UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.           )

Filed by the Registrant x

Filed by a Party other than the Registrant o

Check the appropriate box:

The Advisory Board Company

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

THE ADVISORY BOARD COMPANY

2445 M Street, NW

Washington, DC 20037

(202) 266-5600

Dear Stockholders:

      On behalf of the Board of Directors and management, I invite you to attend the Annual Meeting of Stockholders of The Advisory Board Company to be held at our offices at 2445 M Street, NW, Washington, DC, 20037, on November 15, 2005, at 10:00 a.m. local time.

      The Notice of Meeting and Proxy Statement accompanying this letter describe the specific business to be acted upon.

      In addition to the specific matters to be acted upon, there will be a report on the progress of the Company and an opportunity for questions of general interest to the stockholders.

      It is important that your shares be represented at the meeting. Whether or not you plan to attend in person, you are requested to mark, sign, date and promptly return the enclosed Proxy Card in the envelope provided.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

THE ADVISORY BOARD COMPANY

2445 M Street, NW

Washington, DC 20037

(202) 266-5600

October 3, 2005

Dear Stockholders:

      We are notifying you that the Annual Meeting of Stockholders (the “Meeting”) of The Advisory Board Company will be held at our offices at 2445 M Street, NW, Washington, DC, 20037, on November 15, 2005, at 10:00 a.m. local time. Only stockholders of record at the close of business on September 23, 2005 are entitled to vote at the Meeting. At the Meeting we will ask stockholders to act on the following matters:

      In addition, we will transact any other business that is properly presented at the Meeting or any adjournment or postponement thereof.

      Each of these matters is described in more detail in the enclosed Proxy Statement. We have also enclosed a copy of our Annual Report for the fiscal year ended March 31, 2005. Please use this opportunity to take part in The Advisory Board Company’s affairs by voting your shares.

      Whether or not you plan to attend the Meeting, please complete, sign and date the enclosed Proxy Card and return it in the envelope provided.

2005 ANNUAL MEETING OF STOCKHOLDERS

PROXY STATEMENT

TABLE OF CONTENTS

PROXY STATEMENT

INFORMATION ABOUT THE MEETING, VOTING AND PROXIES

Date, Time and Place of Meeting

      Our Board of Directors is asking for your proxy for use at our Annual Meeting of Stockholders (the “Meeting”) to be held at our offices at 2445 M Street NW, Washington, DC, 20037, on November 15, 2005, at 10:00 a.m. local time and any adjournment or postponement of the Meeting. We are initially mailing this Proxy Statement and proxy to our stockholders on or about October 3, 2005.

Record Date, Outstanding Shares and Quorum

      Only holders of record of our common stock at the close of business on September 23, 2005 (the “Record Date”) will be entitled to vote at the Meeting. On the Record Date, we had 18,995,586 shares of common stock outstanding and entitled to vote. If a majority of the shares outstanding on the Record Date are present at the Meeting, either in person or by proxy, we will have a quorum at the Meeting. Any shares represented by proxies that are marked for, against or to abstain from voting on a proposal will be counted as present in determining whether we have a quorum. If a broker, bank, custodian, nominee or other record holder of our common stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular matter, the shares held by that record holder (referred to as “broker non-votes”) will also be counted as present in determining whether we have a quorum, but will not be counted or entitled to vote on that particular matter.

Voting Rights and Voting of Proxies

      Holders of our common stock are entitled to one vote for each share they held as of the Record Date. Cumulative voting for directors is not permitted. Directors will be elected by a plurality of the votes cast by the shares of common stock present at the Meeting (either in person or by proxy), which means that the seven nominees with the most votes will be elected. Approval of each of Proposal No. 2 (adoption of the 2005 Stock Incentive Plan) and Proposal No. 3 (ratification of independent registered accountant) requires approval by the holders of a majority of the shares of common stock present at the Meeting (either in person or by proxy). In accordance with Delaware law, abstentions have the effect of a vote “against” any matter as to which they are specified, whereas broker non-votes are not considered votes cast and, therefore, will not affect the outcome of the vote on the matters presented at the Meeting.

Solicitation and Voting of Proxies

      The proxy included with this Proxy Statement is solicited by our Board of Directors for use at the Meeting. You can submit your Proxy Card by mailing it in the envelope provided. If your Proxy Card is properly completed and received, and is not revoked before the Meeting, your shares will be voted at the Meeting according to the instructions indicated on your Proxy Card. Proxies will extend to, and be voted at, any adjournment or postponement of the Meeting. If you sign and return your Proxy Card but do not give any voting instructions, your shares will be voted in favor of the election of each of the director nominees listed in Proposal No. 1 below and in favor of Proposal No. 2 and Proposal No. 3. As far as we know, no other matters will be presented at the Meeting. However, if any other matters of business are properly presented, the proxy holder named on your Proxy Card is authorized to vote the shares represented by your Proxy Card according to his judgment.

Expenses of Solicitation

      We will pay the costs of preparing, printing and mailing this Notice of Annual Meeting of Stockholders and Proxy Statement, the enclosed Proxy Card and our 2005 Annual Report. We will also reimburse brokerage firms and others for reasonable expenses incurred by them in connection with their forwarding of proxy solicitation materials to beneficial owners. The solicitation of proxies will be conducted primarily by mail, but may also include telephone, facsimile or oral communications by our directors, officers or regular employees acting without special compensation. We have engaged The Proxy Advisory

Group of Strategic Stock Surveillance, LLC, to assist in the solicitation of proxies and provide related advice and informational support, for a services fee and the reimbursement of customary disbursements that are not expected to exceed $17,500 in the aggregate.

Revocation of Proxies

      If you submit the enclosed Proxy Card, you may revoke it at any time before voting takes place at the Meeting. There are three ways you can revoke your proxy: (1) deliver to the Secretary of the Company a written notice, dated later than the Proxy Card you want to revoke, stating that the proxy is revoked; (2) deliver to the Secretary of the Company a signed Proxy Card dated later than the proxy you want to revoke; or (3) attend the Meeting and vote in person. For this purpose, communications to the Secretary of the Company should be addressed to David L. Felsenthal, Chief Financial Officer, Secretary and Treasurer, The Advisory Board Company, 2445 M Street, NW, Washington, DC, 20037, and must be received before voting takes place at the Meeting. Please note that if your shares are held of record by a broker, bank or other nominee and you wish to revoke a previously submitted Proxy Card, you must contact that entity. If your shares are held of record by a broker, bank or other nominee and you wish to vote at the Meeting, prior to the Meeting you must obtain from that entity a Proxy Card covering the shares you beneficially own.

BOARD CORPORATE GOVERNANCE MATTERS

Board of Directors Meetings and Committees

      During fiscal 2005, the Board of Directors (the “Board”) met seven times and took action by unanimous written consent on a number of occasions. All directors attended 75% or more of the aggregate number of meetings of the Board and of the committees on which they served. The Board of Directors also meets in regularly scheduled executive sessions at least two times per year. These sessions, which are attended only by the Board’s independent directors, are chaired by the Lead Director.

      The Board of Directors has determined that each of the directors standing for re-election, except Mr. Williams as the Chairman and Chief Executive Officer, has no material relationship with the Company and is “independent” as defined in the current Marketplace Rules of The NASDAQ Stock Market, Inc. (“NASDAQ”).

      The Board has three committees — the Audit Committee, Compensation Committee and Governance Committee. The role of each of the committees is governed by a charter adopted by the Board. A copy of the Audit Committee’s charter, as amended by the Board, is attached as Appendix A to this Proxy Statement. A copy of the Governance Committee charter was filed with our fiscal 2003 Proxy Statement, which may be accessed via our website at www.advisoryboardcompany.com. We do not have a policy on director attendance at our Annual Meetings of Stockholders. One director attended our most recent Annual Meeting of Stockholders.

      Audit Committee. The members of our Audit Committee are Ms. Zumwalt, Mr. Kindick and Mr. Neaman. Ms. Zumwalt serves as chair of the committee. The Audit Committee, among other things, is directly responsible for the appointment, compensation and oversight of the work of the independent registered accountants; approves in advance audit and any permissible non-audit services performed by our independent registered accountant; reviews with the independent registered accountant and management our internal controls; reviews the adequacy of our accounting and financial controls as reported by management and the independent registered accountant; and oversees our compliance systems and codes of conduct. Each of the members of the Audit Committee is independent within the meaning of NASDAQ’s director independence standards, as currently in effect, and meets heightened independence criteria applicable to audit committee members under SEC rules and NASDAQ listing standards. The Board of Directors has determined that all of the Company’s Audit Committee members are financially literate and has determined that Ms. Zumwalt meets the qualifications of an “audit committee financial expert” as defined under SEC rules. The Audit Committee met seven times during fiscal 2005.

      Compensation Committee. The members of our Compensation Committee are Mr. Laird, Mr. Casper, Mr. Kindick and Mr. Shapiro. Mr. Laird serves as chair of the committee. The Compensation Committee, among other things: reviews and makes recommendations to the Board with respect to the compensation of the Chief Executive Officer and of directors; establishes or approves the compensation for other executive officers; and administers and oversees our stock-based compensation plans. Each of the members of the Compensation Committee is independent within the meaning of NASDAQ’s director independence standards, as currently in effect. The Compensation Committee met one time and took action by unanimous written consent two times during fiscal 2005.

      Governance Committee. The members of our Governance Committee are Mr. Kindick, Mr. Casper, Mr. Laird, Mr. Neaman, Mr. Shapiro and Ms. Zumwalt. Mr. Kindick serves as chair of the committee. The Governance Committee, among other things: reviews and assesses the development of the executive officers and considers and makes recommendations to the Board regarding promotion and succession issues; annually evaluates and reports to the Board on the performance and effectiveness of the committees specifically and the Board as a whole; annually presents to the Board a list of individuals recommended to be nominated for election to the Board; reviews, evaluates and recommends changes to the Company’s corporate governance principles; and recommends to the Board individuals to be elected to fill vacancies and newly created directorships. Each of the members of the Governance Committee is independent within the meaning of NASDAQ’s director independence standards, as currently in effect. The Governance Committee took action by unanimous written consent one time during fiscal 2005.

Compensation of the Board

      The Board or, to the extent authorized by the Board, the Compensation Committee, sets directors’ compensation under The Advisory Board Company Directors’ Stock Plan and such other arrangements as are deemed to be appropriate. To date, each director who is not an employee has received an initial grant of options to purchase 40,416 shares of common stock upon becoming a director. For fiscal 2005, non-employee directors also received an annual grant of options to purchase 10,000 shares of common stock and a $15,000 annual retainer. Directors who are employees of the Company generally do not receive additional compensation for their service on the Board. Compensation paid to Mr. Williams for fiscal 2005 is described in the section of this proxy statement entitled “Executive Compensation.”

      In July 2004, the Board established the position of Lead Director which is to be filled in the event the position of Chairman of the Board and the office of Chief Executive Officer are held by the same person. Mr. Kindick currently serves as our Lead Director. The Lead Director’s role is to preside at meetings of non-management members of the Board, and to perform other similar functions as deemed appropriate by the Board. In lieu of the director’s compensation described above, the Lead Director receives an annual grant of options to purchase 30,000 shares of common stock, and is paid an annual fee of $100,000.

Consideration of Director Nominees

      The Governance Committee will consider director nominees submitted by stockholders. Stockholders should submit the name of any person recommended as a nominee along with information demonstrating their own stock ownership to The Advisory Board Company, Attn: Corporate Secretary, 2445 M Street, NW, Washington, D.C., 20037.

      The Governance Committee identifies prospective director candidates in various ways, including through current Board members, management, stockholders or other persons. These candidates are evaluated at meetings of the Governance Committee, and may be considered at any point during the year.

      The Governance Committee works with the Board on an annual basis to determine the appropriate characteristics, skills and experience for the Board as a whole and its individual members. The Board seeks to include Directors with diverse experience in areas relevant to the Company’s business. The Company also seeks Directors with the highest standards of ethics and integrity, sound business judgment and the willingness to make a strong commitment to the Company and its success. The Board will evaluate each individual in the context of the Board as a whole, with the objective of recommending a group that can best contribute to the success of the business and represent stockholder interests through the exercise of

sound judgment, using its diversity of experience. In determining whether to recommend a director for re-election, the Governance Committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board.

Code of Conduct

      The Company has adopted The Advisory Board Company Code of Ethics for Finance Team Members, a copy of which was filed with the SEC on June 14, 2004, as exhibit 14.1 to the Company’s Form 10-K for the year ended March 31, 2004, which may be accessed via at the Company’s website. To the extent permitted by SEC rules and the NASDAQ listing standards, we intend to disclose future amendments to, or waivers from, certain provisions of the Code of Ethics on the Company’s website.

Communications with the Board

      Stockholders may communicate with the members of the Board individually, with all independent directors, or with the Board as a group by writing to The Advisory Board Company, Attn: Corporate Secretary, 2445 M Street, NW, Washington, D.C., 20037. Please mark the outside of the envelope “BOARD COMMUNICATION,” and indicate which director(s) or group of directors the communication is intended for.

