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Our Compensation Committee assists our Board of Directors in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs, and retains outside compensation and legal experts for that purpose, as further explained in the Compensation Committee'sCommittee Report which begins on page 58.55.



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Finally, our Nominating and Corporate Governance Committee assists our Board of Directors in fulfilling its oversight responsibilities with respect to the management of risks associated with the organization, membership and structure of the Board of Directors, succession planning for our directors and corporate governance.

Director Compensation for Fiscal 20162018

In fiscal 2016,2018, pursuant to our Amended Non-Employee Directors Compensation Plan ("Directors Compensation Plan"), our non-employee directors received annual cash retainers for service on the Board of Directors and assigned committees and annual restricted stock awards. Messrs.Mr. Davis, and Udell, our Executive Chairman and Chief Executive Officer, respectively,CEO, received no additional compensation for theirhis service on our Board of Directors. Amounts paid to Mr. Chavous, our President, Academics, Policy and Schools, for his partial year of service as a non-employee director during fiscal 2018 are set forth below in our "Summary Compensation Table for Fiscal 2018".

Pursuant to the terms of the Directors Compensation Plan, each non-employee director receives an annual cash retainer of $50,000$60,000 and an additional $5,000amount for each committee on which the non-employee director serves. For serviceserves, as the Chairman of a Board committee, an additional annual cash retainer is provided in the following amounts:shown below:

The retainer for service on the Audit Committee includes attendance at up to five Audit Committee meetings. Should the Audit Committee meet more than five times per year, members receive an additional fee of $1,500 per meeting attended.

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The Directors Compensation Plan also provides for annual restricted stock awards for each non-employee director, valued at $100,000 as of the grant date (prorated for a partial year of service), with the shares underlying such awards vesting in equal annual installments over a periodfully one year from the date of three years.the grant. The restricted stock awards were granted on January 4, 2016.2, 2018 to all non-employee directors who held such positions at the beginning of the calendar year.

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The following table sets forth the compensation paid to our non-employee directors for their services during fiscal 2016:2018:

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Please see the Security Ownership of Certain Beneficial Owners and Management table starting on page 7961 for additional information on the beneficial ownership of the Company's common stockCommon Stock by each of our directors.

Director Stock Ownership Guidelines

The Company encourages directorseach director to purchase shares of the Company's common stockCommon Stock and to maintain a minimum ownership level during his or her tenure to foster alignment with our investing stockholders. To reinforce this objective, in early fiscal 2017 we adopted minimum director stock ownership guidelines for all of our non-managementnon-employee directors. Pursuant to those guidelines, these directors must hold shares of the Company's stock equal to the lesser of: (i) shares having a value equal to three times the annual cash retainer paid to non-management directors for board service orand (ii) 15,000 shares. Non-managementNon-employee directors must be in compliance with this policy by September 28, 2021 or five years after they begin Board service, whichever date is later.

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PROPOSAL 1:
ELECTION OF DIRECTORS

Our Board of Directors currently has teneight members: Messrs.Aida M. Alvarez, Craig R. Barrett, Guillermo Bron, Adam L. Cohn, Nathaniel A. Davis, John M. Engler, Steven B. Fink, Jon Q. Reynolds,Robert E. Knowling, Jr., Andrew H. Tisch, Stuart J. Udell, Ms. Fredda J. Cassell, and Dr. Craig R. Barrett.Liza McFadden.

The term of office of each member of our Board of Directors expires at the Annual Meeting, or in any event at such time as their respective successors are duly elected and qualified or their earlier resignation, death, or removal from office. Each year, the stockholders will elect the members of our Board of Directors to a one-year term of office.

Upon the recommendation of our Nominating and Corporate Governance Committee, the Board of Directors has approved the nomination of teneight directors, Messrs.Aida M. Alvarez, Craig R. Barrett, Guillermo Bron, Cohn,Nathaniel A. Davis, John M. Engler, Steven B. Fink, Reynolds, Tisch, Udell Ms. Cassell,Robert E. Knowling, Jr. and Dr. Barrett,Liza McFadden, for election at the Annual Meeting to serve until the next annual meeting of the stockholders (or until such time as their respective successors are elected and qualified or their earlier resignation, death, or removal from office).

Our Board of Directors has no reason to believe that the persons listed below as nominees for directors will be unable or decline to serve if elected. In the event of death or disqualification of any nominee or the refusal or inability of any nominee to serve as a director, proxies cast for that nominee may be voted with discretionary authority for a substitute or substitutes as shall be designated by the Board of Directors. Nominees for election to the Board of Directors shall be elected by a plurality of votes present in person or by proxy at the annual meeting and entitled to vote.

OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE NOMINEES LISTED BELOW.

NOMINEES FOR ELECTION AT THE ANNUAL MEETING

Set forth below are the names and other information pertaining to each person nominated to the Board of Directors.

Aida M. Alvarez, Age 69

Ms. Alvarez joined us a director in April 2017 and is a member of our Audit Committee. She currently serves as Chair of the Latino Community Foundation. As Administrator of the U.S. Small Business Administration, she was a member of President Clinton's Cabinet from 1997 to 2001. Previously, Ms. Alvarez served as the Director of the Office of Federal Housing Enterprise Oversight from 1993 to 1997, where she was charged with financial oversight of the secondary housing market, the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"). Prior to that, she worked for the New York City Health and Hospitals Corporation, Bear Stearns & Company, Inc. and the First Boston Corporation. She has served on the boards of directors of Oportun, Inc. (formerly Progress Financial Corporation) since 2011; Zoosk, Inc. since 2014; and HP Inc. since February 2016. From 2006 to June 2016, Ms. Alvarez served on the board of Wal-Mart Stores Inc., and from 2004 to 2014, served on the boards of MUFG Americas Holdings Corporation (formerly UnionBanCal Corporation) and MUFG Union Bank N.A. (formerly Union Bank N.A.). Ms. Alvarez holds a Bachelor's Degree from Harvard College. Ms. Alvarez was selected as a director because of her financial expertise, government experience, and ability to bring diverse perspectives to the Board.

