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Sample Business Contracts

Stock Option Agreement #2 - The Corporate Advisory Board Co. and Jeffrey D. Zients

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                           STOCK OPTION AGREEMENT #2

                                  PURSUANT TO

                      THE CORPORATE ADVISORY BOARD COMPANY

                    STOCK-BASED INCENTIVE COMPENSATION PLAN

     THIS STOCK OPTION AGREEMENT #2 (this "Option Agreement"), is made effective
as of October 31, 1997 (the "Effective Date"), between The Corporate Executive
Board Company, a Delaware corporation (the "Company"), and Jeffrey D. Zients
(the "Optionee"), granting to the Optionee Options to purchase 2,538 Option
Shares at a purchase price of $35.00 per Option Share, as further described in
Section 2 hereinbelow.

                                R E C I T A L S
                                - - - - - - - -

     A.  On the Effective Date, the Company adopted the Stock-Based Incentive
Compensation Plan (the "Plan") and, separately, granted the Optionee Options to
purchase hares of Class B Nonvoting Common Stock of the Company, par value $0.01
per share (the "Stock").

     B.  The Company and the Optionee now desire to memorialize their
understanding with respect to the grant of Options made as of the Effective
Date.

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

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

     l.   1,000 authorized shares of Class A Common Stock, par value $0.01 per
          share, of which 1,000 shares have been issued to David G. Bradley;

     2.   1,399,000 authorized shares of Class B Nonvoting Common Stock (the
          "Stock"), par value $0.01 per share, of which 726,000 shares have been
          issued to David G. Bradley;
<PAGE>

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

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

                                   AGREEMENTS
                                   ----------

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

     "Act" is defined in Section 7(a).

     "Agreement Not to Compete" means the Agreement Concerning Exclusive
Services, Confidential Information, Business Opportunities, Non-Competition,
Non-Solicitation, and Work Product between the Optionee and the Company.

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

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

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

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

     "Committee" is defined in the Plan.

     "Company" is defined in the preamble.

                                       2
<PAGE>

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

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

     "Effective Date" is defined in the preamble.

     "Exercise Date" is defined in Section 6(a).

     "Exercise Price" is defined in Section 2.

     "Expiration Event" is defined in Section 5.

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

     "First Vesting Date" is defined in Section 3(a).

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

     "Fourth Vesting Date" is defined in Section 3(a).

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

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

     "Last Vesting Date" is defined in Section 3(a).

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

                                       3
<PAGE>

outstanding stock of the Company, the holder of a plurality of the outstanding
stock of the Company.

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

     "Net Proceeds" is defined in Section 4(b)(ii).

     "Non-Vested Options" is defined in Section 3(a).

     "Note" is defined in Section 6(a)(iii).

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

     "Option Agreement #1" means the Stock Option Agreement #1 between the
Optionee and the Company.

     "Option Number" is defined in Section 2.

     "Optionee" is defined in the preamble.

     "Option Shares" means Stock subject to the Option.

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

     "Plan" is defined in Recital A.

     "Redemption Date" is defined in Section 11(a).

     "Redemption Payment" is defined in Section 11(a).

     "Redemption Payment Period" is defined in Section 11(a).

     "Second Vesting Date" is defined in Section 3(a).

     "Stock" is defined in Recitals A and D.

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

     "Stockholders' Agreement" means the Stockholders' Agreement of the Company
setting forth, inter alia, certain rights, preferences and privileges of and
               ----------                                                  
restrictions on the Option

                                       4
<PAGE>

Shares. The Optionee must execute a copy of the Stockholders' Agreement prior to
receiving his or her Option Shares pursuant to the exercise of the Option.

     "Termination Date" means the date on which the Optionee ceases to serve as
an officer of the Company (or act in such other capacity with the Company as the
Chairman of the Board and the Optionee shall later mutually agree) for any
reason other than (i) for Cause, (ii) for death or a Disability, or (iii) upon a
Voluntary Resignation Date.

     "Third Vesting Date" is defined in Section 3(a).

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

     "Vesting Dates" means the First Vesting Date, the Second Vesting Date, the
Third Vesting Date, the Fourth Vesting Date, and the Last Vesting Date,
collectively.

