ABCO The Advisory Board Company (MM)

PROPOSAL NO. 3 APPROVAL OF 2009 INCENTIVE PLAN AMENDMENT

The stockholders are being asked to consider and vote upon a proposal to approve an amendment to section 5 of The Advisory Board Company Amended and Restated 2009 Stock Incentive Plan, which we refer to as the “2009 incentive plan” or the “plan,” to increase the total number of shares of common stock issuable under the 2009 incentive plan.

Stockholder approval of the amendment, which we refer to as the “2009 plan amendment,” would authorize the company to increase the total number of shares of common stock issuable under the 2009 incentive plan by 1,000,000 shares.

The company is seeking approval of the 2009 plan amendment to comply with NASDAQ stockholder approval requirements applicable to material amendments to equity plans that have been approved by stockholders.

The Board of Directors approved the 2009 plan amendment, subject to stockholder approval at this annual meeting, on April 17, 2017 upon the recommendation of the Compensation Committee. If approved by stockholders at the annual meeting, the 2009 plan amendment will be effective at the time of stockholder approval.

You are urged to read this entire proposal and the complete plan document, which is attached as Appendix B to this proxy statement. We believe that the 2009 plan amendment is necessary to recruit and retain key employees critical to our success and to align the interests of our management with the interests of our stockholders, and thus that this proposal is in the best interests of our stockholders. We have explained our reasons for supporting this proposal under “Why We Believe You Should Vote For This Proposal” below.

Prior Stockholder Approvals

The company’s stockholders approved the 2009 incentive plan at our 2009 annual meeting of stockholders held on September 11, 2009 and approved an amendment to increase the total number of shares of common stock issuable under the plan at our 2011 annual meeting of stockholders held on September 13, 2011. At our 2013 annual meeting of stockholders held on September 5, 2013, the company’s stockholders approved (1) an amendment to the 2009 incentive plan to increase the total number of shares of common stock issuable under the plan by 2,125,000 shares, (2) an amendment to the 2009 incentive plan to increase the maximum term for option awards and freestanding stock appreciation rights awards under the plan from five years to seven years, effective for awards granted from and after the date of such stockholder approval, and (3) the material terms for payment of performance-based compensation under the 2009 incentive plan as required by Section 162(m) of the Internal Revenue Code, or “Code.” At our 2015 annual meeting of stockholders held on June 9, 2015, the company’s stockholders approved an amendment to the 2009 stock incentive plan to reserve as additional plan shares (a) 3,800,000 shares of common stock and (b) all shares of common stock available for future awards under the company’s 2005 Stock Incentive Plan, which we refer to as the “2005 incentive plan,” as of June 9, 2015, as well as all shares (i) subject as of that date to outstanding awards under the 2005 incentive plan and (ii) subject as of June 26, 2009 under the company’s 2006 Stock Incentive Plan, which we refer to as the “2006 incentive plan,” that, in either case, cease to become subject to such awards (other than by reason of exercise or settlement of such awards to the extent the awards are exercised for or settled in vested and nonforfeitable shares).

Why We Believe You Should Vote For This Proposal

Approval of the 2009 plan amendment would increase the total number of shares of common stock issuable under the 2009 incentive plan by 1,000,000 shares.

The Board of Directors believes that the 2009 plan amendment is essential for the ongoing success of our company and its ability to recruit, retain, and reward key employees and to continue to provide equity-based compensation in a manner that is consistent with the company’s current compensation program and aligned with stockholders’ interests. If this proposal is not approved by stockholders, the Compensation Committee will continue to make grants under the 2009 incentive plan to the extent of the shares of common stock remaining

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available for issuance under the plan and otherwise in accordance with the current terms of the plan. Our directors believe that if this proposal is not approved our ability to align the interests of key employees with stockholders through equity-based compensation would be compromised, disrupting our compensation program and impairing our ability to recruit and retain key employees, or requiring us to shift our compensation plan to include a much higher proportion of cash compensation.