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Craig R. Barrett, Age 7779

Dr. Barrett joined us as a director in September 2010, and currently serves as Chairman of our Academic Committee.Committee and became our Lead Independent Director in September 2017. He served as Chairman and Chief Executive Officer of Intel Corporation which he joined in 1974,from 1998, until his retirement in 2009.2009, having served in various roles, including Chief Operating Officer, since joining Intel Corporation in 1974. Prior to Intel Corporation, Dr. Barrett was a member of the Department of Materials Science and Engineering faculty of Stanford University. Dr. Barrett currently serves as Co-Chairman of Achieve, Inc., an independent, bipartisan, non-profit education reform organization; Chairman of Change the Equation, an organization promoting widespread literacy in science, technology, engineering and math (STEM); President and Chairman of BASIS Schools, Inc.; Vice Chair of the Science Foundation Arizona; and Co-Chairman of the Business Coalition for Student Achievement. Dr. Barrett holds a B.S., M.S. and Ph.D. degrees in Materials Science from Stanford University. Dr. Barrett was selected as a director because of his deep knowledge and experience in information technology innovation, as well as his global, operational, and leadership experience as Chairman and Chief Executive Officer of Intel Corporation. He also brings a unique perspective to the Board of Directors from his tenure as a professor and his volunteer work and support of numerous educational organizations.

Guillermo Bron, Age 6466

Mr. Bron joined us as a director in July 2007 and currently serves as a member of our Nominating and Corporate Governance Committee and our Audit Committee. Mr. Bron is awas Managing Director at Pine Brook Road Partners, LLC, an investment firm, from December 2013 to June 2017, and served as a Managing Director of Acon Funds Management LLC, a private equity firm, from 2006 to 2012. Mr. Bron has also served as Chairman and a director of United Pan Am Financial Corp. (UPFC) since 1994, and he served as a director of Pan American Bank, FSB (Pan American), a former wholly-wholly owned subsidiary of UPFC, from 1994 to 2005. Mr. Bron has served as Chairman of idX Corporation sincefrom 2008 to 2018, and

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from 2000 to 2002, Mr. Bron was a director of Telemundo Group, Inc. From 1994 to 2003, Mr. Bron was an officer, director and principal stockholder of a general partner of Bastion Capital Fund, L.P., a private equity investment fund primarily focused on the Hispanic market. Previously, Mr. Bron was a Managing Director of Corporate Finance and Mergers and Acquisitions at Drexel Burnham Lambert. Mr. Bron holds a B.S. in Electrical Engineering and Management from Massachusetts Institute of Technology and an M.B.A. from Harvard University. Mr. Bron was selected as a director because of his extensive executive leadership and international experience, as well as his expertise in investment banking and capital markets, which enables him to bring valuable insights to the Board of Directors in the areas of finance and strategy. The Board of Directors also benefits from his prior experience as a public company director and audit committee member.

Fredda J. Cassell, Age 61

Ms. Cassell joined us as a director in May 2014, and is a member of our Audit Committee. Ms. Cassell was with PricewaterhouseCoopers LLP for 32 years, having been a partner with the firm from 1992 until her retirement in June 2012. Ms. Cassell is a CPA, received her B.A. from Washington University in St. Louis and holds an M.B.A. from Washington University's John M. Olin School of Business. She previously served on the Board of Directors of the United Hospital Fund and was a member of its Audit Committee. Ms. Cassell was selected as a director because she is a highly accomplished senior executive. Ms. Cassell also possesses experience and expertise working with senior management of both public and private multinational companies in many industries, dealing extensively with complex technical accounting matters, acquisitions and divestitures, financial reporting, and internal control over financial reporting.

Adam L. Cohn, Age 45

Mr. Cohn joined us as a director in February 2013 and currently serves as the Chairman of our Compensation Committee. He is Co-CEO of Stone Canyon Industries LLC ("SCI"), a company he co-founded in September of 2014. SCI is a holding company that owns and invests in operating companies around the world. Mr. Cohn serves on the board of directors of SCI, Fleischmann's Vinegar Company and FLY Wheel Sports, each a privately-held company in which SCI invests. In addition, he is a partner at Knowledge Universe, or KU, where he is head of mergers and acquisitions and business development for KU and its portfolio companies. Mr. Cohn has been employed by KU since March of 2000. Prior to joining KU, he was a senior associate with Whitney & Co., a leading private equity firm. At Whitney & Co., he was responsible for sourcing and executing transactions for the Whitney Mezzanine Fund. Prior to Whitney & Co., Mr. Cohn was an investment banker in the Financial Sponsors Group at Bankers Trust Company and Deutsche Bank. He has a B.S. in business from Skidmore College and an M.B.A. from Columbia University. Mr. Cohn was selected as a director based on his significant financial and transactional experience in private equity and investment banking, as well as his experience with education companies. The Board of Directors also benefits from his extensive board experience.

Nathaniel A. Davis, Age 6264

Mr. Davis joined us as a director in July 2009 and has served as our Chairman since June 2012. In January 2013, he became our Executive Chairman, and in January 2014, Mr. Davis was appointed to be our Chief Executive Officer,CEO, serving in that role through February 2016.2016 and again beginning in March 2018. He also is a member of our Academic Committee. Prior to joining the Company, he served as the managing director of RANND Advisory Group from 2003 until December 2012. Previously, Mr. Davis worked for XM Satellite Radio from June 2006 to November 2008, serving as President and then Chief Executive Officer until the company's merger with Sirius Radio. He also served on the XM Satellite Radio board from 1999 through 2008. From 2000 to 2003, Mr. Davis was President and Chief Operating Officer and a board member of XO Communications Inc. Mr. Davis has also held senior executive positions at Nextel Communications (EVP, Network and Technical Service), MCI Telecommunications (Chief Financial Officer) and MCI Metro (President and Chief Operating Officer). Since 2011, Mr. Davis has served as a director of Unisys Corporation and RLJ Lodging Trust. Mr. Davis has also previously served on the board of several public and private firms including Mutual of America Capital Management Corporation, Charter

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Communications and Telica Switching. Mr. Davis receivedholds an M.B.A. from the Wharton School of the University of Pennsylvania, an M.S. in Engineering Computer Science at the Moore School of the University of Pennsylvania, and a B.S. in Engineering from Stevens Institute of Technology. Mr. Davis was selected as a director based on his strong record of executive management, finance and systems engineering skills, as well as his insight into the considerations necessary to run a successful, diverse global

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business. The Board of Directors also benefits from his previous service on other public company boards and his experience in accounting and financial reporting.