     "Vested Options" is defined in Section 3(a).

     "Voluntary Resignation Date" means the date on which the Optionee ceases to
serve as an officer of the Company (or act in such other capacity with the
Company as the Chairman of the Board and the Optionee shall later mutually
agree) for voluntary reasons.  Voluntary Resignation Date shall not include the
date on which the Optionee ceases to serve as an officer of the Company (or act
in such other capacity with the Company as the Chairman of the Board and the
Optionee shall later mutually agree) due to death or a Disability.

     "Withholding Taxes" is defined in Section 12.
    
     2. Grant of Option. The Company grants to the Optionee the right and option
(the "Option" or "Options") to purchase, on the terms and conditions hereinafter
set forth, all or any part of an aggregate number of Option Shares as described
in the preamble (the outstanding amount of such unexercised and unexpired
Options herein referred to as the "Option Number"), at the purchase price per
Option Share as described in the preamble (as such amount may be adjusted as
herein provided, the "Exercise Price"), on the terms and conditions set forth
herein. These Options shall be treated as non-qualified stock options.

     3.  Vesting.

     (a) Generally.  The Options to purchase Stock of the Company shall vest
         ---------                                                         
according to the following schedule (the amount of unexercised and unexpired
Options vested as of a given date shall herein be referred to as the "Vested
Options"; the amount of unexercised and unexpired Options not vested as of a
given date shall herein be referred to as the "Non-Vested Options"):

                                       5
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------
                                                 CUMULATIVE NUMBER OF
        DATE                                        OPTIONS VESTED
-------------------------------------------------------------------------
<S>                                                 <C>
    The Effective Date                                   136
-------------------------------------------------------------------------
       April 1, 1998                                   
(the "First Vesting Date")                               272
-------------------------------------------------------------------------    
       April 1, 1999                                   
(the "Second Vesting Date")                              527
-------------------------------------------------------------------------
       April 1, 2000                                   
(the "Third Vesting Date")                               781
-------------------------------------------------------------------------
       April 1, 2001                                   
(the "Fourth Vesting Date")                            1,036
-------------------------------------------------------------------------
       April 1, 2006                                   
(the "Last Vesting Date")                              2,538
-------------------------------------------------------------------------
</TABLE>

     (b) Approved Sale.  Prior to the Last Vesting Date and an Initial Public
         -------------                                                      
Offering, in the event of either an Approved Sale pursuant to Section 4(b)(i) or
a Distribution pursuant to Section 4(b)(ii) that does not permit the exercise of
all Option Shares, the Options exercisable pursuant to such sections shall,
first, be deemed Vested Options and shall, second, be deemed Non-Vested Options
(but only to the extent the number of Options exercisable pursuant to Sections
4(b)(i) and (ii) exceeds the number of Vested Options).  Any Non-Vested Options
that remain outstanding as of the end of the day on which any of the events
described in the foregoing sentence have occurred shall vest according to the
schedule set forth in Section 3(a) above as if the Approved Sale or Distribution
described in the foregoing sentence did not occur.

     (c) Effect of Merger, Adjustments and Dilution.  In the event the number of
         ------------------------------------------                            
Options are adjusted pursuant to Sections 9 or 10 below, the schedule set forth
in Section 3(a) above with respect to the cumulative number of Options that vest
on each of certain specified dates shall be proportionately modified to reflect
such adjustment in the number of Options.  More particularly (without limiting
the generality of the foregoing), the percentage of Options vested on each of
the dates specified on the schedule shall be the same before and after any
adjustments required by Sections 9 or 10 below.

     (d) Initial Public Offering.  In the event of an Initial Public Offering,
         -----------------------                                             
the Options shall vest according to the provisions of Section 4(b)(iii) below.

     (e) No Additional Rights.  This Section 3 shall not confer on the Optionee
         --------------------                                                 
any right, expressed or implied, other than those rights specifically expressed
in this Option Agreement.