Our Continuing Emphasis on Linking Compensation and Stockholder Value Creation.     We believe it is essential to provide a long-term link between compensation and stockholder value creation, and we rely on equity compensation as one of the most efficient and effective means to create such a relationship. Our long-term equity incentive program is designed to align the interests of our officers and other key employees with those of stockholders, motivate the executive officer team to achieve key financial goals, and reward superior performance over a multi-year period. We historically have used options and restricted stock units to create this link between pay and performance. Options inherently have no value unless our stock price increases, because the 2009 incentive plan requires options to be granted with an exercise price at least equal to fair market value of our common stock on the date of grant. The fair value of a restricted stock unit fluctuates with upward or downward movements in our stock price, which serves to align management’s interests with those of stockholders while at the same time creating more stability by providing an incentive for the holders of restricted stock units to remain with the company even if our stock price declines after the date of grant. If stockholders do not approve the 2009 plan amendment, our ability to create long-term incentives for key employees will be substantially diminished.

The Need to Provide Competitive Compensation.     Similar to other companies in our industry, we believe equity compensation is integral in providing a competitive total compensation package necessary to recruit, retain, and reward key employees. Successful execution of our business strategy requires us to hire and retain high-performing key employees in a number of functional areas, including senior management, operations, engineering, software development, sales, marketing, finance, legal, human resources, and strategy. We compete in the labor market for these talented employees with many other public and privately-held companies that provide equity-based compensation, and we believe that we must continue granting equity-based awards to remain a competitive employer. Therefore, we believe it is essential to our business strategy to have equity-based compensation as a component of our compensation program.

Cash Compensation Expense Increase.     If our ability to provide equity compensation is impaired, our company’s cash compensation costs could increase substantially to offset equity compensation typically provided in the marketplace and maintain total compensation levels to attract and retain top performers. It is important that we use our cash resources to operate and expand our business, rather than unnecessarily divert cash to pay compensation that otherwise would be delivered through equity-based awards.

History of Prudent Usage.     Our historic equity usage has been effective in recruiting and retaining talent and aligning management incentives with company performance, and has been in line with industry norms on an aggregate basis. We set targets for equity compensation based on industry standards and other data provided to the Compensation Committee by an independent compensation consultant. Based on this information, our equity usage is consistent with the broader market as well as with the peer group of companies we use to benchmark executive compensation.

In addition, we have repurchased approximately 4,514,000 shares of our common stock for a total purchase price of approximately $190.5 million from April 1, 2012 through December 31, 2016 under our share repurchase program. We will continue to seek an appropriate balance between meeting employee hiring, retention, and compensation goals and avoiding excessive stockholder dilution.

Promotion of Good Corporate Governance Practices.     The company and the Board of Directors designed the 2009 incentive plan to include a number of provisions that we believe promote best practices by reinforcing the alignment between stock-based compensation arrangements and stockholders’ interests. Under these provisions:

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Equity Awards and Other Plan Information.     The following table includes information regarding all of the company’s outstanding equity awards and shares available for future awards under the company’s equity plans as of April 3, 2017, without giving effect to this Proposal 3:

Summary of Material Provisions of 2009 Incentive Plan

The following summary of the material provisions of the 2009 incentive plan, as the plan is proposed to be amended by the 2009 plan amendment, is qualified in its entirety by reference to the complete text of the 2009

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incentive plan, which is attached as Appendix B to this proxy statement and incorporated by reference into this proposal. You are urged to read this proposal and the text of the 2009 incentive plan in their entireties.

Unless the context requires otherwise, references to the “company” in the following summary refer solely to The Advisory Board Company and not to subsidiaries of The Advisory Board Company.

Administration.     The 2009 incentive plan is administered by the Compensation Committee. Subject to the express provisions of the 2009 incentive plan, the administrator is authorized and empowered to do all things that it determines to be necessary or appropriate in connection with the administration of the 2009 incentive plan. The Compensation Committee may 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 2009 incentive plan. In addition, the Compensation Committee may delegate any or all aspects of the day-to-day administration of the 2009 incentive plan to one or more officers or employees of the company or any subsidiary, and/or to one or more agents.

The Board of Directors is authorized to appoint one or more committees of the Board consisting of one or more directors of the company who need not be non-employee directors. Any such committees would be authorized to administer the 2009 incentive plan with respect to participants in the plan who are not the company “officers” within the meaning of Rule 16a-1(f) under the Securities Exchange Act of 1934 or the company directors and, in this capacity, would be authorized to grant awards under the 2009 incentive plan to such participants and to determine all terms of such awards.