John M. Engler, Age 6870

Mr. Engler joined us as a director in October 2012 and is Chairman of our Compensation Committee and a member of our Nominating and Corporate Governance Committee and our Academic Committee. He has served as President of the Business Roundtable sincefrom January 2011.2011 to February 2017. From 2004 to 2011, Mr. Engler was the President and Chief Executive Officer of the National Association of Manufacturers. He was President of State and Local Government and Vice President of Government Solutions for North America for Electronic Data Systems Corporation from 2003 to 2004. Mr. Engler served as Michigan's 46^th governor for three terms from 1991 to 2003. He has served on the board of directors of Universal Forest Products Inc. since 2003 and is chairman of its Nominating and Corporate Governance Committee and a member of its Personnel and Compensation Committee. He is also a directorcurrently serves as Interim President of Munder Capital Management.Michigan State University. Previously, Mr. Engler was a director of Northwest Airlines from 2003 to 2008, a director of Dow Jones & Company, Inc. from 2005 to 2007, and a director of Delta Airlines from 2008 to 2012.2012, and he was also a director of Munder Capital Management. Mr. Engler holds a B.S. in Agricultural Economics from Michigan State University and a J.D. from the Thomas M. Cooley Law School. Mr. Engler was selected as a director because of his executive and legislative expertise as a state governor, including working with state education budgets, and for his business experience. The Board of Directors also benefits from Mr. Engler's perspective as a director of numerous public companies and as a member of their audit committees.

Steven B. Fink, Age 6567

Mr. Fink joined us as a director in October 2003, and currently serves as Chairman of our Audit Committee and is a member of our Compensation Committee. Mr. Fink is the Deputy ChairmanCo-Chairman of Heron International and a Director of the Foundation of the University of California, Los Angeles. Mr. FinkInternational. He served as a director of Nobel Learning Communities, Inc. from 2003 to 2011 and as Chairman of the Board of Life Storage, LLC from 2013 to 2016. In addition, Mr. Fink is a member of the BoardBoards of the Smithsonian National MuseumJackson Laboratories, City of American History, the Board ofHope, St. Helena Hospital, Ole Health and the Herb Ritts Foundation, and is a member of The J. Paul Getty Photographs Council. From 1999 to 2009, Mr. Fink served as a director of Leapfrog, Inc. and was its Chairman from 2004 to 2009. From 2000 to 2008, Mr. Fink was the Chief Executive Officer of Lawrence Investments, LLC. Mr. Fink has also previously served as Chairman and Chief Executive Officer of Anthony Manufacturing, Chairman and Managing Director of Knowledge Universe and Chairman and Chief Executive Officer of Nextera. Mr. Fink holds a B.S. in Psychology from the University of California, Los Angeles and a J.D. and an L.L.M. from New York University. Mr. Fink was selected as a director based on his significant experience in operations and financial oversight gained as serving as director or chairman for various public and private companies in addition to his membership on various company audit committees which enables him to contribute significantly to the financial oversight, risk oversight and governance of the Company.

Jon Q. Reynolds,Robert E. Knowling, Jr., Age 4863

Mr. ReynoldsKnowling joined us as a director in April 2011January 2018 and became the Lead Independent Director in January 2013. He also currently serves as Chairmanis a member of our Compensation Committee. In 1999, Mr. Reynolds became a General Partner at Technology Crossover Ventures, or TCV, a private equitySince May 2009, he has served as Chairman of Eagles Landing Partners, which specializes in helping senior management formulate strategy, lead organizational transformations, and venture capital firm thatre-engineer businesses. From 2002 to 2009 he joined in 1997. Prior to joining TCV, Mr. Reynolds was an Associate with General Atlantic Partners, a private equity firm focused on late stage software and service businesses. Before joining General Atlantic Partners, Mr. Reynolds was a memberserved as Chief Executive Officer of the mergers and acquisitions group at Lazard Freres & Co., where he focused on the technology and telecommunication industries. Mr. Reynolds holds an A.B. degree from Dartmouth College and an M.B.A. from Columbia Business School. Mr. Reynolds serves as a director of OSIsoft, LLC, Genesys Telecommunications Laboratories, Inc., IQMS, OneSource Virtual, Inc., and Webroot Software, Inc., none of which are publicly-traded companies. Mr. Reynolds was nominated as a director because of his experience in mergers and acquisitions and as a director of other public companies. Additionally, his experience as an active investor in numerous software and online education companies and extensive relationships throughout our industry will benefit the Board of Directors and the Company.NYC Leadership Academy,

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an independent non-profit corporation created by Chancellor Joel I. Klein and Mayor Michael R. Bloomberg that is chartered with developing the next generation of principals in the New York City public school system. Mr. Knowling has also held roles as Chief Executive Officer of Telwares, Chairman and Chief Executive Officer of SimDesk Technologies, Inc. and Chairman, President and Chief Executive Officer of Covad Communications. He was awarded the Wall Street Project's Reginald Lewis Trailblazers Award by President Clinton and the Reverend Jesse Jackson in 1999. Mr. Knowling serves on the board of directors for Roper Technologies, Inc. He also previously served on the board of Heidrick & Struggles, Inc. from 2010 to 2015 and Convergys Corporation from 2017 to 2018. He holds a B.A. in theology from Wabash College and an M.B.A. from Kellogg School of Management, Northwestern University. Mr. Knowling was selected as a director based on his experience in public education, public company leadership roles, technology and organizational development.

Andrew H. Tisch,Liza McFadden, Age 6755

Mr. TischMs. McFadden joined us as a director in August 20012017 and served as Chairman of the Board of Directors from May 2007 to June 2012. He currently is a member of our Nominating and Corporate Governance Committee. Since 1985, Mr. Tisch has been a director of Loews Corporation,Ms. McFadden currently leads LIZA and is Co-Chairman of its board, Chairman of its executive committeePartners LLC. Previously, she was President and since 1999, has been a member of its OfficeChief Executive Officer of the President. Mr. Tisch has alsoBarbara Bush Foundation for Family Literacy from 2012 to 2018. She is a former high school teacher, Florida Department of Education administrator, and served as a director of three subsidiaries of Loews Corporation: Diamond Offshore Drilling, Inc. since 2011, CNA Financial Corporation since 2006, and Boardwalk Pipeline Partners, LP since 2005. Mr. Tisch previously served as a director of Bulova Corporationin Governor Jeb Bush's administration. Additionally, Ms. McFadden was appointed by President George W. Bush to serve on the National Institute for Literacy Board. She holds an M.A. from 1979 to 2008 and as a director of Lord & Taylor from 2006 to 2008. Mr. Tisch engages in numerous public service activities including serving as a member of the Board of Overseers and executive committee member of Weill Cornell Medicine, trustee of the Brookings Institution, and as a member of the Dean's Advisory Board at the Harvard Business School. Mr. Tisch holds a B.S. in Hotel Administration from CornellFlorida State University and an M.B.A.a B.A. from HarvardFitchburg State University. Mr. TischMs. McFadden was selected as a director because of his extensive experience having served as president or chairman of various multinational companies over his career in additionher dedication to his membership on various boards of public companies which allows him to provide the Board of Directors with leadership and a variety of perspectives on important strategic and governance issues. The Board of Directors also benefits from his involvement in higher education and non-profit organizations.