      You should identify your communication as being from a stockholder of The Advisory Board Company. The Corporate Secretary may request reasonable evidence that your communication is made by one of our stockholders before transmitting your communication to the requested member or members of the Board. The Corporate Secretary will review all communications from our stockholders, and communications relevant to our business and operations, as determined by the Corporate Secretary, will be forwarded to the requested member or members of the Board.

Communications with the Audit Committee

      The Audit Committee has established procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters. A communication or complaint to the Audit Committee regarding such matters may be submitted by writing to The Advisory Board Company, Attn: Corporate Secretary, 2445 M Street, NW, Washington, D.C., 20037. Please mark the outside of the envelope “AUDIT COMMITTEE COMMUNICATION.”

Audit Committee Pre-Approval Policy

      Under The Advisory Board Company Audit and Non-Audit Service Pre-Approval Policy adopted by the Audit Committee, all audit and non-audit services to be performed by the independent registered accountant for the Company require pre-approval by the Audit Committee. In some cases, pre-approval relates to audit or non-audit services that fall within certain established categories and budgets, and in other cases a particular defined task or scope of work may be pre-approved subject to a specific budget. Pre-approvals may be granted by either the full Audit Committee or, subject to a $50,000 limitation per engagement, by any member of the Audit Committee pursuant to delegated authority. Any pre-approvals by an Audit Committee member pursuant to this delegated authority shall be reported to the Audit Committee at its next scheduled meeting. The Audit Committee cannot delegate pre-approval authority to management.

AUDIT COMMITTEE REPORT

      The Audit Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting and reporting practices of the Company, the qualifications and independence of the Company’s registered public accounting firm and such other duties as directed by the Board. Management has the primary responsibility for preparing the financial statements and implementing the Company’s financial reporting process. Management also has the primary responsibility for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. The Company’s registered public accountant is responsible for expressing an opinion on the conformity of the Company’s audited financial statements to accounting principles

generally accepted in the United States of America. The Company’s registered public accountant also is responsible for expressing an opinion on management’s assessment of the effectiveness of internal control over financial reporting and an opinion on the effectiveness of the Company’s internal control over financial reporting The Audit Committee members do not serve as professional accountants or auditors, and their functions are not intended to duplicate or to certify the activities of management and the registered public accountant or to verify the independence of the registered public accountant under applicable rules.

      In this context, the Audit Committee reviewed and discussed with management and the independent public accountant the audited financial statements for the fiscal year ended March 31, 2005 (the “Audited Financial Statements”) and management’s maintenance of and assessment of the effectiveness of internal control over financial reporting as of March 31, 2005. The Audit Committee has discussed with the registered public accountant the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended. In addition, the Audit Committee has received from the independent public accountant the written disclosures required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and discussed with them their independence from the Company and its management. In addition, the Audit Committee has considered whether the non-audit services provided by Ernst & Young LLP are compatible with maintaining the registered public accountant’s independence.

      Following the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Audited Financial Statements be included in the Company’s Annual Report on SEC Form 10-K for the fiscal year ended March 31, 2005, for filing with the Securities and Exchange Commission.

AUDIT COMMITTEE MEMBERS

LeAnne M. Zumwalt, Chair

Kelt Kindick

Mark R. Neaman

PROPOSAL NO. 1

ELECTION OF DIRECTORS

      Our Board of Directors currently has seven members. At the Meeting, we will nominate all seven of the current directors for re-election to the Board of Directors. The Board has determined that, if elected to serve another term on the Board, Mr. Williams will continue to serve as our Chairman of the Board, and Mr. Kindick will continue to serve as Lead Director. Each of the nominees to the Board has consented to serve if elected and we are not aware of any nominee who is unable or unwilling to serve. However, if any nominee is unable or unwilling to serve, the proxy holder named on your Proxy Card may decide to vote the shares represented by your Proxy Card for any substitute nominee or the Board of Directors may determine not to nominate a substitute and may reduce the size of the Board.

Vote Required for Approval

      Directors will be elected by the affirmative vote of a plurality of the shares present at the Meeting, which means that the seven nominees who receive the most votes will be elected. If properly executed and timely submitted, your proxy will be voted “for” each of these seven nominees unless your proxy is marked to withhold authority to vote for any or all of them.

Directors/Nominees

      The following table shows the Company’s nominees for election to the Board of Directors. Each of the nominees currently serves as a director. Each nominee, if elected, will serve until the next annual

meeting of stockholders and the election and qualification of a successor, or until his or her earlier death, resignation or removal.

The Board of Directors recommends a vote FOR the election of each of the

director nominees named above.

      Frank J. Williams joined us in September 2000 as an Executive Vice President and has been our Chief Executive Officer and a director since June 2001. In November 2004, he began serving as Chairman of our Board of Directors. From June 2000 through January 2001, Mr. Williams was also the President of an affiliated company, eHospital NewCo Inc., focused on developing and delivering health care content to patients and providers via the Internet. From May 1999 to May 2000, Mr. Williams served as the President of MedAmerica OnCall, a provider of outsourced services to physician organizations, hospitals, and managed care entities. Mr. Williams also served as a Vice President of Vivra Incorporated and as the General Manager of Vivra Orthopedics, an operational division of Vivra Specialty Partners, a private health care services and technology firm. Earlier in his career, Mr. Williams was employed by Bain & Company. Mr. Williams received a B.A. from University of California, Berkeley, and an M.B.A. from Harvard Business School.

      Marc N. Casper has served on our Board of Directors since February 2003. In December 2001 Mr. Casper joined Thermo Electron Corporation, which provides instrumentation and services to the pharmaceutical, biotechnology and industrial laboratory markets, as President Life and Laboratory Sciences, and since December 2003 he has served as Senior Vice President of Thermo Electron Corporation. From 2000 to 2001, Mr. Casper served as President, Chief Executive Officer and Director of Kendro Laboratory Products, which produces sample preparation and processing equipment. In 1997, Mr. Casper joined Dade Behring, Inc., which provides products and systems serving the global clinical diagnostics market, as Executive Vice President for Europe, Asia and Intercontinental, and he was promoted to President-Americas in 1999. Mr. Casper started his career with Bain & Company as a strategy consultant and later joined Bain Capital, a leading leveraged-buyout firm. Mr. Casper received a B.A. from Wesleyan University, and an M.B.A. from Harvard Business School.

      Kelt Kindick has been a director since November 2001, and was named Lead Director in November 2004. He serves as a senior partner at Bain & Company, Inc., a privately held management consulting firm. Mr. Kindick joined Bain & Company in 1980, was elected partner in 1986, served as Managing Director of the firm’s Boston office from 1991 to 1996 and as Chairman of the firm’s executive committee from 1998 to 1999. Mr. Kindick also served as the Chief Financial Officer of the Commonwealth of Massachusetts from March 2003 to January 2005. Mr. Kindick received a B.A. from Franklin & Marshall College and an M.B.A. from Harvard Business School.

      Joseph E. Laird, Jr. has been a director since November 2001. From 1999 until the present, Mr. Laird has been with Laird Squared, LLC, an investment banking company serving the database

information services industry, where he currently serves as Chairman and Chief Executive Officer. From 1989 to 1998, Mr. Laird was a Managing Director of Veronis, Suhler & Associates, a leading specialty merchant bank that serves the media and information industries. From 1975 to 1989, Mr. Laird held a variety of positions, including senior securities analyst and investment strategist, for PaineWebber Mitchell and Hambrecht & Quist. Mr. Laird serves on the board of directors of FactSet Research Systems, a publicly held financial information services database integrator. Mr. Laird received an A.B. from Franklin & Marshall College and an M.B.A. from the Wharton School of Business at the University of Pennsylvania.

      Mark R. Neaman has served as a member of our Board of Directors since November 2004. Since 1992 Mr. Neaman has served as President and Chief Executive Officer of Evanston Northwestern Healthcare Corporation, a $1 billion integrated provider of healthcare services which includes three hospitals, a 500-physician multi-specialty group practice, a $100 million foundation, a research institute and is an academic affiliate of Northwestern University, where he holds a faculty position as a Senior Fellow. From 1984 to 1991 Mr. Neaman served as Evanston Northwestern’s Executive Vice President and Chief Operating Officer. Mr. Neaman serves on the board of directors of several private healthcare entities and charitable and educational organizations. Mr. Neaman received a B.S. in Business Administration and an M.S. in Business and Healthcare Administration from The Ohio State University.

      Leon D. Shapiro has served as a member of our Board of Directors since November 2004. In June 2005, Mr. Shapiro was named Group President of The NPD Group, Inc., a global provider of consumer and retail information, where he heads all their technology related businesses. From 1989 to 2004, Mr. Shapiro was with Gartner, Inc., the leading provider of research and analysis on the global information technology industry. Most recently he was President, Gartner Executive Programs and a member of the Gartner Leadership Team. Previously Mr. Shapiro was senior vice president and general manager of Gartner Community, which included Gartner’s Worldwide Events, Best Practices and Executive Programs business divisions, where he built the world’s largest CIO membership program. He earned his bachelor’s degree in economics and political science from the Hebrew University of Jerusalem in Israel and has completed advanced M.B.A. courses at the University of Connecticut.

      LeAnne M. Zumwalt has been a director since November 2001. Ms. Zumwalt is presently a Vice President of DaVita, Inc., a publicly held provider of dialysis services, where she has been employed since 1999. From 1997 through 1999, Ms. Zumwalt was the Chief Financial Officer of Vivra Specialty Partners, a privately held health care services and technology firm. From 1991 to 1997, Ms. Zumwalt held several executive positions, including Chief Financial Officer and Treasurer, with Vivra Incorporated, a publicly held provider of dialysis services. Ms. Zumwalt also served on the board of directors of Vivra Incorporated from 1994 to 1997. Prior to joining Vivra Incorporated, Ms. Zumwalt was with Ernst & Young LLP for ten years. Ms. Zumwalt received a B.S. from Pacific Union College.

PROPOSAL NO. 2

ADOPTION OF THE ADVISORY BOARD COMPANY 2005 STOCK INCENTIVE PLAN

      At the Meeting, stockholders will be asked to approve The Advisory Board Company 2005 Stock Incentive Plan (the “2005 Plan”). The 2005 Plan is intended to supersede existing equity compensation plans and allow certain forms of stock-based compensation and performance-based cash bonuses to eligible employees and non-employee directors.

Background

      On September 21, 2005, our Board of Directors adopted (subject to stockholder approval) the 2005 Plan to replace for future grants our existing equity-based incentive plans and to provide for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and cash incentives. Stock options have historically been an important component of our incentive compensation program for key employees and have been a significant component of compensation for non-employee directors. We believe that option grants have been critical in attracting and retaining talented employees and officers, aligning their interests with those of stockholders, and focusing key employees on the long-term growth of the

Company. We expect to continue to primarily utilize stock options for equity-based compensation arrangements in the near term, but the 2005 Plan provides for a number of other equity-compensation arrangements that we may use based on changes in competitive practices and possible changes in accounting or tax treatment.

      In implementing stock-based compensation programs, we seek to balance the need to maintain a talented resource pool in a human-intensive and highly competitive business with efforts to closely monitor and reduce our “burn rate” from stock options, where burn rate is defined as the number of options granted in a fiscal year divided by the gross number of shares outstanding at the end of that fiscal year. In connection with the proposal of the new plan, we intend to maintain a burn rate across the next three fiscal years equal to or less than the industry mean at the end of our most recently completed fiscal year, based on a sampling of companies with whom we are included in the 4-digit Global Industry Classification Standard (“GICS”) code (as developed by Standard & Poor’s and Morgan Stanley Capital Management). This burn rate was 2.87% for the fiscal year ending March 31, 2005.

      We believe there are several factors unique to our situation you should consider when evaluating the relative impact of our proposed plan on existing stockholders. In an effort to align management incentives with those of long-term stockholders, approximately 80% of employee options that have been granted since our initial public offering did not first become exercisable until a minimum of three or four years after the grant date, rather than ratably over the vesting period, resulting in longer periods over which options are outstanding. This is consistent with our efforts to retain key employees over the long term and align their incentives with stockholders. As a result of these extended vesting terms, there are a higher number of options outstanding than would have been outstanding if our options had vested ratably and been exercised earlier. In addition, our Board of Directors made a strategic decision to return equity to our stockholders and implemented a share repurchase program under which we have repurchased more than 1.9 million shares of our common stock (approximately 9.2% of total shares issued since our initial public offering in November 2001), which reduces the total number of shares outstanding.

      We believe our use of stock options to attract and retain highly skilled employees has had a significant positive impact on our business and results of our operations. Our revenue has grown from $81.0 million in fiscal 2002 to $141.6 million in fiscal 2005, a compound annual growth rate of 22%, while diluted earnings per share grew from $0.62 per share in fiscal 2002 to $1.22 per share in fiscal 2005. In addition, the retention rate of our career research staff is greater than 80%. Because we believe an adequate stock compensation plan administered prudently and focused on long term value is a key component of these successes, the Board of Directors recommends that you vote in favor of the 2005 Plan.

