluntary Notice Date occurs
at least ten (10) months prior to a Voluntary Resignation Date, the Employee
shall forfeit his or her right to any portion of the Equity Value Amount
payable after the Voluntary Resignation Date.

                (b)  Death or Disability. If the Employee ceases to be employed
by the Company due to his or her death or a Disability, the Employee shall not
forfeit his or her right to any portion of the Equity Value Amount.

                (c)  Termination for Cause or Violation of Non-Competition
Agreement. If the Employee is terminated by the Company for Cause, or if the
Employee violates any provision of the Non-Competition Agreement, the Employee
shall forfeit his or her right to any portion of Equity Value Amount that has
not been paid to the Employee as of such termination date or as of the date of
the violation (the "Violation Date") and, to the extent the Employee has
received all or a portion of the Equity Value Amount, he or she shall be
required to repay the Company immediately upon demand any portion of the Equity
Value Amount paid to the Employee within the ten (10) months prior to such
termination date or Violation Date. The Employee hereby acknowledges and
agrees that

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the execution of the Non-Competition Agreement is additional consideration for
this Agreement. No payments under Section 2 above shall be made unless the
Employee has executed the Non-Competition Agreement.

                (d)  Income from Operations. No payment under Section 2 shall
be made in any Fiscal Year in which the Company's Income from Operations for
the immediately prior Fiscal Year is less than Fifteen Million Dollars
($15,000,000). No interest shall accrue during any period of delay solely due to
this restriction. Any payment delayed due to this restriction shall be made by
December 31 of the first Fiscal Year after the Fiscal Year in which the
Company's Income from Operations satisfy the criteria of this subsection (d),
unless such payment is further delayed pursuant to another restriction. Except
as provided in Sections 3(a)-(c) above, the Equity Value Amount shall not be
forfeited as a result of this restriction.

                (e)  Cash Shortage. No payment under Section 2 above shall be
made if the Company determines it is suffering from a Cash Shortage. Any payment
that would otherwise be made 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 payments that had 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 solely due to this restriction. Except as provided in Sections
3(a)-(c) above, the Equity Value Amount shall not be forfeited as a result of a
Cash Shortage.

        SECTION 4.  NONTRANSFERABILITY. The right to all or any portion of the
Equity Value Amount shall not be transferable by the Employee except, after the
Employee's death, or his to her spouse, child, estate, personal representative,
heir or successor. More particularly (but without limiting the generality of the
foregoing), the right to all or any portion of the Equity Value Amount 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 right to all or any portion of the
Equity Value Amount contrary to the provisions hereof, and the levy of any
attachment or similar process upon such right to the Equity Value Amount that
would otherwise effect a change in the ownership of the right to all or any
portion of the Equity Value Amount, shall terminate any further obligation the
Company has with respect to any unpaid portion of the Equity Value Amount;
provided, however, that in the case of the involuntary levy of any attachment or
similar involuntary process upon the Equity Value Amount, the Employee shall
have thirty (30) days after notice thereof to cure such levy or process before
the Company's obligation with respect to the Equity Value Amount terminates.
This Agreement shall be binding on and enforceable against any person who is a
permitted transferee pursuant to the first sentence of this Section.

        SECTION 5.  TAXES. The Company 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 payment of the Equity Value Amount, including but not
limited to, deducting the amount of any such withholding taxes from any other
amount then or thereafter payable to the Employee, requiring the Employee to pay
to the Company the amount required to be withheld or to execute such documents
as the Company

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deems necessary or desirable to enable it to satisfy its withholding
obligations, or any other reasonable means.

        SECTION 6.  NOTICES. All notices, requests, demands and other
communications pursuant to this 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 to the Company at its
principal Employee offices addressed to the attention of the Company's Chairman
of the Board of Directors, and if to Employee 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 Employee or his or her permitted transferee to the Company).

        SECTION 7.  NOT AN EMPLOYMENT CONTRACT. Nothing in this Agreement or any
other instrument executed pursuant hereto shall confer upon the Employee any
right to continue in the employ of the Company nor shall affect the right of the
Company to terminate the employment of the Employee with or without Cause.

        SECTION 8.  AMENDMENTS AND WAIVERS. This Agreement may be amended, and
any provision hereof may be waived, only by a writing signed by the party to be
charged.