Stuart J. Udell, Age 49

Mr. Udell joined us as a director and as Chief Executive Officer in February 2016. Mr. Udell brings significant strategic and operational experience to K12 in the education industry. Most recently, Mr. Udell served as Executive Chairman (from 2015-2016)community and Chief Executive Officer (from 2010-2015), of Catapult Learning, LLC, a privately-held provider of instructional services, professional development, and operator of schools. Prior to joining Catapult Learning, from 2009-2010, Mr. Udell was the President of Postsecondary Education at The Princeton Review. He was concurrently, from 2007-2010, the Chief Executive Officer of Penn Foster Inc., a global leaderexpertise in high school and career-focused online learning, which was acquired by The Princeton Review. Mr. Udell spent 11 years at Kaplan, most recently as President of Kaplan K12 Learning Services (from 2002-2007), where he built the K-12 school division. From 1997-2001, Mr. Udell was President of the School Renaissance Institute, the training, publishing, and research subsidiary of Renaissance Learning Inc. Mr. Udell has served the last 13 years on the board of directors of the National Dropout Prevention Center/Network at Clemson University. Mr. Udell holds a MBA from Columbia University and a BS from Bucknell University.literacy.

Executive Officers

Set forth below is biographical information for each of our current executive officers who is not also a director.

Allison B. Cleveland, Executive ViceKevin P. Chavous, President, of School Management and Services,Academics, Policy & Schools Group, Age 4362

Ms. ClevelandMr. Chavous joined us in October 2002January 2017 and serves as Executive Vice President of School Management and Services. During her time at K12, Ms. Cleveland has been instrumental in building the managed public school line of business. Most recently, she served as the Senior Vice President of School Services, overseeing academic and operational services in the managed public schools. Prior to that, Ms. Cleveland was the Regional Vice President of the Southern Region, responsible for schools in the Southeast portion of the United States. In her early years at K12, Ms. Cleveland worked in support of new school start-up and school operations, where she was responsible for the successful launch of K12 Virtual Academies throughout the country. Ms. Cleveland began her career at Andersen Consulting, where she focused on clients in the telecommunications industry and government. She holds a BSE in Biomedical and Electrical Engineering from Duke University and an MBA and MA in Education from Stanford University. Ms. Cleveland currently serves as President, Academics, Policy & Schools Group. He was a Directormember of our Board of Directors from January 2017 to October 2017 before resigning to take his current position. Previously, he was the Founder and Chief Executive Officer of The Chavous Group, an educational consulting firm, a position he held from January 2012 until January 2018 and was a founding Board Member of the American Federation for Children ("AFC"). He served as AFC's Executive Counsel from 2012 to 2016. Previously, Mr. Chavous was a partner at the Foundation for BlendedSNR Denton law firm from 2002 to 2012 and Online Learning.served as a member of the Council of the District of Columbia from 1993 to 2005, where he was Chair of the Council's Education Committee. He also has served on the board of various charter schools across the country including the Friendship Charter Schools in Washington, D.C. Mr. Chavous holds a B.A. from Wabash College and a J.D. from the Howard University School of Law.

Lynda B. Cloud, Executive Vice President, Products, Age 49

Ms. Cloud joined us in September 2014 and serves as Executive Vice President, Products. As the head of K12's Curriculum and Products organization, she oversees the development and delivery of all program content and customer-facing technologies, and drives the product strategy and results across all areas of the business. Prior to joining K12, she was with Pearson Publishing for more than 20 years, where she held senior leadership positions in

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Product Development, Marketing, and Product Management. In her role as General Manager, she drove strategy for the company's print and digital properties in the North American educational market. She holds a BA in English/Elementary Education from Susquehanna University.

Howard D. Polsky,Vincent W. Mathis, Executive Vice President, General Counsel and Secretary, Age 6554

Mr. PolskyMathis joined us in June 2004,September 2018 and serves as Executive Vice President, General Counsel and Secretary. In this role, he has executive responsibility for providing comprehensive legal counsel for our business, including matters relating to securities, litigation, regulatory compliance, intellectual property, contracts and licensing, and corporate governance. Mr. Polsky previously heldMathis has more than 20 years of legal experience counseling diverse global businesses. Prior to joining the positionCompany, Mr. Mathis served as Senior Vice President Corporate Affairs, Corporate Secretary and Chief of Staff to the CEO at The AES Corporation where he earlier was Vice President and Deputy General Counsel. Prior to his roles at The AES Corporation, Mr. Mathis was an Executive Vice President and General Counsel at ContourGlobal, LLC, a private international energy company. Previously, Mr. Mathis worked for

Table of Lockheed Martin Global Telecommunications from 2000 to 2002. Prior to its acquisition by Lockheed Martin, Mr. Polsky was employed by COMSAT Corporation from 1992 to 2000, initially serving as Vice PresidentContents

Shearman and General Counsel of COMSAT's largest operating division,Sterling, LLP and subsequently serving on the executive management team as Vice President of Federal PolicyUnited States Securities and Regulation. From 1983 to 1992, Mr. Polsky was a partner at Wiley, Rein & Fielding, and was an associate at Kirkland & Ellis from 1979 to 1983. Mr. PolskyExchange Commission. He began his legal career at Venable, LLP. Mr. Mathis formerly served on the Federal Communications Commission. He receivedBoard of Directors of Indianapolis Power and Light Company Enterprises, Inc., AES Tietê Energia S.A., and AES Elpa S.A. In addition, he previously served on the Board of Directors at IPALCO Enterprises, Inc., DPL Inc. and The Dayton Power and Light Company and was Chairman of Eletropaulo Metropolitana Eletricidade de São Paulo S.A. Mr. Mathis holds a J.D. from the University of Virginia and a B.A. in GovernmentEconomics and Political Science from LehighThe University and a J.D. from Indiana University. Mr. Polsky currently serves as a member of the Advisory Board to the Lehigh University College of Arts and Science.Richmond.