     4.  Exercisability.
         -----------------

     (a) Generally.  Prior to an Initial Public Offering, all unexpired and
         ---------                                                        
unexercised Vested Options as of a particular Vesting Date shall be exercisable
during the month of April beginning on such Vesting Date and during every month
of July, October, January, and April thereafter, or at such other times after
such Vesting Date and prior to an Initial Public Offering as determined by the
Company in its sole and absolute discretion.  Prior to an Initial Public
Offering

                                       6
<PAGE>

and notwithstanding anything in this Section 4(a) to the contrary, if an
investment bank is performing, or has performed, substantial services for the
Company to examine, investigate, and analyze the possibility, feasibility, or
viability of an Initial Public Offering within six (6) months of a month during
which the Options would otherwise become exercisable pursuant to this Section
4(a), the Chairman of the Board may, in his sole and absolute discretion, make a
determination that such Options shall not be exercisable for such month and may
designate some other month (including the following month of January, April,
July, or October, as appropriate) for the exercise of the Options; provided,
however, the Chairman of the Board may not designate some other month for the
exercise of the Options pursuant to this Section 4(a) any later than the month
of March beginning on March 1, 2009.

     (b) Other Exercisable Events.  Notwithstanding anything to the contrary in
         ------------------------                                             
Section 4(a) above, the Options shall be exercisable upon the occurrence of any
of the following events prior to, on, or after, the Vesting Dates:

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

          (ii)   Approved Sale of Assets.  Prior to an Initial Public Offering,
                 -----------------------                                      
     in the event of a Distribution by the Company that is funded with one
     hundred percent (100%) of the proceeds, after payment of related expenses
     (the "Net Proceeds") from an Approved Sale of one hundred percent (100%) of
     the Company's assets, the Options shall be exercisable on the date of such
     Distribution.  For purposes of this Section 4(b)(ii), a Distribution made
     by the Company shall not be treated as a Distribution funded with the Net
     Proceeds from an Approved Sale of the Company's assets to the extent of the
     Company's Undistributed Earnings as of the Distribution date.  However, if
     less than one hundred percent (100%) of the Net Proceeds from an Approved
     Sale of one hundred percent (100%) of the Company's assets is so
     distributed, the Optionee shall only be entitled on the date of the
     Distribution to exercise Options with respect to a number of Option Shares
     equal to the Option Number immediately prior to such Distribution
     multiplied by the percentage of the Net Proceeds from such Approved Sale
     that is so distributed by the Company.  If less than one hundred percent
     (100%) of the Company's assets is sold pursuant to an Approved Sale and all
     or some portion of the Net Proceeds from such Approved Sale is so
     distributed, the Optionee shall be entitled on the date of Distribution to
     exercise Options with respect to a number of Option Shares equal to the
     Option Number immediately prior to such Distribution multiplied by the
     product of (A) the

                                       7
<PAGE>

     percentage, based on Fair Market Value, of the Company's assets sold
     pursuant to such Approved Sale, and (B) the percentage of the Net Proceeds
     from such Approved Sale that is so distributed by the Company.

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

          (A)  as of the date one (1) year after the Initial Public Offering or
               such earlier date(s) as David G. Bradley shall designate in his
               sole and absolute discretion, fifty percent (50%) of the Option
               Number as of the date of the Initial Public Offering; and

          (B)  as of the date two (2) years after the Initial Public Offering or
               such earlier date(s) as David G. Bradley shall designate in his
               sole and absolute discretion, fifty percent (50%) of the Option
               Number as of the date of the Initial Public Offering.

     (c) Determination of Exercisable Options.  The good faith determination by
         ------------------------------------                                 
the Company of the number of Options that may be exercisable by the Optionee
pursuant to Sections 4(b)(i), (ii) and (iii) above shall be binding upon the
Optionee.

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

     (a) March 31, 2009.  Upon March 31, 2009, the Options shall expire.
         --------------                                                

     (b) Termination by the Company.  Prior to an Initial Public Offering, (i)
         --------------------------                                          
the Options shall all expire as of the date the Optionee is terminated by the
Company for Cause; or (ii) as of the Termination Date, the Options that are Non-
Vested Options as of the Termination Date shall all expire as of such
Termination Date.

     (c) Voluntary Resignation by the Optionee.  Prior to an Initial Public
         -------------------------------------                            
Offering, (i) the Options shall all expire on the Voluntary Resignation Date if
the Optionee resigns without providing the Company with twelve (12) months prior
notice; or (ii) as of a Voluntary Resignation Date, the Options that are Non-
Vested Options as of the Voluntary Resignation Date shall all expire as of such
Voluntary Resignation Date.