        SECTION 9.  ENTIRE AGREEMENT. This Agreement, together with the Plan,
the Option Agreement, the Stockholders' Agreement, the Non-Competition
Agreement and the Substitution Agreement, sets forth the entire agreement and
understanding between the parties as to the subject matter hereof and supersedes
all prior oral and written and all contemporaneous oral discussions, agreements
and understandings of any kind or nature.

        SECTION 10.  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 Agreement, nor shall they affect its meaning,
construction or effect.

        SECTION 11.  ASSIGNABILITY. Notwithstanding anything herein to the
contrary, the Company, its successors and its assigns may assign, in whole or
part, their rights and obligations under this Agreement as the Company, its
successors or its assigns may elect in their sole discretion.

        SECTION 12.  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 Agreement.

        SECTION 13.  UNSECURED INTEREST. To the extent that the Employee or any
permitted transferee acquires a right to receive payments under this Agreement,
such right shall be arbitrators ten (10) days following such service or
thereafter. If the panel of arbitrators is equivalent to that of an unsecured
general creditor of the Company. The Employee agrees to waive any priority
creditor status for wage payments with respect to any amounts due hereunder.

        SECTION 14.  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 (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:

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<PAGE>   7
                (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 14, all of the arbitration proceedings shall be conducted in
        accordance with the rules of the arbitrators.

                (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
        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 above.

                (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 14 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.

        SECTION 15.  GOVERNING LAW. All terms of and rights under this 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.

        SECTION 16.  ACTIONS BY THE COMPANY.  Any reference within this
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).

                                      7
<PAGE>   8
        SECTION 17.  BINDING EFFECT. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns.

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.

                                         THE ADVISORY BOARD COMPANY

                                         By:  /s/ MICHAEL A. D'AMATO
                                              ----------------------

                                         Name:  Michael A. D'Amato
                                                ---------------------

                                         Title:  CFO
                                                 --------------------

                                        /s/ RICHARD SCHWARTZ
                                        -----------------------------
                                         EMPLOYEE

                                      8<PAGE>   1
                                                                   EXHIBIT 10.19

                           "LIQUID MARKETS" AGREEMENT

        THIS "LIQUID MARKETS" AGREEMENT (this "Agreement") is made as of _______
________ (the "Effective Date"), between The Advisory Board Company, a Maryland
corporation (the "Company"), and ___________ (the "Optionee").

                                 R E C I T A L S

        A.      The Company adopted the Stock-Based Incentive Compensation Plan
(the "Original Plan"), as of March 1, 1994, to provide for the grant to certain
employees of the Company ("Participants") of options ("Original Options") to
purchase shares of Class B Nonvoting Stock, $0.01 par value, of the Company (the
"Stock").

        B.      As a Participant, Optionee was granted Original Options as
reflected in the stock option agreement between the Optionee and the Company
(the "Original Option Agreement").

        C.      The Original Options are not transferable. None of the Original
Options have vested. As a result, it has been impossible for the Optionee to
liquidate the Original Options.

        D.      In order to create greater liquidity for the Optionee, to reward
the Optionee for past and continuing contributions to the Company, and to
provide further incentives for the Optionee to remain with the Company and
continue making such contributions in the future, the Company has offered the
Optionee an opportunity to (i) sell all or part of the Original Options to the
Company immediately, and/or (ii) with respect to those Original Options which
are not sold, to modify all or part of such Original Options (such modified
Original Options are hereinafter referred to as "Continuing Options"), as
described in that certain Continuing Stock Option Agreement (the "Continuing
Option Agreement") and that certain Continuing Stock-Based Incentive
Compensation Plan (the "Continuing Option Plan") attached hereto as Exhibits A
and B, respectively.

        E.      The Number of Options Granted that the Optionee currently owns
is            which the Optionee desires to currently owns is treat as follows:

               1.                    Number of Options Sold as
                      --------------
                      provided for herein;

               2.                    Original Options modified as
                      --------------
                      Continuing Options as described herein.