James J. Rhyu, Executive Vice President and Chief Financial Officer and President, Product and Technology, Age 4648

Mr. Rhyu joined us in June 2013 and serves as Executive Vice President and Chief Financial Officer.Officer and President, Product and Technology. Prior to joining the Company, Mr. Rhyu served as Chief Financial Officer and Chief Administrative Officer of Match.com, a subsidiary of publicly traded IAC/InterActiveCorp, since June 2011. In those roles, he was responsible for overseeing a broad range of functions, including finance, human resources, legal, information technology and operations, certain international operations and product development. Prior to his roles at Match.com, Mr. Rhyu was a Senior Vice President of Finance at Dow Jones & Company from January 2009 until May 2011, where he ran the global financial function. Previously, Mr. Rhyu served for three years as the Corporate Controller of Sirius XM Radio Inc. and its predecessor company, XM Satellite Radio, as well as serving in the same role for Graftech International. Mr. Rhyu also served six years as an auditor with Ernst & Young LLP in the United States and South America. Mr. Rhyu holds a B.S. from the Wharton School of Business at the University of Pennsylvania and an M.B.A. from the London Business School.

Joseph P. Zarella, Executive Vice President, Business Operations, Age 57

Mr. Zarella joined us in October 2014, and serves as Executive Vice President, Business Operations, leading the Company's marketing organization, information technology organization, enrollment and customer care operations, as well as contract provisioning, billing and collections functions. Mr. Zarella has more than 20 years of successful customer service, sales and marketing operations, and information technology management experience. Prior to joining the Company, Mr. Zarella served as Chief Service Officer for SiriusXM Satellite Radio and its predecessor company, XM Satellite Radio, since 2006. In this role, he led the Company's sales, marketing, customer service and retention operations. Before joining XM Satellite Radio, he served at Constellation NewEnergy as Managing Director of Operations, where he was responsible for setting the corporate operations consolidation strategy. Prior to that, he was Vice President of Revenue Operations for XO Communications for six years, which followed after more than ten years' experience at MCI Communications serving as Vice President of Financial Operations and holding several executive operations leadership positions. Mr. Zarella holds a B.S. in Information Systems from the University of Massachusetts, and an M.B.A. in International Finance from the University of Dallas.

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides information about our fiscal 20162018 compensation for the following named executive officers (our "NEOs"("NEOs"):

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Nathaniel A. Davis, Chairman and CEO



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James J. Rhyu, Chief Financial Officer and President, Product and Technology



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Kevin P. Chavous, President, Academics, Policy and Schools



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Howard D. Polsky, former Executive ChairmanVice President, General Counsel and Secretary



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Allison B. Cleveland, former Executive Vice President, School Management and Services



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Stuart J. Udell, Chief Executive Officer

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James, J. Rhyu, EVP and Chief Financial Officer

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Howard D. Polsky, EVP, General Counsel and Secretary

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Allison Cleveland, EVP, School Management and Services

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Joseph P. Zarella, EVP, Business Operationsformer CEO

Executive Summary

SinceWe achieved solid financial and operational gains in fiscal 2018, positioning the Company to fulfill its educational mission of helping students to reach their potential through personalized learning and inspired teaching. We also continued our trend of stockholder engagement and executive compensation reforms through fiscal 2018. With the unanticipated mid-year departure of Mr. Udell as CEO in fiscal 2018, it was essential to fill the CEO role quickly by appointing a person with detailed knowledge of the Company's operations, its customers, and the public policy issues critical to our success. The Board of Directors therefore determined that Mr. Davis should resume his position as CEO (which he had previously held from 2014-2016) and entered into an 18-month extension of his employment agreement and we consolidated the CEO and Executive Chairman roles. Besides assuring the continuity of leadership and expertise, significant overall compensation savings have been realized. Our Lead Independent Director, Mr. Barrett, will remain in place to assure Board oversight distinct from management.

From our inception in 1999, we have offered online educationalcurriculum, instructional support services, software and softwareproducts designed to facilitate individualized learning for students in kindergarten through 12^th12th grade. As we continue to invest in our curriculum, academic support programs, and learning platforms to respondOur path to the unique needsgains we realized in fiscal year 2018 began three years ago when we shifted away from our early priorities for revenue and enrollment growth to focus instead on pursuing a multi-year strategic plan to establish schools of academic quality that attract and retain students. This not only required significant investments, but occurred in an environment of external challenges over which our management generally has no control, including rapidly changing education policies at both the federal and state levels, newly enacted and dissimilar state academic accountability standards and regulatory requirements, and unionization of our virtual charter school customers in one state. With the confluence of these factors, we encountered a period of slower enrollment growth, academic challenges, operational adjustments, and increased costs, resulting in total shareholder returns that, for certain periods during the transition, were negative. Moreover, to maintain an engaged executive team over the duration of the schools, studentsmulti-year strategic plan, we adopted a long-term incentive compensation plan ("LTIP") and familiesutilized targeted annual incentives that together were necessary to execute the plan successfully and create the building blocks for future expansion of the business and shareholder growth.

In fiscal 2017 we serve, our missionsaw this approach begin to yield some positive results and vision is to transform learning for every student and to become the trusted leader in education innovation. Following operational performance challenges in fiscal 2015, we initiated a shift2018 our core business delivered further improvements in our strategic focus from a growth-motivated organization to a business model built upon sustained corporate development and student academic success. This transformation continued into fiscal 2016 as we position ourselves to drive and effectively execute this fundamental evolution in strategy.

Our executive leadership structure and compensation plans and programs are not immune to the consequences of a redefined business strategy and have necessarily been re-evaluated and modified based on experience and results. Specifically, fiscal 2016 saw a restructuring of our executive leadership team to bring it into closer alignment with individual expertise, accountability and division of authority to more effectively address our financial, operational and student academic needs. In addition, following disappointing results onperformance. Although our annual advisory vote on executive compensationstock price has continued to face headwinds from the issues identified above, revenue growth, profitability and capital expenditures for fiscal 2015,the year met or exceeded our guidance and we engaged in meaningful dialogue with our stockholders to identify and address their primary concerns regarding our executive compensation programs and practices. Informed by these conversations, we pursued additional adjustments to build uponsaw the redesign of our executive compensation program that began in fiscal 2015 and implemented a series of reforms to ensure that our pay practices mirror our pay for performance philosophy. We are optimistic that the strategic shift in our business strategy, coupled with a rejuvenated executive leadership structure and executive compensation programs and practices, will lead to enhanced academic performance of the students we serve, increased student retention at our managed schools, and improved operational performance, all of which should drive stockholder value over the long-term.