Participants.     Any person who is a current or prospective officer or employee of the company or of any subsidiary is eligible for selection by the administrator for the grant of awards under the 2009 incentive plan. In addition, non-employee directors and any service providers who have been retained to provide consulting, advisory, or other services to the company or to any subsidiary are eligible for the grant of awards under the 2009 incentive plan. Options intending to qualify as “incentive stock options,” or “ISOs,” within the meaning of Section 422 of the Code may be granted only to employees of the company or any subsidiary. As of April 3, 2017, approximately 3,700 employees and seven non-employee directors were eligible to participate in the 2009 incentive plan.

Shares Subject to the 2009 Incentive Plan and to Awards.     Subject to adjustments for changes in the company’s capitalization, the aggregate number of shares issuable pursuant to all awards granted on or after the date of stockholder approval of this Proposal 3 may not exceed the sum of:

Shares granted under options or stock appreciation rights are counted against this limit on a one-for-one basis and any shares granted as awards other than options or stock appreciation rights will be counted against this limit as two and one one-hundredths (2.01) shares for every one (1) share subject to such award. The shares issued pursuant to awards granted under the 2009 incentive plan may be shares that are authorized and unissued or shares that were reacquired by the company, including shares purchased in the open market.

For purposes of determining the share limits described in the paragraph above, the aggregate number of shares issued under the 2009 incentive plan at any time will equal only the number of shares actually issued upon

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exercise or settlement of an award. Notwithstanding the foregoing, shares subject to an award under the 2009 incentive plan may not again be made available for issuance under the 2009 incentive plan if such shares are:

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 will not count as shares issued under the 2009 incentive plan. Any shares that again become available for grant will be added back as one (1) share if such shares were subject to options or stock appreciation rights granted under the 2009 incentive plan, and as two and one one-hundredths (2.01) shares if such shares were subject to awards other than options or stock appreciation rights granted under the 2009 incentive plan.

For a summary of the maximum number of shares subject to awards that may be granted under the 2009 incentive plan during any calendar year and the aggregate number of shares that may be issued pursuant to the exercise of ISOs granted under the 2009 incentive plan, see “Performance-Based Compensation Terms” below. Subject to certain exceptions, the aggregate number of shares subject to options and stock appreciation rights granted under the 2009 incentive plan during any calendar year to any one non-employee director will not exceed 60,000 shares, and the aggregate number of shares issued or issuable under all awards granted under the 2009 incentive plan other than options or stock appreciation rights during any calendar year to any one non-employee director will not exceed 30,000 shares. In the calendar year in which a non-employee director first joins the Board of Directors, is designated as Chairman of the Board, or is designated as Lead Director, the maximum number of shares subject to awards granted to the non-employee director may be up to 200% of the number of shares set forth in the foregoing limits. The aggregate number of shares issued under the 2009 incentive plan pursuant to all awards granted to service providers, other than employees or non-employee directors, will not exceed 200,000 shares.

In the event that the company acquires another corporation and assumes outstanding equity awards of such acquired corporation, the number of shares authorized for issuance under the 2009 incentive plan will be increased to the extent necessary to satisfy such assumed equity awards and such shares will not reduce the shares otherwise authorized for issuance under the 2009 incentive plan. In the event that a corporation acquired by the company, or with which the company combines, has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan may be used for awards under the 2009 incentive plan and will not reduce the shares authorized for issuance under the 2009 incentive plan, so long as awards using such available shares will not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and will only be made to individuals who were not employees, directors, or consultants of the company immediately before such acquisition or combination.

On April 12, 2017, the closing price of the company’s common stock as reported on the NASDAQ Global Select Market was $47.40 per share.

Fair Market Value Determination.     For so long as the company’s common stock is traded on the NASDAQ Global Select Market, the fair market value of the common stock on an award grant date, or on any other date for which fair market value is required to be established under the 2009 incentive plan, will be the official closing price per share at which shares of the common stock are sold in the regular way on the NASDAQ Global Select Market on the date in question. If no shares of the company’s common stock are traded on the NASDAQ Global Select Market on such date, the fair market value of the common stock will be the closing price per share at which shares of the common stock are sold in the regular way on the NASDAQ Global Select Market on the next preceding date for which shares of the company’s common stock are traded on the NASDAQ Global Select Market.

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If the company’s common stock ceases to be traded on the NASDAQ Global Select Market, fair market value will similarly be determined by reference to the closing price per share at which shares of the company’s common stock are sold on any other exchange, listing, quotation, or similar service. If no such closing price is available, the administrator will determine the fair market value of the common stock by such other valuation method, consistent with Section 409A of the Code, as the administrator may determine.