Plan Overview

      Currently, we implement our equity compensation arrangements for executives, employees and non-employee directors through three plans: The Advisory Board Company 1997 Stock-Based Incentive Compensation Plan (the “1997 Plan”), The Advisory Board Company 2001 Stock-Based Incentive Compensation Plan (the “2001 Plan”), and The Advisory Board Company Directors’ Stock Plan (the “Directors’ Plan”). All awards under these plans have been in the form of stock options. As of September 23, 2005, there were 3,225,158 shares subject to outstanding options under these plans, with a weighted average exercise price of $28.88 per share, and a weighted average remaining term of 6.5 years. A total of 64,241 shares remain available for grant under the 1997 and 2001 Plans and 238,048 shares remain available for issuance under the Directors’ Plan. As more fully described below, if stockholders approve the 2005 Plan, the existing plans will no longer be used for future grants and the number of shares we will be authorized to issue under stock-based compensation arrangements will increase by 1,600,000 shares. If stockholder approval of the 2005 Plan is not obtained, the 1997 Plan, the 2001 Plan and the Directors’ Plan will not be suspended and will continue to be available for new grants in accordance with those plans’ terms.

      Approval of the 2005 Plan will permit us to continue to use stock-based compensation to further align the interests of our employees and directors with those of our stockholders to motivate employees, non-employee directors and others providing services to us or any subsidiary. The 2005 Plan also includes

provisions designed to allow awards to satisfy the requirements for deductibility of executive compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended, (the “Code”).

      In addition, the 2005 Plan contains a number of provisions that reflect “best practices” followed by the Company. Specifically, the 2005 Plan prohibits:

Summary of Key Terms of the 2005 Plan

      The following is a brief description of the 2005 Plan. The full text of this Plan is attached as Appendix B to this Proxy Statement, and the following description is qualified in its entirety by reference to the text of the 2005 Plan set forth in Appendix B.

Plan Term

      November 15, 2005 to November 15, 2015, subject to stockholder approval of the 2005 Plan.

Award Types

      Options, stock appreciation rights, restricted stock, restricted stock units and incentive bonuses may be awarded under the 2005 Plan.

Shares Authorized

      1,600,000 plus (i) any shares that, as of November 15, 2005, remain available for additional awards under the 2001 Plan, the 1997 Plan and the Directors’ Plan (collectively, the “Prior Plans”) and (ii) any shares subject to outstanding awards under the Prior Plans that, on or after November 15, 2005, cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable shares). Thus, if approved by stockholders, and assuming no additional options are granted under the Prior Plans and no outstanding options are forfeited prior to November 15, 2005, the 2005 Plan initially will be authorized to issue up to 1,902,289 shares of common stock. Each share issued under awards other than options or stock appreciation rights count against the number of shares available under the 2005 Plan as two (2) shares. Shares issued under options or stock appreciation rights count against the shares available under the 2005 Plan on a one share-for-share basis.

      The number of shares considered issued under the 2005 Plan equals the number of shares issued upon exercise or settlement of an award. However, shares retained by or delivered to the Company to pay the exercise price or withholding taxes arising under an award, unissued shares resulting from the settlement of a stock appreciation right in stock or net settlement of such stock appreciation right, and shares repurchased on the open market with the proceeds of a stock option exercise do not again become available for issuance under the 2005 Plan. Shares that have been cancelled, expired, forfeited or otherwise not issued under an award and shares subject to awards settled in cash do not count as shares issued under the 2005 Plan.

Eligibility

      Current or prospective officers or employees (including any director who is also an employee, in his or her capacity as such) of the Company and its subsidiaries, and non-employee director of the Company are eligible to receive awards under the 2005 Plan, in each case subject to the individual share limitations

described below. In addition, any other person who provides consulting, advisory or other services to the Company or any subsidiary (a “service provider”) also is eligible to receive awards under the 2005 Plan, except that the total number of shares that may be issued under awards granted to service providers may not exceed 100,000 shares in the aggregate. Although the Company has not previously granted shares to consultants or other outside service providers, the Company is seeking the flexibility to do so in order to be able to accommodate any unique opportunities or needs that may arise. The 2005 Plan Administrator determines which eligible participants will receive awards under the 2005 Plan. The Company expects that approximately 700 persons currently would qualify to participate in the 2005 Plan (including all of the Company’s non-employee directors), although in practice, in addition to the Company’s non-employee directors, approximately 110 current key employees and officers have been granted options under the prior plans.

Individual Annual Award Limits

      The 2005 Plan sets forth limitations on the number of shares that can be subject to awards granted to participants in any fiscal year (not counting stock appreciation rights granted in tandem with other awards granted under the 2005 Plan). For participants other than non-employee directors, the individual annual award limits are:

      For non-employee directors, the individual annual award limits are:

      However, in the calendar year in which a non-employee director first joins the Board of Directors or is first designated Chairman of the Board of Directors (or Lead Director in the event the position of Chairman of the Board and the office of Chief Executive Officer are held by the same person), he or she may receive awards up to two hundred percent (200%) of the number of shares set forth in the foregoing limits.

Administration

      The 2005 Plan will be administered by the Compensation Committee of the Board of Directors or, in the absence of a Compensation Committee, the Board of Directors itself (the “Administrator”). Under NASDAQ rules, members of the Compensation Committee are required to satisfy NASDAQ’s standards for independence, subject to certain narrow exceptions. The Administrator may delegate various functions to subcommittees or certain officers of the Company. Subject to the provisions of the 2005 Plan, the Administrator has the power:

Stock Options

      Under the terms of the 2005 Plan, the exercise price for stock options is established by the Administrator but must at least equal the fair market value of the Company’s common stock on the date of grant, unless granted in connection with a merger or acquisition as a replacement for options held by optionees of the acquired entity, and options may be for a term of no more than seven (7) years. Otherwise, the Administrator has discretion to determine the number of shares subject to an option (subject to the individual limitations set forth in the 2005 Plan), the vesting, expiration and forfeiture provisions for options, the restrictions on transferability of an option, and any other terms and conditions otherwise consistent with the 2005 Plan. Options granted under the 2005 Plan may be either incentive stock options qualifying under Code Section 422 (“ISOs”) or options which are not intended to qualify as incentive stock options (“NQSOs”). The exercise price of an option may be paid through various means acceptable to the Administrator, including in cash or by delivering to the Company the proceeds of shares of the Company’s stock issuable under an option. The 2005 Plan prohibits repricing stock options without stockholder approval.

Stock Appreciation Rights

      A stock appreciation right provides the right to the monetary equivalent of the increase in the value of a specified number of the Company’s shares over a specified period of time after the right is granted. Stock appreciation rights may be paid in stock, cash or a combination thereof. Stock appreciation rights may be granted either in tandem with or as a component of other awards granted under the 2005 Plan or not in conjunction with other awards and may, but need not, relate to a specific option. Stock appreciation rights are generally subject to the same terms and limitations as options, including the fact that the 2005 Plan prohibits repricing stock appreciation rights without stockholder approval.

Restricted Stock and Restricted Stock Units

      Restricted stock is an award of shares, the grant, issuance, retention and/or vesting of which is subject to such performance and other conditions as are specified by the Administrator. The Administrator has discretion to determine the terms of any restricted stock award, including the number of shares subject to a restricted stock award (subject to the individual limitations set forth in the 2005 Plan), the price (if any) paid for restricted stock or restricted stock units and the minimum period over which restricted stock may vest, which must cover at least a 3-year period (but may be subject to pro-rata vesting over such 3-year period) other than as a result of or upon the participant’s death, disability, retirement or in connection with a change in control of the Company, unless the grant, issuance, vesting or retention of the award is contingent upon satisfaction of a performance criteria over at least a one year period.

Incentive Bonuses

      The 2005 Plan authorizes the grant of incentive bonuses pursuant to which a participant may become entitled to receive an amount, which may be paid in cash or stock, based on satisfaction of certain criteria. The Administrator has discretion to determine the terms of any incentive bonus, including the maximum amount payable (subject to the individual limitations set forth in the 2005 Plan), the performance period, which must be not less than one year, and criteria (which may be based on financial performance and/or personal performance evaluations) and level of achievement versus these criteria, the timing of any payment, restrictions on an incentive bonus prior to actual payment, forfeiture provisions, and any other terms and conditions consistent with the 2005 Plan. The Administrator may specify a percentage of the target incentive bonus intended to satisfy the requirements for “performance-based compensation” under Code Section 162(m) using “Qualifying Performance Criteria” described below.

New Plan Benefits

      As of the date of this proxy statement, no awards have been made under the 2005 Plan. The benefits that will be awarded or paid under the 2005 Plan are not currently determinable. As of September 23, 2005, the closing price of our common stock was $49.11 per share.

Qualifying Performance Criteria

      The Administrator may establish performance criteria and levels of achievement versus such criteria that shall determine the number of shares of common stock to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an award, which criteria may be based on Qualifying Performance Criteria or other standards of financial performance and/or personal performance evaluations. In addition, the Administrator may specify that an award or a portion of an award is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code, provided that the performance criteria for such award or portion of an award that is intended by the Administrator to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code shall be a measure based on one or more Qualifying Performance Criteria selected by the Administrator and specified at the time the award is granted. However, nothing in the 2005 Plan requires that awards granted under it be designated to satisfy Section 162(m)’s requirements for “performance-based compensation,” and the Administrator may in its discretion grant awards that may not be deductible by the Company. Notwithstanding satisfaction of any performance goals, the number of shares issued under or the amount paid under an award may, to the extent specified in the award agreement, be reduced by the Administrator on the basis of such further considerations as the Administrator in its sole discretion shall determine.

      Qualifying Performance Criteria will be any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to a previous year’s results or to a designated comparison group, in each case as specified by the Administrator in the award:

      The Administrator (i) shall appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to eliminate the effects of charges for restructurings, discontinued operations, extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or related to the disposal of a segment of a business or related to a change in accounting principle all as determined in accordance with standards established by opinion No. 30 of the Accounting Principles Board or other applicable or successor accounting provisions, as well as the cumulative effect of accounting changes, in each case as determined in accordance with generally accepted accounting principles or identified in the Company’s financial statements or notes to the financial statements and (ii) may appropriately adjust any evaluation of performance under Qualifying Performance Criteria to exclude any of the following events that occurs during a performance period:

Transferability

      Awards are only transferable by a recipient’s last will and testament and by the applicable laws of descent and distribution. However, to the extent permitted by the Administrator, an award recipient may transfer an award to any of his or her family members, 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, so long as the award recipient and the person (or trust or partnership) to whom the award is transferred execute a written agreement containing such terms as specified by the Administrator and the transfer is pursuant to a gift or domestic relations order to the extent permitted by the general instructions to SEC Form S-8.

Change of Control

      Under the 2005 Plan, the Administrator has discretion to provide that awards vest upon a change of control and to define what events constitute a change of control.

Adjustments

      The number and kind of shares of common stock available for issuance under the 2005 Plan, the number and kind of shares subject to outstanding awards, the exercise price of outstanding stock options, and the number and kind of shares subject to the various limitations under the 2005 Plan, may be adjusted by the Administrator as it determines appropriate to reflect any reorganization, reclassification,

combination of shares, stock split, reverse stock split, spin-off, dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of shares of the common stock of the Company outstanding. Such adjustments need not be uniform as between different awards or types of awards granted under the 2005 Plan.

Amendments

      The Board of Directors may terminate, amend or discontinue the 2005 Plan and the Administrator may amend or alter any agreement or other document evidencing an award made under the 2005 Plan, provided that no action may be taken by the Board of Directors (except those described earlier in the “Adjustments” section) without the approval of the stockholders to:

Tax Consequences of the 2005 Plan

      The following discussion of the federal income tax consequences of the 2005 Plan is intended to be a summary of applicable federal law as currently in effect. Foreign, state and local tax consequences may differ and laws may be amended or interpreted differently during the term of the 2005 Plan or of awards granted thereunder. Because the federal income tax rules governing awards and related payments are complex and subject to frequent change, award holders are advised to consult their individual tax advisors.

      Stock Options: ISOs and NQSOs are treated differently for federal income tax purposes. ISOs are intended to comply with the requirements of Section 422 of the Code. NQSOs do not comply with such requirements.