        F.      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 and/or other senior executives of the Company,
and that the Optionee had the opportunity to ask Jeffrey D. Zients, other senior
executives of the Company, and/or the Company's auditors, Arthur Andersen LLP,
whatever questions the Optionee desired concerning the financial and operational
performance and expectations of the Company. Finally, the Optionee acknowledges
that all future operating

<PAGE>   2

results are impossible to predict and that no representation is being made by
the Company or Arthur Andersen LLP with respect to the accuracy or completeness
of any forecast regarding the future.

                                   AGREEMENTS

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

        "Agreement" is defined in the preamble.

        "Agreement Not to Compete" is that certain Agreement Concerning
Exclusive Services, Confidential Information, Business Opportunities,
Non-Competition, Non-Solicitation and Work Product between the Optionee and the
Company attached as Exhibit C.

        "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, continuing options
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 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.

        "Company" is defined in the preamble.

        "Continuing Options" is defined as "Options" in the Continuing Option
Agreement.

        "Continuing Option Agreement" is that certain agreement between Optionee
and the Company defined in Recital D and attached hereto as Exhibit A.

        "Continuing Option Plan" is that certain employee stock-based incentive
compensation plan of the Company defined in Recital D and attached hereto as
Exhibit B.

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

        "Earn Out Payment" is defined in Section 3(b).

                                        2

<PAGE>   3

        "Effective Date" is defined in the preamble.

        "Exercise Price" is defined in the Original Option Agreement.

        "Fiscal Year" or "FY" is 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.

        "Income from Operations" is the income from operations (or similar
entry) shown on the audited financial statements of the Company for each Fiscal
Year, not including any compensation income or expense relating to any payments
made in connection with the sale of any Original Options pursuant to this
Agreement.

        "Initial Payment" is defined in Section 3(a).

        "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.

        "Number of Options Granted" is defined in Section 2.

        "Number of Options Sold" is defined in Section 2(a).

        "Optionee" is defined in the preamble.

        "Original Option Agreement" is defined in Recital B.

        "Original Options" is defined in Recital A.

        "Original Plan" is defined in Recital A.

        "Participants" is defined in Recital A.

        "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.

        "Purchase Price" is defined in Section 3.

        "Restrictions for Protecting the Company" is defined in Section 4.

        "Stock" is defined in Recital A.

        "Stockholders' Agreement" means that certain Continuing Stockholders'
Agreement of the Company setting forth, inter alia, certain rights, preferences
and privileges of and restrictions on any shares that may be received pursuant
to exercise of the Continuing Options.

                                        3

<PAGE>   4

        "Voluntary Resignation Date" means the date on which the Optionee
voluntarily resigns from employment with the Company. 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.

        2.      NUMBER OF OPTIONS SOLD AND CONTINUING OPTIONS. Optionee was
granted the number of Original Options set forth in Recital E. above (the
"Number of Options Granted") pursuant to the Original Plan. Optionee hereby
agrees to the following regarding those Original Options:

        a.      Optionee agrees to sell to the Company the number of Original
Options set forth in Recital E.l. above (the "Number of Options Sold"), in
exchange for the Purchase Price, as defined below, to be paid to Optionee
according to the terms of Section 3 below, subject to the Restrictions for
Protecting the Company, as defined below; and

        b.      Optionee agrees to modify the number of Original Options set
forth in Recital E.2. above to be henceforth treated as Continuing Options
pursuant to the Continuing Option Agreement attached hereto as Exhibit A, which
the Optionee agrees to executed simultaneously with this Agreement. If the
Number of Options Sold, as defined in subparagraph a. above, combined with the
number of Continuing Options exceeds the Number of Options Granted, the Number
of Options Sold shall be presumed correct and the number of Continuing Options
shall be adjusted as necessary to make the Number of Options Sold plus the
number of Continuing Options equal the Number of Options Granted.

        c.      Optionee agrees to execute the Agreement Not to Compete,
attached hereto as Exhibit C, which is additional consideration for this
Agreement. No payments under Section 3 shall be paid until Optionee executes the
Agreement Not to Compete.

        3.      PAYMENTS TO BE MADE BY THE COMPANY. The Company agrees to pay to
Optionee an Initial Payment and Earn Out Payment with respect to the Number of
Options Sold (together, the "Purchase Price"), as described below.

        a.      Initial Payment. The Company shall pay to Optionee an initial
payment (the "Initial Payment") to be paid in two installments beginning
immediately.