Option Awards.     The administrator will establish the exercise price per share under each option, which, other than in the event of options granted in connection with a merger or other acquisition, will not be less than the fair market value of a share on the date the option is granted. The administrator will establish the term of each option, which in no case may exceed a period of seven years from the date of grant. Options granted under the 2009 incentive plan may either be ISOs or nonqualified stock options which are not intended to qualify as ISOs, or “NQSOs.” Subject to exceptions for death, disability, a change of control of the company, or, with respect to an option granted 12 months or more before the date of a termination of employment, in connection with such termination of employment, the vesting and/or exercisability of any option that is based solely on performance criteria and level of achievement versus such criteria will be subject to a performance period of not less than 12 months, and any option under which vesting and/or exercise is based solely on continued employment or the passage of time may not vest or be exercised in full prior to the 36th month following its date of grant (other than awards to non-employee directors, which will be subject only to a one-year minimum vesting requirement), but such vesting and/or exercise may be subject to pro-rata vesting over such 36-month period following a one-year minimum vesting period. Unless such an action is approved by stockholders, the 2009 incentive plan prohibits repricing out-of-the-money options and stock appreciation rights (that is, reducing the exercise price of an option or stock appreciation right with an exercise price above the market value of the company’s common stock or exchanging any such option or stock appreciation right for cash or a new award with a lower (or no) exercise price).

Stock Appreciation Rights.     A stock appreciation right provides the right to the monetary equivalent of the increase in value of a specified number of the shares over a specified period of time after the right is granted. Stock appreciation rights may be granted to participants either in tandem with or as a component of other awards granted under the 2009 incentive plan, or “tandem SARs,” or not in conjunction with other awards, or “freestanding SARs.” All freestanding SARs will be granted subject to the same terms and conditions applicable to options as set forth above (including the minimum vesting requirements) and in the 2009 incentive plan and all tandem SARs will have the same exercise price, vesting, exercisability, forfeiture, and termination provisions as the award to which they relate. The 2009 incentive plan prohibits repricing stock appreciation rights without stockholder approval.

Restricted Stock and Restricted Stock Units.     Restricted stock is an award or issuance of shares that the grant, issuance, retention, vesting, and/or transferability of which is subject during specified periods of time to conditions (including continued employment or performance conditions) and terms as the administrator deems appropriate. Restricted stock units are awards denominated in shares under which the issuance of shares is subject to conditions (including continued employment or performance conditions) and terms as the administrator deems appropriate. Participants holding shares of restricted stock granted under the 2009 incentive plan may exercise full voting rights with respect to those shares during the period of restriction. Participants 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. Participants in whose name restricted stock is granted are entitled to receive all dividends and other distributions paid with respect to those shares, unless determined otherwise by the administrator. Shares underlying restricted stock units are entitled to dividends or dividend equivalents only to the extent provided by the administrator. Participants will not vest in dividends paid on performance-based awards of restricted stock or in dividend equivalent rights paid on performance-based awards of restricted stock units, and will be required to forfeit and repay to the company such dividends and dividend equivalent rights, if the performance criteria for the underlying awards of restricted stock or restricted stock units are not achieved.

Subject to exceptions for death, disability, a change of control of the company, or, with respect to any such award granted 12 months or more before the date of a termination of employment, in connection with such termination of employment, the grant, issuance, retention, vesting, or settlement of shares under any such award

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that is based solely on performance criteria and level of achievement versus such criteria will be subject to a performance period of not less than 12 months, and the grant, issuance, retention, vesting, or settlement of any restricted stock or restricted stock unit award that is based solely on continued employment or the passage of time may not vest or be settled in full prior to the 36th month following its date of grant (other than awards to non-employee directors, which will be subject only to a one-year minimum vesting requirement), but such grant, issuance, retention, vesting, and/or settlement may be subject to pro-rata vesting over such 36-month period following a one-year minimum vesting period.

Incentive Bonuses.     Each incentive bonus confers 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. The administrator establishes the performance criteria and level of achievement versus these criteria that will determine the target and maximum amount payable under an incentive bonus, which criteria may be based on financial performance and/or personal performance evaluations.

Deferral of Gains.     The administrator may provide, in an award agreement or otherwise, 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.