      Only employees, and not non-employee directors, can be granted ISOs. An optionee is not taxed on the grant or exercise of an ISO. The difference between the exercise price and the fair market value of the shares on the exercise date will, however, be a preference item for purposes of the alternative minimum tax. If an optionee holds the shares acquired upon exercise of an ISO for at least two years following the option grant date and at least one year following exercise, the optionee’s gain, if any, upon a subsequent disposition of such shares is long-term capital gain. The measure of the gain is the difference between the proceeds received on disposition and the optionee’s basis in the shares (which generally equals the exercise price). If an optionee disposes of stock acquired pursuant to exercise of an ISO before satisfying the one and two-year holding periods described above, the optionee will recognize both ordinary income and capital gain in the year of disposition. The amount of the ordinary income will be the lesser of (i) the amount realized on disposition less the optionee’s adjusted basis in the stock (usually the option price) or (ii) the difference between the fair market value of the stock on the exercise date and the option price. The balance of the consideration received on such a disposition will be long-term capital gain if the stock had been held for at least one year following exercise of the ISO and otherwise will be short-term capital gain. The Company is not entitled to an income tax deduction on the grant or exercise of an ISO or on the optionee’s disposition of the shares after satisfying the holding period requirement described above. If the holding periods are not satisfied, the Company will be entitled to a deduction in the year the optionee disposes of the shares in an amount equal to the ordinary income recognized by the optionee.

      In order for an option to qualify for ISO tax treatment, the grant of the options must satisfy various conditions (e.g., the limitation of $100,000 of stock underlying ISOs that may vest in one year) and the option holder must satisfy certain conditions, including exercising the option while an employee or within a

short period of time after ceasing to be an employee, and holding the shares acquired upon exercise of the option for a specified period of time. The Company does not guarantee that any option will qualify for ISO tax treatment even if the option is intended to qualify for such treatment. In the event an option intended to be an ISO fails to so qualify, it will be taxed as an NQSO as described in the next paragraph.

      An optionee is not taxed on the grant of an NQSO. On exercise, however, the optionee recognizes ordinary income equal to the difference between the option price and the fair market value of the shares acquired on the date of exercise. The Company is entitled to an income tax deduction in the year of exercise in the amount recognized by the optionee as ordinary income. Any gain (or loss) on subsequent disposition of the shares is long-term capital gain (or loss) if the shares are held for at least one year following exercise. The Company does not receive a deduction for this gain.

      Stock Appreciation Rights: The grant of a stock appreciation right is generally not a taxable event for a participant. Upon exercise of the stock appreciation right, the participant will generally recognize ordinary income equal to the amount of cash and/or the fair market value of any shares received. The participant will be subject to income tax withholding at the time when the ordinary income is recognized. The Company will be entitled to a tax deduction at the same time for the same amount. If the stock appreciation right is settled in shares, the participant’s subsequent sale of the shares generally will give rise to capital gain or loss equal to the difference between the sale price and the ordinary income recognized when the participant received the shares, and these capital gains (or losses) will be taxable as long-term capital gains if the participant held the shares for more than one year. However, it should be noted that the enactment of Section 409A of the Code has created some uncertainty regarding the treatment of stock appreciation rights that were not granted before December 31, 2004.

      Restricted Stock and Restricted Stock Units: Grantees of restricted stock or restricted stock units do not recognize income at the time of the grant of such restricted stock or restricted stock units. However, when the restricted stock or restricted stock units vest or are paid, as applicable, grantees generally recognize ordinary income in an amount equal to the fair market value of the stock or units at such time, and the Company will receive a corresponding deduction.

      Incentive Bonuses: A participant will not have taxable income upon the grant of a contingent right to an incentive bonus. Rather, taxation will be postponed until the incentive bonus becomes payable, and, if the participant has timely elected deferral to a later date, such later date. At that time, the participant will recognize ordinary income equal to the value of the amount then payable. Subject to the Section 162(m) restrictions discussed below, the Company will be entitled to a tax deduction at the same time and for the same amount.

      Company Deduction and Section 162(m): For the individual serving as the chief executive officer of the Company at the end of the taxable year and for the individuals serving as officers of the Company or a subsidiary at the end of such year who are among the four highest compensated officers (other than the chief executive officer) for proxy reporting purposes, Section 162(m) of the Code limits the amount of compensation otherwise deductible by the Company and its subsidiaries for such year to $1,000,000 for each such individual except to the extent that such compensation is “performance-based compensation.” One of the requirements for compensation to qualify as “performance-based compensation” under Section 162(m) is that it be granted under a stockholder approved plan setting forth certain information. Approval of the 2005 Plan by stockholders is intended to satisfy this requirement in order that awards granted under the 2005 Plan may, if and to the extent determined appropriate by the Administrator, satisfy the requirements of “performance-based compensation” under Section 162(m). The Company expects that NQSOs and ISOs should qualify as performance-based compensation. The Administrator may establish performance conditions and other terms with respect to grants of restricted stock, restricted stock units and incentive bonuses in order to qualify such grants as performance-based compensation for purposes of Section 162(m) of the Code. At the time of grant, the Administrator will determine the extent to which such grant will be performance-based compensation for purposes of Section 162(m) of the Code. In addition, the Administrator will certify the extent to which the Qualifying Performance Criteria have been satisfied before any payment is made that is intended to qualify as performance-based compensation. However, nothing in the 2005 Plan requires that awards granted under it be designed to satisfy

Section 162(m)’s requirements for “performance-based compensation,” and the Administrator may in its discretion grant awards that may not be deductible by the Company.

      Tax Withholding: To the extent required by applicable federal, state, local or foreign law, a participant shall be required to satisfy, in a manner satisfactory to the Company, any withholding tax obligations that arise by reason of an award.

Equity Compensation Plan Information

      The following table summarizes information as of March 31, 2005, relating to equity compensation plans of the Company, pursuant to which grants of options, performance stock, performance stock units or other rights to acquire shares may be granted from time to time.

Equity Compensation Plan Information

      As of September 23, 2005, there were 3,225,158 shares subject to issuance upon exercise of outstanding options or awards under all of our equity compensation plans referred to in the table below, at a weighted average exercise price of $28.88 per share, and with a weighted average remaining life of 6.5 years. As of September 23, 2005, there were 302,289 shares available for future issuance under those equity compensation plans.

Vote Required for Approval

      The affirmative vote of the holders of a majority of the shares of common stock represented and voting at the Meeting is required to approve the 2005 Plan. Unless marked to the contrary, proxies received will be voted FOR approval.

The Board of Directors of the Company recommends a vote FOR the approval of

The Advisory Board Company 2005 Stock Incentive Plan.

PROPOSAL NO. 3

RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS

INDEPENDENT REGISTERED ACCOUNTANT FOR THE FISCAL YEAR ENDING MARCH 31, 2006

      The Audit Committee has selected Ernst & Young LLP as the Company’s independent registered accountant to perform the audit of the Company’s financial statements and an audit of management’s assessment of the effectiveness of and the effectiveness of the Company’s internal control over financial reporting for the fiscal year ending March 31, 2006, and we are asking stockholders to ratify this selection. If the stockholders fail to ratify the selection of Ernst & Young LLP, that fact will be taken under advisement by the Audit Committee in determining whether to retain Ernst & Young LLP and whether to select them in future years. Representatives from Ernst & Young LLP are expected to be present at the Meeting. They will have the opportunity to make a statement at the Meeting if they wish to do so, and they will be available to respond to appropriate questions from stockholders.

Vote Required for Approval

      Ratification of the appointment of Ernst & Young LLP as our independent registered accountant for the fiscal year ending March 31, 2006 requires the affirmative vote of a majority of the shares present and entitled to vote at the Meeting.

      The Board of Directors recommends a vote FOR ratification of the appointment of

Ernst & Young LLP as independent registered accountant for the fiscal year ending March 31, 2006.

INDEPENDENT REGISTERED ACCOUNTANT’S FEES AND SERVICES

      Fees paid to our independent registered accountant, Ernst & Young, LLP, for each of the past two years are set forth below.

      Audit Fees: Audit fees were for professional services rendered for the audit of the Company’s annual financial statements for the fiscal years ended March 31, 2005 and 2004, the reviews of the financial statements included in the Company’s quarterly reports on Forms 10-Q for the quarterly periods in the fiscal years ended March 31, 2005 and 2004. Also included for the 2005 fiscal year are fees associated with the audit of management’s assessment of the effectiveness of and the effectiveness of the Company’s internal control over financial reporting, comfort letters and consent procedures.

      Audit-Related Fees: Audit related fees were for assurance and related services rendered that are reasonably related to the audit, including benefit plan audits, and reviews of the Company’s financial statements for the fiscal years ended March 31, 2005 and 2004, exclusive of the fees disclosed as Audit Fees above.

      Tax Fees: Tax fees were for services related to tax compliance, consulting and planning services rendered during the fiscal years ended March 31, 2005 and 2004.

      All Other Fees: We did not incur fees for any other services, exclusive of the fees disclosed above relating to audit, audit-related and tax services, rendered during the fiscal years ended March 31, 2005 and 2004.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth certain information regarding the beneficial ownership of the Company’s common stock as of September 23, 2005, by (i) each person known to the Company to own more than 5% of the Company’s common stock, (ii) each Named Officer (as defined in the section of this proxy statement entitled “Executive Compensation”), (iii) each director or director nominee and (iv) all current directors and executive officers as a group.

EXECUTIVE OFFICERS

      The following table sets forth the names, ages and positions within The Advisory Board Company of the persons who serve as our executive officers.

      Frank J. Williams’s business experience is listed above in the section for nominees for the Board of Directors.

      Scott M. Fassbach first joined us in 1987. He has been our Chief Research Officer since March 2000. From 1987 through 1990, and from 1991 through March 2000, Mr. Fassbach served in various management capacities with us. From 1990 to 1991, Mr. Fassbach worked in Ernst & Young’s health care consulting practice. Mr. Fassbach received a B.A. from Johns Hopkins University and an M.A. from Harvard University.

      David L. Felsenthal first joined us in 1992. He has been our Chief Financial Officer, Treasurer and Secretary since April 2001. From September 1999 to March 2001, Mr. Felsenthal was Vice President of an affiliated company, eHospital NewCo Inc., focused on developing and delivering health care content to patients and providers via the internet. From 1997 to 1999, Mr. Felsenthal worked as Director of Business Development and Special Assistant to the CEO/ CFO of Vivra Specialty Partners, a private health care

services and technology firm. From 1992 through 1995, Mr. Felsenthal held various positions with us, including research analyst, manager and director of the original executive inquiry research department. Mr. Felsenthal received an A.B. degree from Princeton University and an M.B.A. from Stanford University.

      Scott A. Schirmeier joined us in 1995 and has been our General Manager, Sales and Marketing, since June 2001. From 1995 to June 2001, Mr. Schirmeier held various management positions overseeing marketing, sales and relationship management functions, including Senior Director, Sales and Relationship Management from July 1998 to March 2000, and Executive Director, Sales and Marketing from March 2000 to June 2001. Mr. Schirmeier received a B.A. from Colby College.

      Richard A. Schwartz joined us in 1992 and has been our General Manager, Research since June 2001. Prior to June 2001, Mr. Schwartz held various management positions in our research programs, including Executive Director, Research from June 1996 to March 2000, and Executive Vice President from March 2000 to May 2001. Mr. Schwartz received a B.A. from Stanford University and an M.B.A. from Duke University.

EXECUTIVE COMPENSATION

Summary Compensation Table

      The following table presents certain information concerning compensation earned for services rendered for fiscal 2003, 2004 and 2005 by the Chief Executive Officer and the four other most highly paid persons who served as executive officers during fiscal 2005 (the “Named Officers”).

Option Grants in Fiscal 2005

      The following table shows information about stock option grants to our Named Officers during fiscal 2005. These options are included in the Summary Compensation Table above. All options were granted at fair market value under The Advisory Board Company 2001 Stock-Based Incentive Compensation Plan. All of the options granted have seven-year terms and vest over four years. The rules of the Securities and Exchange Commission require us to show hypothetical gains that the Named Officers would have for these options at the end of their ten-year terms. These gains are calculated assuming annual compound stock price appreciation of 5% and 10% from the date the option was originally granted to the end of the option

term. The 5% and 10% assumed annual compound rates of stock price appreciation are required by Securities and Exchange Commission rules. They are not our estimate or projection of future stock prices.

Stock Option Grants in Fiscal 2005

Option Exercises in Fiscal 2005 and Fiscal Year-End Option Values

      The following table shows information about the value realized on option exercises for each of our Named Officers during fiscal 2005 and the value of their unexercised options at the end of fiscal 2005. Value realized, or gain, is measured as the difference between the exercise price and market value or the price at which the shares were sold on the date of exercise.

Aggregated Option Exercises in Fiscal 2005

and Year-End Option Values

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

      Pursuant to its charter, the Compensation Committee’s responsibilities include developing and administering a compensation policy for executive officers that contains appropriate performance incentives and equity-linked components and reviewing annually the performance of the executive officers of the Company. The members of our Compensation Committee are Mr. Laird, Mr. Casper, Mr. Kindick and Mr. Shapiro. Mr. Laird serves as chair of the committee. Each of the members of the Compensation Committee is a non-employee director who qualifies as “independent” under The NASDAQ Stock Market’s Marketplace Rules.