Advisory Vote on Executive Compensation and Stockholder Engagement

Although we gained majority-level support on our annual advisory vote on executive compensation in 2013 (54%) and 2014 (69%), these levels were nonetheless concerning. In fiscal 2015, we therefore began a fundamental restructuring of our executive compensation program in conjunction with our shift to a sustained business development strategy. Essentially, we sought to create incentives for our executives to increase shareholder value by implementing the initiatives in their respective business and functional units that would be required to move the strategy forward in a measurable way. Some changes were implemented immediately, such as a redesign of our annual cash bonus plan, or the Executive Bonus Plan, and engagement of a new compensation consultant, while others, including a performance-based equity incentive plan, required additional time to transition and were introduced this past fiscal year. However, this convergence of a new business strategy and compensation incentives to execute that strategy was not originally communicated effectively to our investors and at our 2015 annual meeting, our executive compensation programs received support from only 47% of our voting stockholders. We considered those results seriously and, while we have undertaken stockholder outreach in the past, our management intensified its outreach efforts in fiscal 2016 to seek to better explain the compensation incentives tied to our revised strategy plan and likewise to learn more about the stockholder concerns that led to the disappointing say-on-pay results.highest

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Instudent retention level in eight years. Based on these outcomes, we believe the fallstrategy begun three years ago has worked in many respects, and during this time we formed an executive leadership team that is poised to continue the trend. To ensure the continuity of 2015this progress, Mr. Davis was selected as the person best suited to spearhead K12's leadership team in its current phase and continuing throughhe re-assumed the fallposition of 2016,CEO during fiscal 2018, a position he previously held from January 2014 to February 2016.

We have identified the following four cornerstones on which we intend to focus our Vice President, Financeefforts to accelerate our business growth and Head of Investor Relations; our General Counsel; and our Senior Vice President, Human Resources, contacted eacheducation mission:

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#1 Strengthening Our Core—Our Managed Public School programs remain the foundation of our top twenty-fivebusiness and the improvements in retention makes us optimistic about its strength and potential for growth.



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#2 Preparing Students for the Future—We are focused on building a more comprehensive career readiness program with a distinct brand and better linkage to corporations, trade associations, and higher education institutions.



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#3 Becoming a Trusted Advisor—Our management team is proactively complementing our content and services sales approach by positioning our Institutional business as a trusted software services provider delivering end to end digital learning solutions.



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#4 Going Global—We continue to develop international opportunities by building partnership-focused relationships with in-country organizations.

We believe that by actively pursuing these strategic priorities, stockholders in K12 will realize the benefits of strong revenue and spoke with many of them in order to identifyprofitability growth, and address concerns regardingjust as importantly, see their investment provide educational choices and exceptional learning opportunities for students and families across the nation.

Stockholder Engagement and Compensation Reforms and Highlights

As we developed our executive compensation practices and policies. These outreach efforts were conducted with the assistance of our Lead Independent Director, who is also a member ofprogram for fiscal 2018, our Compensation Committee and a General Partner at TCV, our largest investor and holder of approximately 10% of our shares of common stock. These discussions addressed the fundamental shift in our business strategy, which impacted near term profitability. We explained to our stockholders that, in order to drive executive performance and retention during this period of transition, the performance objectives and compensation program design for our executives must reflect this near-term impact in a realistic way in order to provide fair rewards for executive contributions toward achieving important milestones for our business. Additionally, we sought to convey to stockholders the Company's and the Committee's strong confidence that our executive team is performing well as they navigate challenges arising from external events and factors over which they have no control, including, in fiscal 2016, an industry-wide investigation of for-profit virtual schools in California which cast a cloud over our stock and diverted management attention in responding to demanding and massive document productions and interviews. The decision in fiscal 2015 of the independent Agora Cyber Charter School Board to convert to a self-managed business model also had to be takentook into account given its financial impact on our business.

We also believe that the low level of support forextensive stockholder input we received and took steps to more tightly link executive pay to measurable performance results. Over the last several years, we have extensively overhauled our executive compensation programs and practices, including making the following structural changes prior to fiscal 2018 (which were continued into fiscal 2018):

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Maintained salaries at prior year levels, with the average benchmarked near the 25^th percentile of the peer group and continued to emphasize pay-for-performance;



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Granted no extraordinary or one-time bonus awards outside of our standard executive compensation program;



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Removed individual goals from our annual cash bonus program for the most senior executives; and



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Expanded the use of performance-based stock awards and added stockholder return metrics as a feature of these awards.

Following these reforms, the annual stockholder advisory vote on our executive compensation for fiscal 20152017 yielded an approval rate of 78.5%, which was due,a significant improvement over prior years. We view this as an endorsement of the positive changes we have made, but also recognize that it still reflects lingering concerns among a portion of our stockholder base. To understand, address and respond to those concerns consistent with the fiduciary duties of the Board of Directors, during fiscal 2018 we maintained our stockholder outreach efforts with the goal of receiving meaningful feedback. Accordingly,

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at the beginning of fiscal 2018, we proactively reached out to our top 25 stockholders, speaking with a total of five stockholders that responded and in part,the aggregate held over 20% of our shares outstanding. Our Investor Relations and Human Resources leaders conducted the outreach efforts, with the Chairman of the Compensation Committee participating in some of the calls. We continued these discussions during the year through written correspondence and in-person stockholder meetings to negative recommendationscontinue our executive compensation dialogue.

The stockholders that we spoke with recognized and commended our continued responsiveness to their feedback such as the elimination of overlapping performance metrics in short- and long-term incentive pay programs and the introduction of longer term performance metrics in our 2016 LTIP.

These conversations centered on three key themes, which we have sought to address in a careful and deliberative manner so as to further our strategic business objectives:

Leadership Structure and Total Compensation Cost.

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Key Stockholder Concerns.  Our stockholders expressed concerns over the total compensation cost associated with maintaining separate positions of an Executive Chairman and CEO with distinct roles and each receiving significant compensation amounts.



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Fiscal 2018 Highlight—Streamlined Leadership Team.  With the mid-year departure of Mr. Udell, our Board of Directors determined that a single executive position undertaken by Mr. Davis with his deep knowledge of our operations, relations with our major school board customers, and architect of our going forward strategy, would best serve the Company's needs at this time. During fiscal 2018 we consolidated the separate roles of a distinct CEO and Executive Chairman into the position of Chairman and CEO. We will continue to evaluate our executive leadership needs as we execute on our strategic business goals and priorities. To maintain flexibility and ensure that stockholders are not overly burdened with excessive severance costs, we also negotiated an arrangement that would eliminate our cash severance obligations to Mr. Davis in the event Mr. Davis is replaced by a new CEO. This resulted in a one-time equity incentive award for Mr. Davis that is subject to meaningful performance and other vesting conditions, which are described below under the heading "—Determination of Long-Term Incentive Compensation—Mr. Davis-Performance Based Restricted Stock Awards."