                (i)     The amount of the Initial Payment per option shall be
        Fifty-five (55) Dollars minus the Exercise Price, as defined in the
        Original Option Agreement. For further clarity, the total Initial
        Payment shall equal the difference between Fifty-five (55) Dollars and
        the Exercise Price, multiplied by the Number of Options Sold.

                (ii)    Unless either of the two following circumstances occur,
        twenty-five percent (25%) of the Initial Payment shall be paid no later
        than December 31, 1995 and seventy-five percent (75%) of the Initial
        Payment shall be paid by December 31, 1996:

                        (a)     If the Optionee is terminated for Cause before
                March 31, 1998 or a Voluntary Resignation Date occurs before
                March 31, 1998, the Optionee will forfeit the right to any
                portion of the Initial Payment that has not been paid to the
                Optionee as of the date of Optionee's termination for Cause or
                the Voluntary Resignation Date, as appropriate. However, if
                Optionee is terminated without

                                        4

<PAGE>   5

                Cause prior to March 31, 1998 or ceases to be employed by the
                Company as the result of death or a Disability, the Optionee
                will not forfeit his or her right to the Initial Payment. If
                Optionee is still employed by the Company on March 31, 1998,
                Optionee will not forfeit the right to the Initial Payment due
                to resignation or termination after that date, provided a
                Voluntary Resignation Date does not occur without the Optionee
                providing the Company with at least ten (10) months prior notice
                of his or her intention to resign. If a Voluntary Resignation
                Date occurs without the Optionee providing the Company with ten
                (10) months prior notice, Optionee will forfeit the right to any
                portion of the Initial Payment that has not been paid to the
                Optionee as of the Voluntary Resignation Date.

                        (b)     If one or more of the circumstances resulting in
                Restrictions for Protecting the Company, as enumerated in
                Section 4, occurs, payment of the Initial Payment will be
                delayed to the extent provided in Section 4. Except as provided
                in Section 3(a) (ii) (a), the Initial Payment shall not be
                forfeited as a result of a Restriction for Protecting the
                Company.

        b.      Earn Out Payment. The Company shall pay to Optionee an
additional payment (the "Earn Out Payment") based on the Company's Income from
Operations for the Fiscal Year ending March 31, 1998.

                (i)     The amount of the Earn Out Payment shall depend on the
        level of Income from Operations for FY 1998. If the FY 1998 Income from
        Operations is less than Ten Million Dollars ($10,000,000) the amount of
        the Earn Out Payment will be Zero Dollars ($0). If the FY 1998 Income
        from Operations is equal to or greater than Ten Million Dollars
        ($10,000,000), the amount of the Earn Out Payment will be as follows:

<TABLE>
<CAPTION>
                                                      EARN OUT PAYMENT PER
              FY 1998 INCOME FROM OPERATIONS               OPTION SOLD
              ------------------------------               -----------
<S>                                                   <C>
             $10,000,000-$15,999,999                           $36
             $16,000,000-$19,999,999                           $41
             $20,000,000-$2l,999,999                           $57
             $22,000,000-$23,999,999                           $67
             $24,000,000-$25,999,999                           $80
             $26,000,000-$27,999,999                           $89
             $28,000,000-$29,999,999                           $99
             $30,000,000 or over                              $110
</TABLE>

                (ii)    The Earn Out Payment shall be paid to Optionee by
        December 31, 1998, unless either of the two following circumstances
        occurs:

                        (a)     If Optionee is terminated for Cause before March
                31, 1998 or a Voluntary Resignation Date occurs before March 31,
                1998, the Optionee will forfeit the right to any portion of the
                Earn Out Payment. However, if the

                                        5
<PAGE>   6

                Optionee is terminated without Cause prior to March 31, 1998 or
                the Optionee ceases to be employed by the Company as the result
                of death or a Disability, the Optionee will not forfeit the
                right to the Earn Out Payment as a result of that termination.
                If the Optionee is still employed by the Company on March 31,
                1998, the Optionee will not forfeit the right to the Earn Out
                Payment due to resignation or termination after that date,
                provided a Voluntary Resignation Date does not occur without the
                Optionee providing the Company with at least ten (10) months
                prior notice of his or her intention to resign. If a Voluntary
                Resignation Date occurs without the Optionee providing the
                Company with ten (10) months prior notice, Optionee will forfeit
                the right to any portion of the Earn Out Payment that has not
                been paid to Optionee as of the Voluntary Resignation Date.