General Compensation Practices for Officers

      Base Salary. The base salaries of the Company’s executive officers are derived from a combination of external and internal factors. Through a comparison of competitive industry practices, as well as an assessment of the performance, scope and impact of their job, Mr. Williams recommends to the Compensation Committee a base salary for each executive officer. The Compensation Committee, after taking into consideration Mr. Williams’ recommendations, as well as historic and comparable pay levels within the Company and its periodic assessment of competitive pay levels for executive officers with similar skill sets, establishes annual base salaries for each of the Company’s executive officers.

      Annual Bonus. The Compensation Committee generally intends to award annual bonuses in order to motivate and reward each of the Company’s executive officers based on attainment of the Company’s

annual financial and other goals, achievement of financial performance and operating objectives, the individual performance of each executive officer and historic and comparable pay levels within the Company. Annual bonus targets are pre-established by the Compensation Committee and reflect competitive industry practice. The size of the annual bonus pool is based upon the overall Company financial performance and the amount payable to each executive officer is adjusted upward or downward from the annual bonus targets based upon the executive’s individual performance based primarily on achievements in their function or franchise against certain performance metrics. All bonuses for executive officers are reviewed and approved by the Compensation Committee.

      Stock Options. The Compensation Committee generally intends to grant equity-based awards to each of the Company’s executive officers on an annual basis and in connection with other career milestones, such as assuming added responsibilities or achieving exceptional performance, and in connection with executive officers who are in a position to make major contributions to the Company’s growth and profitability. The number of stock options granted to executive officers is based upon subjective and objective evaluation as to competitive practices for equity-based compensation. Historically, the Compensation Committee has utilized awards of stock options that are designed to promote long-term stockholder value through a vesting schedule that generally provides for the options to become exercisable at the third and fourth anniversary of the option grant, subject to the stock option holder’s continued employment with the Company.

Compensation of the Chief Executive Officer

      Under the terms of his employment agreement as our Chief Executive Officer, Mr. Williams received an annual salary of $500,000 in fiscal 2005. Mr. Williams’ employment agreement also provides for an annual bonus at the discretion of the Board of Directors and upon recommendation of the Compensation Committee. The Compensation Committee recommended, and the Board approved, a bonus for Mr. Williams of $225,000 based on an evaluation of the Company’s performance as compared to annual financial goals and operating objectives in fiscal 2005 and other annual goals, such as the continued growth and advancement of the Company and its human resources, and the development of growth strategies for future years. The Board of Directors, upon recommendation of the Compensation Committee, determines the level of options to be granted to the Chief Executive Officer consistent with the factors discussed above for other executive officers. In fiscal 2005, after achieving the criteria established for awarding performance-based options, Mr. Williams was granted options to purchase 90,000 shares of our common stock.

Deductibility of Executive Compensation in Excess of $1.0 Million

      Section 162(m) of the Internal Revenue Code generally disallows a federal income tax deduction to any publicly held corporation for compensation paid in excess of $1.0 million to each of the five highest paid officers of the corporation unless the compensation is paid under a predetermined objective performance plan meeting certain requirements or satisfies one of various other exemptions. The special compensation arrangements, The Advisory Board Company 1997 Stock-Based Incentive Compensation Plan and The Advisory Board Company 2001 Stock-Based Incentive Compensation Plan are designed so that awards under these plans can qualify as “performance based compensation,” which is not subject to Section 162(m). The Company does not believe that, other than stock option grants, its compensation arrangements will result in excess of $1.0 million being paid to any of its executive officers. However, the Board may determine to award compensation in the future that would not be deductible under Section 162(m) in such circumstances as it deems appropriate. Moreover, in light of the ambiguities and uncertainties under Section 162(m), no assurance can be made that compensation intended by the Company to satisfy the requirements for deductibility under Section 162(m) does in fact do so.

COMPENSATION COMMITTEE MEMBERS

Joseph E. Laird, Jr., Chair

Marc N. Casper

Kelt Kindick

Leon D. Shapiro

EMPLOYMENT CONTRACTS, TERMINATION OF

EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS

Option Plans

      In the event that there is any change in the number or kind of the outstanding shares of our common stock, whether by reason of merger, consolidation or otherwise, then the plan administrator of The Advisory Board Company 1997 Stock-Based Incentive Compensation Plan, The Advisory Board Company 2001 Stock-Based Incentive Compensation Plan and The Advisory Board Company Directors’ Stock Plan, and, if approved, the 2005 Plan (collectively hereafter referred to as the “Plans”) shall, in its sole discretion, determine the appropriate adjustment, if any, to options held by Company employees, including the Named Officers. In addition, in the event of such a change, the plan administrator may accelerate the time or times at which any option may be exercised and may provide for cancellation of accelerated options that are not exercised within a time prescribed by the plan administrator in its sole discretion. Options granted under the Plans generally provide that, if an optionee’s employment is terminated for any reason other than for cause or voluntary resignation, all options granted under the Plans vest immediately.

Employment Arrangements

      Mr. Williams is employed as our Chief Executive Officer pursuant to the terms of an employment agreement which continues in effect until his termination or separation from the Company. Under the terms of the employment agreement, Mr. Williams received an annual salary of $500,000 in fiscal 2005. Mr. Williams’ annual salary is subject to periodic increase at the discretion of the Board of Directors, and upon recommendation by the Compensation Committee. Mr. Williams’ employment agreement also provides for an annual discretionary bonus. In fiscal 2005, Mr. Williams was awarded a bonus of $225,000 based on his managerial performance. The employment agreement also provides that Mr. Williams, in addition to salary and bonus, is entitled to certain fringe benefits, including participation in the Company’s 401(k) plan, the reimbursement of business-related expenses and disability insurance coverage. The employment agreement requires Mr. Williams to devote his efforts and abilities to us on a full-time basis. If Mr. Williams is terminated without cause, the employment agreement provides that he will continue to receive his base salary for one year after the date of termination and that all the options granted to him will vest and become exercisable.

      Upon a change of control, 50% of all options granted to Mr. Williams will vest and immediately become exercisable on the date of the change of control and the remaining 50% of all options granted to him will vest and immediately be exercisable on the second anniversary of the change of control. For this purpose, a change of control includes the acquisition by any person of more than 50% of our stock and the merger of the Company, but does not include a purchase or merger with The Corporate Executive Board Company or a private buyout by a group including our management.

      Mr. Williams is also party to a noncompetition agreement with us. Under the terms of this agreement, Mr. Williams may not compete with us or solicit our employees for a period of two years after the termination of his employment. This agreement also provides that Mr. Williams may not disclose any of our confidential or proprietary information, must disclose business opportunities to us and must return all of our property upon the termination of his employment.

      Messrs. Fassbach, Felsenthal, Schirmeier and Schwartz are parties to agreements with us concerning exclusive services, confidential information, business opportunities, noncompetition, non-solicitation and work product. These agreements prohibit those individuals from competing with us or soliciting our employees during their tenure as members of our Board of Directors or as employees, as the case may be, and, if the individual is terminated for cause or resigns, for a period of two years thereafter. These agreements also provide that Messrs. Fassbach, Felsenthal, Schirmeier and Schwartz will not disclose any of our confidential or proprietary information.

STOCK PERFORMANCE GRAPH

      The graph below compares the cumulative total stockholder return on our common stock from the date of our initial public offering through March 31, 2005, with the cumulative total return on the Russell 2000 Index and the Nasdaq National Market (U.S.) Index for the same period. The graph assumes that $100 was invested in our common stock and in each of the other indexes on November 12, 2001 and that any dividends were reinvested. The comparisons in the graph below are based on historical data (with our common stock prices based on the closing price on the date of the initial public offering and thereafter) and are not intended to forecast the possible future performance of our common stock.

COMPARISON OF THE CUMULATIVE TOTAL RETURN AMONG

THE ADVISORY BOARD COMPANY, THE RUSSELL 2000 INDEX

AND THE NASDAQ NATIONAL MARKET (U.S.) INDEX

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      In fiscal 2000 we assigned our office lease to Atlantic Media Company (formerly DGB Enterprises, Inc., an entity created in 1997 by our founder, David G. Bradley, to manage his various business interests including his ownership in us), and subsequently entered into a sublease agreement with them on terms consistent with the original agreement. The lease agreement expired in May 2004. We incurred rent expense under this arrangement of $3.4 million, $3.6 million and $0.6 million in fiscal 2003, 2004 and 2005, respectively.

      In July 2001, we entered into an administrative services agreement whereby Atlantic Media Company provided us with services related to the facilities associated with our shared leased space, and we provided Atlantic Media Company with certain administrative services. Fees for the services were based on direct costs per transaction, square footage, headcount or a fixed cost per month that approximated the cost for

each entity to internally provide or externally source these services. We believe these charges approximated the costs which would have been incurred had we operated on a stand-alone basis. We incurred net charges under the agreement of $0.7 million, $1.0 million and $0.6 million in fiscal 2003, 2004 and 2005, respectively.

OTHER MATTERS

Next Annual Meeting and Stockholder Proposals

      Under Securities and Exchange Commission rules, any stockholder who intends to present a proposal at the next annual meeting of stockholders must submit the proposal to us at our principal executive offices, pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, no later than June 3, 2006, which is a reasonable time before we begin to print and mail our proxy materials, and must satisfy the other requirements of Rule 14a-8 under the Securities Exchange Act of 1934 in order for the proposal to be considered for inclusion in our Proxy Statement and Proxy Card for that meeting. Any stockholder who wishes to bring a proposal before our next annual meeting of stockholders, but does not wish to include it in our proxy materials, or wishes to nominate one or more persons to serve as Directors, must provide written notice of the proposal to our Secretary at our principal executive offices not later than August 17, 2006 nor earlier than June 3, 2006, and must satisfy the requirements of our Bylaws. If a stockholder making such a proposal does not also satisfy the requirements of Rule 14a-4(c) under the Securities Exchange Act of 1934, we may exercise discretionary voting authority over proxies we solicit in determining how to vote on the proposal.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers, and 10% stockholders to file forms with the Securities and Exchange Commission to report their beneficial ownership of our stock and any changes in beneficial ownership. Anyone required to file forms with the Securities and Exchange Commission must also send copies of the forms to us. We have reviewed all forms provided to us. Based on that review and on written information given to us by our executive officers and directors, we believe that all Section 16(a) filing requirements were met during fiscal 2005, except that a late Form 4 was filed by Kelt Kindick reporting the transfer of options pursuant to a marital property settlement dated June 24, 2004.

Delivery of Documents to Stockholders Sharing an Address

      If you are a beneficial owner, but not the record holder, of Company shares, your broker, bank or other nominee may only deliver one copy of our Proxy Statement and Annual Report to multiple stockholders who share an address unless that nominee has received contrary instructions from one or more of the stockholders. We will deliver promptly, upon written or oral request, a separate copy of the Proxy Statement and Annual Report to a stockholder at a shared address to which a single copy of the documents were delivered. A stockholder who wishes to receive a separate copy of the Proxy Statement and Annual Report, now or in the future, should submit their request to us by telephone at 202-266-5600 or by submitting a written request to David L. Felsenthal, Chief Financial Officer, Secretary, and Treasurer, 2445 M Street NW, Washington, DC 20037. Beneficial owners sharing an address who are receiving multiple copies of proxy materials and annual reports and wish to receive a single copy of such materials in the future will need to contact their broker, bank or other nominee to request that only a single copy of each document be mailed to all stockholders at the shared address in the future.

Other Business

      Our Board of Directors does not currently intend to bring any other business before the Meeting, and is not aware of any other business to be brought before the Meeting. If any other business is properly brought before the Meeting, the proxies will be voted in accordance with the judgment of the proxy holders.

Whether or not you plan to attend the Meeting, please complete, sign, date and promptly return the accompanying Proxy Card in the enclosed postage-paid envelope.

APPENDIX A

THE ADVISORY BOARD COMPANY

AUDIT COMMITTEE CHARTER

July 28, 2004

Organization

      There shall be a committee of the Board of Directors (the “Board”) of The Advisory Board Company (the “Company”) to be known as the Audit Committee (the “Committee”). The Committee shall be composed of at least three directors each of whom is appointed annually by the Board, is able to read and understand fundamental financial statements including a company’s balance sheet, income statement, and cash flow statement, satisfies the requirements set forth in Rule 4350(d)(2) of the National Association of Securities Dealers’ listing standards, and is free of any relationship that, in the opinion of the Board, would interfere with their exercise of independent judgment as a Committee member. At least one member of the Committee shall have past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background, including a current or past position as a chief executive or financial officer or other senior officer with financial oversight responsibilities.

Statement of Purpose

      The Committee shall provide assistance to the Board in fulfilling its responsibilities to the stockholders, potential stockholders, and investment community relating to the accounting, reporting, and financial practices of the Company, and shall have general responsibility for surveillance of internal controls and accounting and audit activities of the Company. In so doing, it is the responsibility of the Committee to maintain free and open means of communication between the Board, the independent auditors, the internal auditors, and the financial management of the Company.