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

                                       8
<PAGE>

outstanding Stock sold pursuant to the Approved Sale by such Majority
Shareholder divided by the total number of shares of the Company's outstanding
Stock held by such Majority Shareholder immediately prior to such Approved Sale
exceeds the number of Option Shares purchased by the Optionee on the date of
such Approved Sale.

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

     (f) Initial Public Offering.  In the event of an Initial Public Offering,
         -----------------------                                             
the Options shall expire as of the Voluntary Resignation Date or the date on
which the Optionee ceases to be employed by the Company for Cause.  Any portion
of the Option that is unexercisable as of the expiration date shall remain
unexercisable and shall also terminate as of such date.  If, within two (2)
years after an Initial Public Offering, the Optionee is terminated by the
Company other than for Cause or ceases employment as a result of death or a
Disability, the Options shall expire as of the date two (2) years and thirty
(30) days after the date of the Initial Public Offering.  Notwithstanding
anything in this subsection (f) to the contrary and except as otherwise provided
in Section 5(a) above, if two (2) years have elapsed since the Initial Public
Offering, the Option shall expire as of the date thirty (30) days after the date
on which the Optionee ceases to be employed by the Company for any reason other
than death or a Disability.

     6.  Exercise of the Option.
         ----------------------

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

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

                                       9
<PAGE>

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

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

          (iv)   The amount, if any, required pursuant to Section 12 hereof.

     (b) Notwithstanding anything in Section 6(a) to the contrary, the Committee
may, in its sole and absolute discretion, permit payment of the Exercise Price
in such form or in such manner as may be otherwise permissible under the Plan
and under any applicable law.

     (c) If the Optionee provides payment as provided in Section 6(a)(iii)(B)
above, the Optionee agrees to execute and deliver such other documents as may be
reasonably required by the Company to effectuate and secure the Note.  If a
Voluntary Resignation Date occurs without the Optionee providing the Company
with twelve (12) months prior notice of his or her intention to resign, the
Note, together with any accrued interest thereon, shall be immediately payable
upon the earlier of the due date of the Note or the Voluntary Resignation Date.

     7.  Compliance with Legal Requirements.
         ----------------------------------

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

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

                                       10
<PAGE>

assurances satisfactory to counsel to the Company with respect to such matters
as the Company reasonably may deem desirable to assure compliance with all
applicable legal requirements.

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

     8.  Nontransferability.  Subject to Sections 9 and 11 hereof, the Option
         ------------------                                                 
shall not be transferable by the Optionee except, after the Optionee's death, to
his or her spouse, child, estate, personal representative, heir or successor.
More particularly (but without limiting the generality of the foregoing), the
Option may not be assigned, transferred (except as aforesaid), pledged or
hypothecated in any way (whether by operation of law or otherwise), and shall
not be subject to execution, attachment or similar process.  Any assignment,
transfer, pledge, hypothecation or other disposition of the Option contrary to
the provisions hereof, and the levy of any attachment or similar process upon
the Option that would otherwise effect a change in the ownership of the Option,
shall terminate the Option; provided, however, that in the case of the
involuntary levy of any attachment or similar involuntary process upon the
Option, the Optionee shall have thirty (30) days after notice thereof to cure
such levy or process before the Option terminates.  This Option Agreement shall
be binding on and enforceable against any person who is a permitted transferee
of the Option pursuant to the first sentence of this Section.

     9.  Effect of Merger; Adjustments.
         -----------------------------

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

     (b) Subject to Section 9(a) above, if the shares of the Stock are changed
into or exchanged for a different number or kind of shares or securities, as the
result of any one or more reorganizations, recapitalizations, mergers,
acquisitions, stock splits, reverse stock splits, stock dividends or similar
events, an appropriate adjustment shall be made in the number and kind of shares
or other securities subject to the Option, and the price for each share or other
unit of any securities subject to this Option Agreement, in accordance with
Section 10 of the Plan.  No fractional interests shall be issued on account of
any such adjustment unless the Committee specifically determines to the
contrary; provided, however, that in lieu of fractional interests, the Optionee,
          --------  -------                                                    
upon the exercise of the Option in whole or part, shall receive cash in an
amount equal to the amount by which the Fair Market Value of such fractional
interests exceeds the Exercise Price attributable to such fractional interests.