Performance-Based Compensation Terms.     The administrator may establish performance criteria and level of achievement versus such criteria that will 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,” as described below, or other standards of financial performance 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, so long as 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 will be a measure based on one or more qualifying performance criteria selected by the administrator and specified at the time the award is granted.

Section 162(m) generally provides that no federal income tax business expense deduction is allowed for annual compensation in excess of $1 million paid by a publicly traded corporation to its chief executive officer or any of its three other most highly compensated officers (excluding the chief financial officer). However, there is no limitation on the deductibility of compensation paid to such officers, or “covered employees,” that represents qualified performance-based compensation under Section 162(m). To constitute qualified performance-based compensation, the compensation paid by the corporation to its covered employees must be paid under a plan whose material terms for the payment of such compensation have been approved by the corporation’s stockholders. Further, any such compensation must be paid solely on account of the achievement of one or more objective performance goals established in writing by a qualified committee while the achievement of such goals is substantially uncertain and in any event not later than 90 days after the performance period begins. The amount of compensation payable if a performance goal is achieved may not be increased, but the committee may reduce or eliminate compensation even if the performance goal is achieved.

Section 162(m) requires stockholder approval of performance-based compensation every five years. Stockholders last approved the Section 162(m) performance-based compensation terms under the 2009 incentive plan at our 2013 annual meeting of stockholders.

Awards of qualified performance-based compensation may be granted under the 2009 incentive plan to individuals who are officers of the company or any of its subsidiaries. As of April 3, 2017, seven officers of the company and its subsidiaries were eligible to participate in the 2009 incentive plan.

The 2009 incentive plan contains limitations on the number of shares available for issuance with respect to specified types of awards. Subject to adjustments for changes in the company’s capitalization:

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Subject to adjustments for changes in the company’s capitalization, the maximum number of shares of the company’s common stock that may be subject to any and all stock-based awards granted under the 2009 incentive plan in a calendar year to any person eligible for an award is 1,000,000 shares, and the maximum aggregate number of shares that may be issued pursuant to the exercise of ISOs granted under the 2009 incentive plan is 2,110,000 shares.

The 2009 incentive plan authorizes the establishment of performance goals based on any one or more qualifying performance criteria. For purposes of the 2009 incentive plan, the term “qualifying performance criteria” means any one or more of the following performance criteria, or derivations of such 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:

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The administrator will certify the extent to which any qualifying performance criteria have 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 be reduced, but not increased, by the administrator on the basis of such further considerations as the administrator in its sole discretion may determine.

To the extent consistent with Section 162(m) of the Code, (1) unless the administrator otherwise establishes in writing in connection with an award at the time the award is granted, the administrator will appropriately adjust any evaluation of performance under 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

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in accounting principle all as determined in accordance with standards established by opinion No. 30 of the Accounting Principles Board (APB 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 (2) the administrator may appropriately adjust any evaluation of performance under qualifying performance criteria to exclude any one or more of the following events occurring during a performance period:

Settlement of Awards.     Awards may be settled in shares, cash, or a combination thereof, as determined by the administrator.

Amendment and Termination.     The Board of Directors may amend, alter, or discontinue the 2009 incentive plan, and the administrator may amend or alter any agreement or other document evidencing an award made under the 2009 incentive plan, except no such amendment may, without the approval of the stockholders of the company (other than in respect of a change in the company’s capitalization): increase the maximum number of shares for which awards may be granted under the 2009 incentive plan; reduce the exercise price of outstanding options and stock appreciation rights; extend the term of the 2009 incentive plan; change the class of persons eligible to be participants; increase the individual maximum limits set forth in the 2009 incentive plan; or otherwise amend the 2009 incentive plan in any manner requiring stockholder approval by law or under the NASDAQ Global Select Market listing requirements.

No amendment or alteration to the 2009 incentive plan or an award or award agreement may be made that would impair the rights of the holder of an award without such holder’s consent, except that no such consent will be required if the administrator determines in its sole discretion and prior to the date of any change of control of the company that such amendment or alteration either is required or advisable in order for the company, the 2009 incentive 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.

Change of Control.     In the event there is a change in the number or kind of outstanding shares under the 2009 incentive plan as a result of a change of control of the company, other merger, consolidation or otherwise, then the administrator will determine the appropriate and equitable adjustment to be effected. In addition, in the event of such a change, 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.