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Fiscal 2018 Highlight—Reduced Leadership Compensation Burden.  The consolidation of our Chairman and CEO positions resulted in an annual cost savings to the Company (based on total target-level compensation, including equity incentives) of approximately $1.8 million. In his role as Chairman and CEO, Mr. Davis' total target-level compensation package was set at a level comparable to his prior tenure in the CEO position, which ended in fiscal 2016.



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Fiscal 2018 Highlight—No Salary Increases.  As in fiscal 2017, we sought to limit total compensation costs by generally maintaining base compensation at prior year levels. Other than in connection with Mr. Davis assuming increased CEO duties, none of our NEOs received any increase in base salaries or target total compensation levels for fiscal 2018.

Annual Bonus Plan Structure and Payouts

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Key Stockholder Concerns.  Our stockholders expressed concerns relating to our bonus plan structure, particularly its reliance for certain executives on individual performance goals and the use of quantitative metrics that overlap with our long-term incentive program. A few

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stockholders also questioned why above-target bonus payouts were provided in years where our stock price performance has trailed members of our compensation peer group.

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Fiscal 2018 Highlight.  In our continued effort to align our pay for performance practices with our strategy and stockholder value creation, we focused on restructuring our annual bonus plan for fiscal 2018, which included:



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Eliminating individual criteria for our CFO, previously eliminated for our Chairman and CEO during fiscal 2017, and continuing to decrease the weighting of individual performance management objectives ("PMOs") for other executive officers from Institutional Shareholder Services50% to 30%.



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Reducing the number of corporate PMOs for our most senior executives so that our annual bonus plan is tied to driving stockholder value through achievement of key financial metrics, operational goals and academic performance.



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Removing performance metrics that overlap with our performance-based equity incentive awards to ensure that executives do not receive duplicate payouts for a singular achievement.



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Updating the corporate PMOs to focus our executives on advancing our strategic priorities, which included adding a new a metric tied to our career and technical education ("ISS"CTE") enrollments.



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Fiscal 2018 Highlight.  As the only publicly traded company in the K-12 space, comparison to our peer companies for purposes of setting target compensation levels present unique challenges. As a result, our stock price returns may not correlate strongly with our peer group. Going forward, to ensure alignment of realized pay amounts with corporate performance, we are enhancing our commitment toward establishing rigorous corporate level performance goals in our annual incentive program. Specifically, we set the fiscal year 2018 threshold performance targets at levels above the actual results for fiscal 2017 and Glass, Lewis & Co. ("Glass Lewis") with respecttarget performance levels are directly tied to 2018 budgeted performance. Additionally, payout for threshold performance was reduced from 50% to 30% of target bonus.

Long-Term Incentive Plan Structures

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Key Stockholder Concern.  Our stockholders expressed concerns about the use of one-year performance periods for certain equity awards granted to our most recent annual advisory vote. Therefore,senior executives and noted our discussions with stockholders also involvedlack of relative stockholder return metrics in our long-term incentive programs.



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Fiscal 2018 Highlight.  We implemented a relative total stockholder return metric on a trial-basis to the specific areas of concern raised by ISS and Glass Lewis with respectperformance-based restricted stock awards granted to our NEOs for fiscal 2018, other than Mr. Davis and Mr. Udell. Performance-based awards for these NEOs are subject to attaining free cash flow goals, subject to increase or decrease in a range of 75% to 125% based on our relative total stockholder return as compared to the component companies in the Russell 2000 Index.



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Fiscal 2018 and 2019 Highlight.  Other than Mr. Chavous, who joined the Company in the fall of fiscal 2018, our NEOs participated in a three-year LTIP that was introduced in fiscal 2016. The fiscal 2016 LTIP was an overperformance plan based on achievement of specific targets over a three-year performance period with no overlapping periods or awards. The purpose of the program was to encourage achievement of strategic initiatives related to academic improvement and an increase in student lifetime value. This plan was still in place

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during fiscal 2018, concluding in early fiscal 2019. To complement the existing three-year LTIP, we utilized a one-year performance period for certain equity awards to our most senior executives in fiscal 2018 to incentivize disciplined focus to drive profitability and financial stability as we continued to execute against our multi-year business plan. In setting this performance period for fiscal 2018, we also took into account the fact that equity awards granted to Mr. Davis were 100% performance-based in fiscal 2018, which we believe is a far heavier burden than the compensation programs. The following table sets forth the primary critiques raised by ISSpractices of our peer companies. For fiscal 2019, we have eliminated one-year performance periods from our long-term incentive programs for key executives. Performance based equity incentives for fiscal 2019 for Mr. Davis, Mr. Rhyu and Glass Lewis regarding our executive compensation programs, the stockholder feedback we received during our outreach efforts and the responsive actions we tookMr. Chavous are based entirely on a three-year performance period and will continuebe earned only if we realize significant stock price appreciation as of the end of the three-year period.

2018 Performance Highlights

While executing on our multi-year strategy as described above, fiscal 2018 saw solid financial results and key achievements in the following areas:

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Managed Public School Retention.  Retention at our managed public schools improved by more than 300 basis points over fiscal 2017 and we saw the highest student retention level in eight years.



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Student Enrollments.  Our total average student enrollments continued to takeincrease, with 105,000 students enrolling in our programs during fiscal 2018, resulting in a 4.8% increase over fiscal 2017.



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School Academic Performance.  Since fiscal 2016, we achieved more than a 95% success rate in maintaining schools that we no longer consider to modifyhave academic performance issues, reducing the number of schools that we consider to be in "academic jeopardy" from 11 to 5.



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Strong Operating and Cash Flow Performance.  We set rigorous goals for the financial performance metrics under our executive compensation programs.

Executive Bonus Plan and performance-based equity awards and met or exceeded target performance under each metric, delivering solid performance for the year, as illustrated in the following table:

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In addition to implementing the responsive actions set forth above, in fiscal 2016 we took a number of additional steps to restructure and refine our executive compensation programs and practices. We also continued to use and expand upon the policies and practices that have historically served to promote the long-term interests of our stockholders and public school customers, while attracting and retaining the talent necessary to achieve those interests. These new and continuing practices are discussed in more detail throughout this Compensation Discussion and Analysis.