Responsibilities

      In accordance with purposes set forth in the foregoing paragraph, the Committee shall:

Procedures

      The Committee’s policies and procedures shall remain flexible in order to best react to changing conditions and to ensure to the Board and stockholders that the accounting and reporting practices of the Company are in accordance with all requirements and are of the highest quality. The Committee shall meet as often as may be deemed necessary or appropriate in its judgment, either in person or telephonically. The Committee shall meet in executive session with the independent auditors, the internal auditor, if any, and the financial management of the Company at least annually. The Committee shall report to the full Board with respect to its meetings and shall make such reports to stockholders as are required by applicable regulations or as are deemed advisable in the Committee’s judgment. The majority of the members of the Committee shall constitute a quorum.

APPENDIX B

THE ADVISORY BOARD COMPANY

2005 STOCK INCENTIVE PLAN

      The purpose of The Advisory Board Company 2005 Stock Incentive Plan (the “Plan”) is to advance the interests of The Advisory Board Company (the “Company”) by stimulating the efforts of employees, officers and, to the extent provided by Section 5(d) and Section 5(e), non-employee directors and other service providers, in each case who are selected to be participants, by heightening the desire of such persons to continue in working toward and contributing to the success and progress of the Company. The Plan supersedes the Company’s 2001 Stock-Based Incentive Compensation Plan, 1997 Stock-Based Incentive Compensation Plan and Directors’ Stock Plan with respect to future awards, and provides for the grant of Incentive and Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock and Restricted Stock Units, any of which may be performance-based, and for Incentive Bonuses, which may be paid in cash or stock or a combination thereof, as determined by the Administrator.

      As used in the Plan, the following terms shall have the meanings set forth below:

      Any person who is a current or prospective officer or employee (including any director who is also an employee, in his or her capacity as such) of the Company or of any Subsidiary shall be eligible for selection by the Administrator for the grant of Awards hereunder. To the extent provided by Section 5(d), any Nonemployee Director shall be eligible for the grant of Awards hereunder as determined by the Administrator. In addition, to the extent provided by Section 5(e), any service provider who has been retained to provide consulting, advisory or other services to the Company or to any Subsidiary shall be eligible for selection by the Administrator for the grant of Awards hereunder. Options intending to qualify as Incentive Stock Options may only be granted to employees of the Company or any Subsidiary within the meaning of the Code, as selected by the Administrator. For purposes of this Plan, the Chairman of the Board’s status as an employee shall be determined by the Administrator.

      This Plan was adopted by the Board as of September 22, 2005, and it will become effective (the “Effective Date”) when it is approved by the Company’s stockholders. All Awards granted under this Plan are subject to, and may not be exercised before, the approval of this Plan by the stockholders prior to the first anniversary date of the effective date of the Plan, by the affirmative vote of the holders of a majority of the outstanding Shares of the Company present, or represented by proxy, and entitled to vote, at a meeting of the Company’s stockholders or by written consent in accordance with the laws of the State of Delaware; provided that if such approval by the stockholders of the Company is not forthcoming, all Awards previously granted under this Plan shall be void. The Plan shall remain available for the grant of Awards until the tenth (10th) anniversary of the Effective Date. Notwithstanding the foregoing, the Plan may be terminated at such earlier time as the Board may determine. Termination of the Plan will not affect the rights and obligations of the Participants and the Company arising under Awards theretofore granted and then in effect.

      (a) Aggregate Limits. The aggregate number of Shares issuable pursuant to all Awards shall not exceed 1,600,000, plus (i) any Shares that were authorized for issuance under the Prior Plans that, as of November 15, 2005, remain available for issuance under the Prior Plans (not including any Shares that are subject to, as of November 15, 2005, outstanding awards under the Prior Plans or any Shares that prior to November 15, 2005 were issued pursuant to awards granted under the Prior Plans) and (ii) any Shares subject to outstanding awards under the Prior Plans as of November 15, 2005 that on or after such date cease for any reason to be subject to such awards (other than by reason of exercise or settlement of the awards to the extent they are exercised for or settled in vested and nonforfeitable shares); provided that any Shares granted under Options or Stock Appreciation Rights shall be counted against this limit on a one-for-one basis and any Shares granted as Awards other than Options or Stock Appreciation Rights shall be counted against this limit as two (2) Shares for every one (1) Share subject to such Award. The aggregate number of Shares available for grant under this Plan and the number of Shares subject to outstanding Awards shall be subject to adjustment as provided in Section 12. The Shares issued pursuant to Awards granted under this Plan may be shares that are authorized and unissued or shares that were reacquired by the Company, including shares purchased in the open market.

      (b) Issuance of Shares. For purposes of Section 5(a), the aggregate number of Shares issued under this Plan at any time shall equal only the number of Shares actually issued upon exercise or settlement of an Award. Notwithstanding the foregoing, Shares subject to an Award under the Plan may not again be made available for issuance under the Plan if such Shares are: (i) Shares that were subject to a stock-settled Stock Appreciation Right and were not issued upon the net settlement or net exercise of such Stock Appreciation Right, (ii) Shares used to pay the exercise price of a Stock Option, (iii) Shares delivered to or withheld by the Company to pay the withholding taxes related a Stock Option or a Stock

Appreciation Right, or (iv) Shares repurchased on the open market with the proceeds of a Stock Option exercise. Shares subject to Awards that have been canceled, expired, forfeited or otherwise not issued under an Award and Shares subject to Awards settled in cash shall not count as Shares issued under this Plan.

      (c) Tax Code Limits. The aggregate number of Shares subject to Awards granted under this Plan during any calendar year to any one Participant shall not exceed 500,000, which number shall be calculated and adjusted pursuant to Section 12 only to the extent that such calculation or adjustment will not affect the status of any Award intended to qualify as “performance based compensation” under Section 162(m) of the Code but which number shall not count any tandem SARs (as defined in Section 7). The aggregate number of Shares that may be issued pursuant to the exercise of Incentive Stock Options granted under this Plan shall not exceed 1,600,000, which number shall be calculated and adjusted pursuant to Section 12 only to the extent that such calculation or adjustment will not affect the status of any option intended to qualify as an Incentive Stock Option under Section 422 of the Code. The maximum amount payable pursuant to that portion of an Incentive Bonus granted in any calendar year to any Participant under this Plan that is intended to satisfy the requirements for “performance based compensation” under Section 162(m) of the Code shall not exceed five million dollars ($5,000,000).

      (d) Director Awards. The aggregate number of Shares subject to Options and Stock Appreciation Rights granted under this Plan during any calendar year to any one Nonemployee Director shall not exceed 30,000, and the aggregate number of Shares issued or issuable under all Awards granted under this Plan other than Options or Stock Appreciation Rights during any calendar year to any one Nonemployee Director shall not exceed 15,000; provided, however, that in the calendar year in which a Nonemployee Director first joins the Board of Directors or is first designated as Chairman of the Board of Directors or Lead Director, the maximum number of shares subject to Awards granted to the Participant may be up to two hundred percent (200%) of the number of shares set forth in the foregoing limits and the foregoing limits shall not count any tandem SARs (as defined in Section 7).

      (e) Awards to Service Providers. The aggregate number of Shares issued under this Plan pursuant to all Awards granted to service providers shall not exceed 100,000.

      (a) Option Awards. Options may be granted at any time and from time to time prior to the termination of the Plan to Participants as determined by the Administrator. No Participant shall have any rights as a stockholder with respect to any Shares subject to Option hereunder until said Shares have been issued, except that the Administrator may authorize dividend equivalent accruals with respect to such Shares. Each Option shall be evidenced by an Award Agreement. Options granted pursuant to the Plan need not be identical but each Option must contain and be subject to the terms and conditions set forth below.

      (b) Price. The Administrator will establish the exercise price per Share under each Option, which, in no event will be less than the market value of the Shares on the date of grant; provided, however, that the exercise price per Share with respect to an Option that is granted in connection with a merger or other acquisition as a substitute or replacement award for options held by optionees of the acquired entity may be less than 100% of the market price of the Shares on the date such Option is granted if such exercise price is based on a formula set forth in the terms of the options held by such optionees or in the terms of the agreement providing for such merger or other acquisition. The exercise price of any Option may be paid in Shares, cash or a combination thereof, as determined by the Administrator, including an irrevocable commitment by a broker to pay over such amount from a sale of the Shares issuable under an Option, the delivery of previously owned Shares and withholding of Shares deliverable upon exercise.

      (c) No Repricing. Other than in connection with a change in the Company’s capitalization (as described in Section 12) the exercise price of an Option may not be reduced without stockholder approval (including canceling previously awarded Options and regranting them with a lower exercise price).

      (d) Provisions Applicable to Options. The date on which Options become exercisable shall be determined at the sole discretion of the Administrator and set forth in an Award Agreement. Unless

provided otherwise in the applicable Award Agreement, to the extent that the Administrator determines that an approved leave of absence or employment on a less than full-time basis is not a Termination of employment, the vesting period and/or exercisability of an Option shall be adjusted by the Administrator during or to reflect the effects of any period during which the Participant is on an approved leave of absence or is employed on a less than full-time basis.

      (e) Term of Options and Termination of Employment: The Administrator shall establish the term of each Option, which in no case shall exceed a period of seven (7) years from the date of grant. Unless an Option earlier expires upon the expiration date established pursuant to the foregoing sentence, upon the termination of the Participant’s employment, his or her rights to exercise an Option then held shall be only as follows, unless the Administrator specifies otherwise:

      (f) Incentive Stock Options. Notwithstanding anything to the contrary in this Section 6, in the case of the grant of an Option intending to qualify as an Incentive Stock Option: (i) if the Participant owns stock possessing more than 10 percent of the combined voting power of all classes of stock of the Company (a “10% Shareholder”), the exercise price of such Option must be at least 110 percent of the fair market value of the Shares on the date of grant and the Option must expire within a period of not more than five (5) years from the date of grant, and (ii) termination of employment will occur when the person to whom an Award was granted ceases to be an employee (as determined in accordance with

Section 3401(c) of the Code and the regulations promulgated thereunder) of the Company and its Subsidiaries. Notwithstanding anything in this Section 6 to the contrary, options designated as Incentive Stock Options shall not be eligible for treatment under the Code as Incentive Stock Options (and will be deemed to be Nonqualified Stock Options) to the extent that either (a) the aggregate fair market value of Shares (determined as of the time of grant) with respect to which such Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Subsidiary) exceeds $100,000, taking Options into account in the order in which they were granted, or (b) such Options otherwise remain exercisable but are not exercised within three (3) months of Termination of employment (or such other period of time provided in Section 422 of the Code).

      Stock Appreciation Rights may be granted to Participants from time to time either in tandem with or as a component of other Awards granted under the Plan (“tandem SARs”) or not in conjunction with other Awards (“freestanding SARs”) and may, but need not, relate to a specific Option granted under Section 6. The provisions of Stock Appreciation Rights need not be the same with respect to each grant or each recipient. Any Stock Appreciation Right granted in tandem with an Award may be granted at the same time such Award is granted or at any time thereafter before exercise or expiration of such Award. All freestanding SARs shall be granted subject to the same terms and conditions applicable to Options as set forth in Section 6 and all tandem SARs shall have the same exercise price, vesting, exercisability, forfeiture and termination provisions as the Award to which they relate. Subject to the provisions of Section 6 and the immediately preceding sentence, the Administrator may impose such other conditions or restrictions on any Stock Appreciation Right as it shall deem appropriate. Stock Appreciation Rights may be settled in Shares, cash or a combination thereof, as determined by the Administrator and set forth in the applicable Award Agreement. Other than in connection with a change in the Company’s capitalization (as described in Section 12) the exercise price of Stock Appreciation Rights may not be reduced without stockholder approval (including canceling previously awarded Stock Appreciation Rights and regranting them with a lower exercise price).

      (a) Restricted Stock and Restricted Stock Unit Awards. Restricted Stock and Restricted Stock Units may be granted at any time and from time to time prior to the termination of the Plan to Participants as determined by the Administrator. Restricted Stock is an award or issuance of Shares the grant, issuance, retention, vesting and/or transferability of which is subject during specified periods of time to such conditions (including continued employment or performance conditions) and terms as the Administrator deems appropriate. Restricted Stock Units are Awards denominated in units of Shares under which the issuance of Shares is subject to such conditions (including continued employment or performance conditions) and terms as the Administrator deems appropriate. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement. Unless determined otherwise by the Administrator, each Restricted Stock Unit will be equal to one Share and will entitle a Participant to either the issuance of Shares or payment of an amount of cash determined with reference to the value of Shares. To the extent determined by the Administrator, Restricted Stock and Restricted Stock Units may be satisfied or settled in Shares, cash or a combination thereof. Restricted Stock and Restricted Stock Units granted pursuant to the Plan need not be identical but each grant of Restricted Stock and Restricted Stock Units must contain and be subject to the terms and conditions set forth below.