Adjustments.     The number and kind of shares available for issuance under the 2009 incentive plan, and the number and kind of shares subject to the individual limits set forth under the 2009 incentive plan, will be equitably adjusted by the administrator 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. The terms of any outstanding award will also be equitably 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.

Transferability.     Awards 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 may be exercisable only by the participant during his or her lifetime. Notwithstanding the

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foregoing, to the extent permitted by the administrator, the person to whom an award is initially granted may make certain limited transfers to certain family members, family trusts, or family partnerships.

No Right to Company Employment.     Nothing in the 2009 incentive plan or an award agreement will 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 of Directors, or service for the company at any time or for any reason not prohibited by law, nor will the 2009 incentive plan or an award itself confer upon any participant any right to continue the participant’s employment or service for any specified period of time. Neither an award nor any benefits arising under the 2009 incentive plan will constitute an employment contract with the company, any subsidiary, and/or its affiliates.

Compliance with Law.     The 2009 incentive 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, will be subject to all applicable foreign, federal, state, and local laws, rules, and regulations, to stock exchange rules and regulations, and to such approvals by any governmental or regulatory agency as may be required. The company will not be required to issue or deliver any certificates for shares prior to the completion of any registration or qualification of such shares under any federal or state law or issuance of any ruling or regulation of any government body that the company will, in its sole discretion, determine to be necessary or advisable.

Termination of the 2009 Incentive Plan.     The 2009 incentive plan became effective on September 11, 2009 and, unless earlier terminated by the Board of Directors, will remain available for the grant of awards until the tenth anniversary of the effective date.

Resales of Shares by Participants.    S hares of the company’s common stock issued pursuant to the 2009 incentive plan will be eligible for sale by participants in the public market without restriction under the Securities Act of 1933, except that any shares purchased by an “affiliate” of the company, as that term is defined in Rule 144 under the Securities Act of 1933, will be subject to the resale limitations of Rule 144.

A participant who is an affiliate of the company may sell in the public market the shares issued to the participant only in accordance with the limitations and conditions of Rule 144, other than the holding period condition. In general, Rule 144 provides that any such person (or persons whose shares are aggregated) is entitled to sell within any three-month period the number of shares that does not exceed the greater of (1) 1% of the then-outstanding shares of common stock and (2) the reported average weekly trading volume of the then-outstanding shares of common stock during the four calendar weeks immediately preceding the date on which the notice of sale is filed with the SEC. Sales under Rule 144 by affiliates also are subject to provisions relating to the manner and notice of sale and the availability of current public information about the company.

Federal Income Tax Treatment.     The following discussion of the federal income tax consequences of the 2009 incentive plan is intended to be a summary of applicable federal law as currently in effect.

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.

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 these holding periods, the excess of the fair market value of the option shares on the date of disposition over the exercise prices will be taxable income to the optionee at the time of the disposition. Of that income, the amount up to the excess of the fair market value of the shares at the time the option was exercised over the exercise price will be ordinary income for income tax purposes and the balance, if any, will be long-term or short-term capital gain, depending upon whether or not the shares were sold more than one year after the option was exercised. 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,

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the company will be entitled to an income tax deduction in the year the optionee disposes of the shares in an amount equal to the ordinary income recognized by the optionee.

If an optionee pays the exercise price of an ISO by tendering shares with a fair market value equal to part or all of the exercise price, the exchange of shares will be treated as a nontaxable exchange, except that this treatment will not apply if the optionee acquired the shares being tendered pursuant to the exercise of an ISO and have not satisfied the special holding period requirements summarized above. The tax basis of the shares tendered to pay the exercise price will be treated as the substituted tax basis for an equivalent number of shares received, and the new shares will be treated as having been held for the same holding period as the holding period that expired with respect to the tendered shares.

If an optionee makes a cashless exercise of an ISO, the optionee will have a disqualifying disposition of the shares that are sold under the cashless exercise program. As a result, as to these shares, the optionee will be taxed in the year of exercise at ordinary-income rates. A cashless exercise thus always involves a disqualifying disposition of shares acquired under an ISO.

In order for an option to qualify for ISO tax treatment, the grant of the option must satisfy various other conditions more fully described in the Code. 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 described below.

An optionee is not taxed on the grant of an NQSO. On exercise, the optionee recognizes ordinary income equal to the difference between the exercise 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. The optionee’s 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 an income tax deduction for this gain.