                        (b)     If one or more of the circumstances resulting in
                Restrictions for Protecting the Company, as enumerated in
                Section 4, occurs, the Earn Out Payment shall be delayed to the
                extent provided in Section 4. Except as provided in Section 3(b)
                (ii) (a), the Earn Out Payment shall not be forfeited as a
                result of a Restriction for Protecting the Company.

        4.      RESTRICTIONS FOR PROTECTING THE COMPANY. The following three (3)
restrictions ("Restrictions for Protecting the Company") will result in delay of
payment of all or part of the Purchase Price under the circumstances described
below:

        a.      No payment under Sections 3.a. and 3.b. above shall be made in
any Fiscal Year in which the Company's Income from Operations for each of the
two preceding Fiscal Years did not exceed its Income from Operations for the
immediately preceding Fiscal Year by at least ten percent (10%). For more
certainty, the Company's annual Income from Operations must grow by a minimum of
ten percent (10%) for two consecutive Fiscal Years before the Company shall make
any payments under Sections 3.a. and 3.b.. No interest shall accrue during the
period of delay due to this restriction. Any payment delayed due to this
restriction shall be made by December 31 of the first year in which the
Company's Income from Operations for the two preceding Fiscal Years satisfy the
criteria of this subsection a., unless such payment is further delayed pursuant
to another Restriction for Protecting the Company.

        b.      No payment under Sections 3.a. and 3.b. above shall be made in
any Fiscal Year in which the Company's Income from Operations for the
immediately prior Fiscal Year is less than Ten Million Dollars ($10,000,000). No
interest shall accrue during the period of delay due to this restriction. Any
payment delayed due to this restriction shall be made by December 31 of the
first Fiscal Year after the Fiscal Year in which the Company's Income from
Operations satisfy the criteria of this subsection b., unless such payment is
further delayed pursuant to another Restriction for Protecting the Company.

        c.      No payment under Sections 3.a. and 3.b. above shall be made if
the Company determines it is suffering from a Cash Shortage. Any payment that
would otherwise be made 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
payments that had 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 solely due to this restriction.

                                        6

<PAGE>   7

        5.      NONTRANSFERABILITY. The right to all or any portion of the
Purchase Price 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 right to all or any portion of the Purchase Price 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 right to all or any portion of the
Purchase Price contrary to the provisions hereof, and the levy of any attachment
or similar process upon such right to the Purchase Price that would otherwise
effect a change in the ownership of the right to all or any portion of the
Purchase Price, shall terminate any further obligation the Company has with
respect to any unpaid portion of the Purchase Price; 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 Company's obligation with
respect to the Purchase Price terminates. This Agreement shall be binding on and
enforceable against any person who is a permitted transferee pursuant to the
first sentence of this Section.

        6.      TAXES. The Company 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 payment of the Purchase Price, 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 withholding
obligations, or any other reasonable means.

        7.      NOTICES. All notices, requests, demands and other communications
pursuant to this 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 to the Company at its principal executive
offices addressed to the attention of the Company's Chairman of the Board of
Directors, 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).

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

        9.      ENTIRE AGREEMENT. This Agreement, together with the Continuing
Option Plan, the Continuing Option Agreement, the Agreement Not to Compete, and
the Stockholders' 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.

                                        7

<PAGE>   8

        10.     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 Agreement, nor shall they affect its meaning, construction or
effect.

        11.     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 Agreement.

        12.     GOVERNING LAW. All terms of and rights under this 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.

        13.     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 (excluding enforcement by
the Company of its rights under the Agreement Not to Compete) 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
13, all of the arbitration proceedings shall be conducted in accordance with the
rules of the arbitrators.

        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 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 above.

        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 13 shall remain confidential, and to that end it
is agreed by the parties that neither the

                                        8

<PAGE>   9

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.

        14.     ACTIONS BY THE COMPANY. Any reference within this 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).

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

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.

                                            THE ADVISORY BOARD COMPANY

                                            By:
                                               -------------------------------
                                            Name:  David G.  Bradley
                                            Title: Chairman

                                            --------------------------------
                                                          OPTIONEE

                                        9

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