     10.  Adjustments and Dilution.
          ------------------------

     (a) If the capitalization of the Company changes as the result of one or
more stock dividends, stock splits, reverse stock splits, combinations,
recapitalizations, reclassifications, mergers, consolidations or similar events,
an appropriate adjustment shall be made in the number

                                       11
<PAGE>

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

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

     11.  Right of Redemption of Options.
          ------------------------------

     (a) Prior to an Initial Public Offering of the Stock of the Company and
notwithstanding anything in Section 8 above to the contrary, the Company shall
have the right, on or after the First Vesting Date and in its sole and absolute
discretion, to redeem, in whole, the Options that are Vested Options as of the
date (the "Redemption Date") of the Company's exercise of this right of
redemption, and the Optionee shall be obligated to sell, in whole, such Vested
Options as required by the Company's exercise of this right.  The redemption of
the Vested Options shall be effective as of the Redemption Date.  Payment for
the redeemed Options (the "Redemption Payment") shall be made by means of the
payment to the Optionee by the Company of the Fair Market Value of such Options
in cash or by check as of the date one (1) year after the Redemption Date or
such earlier date(s) as the Company may designate in its sole and absolute
discretion (the "Redemption Payment Period").  For purposes of this Section
11(a), the Fair Market Value of the redeemed Options shall be determined as of
the Redemption Date and no interest shall accrue on any portion of the
Redemption Payment due and outstanding during the Redemption Payment Period.

     (b) Notwithstanding anything to the contrary in Section 11(a) above, as of
the end of the Redemption Payment Period, payment of any due and outstanding
portion of the Redemption Payment shall be delayed if the Company determines it
is suffering from a Cash Shortage.  Any outstanding portion of a Redemption
Payment that would otherwise be due and payable during a period of Cash Shortage
shall be delayed for a period of six (6) months, after which time the Company
shall either make any payment that has been delayed, or determine that the
Company continues to suffer from a Cash Shortage.  Interest shall accrue at
Market Rate during any period of delay due to this Section 11(b).

     (c) Notwithstanding anything in Sections 11(a) and (b) above to the
contrary, if a Voluntary Resignation Date occurs without the Optionee providing
the Company with twelve (12) months prior notice of his or her intention to
resign, then any portion of the Redemption Payment outstanding as of such
Voluntary Resignation Date, together with any accrued and

                                       12
<PAGE>

unpaid interest thereon, shall be forfeited by the Optionee, and the Company
shall have no further liability with respect to such outstanding portion and
such accrued interest, if any.

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

     13.  No Interest in Shares Subject to Option.  Neither the Optionee
          ---------------------------------------                      
(individually or as a member of a group) nor any beneficiary or other person
claiming under or through the Optionee shall have any right, title, interest, or
privilege in or to any shares of Stock allocated or reserved for the purpose of
the Plan or subject to this Option Agreement except as to such Option Shares, if
any, as shall have been issued to such person upon exercise of the Option or
portion thereof.

     14.  Subject to Stockholders' Agreement.  The Optionee acknowledges that
          ----------------------------------                                
the Option Shares are subject to the terms of the Stockholders' Agreement.

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

     16.  Not an Employment Contract.  Nothing in the Plan, in this Option
          --------------------------                                     
Agreement or any other instrument executed pursuant thereto shall confer upon
the Optionee any right to continue in the employ of the Company nor shall affect
the right of the Company to terminate the employment of the Optionee with or
without Cause.

     17.  Subject to Agreement Not to Compete.  The Optionee acknowledges that
          -----------------------------------                                
the execution of the Agreement Not to Compete is a condition precedent to the
receipt of any rights or benefits conferred on the Optionee by this Option
Agreement.

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

                                       13
<PAGE>

such other address as shall be given in writing by Optionee or his or her
permitted transferee to the Company).

     19.  Binding Effect.  This Option Agreement shall inure to the benefit of
          --------------                                                     
and be binding upon the parties hereto and their respective permitted successors
and assigns.