If an optionee tenders shares in payment of part or all of the exercise price of an NQSO, no gain or loss will be recognized with respect to the shares tendered, even if the shares were acquired pursuant to the exercise of an ISO. In such an event, the optionee will be treated as receiving an equivalent number of shares pursuant to the exercise of the option in a nontaxable exchange. The tax basis of the shares tendered will be treated as the substituted tax basis for an equivalent number of shares received, and the shares received will be treated as having been held for the same holding period as the holding period that expired with respect to the tendered shares. The difference between the aggregate exercise price and the aggregate fair market value of the shares received pursuant to the exercise of the option will be taxed as ordinary income, just as if the optionee had paid the exercise price in cash.

Stock Appreciation Rights .     An optionee is not taxed on the grant of a stock appreciation right. On exercise, the optionee recognizes ordinary income equal to the cash or the fair market value of any shares received. The company is entitled to an income tax deduction in the year of exercise in the amount recognized by the optionee as ordinary income.

Restricted Stock and Restricted Stock Units .     Grantees of restricted stock or restricted stock units do not recognize income at the time of the grant. When the award vests or is paid, 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 income tax deduction. However, no later than 30 days after a participant receives an award of restricted stock, the participant may elect to recognize taxable ordinary income in an amount equal to the fair market value of the shares at the time of receipt. If the election is made in a timely manner, when the restrictions on the shares lapse, the participant will not recognize any additional income. If the participant forfeits the shares to the company (such as upon the participant’s termination prior to vesting), the participant may not claim an income tax deduction with respect to the income recognized as a result of the election. Dividends paid with respect to unvested shares of restricted stock generally will be taxable as ordinary income to the participant at the time the dividends are received unless the participant has made the election described above, in which case the dividends will be taxable as dividends.

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Incentive Bonuses .     A participant will have taxable income at the time an incentive bonus award 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.

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 three most highly compensated officers (other than the chief financial officer) for proxy reporting purposes, Section 162(m) limits the amount of compensation otherwise deductible by the company and its subsidiaries for such year to $1 million for each such individual, except to the extent that such compensation is performance-based compensation. The company expects that NQSOs, ISOs, and stock appreciation rights to 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 compensation awards in order to qualify such grants as performance-based compensation for purposes of Section 162(m).

Tax Withholding .     Payment of the taxes imposed on awards made under the 2009 incentive plan may be made by withholding from payments otherwise due and owing to the holder.

Plan Benefits.     The benefits that will be awarded or paid under the 2009 incentive plan are not currently determinable. Such awards are within the discretion of the Compensation Committee, and the Compensation Committee has not determined future awards or who might receive them. Information about awards granted in fiscal 2016 under the 2009 incentive plan to the company’s named executive officers can be found in the table under the heading “Grants of Plan-Based Awards in Fiscal 2016” in the Executive Compensation section of this proxy statement.

Column (c) above includes 1,862,891 shares of common stock remaining available for future issuance under our 2009 incentive plan at December 31, 2016, and 1,453,429 shares of common stock remaining available for future issuance under our employee stock purchase plan at December 31, 2016.

The table above does not provide information about The Advisory Board Company Inducement Stock Incentive Plan for Royall Employees, which was established on January 9, 2015 in connection with the company’s acquisition of Royall Acquisition Co., or “Royall,” on that date. As permitted under the NASDAQ Marketplace Rules, this equity compensation plan has not been approved by stockholders. The company established the inducement plan to provide for inducement grants of equity awards to certain continuing Royall employees to attract and retain their services following the acquisition. In connection with the closing of the acquisition, inducement awards were made to approximately 60 continuing employees of Royall, and consisted of performance-based stock options to purchase an aggregate of 1,760,000 shares of common stock, and performance-based restricted stock units for an aggregate of 146,667 shares of common stock. Stock options granted under the inducement plan have an exercise price equal to the closing price of company common stock

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on the NASDAQ Global Select Market on January 9, 2015. The stock options have a seven-year term and are eligible to vest, if performance-based vesting criteria are satisfied, in installments commencing in January 2017 and ending in January 2020. The restricted stock units also are eligible to vest in installments commencing in January 2017 and ending in January 2020, subject to satisfaction of performance-based vesting criteria. The vesting criteria in both cases are based on performance of the Royall programs and services. As of April 3, 2017, awards for a total of 822,004 shares remained outstanding.

The Board of Directors unanimously recommends a vote FOR approval of the 2009 incentive plan amendment

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