      (b) Contents of Agreement. Each Award Agreement shall contain provisions regarding (i) the number of Shares or Restricted Stock Units subject to such Award or a formula for determining such number, (ii) the purchase price of the Shares, if any, and the means of payment, (iii) the performance criteria, if any, and level of achievement versus these criteria that shall determine the number of Shares or Restricted Stock Units granted, issued, retainable and/or vested, (iv) such terms and conditions on the grant, issuance, vesting and/or forfeiture of the Shares or Restricted Stock Units as may be determined from time to time by the Administrator, (v) the term of the performance period, if any, as to which performance will be measured for determining the number of such Shares or Restricted Stock Units, and

(vi) restrictions on the transferability of the Shares or Restricted Stock Units. Shares issued under a Restricted Stock Award may be issued in the name of the Participant and held by the Participant or held by the Company, in each case as the Administrator may provide.

      (c) Vesting and Performance Criteria. The grant, issuance, retention, vesting and/or settlement of shares of Restricted Stock and Restricted Stock Units will occur when and in such installments as the Administrator determines or under criteria the Administrator establishes, which may include Qualifying Performance Criteria. The grant, issuance, retention, vesting and/or settlement of Shares under any such Award that is based on performance criteria and level of achievement versus such criteria will be subject to a performance period of not less than one (1) year, and the grant, issuance, retention, vesting and/or settlement of Shares under any Restricted Stock or Restricted Stock Unit Award that is based solely upon continued employment and/or the passage of time may not vest or be settled in full over a period of less than three (3) years but may be subject to pro-rata vesting over such period, except that the Administrator may provide for the satisfaction and/or lapse of all conditions under any such Award in the event of the Participant’s death, disability, Retirement or in connection with a change of control of the Company, and the Administrator may provide that any such restriction or limitation will not apply in the case of a Restricted Stock or Restricted Stock Unit Award that is issued in payment or settlement of compensation that has been earned by the Participant. Notwithstanding anything in this Plan to the contrary, the performance criteria for any Restricted Stock or Restricted Stock Unit that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code will be a measure based on one or more Qualifying Performance Criteria selected by the Administrator and specified when the Award is granted.

      (d) Discretionary Adjustments and Limits. Subject to the limits imposed under Section 162(m) of the Code for Awards that are intended to qualify as “performance based compensation,” notwithstanding the satisfaction of any performance goals, the number of Shares granted, issued, retainable and/or vested under an Award of Restricted Stock or Restricted Stock Units on account of either financial performance or personal performance evaluations may, to the extent specified in the Award Agreement, be reduced by the Administrator on the basis of such further considerations as the Administrator shall determine.

      (e) Voting Rights. Unless otherwise determined by the Administrator, Participants holding shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those shares during the period of restriction. Participants shall have no voting rights with respect to Shares underlying Restricted Stock Units unless and until such Shares are reflected as issued and outstanding shares on the Company’s stock ledger.

      (f) Dividends and Distributions. Participants in whose name Restricted Stock is granted shall be entitled to receive all dividends and other distributions paid with respect to those Shares, unless determined otherwise by the Administrator. The Administrator will determine whether any such dividends or distributions will be automatically reinvested in additional shares of Restricted Stock and subject to the same restrictions on transferability as the Restricted Stock with respect to which they were distributed or whether such dividends or distributions will be paid in cash. Shares underlying Restricted Stock Units shall be entitled to dividends or dividend equivalents only to the extent provided by the Administrator.

      (a) General. Each Incentive Bonus Award will confer upon the Participant the opportunity to earn a future payment tied to the level of achievement with respect to one or more performance criteria established for a performance period of not less than one year.

      (b) Incentive Bonus Document. The terms of any Incentive Bonus will be set forth in an Award Agreement. Each Award Agreement evidencing an Incentive Bonus shall contain provisions regarding (i) the target and maximum amount payable to the Participant as an Incentive Bonus, (ii) the performance criteria and level of achievement versus these criteria that shall determine the amount of such payment, (iii) the term of the performance period as to which performance shall be measured for determining the amount of any payment, (iv) the timing of any payment earned by virtue of performance, (v) restrictions on the alienation or transfer of the Incentive Bonus prior to actual payment, (vi) forfeiture

provisions and (vii) such further terms and conditions, in each case not inconsistent with this Plan as may be determined from time to time by the Administrator.

      (c) Performance Criteria. The Administrator shall establish the performance criteria and level of achievement versus these criteria that shall determine the target and maximum amount payable under an Incentive Bonus, which criteria may be based on financial performance and/or personal performance evaluations. The Administrator may specify the percentage of the target Incentive Bonus that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code. Notwithstanding anything to the contrary herein, the performance criteria for any portion of an Incentive Bonus that is intended by the Administrator to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code shall be a measure based on one or more Qualifying Performance Criteria (as defined in Section 13(b)) selected by the Administrator and specified at the time the Incentive Bonus is granted. The Administrator shall certify the extent to which any Qualifying Performance Criteria has been satisfied, and the amount payable as a result thereof, prior to payment of any Incentive Bonus that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code.

      (d) Timing and Form of Payment. The Administrator shall determine the timing of payment of any Incentive Bonus. Payment of the amount due under an Incentive Bonus may be made in cash or in Shares, as determined by the Administrator. The Administrator may provide for or, subject to such terms and conditions as the Administrator may specify, may permit a Participant to elect for the payment of any Incentive Bonus to be deferred to a specified date or event.

      (e) Discretionary Adjustments. Notwithstanding satisfaction of any performance goals, the amount paid under an Incentive Bonus on account of either financial performance or personal performance evaluations may, to the extent specified in the Award Agreement, be reduced by the Administrator on the basis of such further considerations as the Administrator shall determine.

      The Administrator may, in an Award Agreement or otherwise, provide for the deferred delivery of Shares upon settlement, vesting or other events with respect to Restricted Stock or Restricted Stock Units, or in payment or satisfaction of an Incentive Bonus. Notwithstanding anything herein to the contrary, in no event will any deferral of the delivery of Shares or any other payment with respect to any Award be allowed if the Administrator determines, in its sole discretion, that the deferral would result in the imposition of the additional tax under Section 409A(a)(1)(B) of the Code.

      The Administrator may provide that the Shares issued upon exercise of an Option or Stock Appreciation Right or otherwise subject to or issued under an Award shall be subject to such further agreements, restrictions, conditions or limitations as the Administrator in its discretion may specify prior to the exercise of such Option or Stock Appreciation Right or the grant, vesting or settlement of such Award, including without limitation, conditions on vesting or transferability, forfeiture or repurchase provisions and method of payment for the Shares issued upon exercise, vesting or settlement of such Award (including the actual or constructive surrender of Shares already owned by the Participant) or payment of taxes arising in connection with an Award. Without limiting the foregoing, such restrictions may address the timing and manner of any resales by the Participant or other subsequent transfers by the Participant of any Shares issued under an Award, including without limitation (i) restrictions under an insider trading policy or pursuant to applicable law, (ii) restrictions designed to delay and/or coordinate the timing and manner of sales by Participant and holders of other Company equity compensation arrangements, (iii) restrictions as to the use of a specified brokerage firm for such resales or other transfers and (iv) provisions requiring Shares to be sold on the open market or to the Company in order to satisfy tax withholding or other obligations.

      The number and kind of Shares available for issuance under this Plan (including under any Awards then outstanding), and the number and kind of Shares subject to the individual limits set forth in Section 5 of this Plan, may be adjusted by the Administrator as it determines appropriate to reflect any reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off, dividend or distribution of securities, property or cash (other than regular, quarterly cash dividends), or any other event or transaction that affects the number or kind of Shares of the Company outstanding. Such adjustment may be designed to comply with Section 425 of the Code or, except as otherwise expressly provided in Section 5(c) of this Plan, may be designed to treat the Shares available under the Plan and subject to Awards as if they were all outstanding on the record date for such event or transaction or to increase the number of such Shares to reflect a deemed reinvestment in Shares of the amount distributed to the Company’s securityholders. The terms of any outstanding Award may also be adjusted by the Administrator as to price, number or kind of Shares subject to such Award and other terms to reflect the foregoing events, which adjustments need not be uniform as between different Awards or different types of Awards.

      In the event there shall be any other change in the number or kind of outstanding Shares, or any stock or other securities into which such Shares shall have been changed, or for which it shall have been exchanged, by reason of a change of control, other merger, consolidation or otherwise, then the Administrator shall, in its sole discretion, determine the appropriate adjustment, if any, to be effected. In addition, in the event of such change described in this paragraph, the Administrator may accelerate the time or times at which any Award may be exercised and may provide for cancellation of such accelerated Awards that are not exercised within a time prescribed by the Administrator in its sole discretion.

      No right to purchase fractional shares shall result from any adjustment in Awards pursuant to this Section 12. In case of any such adjustment, the Shares subject to the Award shall be rounded down to the nearest whole share. The Company shall notify Participants holding Awards subject to any adjustments pursuant to this Section 12 of such adjustment, but (whether or not notice is given) such adjustment shall be effective and binding for all purposes of the Plan.

      (a) General. The Administrator may establish performance criteria and level of achievement versus such criteria that shall determine the number of Shares to be granted, retained, vested, issued or issuable under or in settlement of or the amount payable pursuant to an Award, which criteria may be based on Qualifying Performance Criteria or other standards of financial performance and/or personal performance evaluations. In addition, the Administrator may specify that an Award or a portion of an Award is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code, provided that the performance criteria for such Award or portion of an Award that is intended by the Administrator to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code shall be a measure based on one or more Qualifying Performance Criteria selected by the Administrator and specified at the time the Award is granted. The Administrator shall certify the extent to which any Qualifying Performance Criteria has been satisfied, and the amount payable as a result thereof, prior to payment, settlement or vesting of any Award that is intended to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code. Notwithstanding satisfaction of any performance goals, the number of Shares issued under or the amount paid under an award may, to the extent specified in the Award Agreement, be reduced by the Administrator on the basis of such further considerations as the Administrator in its sole discretion shall determine.

      (b) Qualifying Performance Criteria. For purposes of this Plan, the term “Qualifying Performance Criteria” shall mean any one or more of the following performance criteria, either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit or Subsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on an absolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group, in each case as specified by the Administrator: (i) cash

flow (before or after dividends), (ii) earnings per share (including earnings before interest, taxes, depreciation and amortization), (iii) stock price, (iv) return on equity, (v) total stockholder return, (vi) return on capital (including return on total capital or return on invested capital), (vii) return on assets or net assets, (viii) market capitalization, (ix) economic value added, (x) debt leverage (debt to capital), (xi) revenue, (xii) income or net income, (xiii) operating income, (xiv) operating profit or net operating profit, (xv) operating margin or profit margin, (xvi) return on operating revenue, (xvii) cash from operations, (xviii) operating ratio, (xix) operating revenue, or (xx) customer service. To the extent consistent with Section 162(m) of the Code, the Administrator (A) shall appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to eliminate the effects of charges for restructurings, discontinued operations, extraordinary items and all items of gain, loss or expense determined to be extraordinary or unusual in nature or related to the disposal of a segment of a business or related to a change in accounting principle all as determined in accordance with standards established by opinion No. 30 of the Accounting Principles Board (APA Opinion No. 30) or other applicable or successor accounting provisions, as well as the cumulative effect of accounting changes, in each case as determined in accordance with generally accepted accounting principles or identified in the Company’s financial statements or notes to the financial statements, and (B) may appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to exclude any of the following events that occurs during a performance period: (i) asset write-downs, (ii) litigation, claims, judgments or settlements, (iii) the effect of changes in tax law or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs and (v) accruals of any amounts for payment under this Plan or any other compensation arrangement maintained by the Company.

      Each Award may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated by a Participant other than by will or the laws of descent and distribution, and each Option or Stock Appreciation Right shall be exercisable only by the Participant during his or her lifetime. Notwithstanding the foregoing, to the extent permitted by the Administrator, the person to whom an Award is initially granted (the “Grantee”) may transfer an Award to any “family member” of the Grantee (as such term is defined in Section 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, (i) as a condition thereof, the transferor and the transferee must execute a written agreement containing such terms as specified by the Administrator, and (ii) the transfer is pursuant to a gift or a domestic relations order to the extent permitted under the General Instructions to Form S-8. Except to the extent specified otherwise in the agreement the Administrator provides for the Grantee and transferee to execute, all vesting, exercisability and forfeiture provisions that are conditioned on the Grantee’s continued employment or service shall continue to be determined with reference to the Grantee’s employment or service (and not to the status of the transferee) after any transfer of an Award pursuant to this Section 14, and the responsibility to pay any taxes in connection with an Award shall remain with the Grantee notwithstanding any transfer other than by will or intestate succession.