     20.  Entire Option Agreement.  This Option Agreement, together with the
          -----------------------                                          
Plan, Stockholders' Agreement, the Option Agreement #1, the Agreement Not to
Compete and the Substitution Agreement between The Advisory Board Company and
the Optionee, sets forth the entire agreement and understanding between the
parties as to the subject matter hereof (including, but not limited to, any
rights of the Optionee to any value or appreciation in value of the Company or
its capital stock) and supersedes all prior oral and written and all
contemporaneous oral discussions, agreements and understandings of any kind or
nature.

     21.  Amendments and Waivers.  This Option Agreement may be amended, and any
          ----------------------                                               
provision hereof may be waived, only by a writing signed by the party to be
charged.

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

     23.  Actions by the Company.  Any reference within this Option Agreement to
          ----------------------                                               
an action, judgment, conclusion, or determination by the Company shall mean an
action, judgment, conclusion, or determination of the Board of Directors of the
Company or its authorized representative(s).

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

     25.  Governing Law.  All terms of and rights under this Option Agreement
          -------------                                                     
shall be governed by and construed in accordance with the internal law of the
State of Delaware, without giving effect to principles of conflicts of law.

     26.  Arbitration.  The parties shall endeavor to settle all disputes by
          -----------                                                      
amicable negotiations.  Any claim, dispute, disagreement or controversy that
arises among the parties relating to this Option Agreement (excluding
enforcement by the Company of its rights under the Agreement Not to Compete)
that is not amicably settled shall be resolved by arbitration, as follows:

     (a) Any such arbitration shall be heard in the District of Columbia, before
a panel consisting of one (1) to three (3) arbitrators, each of whom shall be
impartial.  Except as the parties may otherwise agree, all arbitrators shall be
appointed in the first instance by the appropriate official in the District of
Columbia office of the American Arbitration Association or, in the event of his
or her unavailability by reason of disqualification or otherwise, by the
appropriate official in the New York City office of the American Arbitration
Association.  In determining the number and appropriate background of the
arbitrators, the appointing authority

                                       14
<PAGE>

shall give due consideration to the issues to be resolved, but his or her
decision as to the number of arbitrators and their identity shall be final.
Except as otherwise provided in this Section 26, all of the arbitration
proceedings shall be conducted in accordance with the rules of the arbitrators.

     (b) An arbitration may be commenced by any party to this Option Agreement
by the service of a written request for arbitration upon the other affected
parties.  Such request for arbitration shall summarize the controversy or claim
to be arbitrated, and shall be referred by the complaining party to the
appointing authority for appointment of arbitrators ten (10) days following such
service or thereafter.  If the panel of arbitrators is not appointed by the
appointing authority within thirty (30) days following such reference, any party
may apply to any court within the District of Columbia for an order appointing
arbitrators qualified as set forth below.

     (c) All attorneys' fees and costs of the arbitration shall in the first
instance be borne by the respective party incurring such costs and fees, but the
arbitrators shall have the discretion to award costs and/or attorneys' fees as
they deem appropriate under the circumstances.  The parties hereby expressly
waive punitive damages, and under no circumstances shall an award contain any
amount that in any way reflects punitive damages.

     (d) Judgment on the award rendered by the arbitrators may be entered in any
court having jurisdiction thereof.

     (e) It is intended that controversies or claims submitted to arbitration
under this Section 26 shall remain confidential, and to that end it is agreed by
the parties that neither the facts disclosed in the arbitration, the issues
arbitrated, nor the views or opinions of any persons concerning them, shall be
disclosed to third persons at any time, except to the extent necessary to
enforce an award or judgment or as required by law or in response to legal
process or in connection with such arbitration.

                                       15
<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Option Agreement to be
effective as of the date set forth above.

                              THE CORPORATE EXECUTIVE BOARD COMPANY


                              By:     /s/ Harold L. Siebert
                                     -----------------------------------
                              Name:   Harold "Rusty" Siebert
                              Title:  Chairman of the Board of Directors



                              OPTIONEE


                              Signature:   /s/ Jeffrey D. Zients
                                          ------------------------------
                                           Jeffrey D. Zients






                                       16