      Except as otherwise provided by the Administrator, if at any time (including after a notice of exercise has been delivered or an award has vested) the Chief Executive Officer or any other person designated by the Administrator (each such person, an “Authorized Officer”) reasonably believes that a Participant may have committed an Act of Misconduct as described in this Section 15, the Authorized Officer, Administrator or the Board may suspend the Participant’s rights to exercise any Option, to vest in an Award, and/or to receive payment for or receive Shares in settlement of an Award pending a determination of whether an Act of Misconduct has been committed.

      If the Administrator or an Authorized Officer determines a Participant has committed an act of embezzlement, fraud, dishonesty, nonpayment of any obligation owed to the Company or any Subsidiary, breach of fiduciary duty, violation of Company ethics policy or code of conduct, or deliberate disregard of

the Company or Subsidiary rules resulting in loss, damage or injury to the Company or any Subsidiary, or if a Participant makes an unauthorized disclosure of any Company or Subsidiary trade secret or confidential information, solicits any employee or service provider to leave the employ or cease providing services to the Company or any Subsidiary, breaches any intellectual property or assignment of inventions covenant, engages in any conduct constituting unfair competition, breaches any non-competition agreement, induces any Company or Subsidiary customer to breach a contract with the Company or any Subsidiary or to cease doing business with the Company or any Subsidiary, or induces any principal for whom the Company or any Subsidiary acts as agent to terminate such agency relationship (any of the foregoing acts, an “Act of Misconduct”), then except as otherwise provided by the Administrator, (i) neither the Participant nor his or her estate nor transferee shall be entitled to exercise any Option or Stock Appreciation Right whatsoever, vest in or have the restrictions on an Award lapse, or otherwise receive payment of an Award, (ii) the Participant will forfeit all outstanding Awards and (iii) the Participant may be required, at the Administrator’s sole discretion, to return and/or repay to the Company any then unvested Shares previously issued under the Plan. In making such determination, the Administrator or an Authorized Officer shall give the Participant an opportunity to appear and present evidence on his or her behalf at a hearing before the Administrator or its designee or an opportunity to submit written comments, documents, information and arguments to be considered by the Administrator. Any dispute by a Participant or other person as to the determination of the Administrator shall be resolved pursuant to Section 23 of the Plan.

      This Plan, the grant, issuance, vesting, exercise and settlement of Awards thereunder, and the obligation of the Company to sell, issue or deliver Shares under such Awards, shall be subject to all applicable foreign, federal, state and local laws, rules and regulations, stock exchange rules and regulations, and to such approvals by any governmental or regulatory agency as may be required. The Company shall not be required to register in a Participant’s name or deliver any Shares prior to the completion of any registration or qualification of such shares under any foreign, federal, state or local law or any ruling or regulation of any government body which the Administrator shall determine to be necessary or advisable. To the extent the Company is unable to or the Administrator deems it infeasible to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, the Company and its Subsidiaries shall be relieved of any liability with respect to the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. No Option shall be exercisable and no Shares shall be issued and/or transferable under any other Award unless a registration statement with respect to the Shares underlying such Option is effective and current or the Company has determined that such registration is unnecessary.

      In the event an Award is granted to or held by a Participant who is employed or providing services outside the United States, the Administrator may, in its sole discretion, modify the provisions of the Plan or of such Award as they pertain to such individual to comply with applicable foreign law or to recognize differences in local law, currency or tax policy. The Administrator may also impose conditions on the grant, issuance, exercise, vesting, settlement or retention of Awards in order to comply with such foreign law and/or to minimize the Company’s obligations with respect to tax equalization for Participants employed outside their home country.

      To the extent required by applicable federal, state, local or foreign law, a Participant shall be required to satisfy, in a manner satisfactory to the Company, any withholding tax obligations that arise by reason of an Option exercise, disposition of Shares issued under an Incentive Stock Option, the vesting of or settlement of an Award, an election pursuant to Section 83(b) of the Code or otherwise with respect to an Award. The Company and its Subsidiaries shall not be required to issue Shares, make any payment or to recognize the transfer or disposition of Shares until such obligations are satisfied. The Administrator may provide for or permit these obligations to be satisfied through the mandatory or elective sale of Shares

and/or by having the Company withhold a portion of the Shares that otherwise would be issued to him or her upon exercise of the Option or the vesting or settlement of an Award, or by tendering Shares previously acquired.

      (a) Administrator of the Plan. The Plan shall be administered by the Administrator who shall be the Compensation Committee of the Board or, in the absence of a Compensation Committee, the Board itself. Any power of the Administrator may also be exercised by the Board, except to the extent that the grant or exercise of such authority would cause any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Securities Exchange Act of 1934 or cause an Award designated as a Performance Award not to qualify for treatment as performance-based compensation under Section 162(m) of the Code. To the extent that any permitted action taken by the Board conflicts with action taken by the Administrator, the Board action shall control. The Compensation Committee may by resolution authorize one or more officers of the Company to perform any or all things that the Administrator is authorized and empowered to do or perform under the Plan, and for all purposes under this Plan, such officer or officers shall be treated as the Administrator; provided, however, that the resolution so authorizing such officer or officers shall specify the total number of Awards (if any) such officer or officers may award pursuant to such delegated authority, and any such Award shall be subject to the form of Option agreement theretofore approved by the Compensation Committee. No such officer shall designate himself or herself as a recipient of any Awards granted under authority delegated to such officer. In addition, the Compensation Committee may delegate any or all aspects of the day-to-day administration of the Plan to one or more officers or employees of the Company or any Subsidiary, and/or to one or more agents.

      (b) Powers of Administrator. Subject to the express provisions of this Plan, the Administrator shall be authorized and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of this Plan, including, without limitation: (i) to prescribe, amend and rescind rules and regulations relating to this Plan and to define terms not otherwise defined herein; (ii) to determine which persons are Participants, to which of such Participants, if any, Awards shall be granted hereunder and the timing of any such Awards; (iii) to grant Awards to Participants and determine the terms and conditions thereof, including the number of Shares subject to Awards and the exercise or purchase price of such Shares and the circumstances under which Awards become exercisable or vested or are forfeited or expire, which terms may but need not be conditioned upon the passage of time, continued employment, the satisfaction of performance criteria, the occurrence of certain events (including events which the Board or the Administrator determine constitute a change of control), or other factors; (iv) to establish and verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any Award; (v) to prescribe and amend the terms of the agreements or other documents evidencing Awards made under this Plan (which need not be identical) and the terms of or form of any document or notice required to be delivered to the Company by Participants under this Plan; (vi) to determine whether, and the extent to which, adjustments are required pursuant to Section 12; (vii) to interpret and construe this Plan, any rules and regulations under this Plan and the terms and conditions of any Award granted hereunder, and to make exceptions to any such provisions in good faith and for the benefit of the Company; and (viii) to make all other determinations deemed necessary or advisable for the administration of this Plan.

      (c) Determinations by the Administrator. All decisions, determinations and interpretations by the Administrator regarding the Plan, any rules and regulations under the Plan and the terms and conditions of or operation of any Award granted hereunder, shall be final and binding on all Participants, beneficiaries, heirs, assigns or other persons holding or claiming rights under the Plan or any Award. The Administrator shall consider such factors as it deems relevant, in its sole and absolute discretion, to making such decisions, determinations and interpretations including, without limitation, the recommendations or advice of any officer or other employee of the Company and such attorneys, consultants and accountants as it may select.

      (d) Subsidiary Awards. In the case of a grant of an Award to any Participant employed by a Subsidiary, such grant may, if the Administrator so directs, be implemented by the Company issuing any subject Shares to the Subsidiary, for such lawful consideration as the Administrator may determine, upon the condition or understanding that the Subsidiary will transfer the Shares to the Participant in accordance with the terms of the Award specified by the Administrator pursuant to the provisions of the Plan. Notwithstanding any other provision hereof, such Award may be issued by and in the name of the Subsidiary and shall be deemed granted on such date as the Administrator shall determine.

      The Board may amend, alter or discontinue this Plan and the Administrator may amend, or alter any agreement or other document evidencing an Award made under this Plan but, except as provided pursuant to the provisions of Section 12, no such amendment shall, without the approval of the stockholders of the Company:

      No amendment or alteration to the Plan or an Award or Award Agreement shall be made which would impair the rights of the holder of an Award, without such holder’s consent, provided that no such consent shall be required if the Administrator determines in its sole discretion and prior to the date of any change of control (as defined in the applicable Award Agreement) that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard.

      The Company and any Subsidiary or affiliate which is in existence or hereafter comes into existence shall not be liable to a Participant or any other person as to: (i) the non-issuance or sale of Shares 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 (ii) any tax consequence expected, but not realized, by any Participant or other person due to the receipt, exercise or settlement of any Award granted hereunder.

      Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or the Administrator to adopt such other incentive arrangements as either may deem desirable, including without limitation, the granting of restricted stock or stock options otherwise than under this Plan or an arrangement not intended to qualify under Code Section 162(m), and such arrangements may be either generally applicable or applicable only in specific cases.

      This Plan and any agreements or other documents hereunder shall be interpreted and construed in accordance with the laws of the Delaware and applicable federal law. Any reference in this Plan or in the

agreement or other document evidencing any Awards to a provision of law or to a rule or regulation shall be deemed to include any successor law, rule or regulation of similar effect or applicability.

      In the event a Participant or other holder of an Award or person claiming a right under an Award or the Plan believes that a decision by the Administrator with respect to such person or Award was arbitrary or capricious, the person may request arbitration with respect to such decision. The review by the arbitrator shall be limited to determining whether the Participant or other Award holder has proven that the Administrator’s decision was arbitrary or capricious. This arbitration shall be the sole and exclusive review permitted of the Administrator’s decision. Participants, Award holders and persons claiming rights under an Award or the Plan explicitly waive any right to judicial review.

      Notice of demand for arbitration shall be made in writing to the Administrator within thirty (30) days after the applicable decision by the Administrator. The arbitrator shall be selected by those members of the Board who are neither members of the Compensation Committee of the Board nor employees of the Company or any Subsidiary. If there are no such members of the Board, the arbitrator shall be selected by the Board. The arbitrator shall be an individual who is an attorney licensed to practice law in the jurisdiction in which the Company’s headquarters are then located. Such arbitrator shall be neutral within the meaning of the Commercial Rules of Dispute Resolution of the American Arbitration Association; provided, however, that the arbitration shall not be administered by the American Arbitration Association. Any challenge to the neutrality of the arbitrator shall be resolved by the arbitrator whose decision shall be final and conclusive. The arbitration shall be administered and conducted by the arbitrator pursuant to the Commercial Rules of Dispute Resolution of the American Arbitration Association. Each side shall bear its own fees and expenses, including its own attorney’s fees, and each side shall bear one half of the arbitrator’s fees and expenses. The decision of the arbitrator on the issue(s) presented for arbitration shall be final and conclusive and may be enforced in any court of competent jurisdiction.

24. No Right to Employment, Reelection or Continued Service

      Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Subsidiaries and/or its affiliates to terminate any Participant’s employment, service on the Board or service for the Company at any time or for any reason not prohibited by law, nor shall this Plan or an Award itself confer upon any Participant any right to continue his or her employment or service for any specified period of time. Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, any Subsidiary and/or its affiliates. Subject to Sections 4 and 19, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Board without giving rise to any liability on the part of the Company, its Subsidiaries and/or its affiliates.

      The Plan is intended to be an unfunded plan. Participants are and shall at all times be general creditors of the Company with respect to their Awards. If the Administrator or the Company chooses to set aside funds in a trust or otherwise for the payment of Awards under the Plan, such funds shall at all times be subject to the claims of the creditors of the Company in the event of its bankruptcy or insolvency.

. FOLD AND DETACH HERE .

THE ADVISORY BOARD COMPANY

This Proxy is solicited on behalf of the Board of Directors

     The undersigned, having duly received the Notice of Annual Meeting of Stockholders and Proxy Statement, dated October 3, 2005, and revoking all prior proxies, hereby appoints Frank J. Williams (with full power to act alone and with power of substitution and revocation), to represent the undersigned and to vote, as designated on this proxy card, all shares of Common Stock of The Advisory Board Company which the undersigned is entitled to vote at the Annual Meeting of Stockholders of The Advisory Board Company to be held at 10:00 a.m. local time on November 15, 2005 at the offices of The Advisory Board Company located at 2445 M Street, NW, Washington, DC 20037, and at any postponement or adjournments thereof. If this proxy is executed and returned and no voting direction is given with respect to any election to office or proposal, this proxy will be voted as recommended by the Board of Directors. Attendance of the undersigned at the meeting or at any postponement or adjournment thereof will not be deemed to revoke this proxy unless the undersigned shall revoke this proxy in writing.

The Board of Directors recommends a vote FOR Proposals One and Two to be voted upon at the Annual Meeting:

(INSTRUCTION: To withhold authority to vote for a nominee, strike a line through the nominee’s name listed below.)

Each Director nominee was recommended by our Governance Committee, which is comprised solely of independent, non-management directors.

. FOLD AND DETACH HERE .

    

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY CARD IN THE ENCLOSED RETURN ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.