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New Executive Leadership Structure

In connection with our transition to a strategic model focused on sustained business development, the Board began to consider whether a new leadership structure was necessary to facilitate our business strategy and heightened focus on long-term growth. Following the resignation of Mr. Murray, our former Chief Operating Officer, in early fiscal 2016, we determined that a successful transition must be led by a leadership team comprised of two individuals serving in the separate and distinct roles of Executive Chairman and Chief Executive Officer. In February 2016 Mr. Udell began serving in the position of Chief Executive Officer with authority over the day to day operations of the business and continued execution of our strategic transformation. Mr. Davis continued in his role of Executive Chairman with primary responsibility for building relations with industry policymakers and school boards, as well as developing corporate strategy and other objectives approved by the Board.

CEO and Executive Chairman Pay Mix

As part of our executive leadership transition, the Committee engaged Compensia, our independent compensation consultant, to design competitive pay packages that focus heavily on variable pay components, with the intent that compensation for our Chief Executive Officer and our Executive Chairman should be overwhelmingly performance-

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based. The basic annual pay mix for each of these executives, which is reflected in their respective employment agreements, is set forth in the following charts:

*

Percentages shown exclude a sign-on bonus and new hire equity grants for Mr. Udell and other one-time performance equity grants awarded in fiscal 2016, as described below.

New Executive Employment Agreements

In connection with this transition of our executive leadership, we entered into an amended and restated employment agreement with Mr. Davis and an employment agreement with Mr. Udell, which were intended to implement the respective pay mix shown above and the variable pay components and compensation reforms introduced for fiscal 2016. A summary of the key terms of these agreements, including one-time equity grants implemented for fiscal 2016 or related to the transition, is set forth below. For additional information regarding these agreements, please read the section below titled "Potential Payments Upon Termination or Change in Control—Employment Agreements".

Mr. Davis

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Reduced Cash Compensation Opportunity.  In connection with his transition to the sole role of Executive Chairman, Mr. Davis's base salary amount was reduced to $400,000, which represents a 43% decrease from his fiscal 2015 base salary level. This also correlates to a reduction in his annual cash bonus opportunity under our Executive Bonus Plan, which is targeted at 150% of base salary (with a maximum award of 300% of base salary).



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Reduced Annual Target Equity Award.  Mr. Davis's amended employment agreement entitles him to annual equity awards under our long-term incentive compensation programs with a target award level of $2 million beginning in fiscal 2017. This represents a $1 million reduction from his target equity award level previously in effect.



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Reduced Severance Entitlements.  Severance terms and conditions generally remained unchanged from Mr. Davis' prior agreement. However, potential severance amounts, which are calculated based upon current salary and other compensation levels, are significantly reduced due to the reduction in annual cash and equity award opportunities.



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Performance-Based RSAs.  Mr. Davis is entitled to earn restricted stock awards based upon our achieving stock price appreciation thresholds over a two year performance period. In order for Mr. Davis to realize the maximum value attributable to these stock price RSAs, our stock price must experience a 144% increase in value over our stock price on the execution date of Mr. Davis's

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employment agreement. Earlier in fiscal 2016, Mr. Davis also received an award of PSUs under our new LTIP, which is described in more detail under "—Determination of Long Term Incentive Compensation—Performance Share Units."

Mr. Udell

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Market-Based Compensation Levels.  Mr. Udell's base salary, target annual incentive and target long-term incentive opportunity levels, which represent an aggregate targeted level of compensation that is less than that provided to Mr. Davis, were developed with guidance from Compensia to ensure that pay levels are reasonable and competitive among our peer group companies.



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Modest Severance Entitlements.  Potential severance payments for Mr. Udell are limited to three times his annual base salary, with no component of bonus awards in the severance calculation (other than a pro-rata bonus entitlement for the year of termination). In addition, unless a change in control occurs, Mr. Udell would be entitled to only one year of additional vesting of long-term incentives (with all performance-based vesting conditioned on attainment of applicable performance metrics).



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Moderate Sign-On Bonus Award.  In order to incentivize Mr. Udell to join the Company and in recognition of compensation opportunities that he forfeited from his former employer when joining K12, Mr. Udell received a one-time sign-on bonus in an amount equal to $400,000 and payable in two equal installments. This bonus must be repaid to us in the event Mr. Udell is terminated for cause or resigns without good reason, in either case, prior February 8, 2017.



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Initial Equity Grants.  Mr. Udell's employment agreement entitles him to certain initial equity awards which are primarily performance-based. More than two-thirds of the value of Mr. Udell's initial equity awards is earned based on the achievement of performance metrics and only one-third vests over time, as shown in the following chart:

For fiscal 2018 our cash flow, profit and revenue metrics were expressed on an "adjusted" basis to eliminate the impact of certain extraordinary and variable elements that are beyond the control of our executives. Please refer to discussion titled "Fiscal 2018 Compensation Decisions" beginning page 29 for a discussion of how these non-GAAP financial measures are calculated.



•

Limited Relocation Expenses.Expanded Business Operations.  Mr. Udell's employment agreement entitles himWe continued to certain paymentsexpand our business operations and focused on developing our CTE programs, highlights of which include opening a new program in connection with his relocation, including $8,333 per monthOhio, developing three new project-based learning centers and making significant equity investments in businesses that are intended to address market demand for a period of six months for temporary commuting expenses and upCTE, in addition to $40,000 for moving expenses incurred in 2016.our core business.

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Executive Compensation Principles and Practices

PrinciplesPrinciples.

Our executive compensation programs areprogram is guided by four basic principles:principles that we seek to incorporate in our executive pay practices:

1.

Link Compensation to Performance.Performance, Stockholder Interests and Student Success.    Compensation levels should reflect actual performance, including both Company-wide performanceconsistent with our redefined business strategy and be aligned with stockholder interests and the performancesuccess of the individual executive.students in the schools we serve.



2.

Maintain Competitive Compensation Levels.    Levels of compensation should be competitive with those offered by comparable companies in our industry to attract, retain and reward our NEOs.

Align Executives'executives. We set base pay levels at the low end of our peer group and Stockholders' Interests.provide above-peer median compensation opportunities to executives only if performance is attained at levels above rigorously set target-level goals.



3.

Reflect our Industry Circumstances and Unique Business.    OurAs the only publicly traded company in the K-12 space, our compensation programs encourage high performing NEOsmust be tailored to remainaddress the interests of stockholders and our public education obligations as we execute on our long-term strategy of creating schools of academic excellence with usinnovative technologies, inspired teaching and increase long-term stockholder value by requiring that they maintain significant share ownership and by granting long-term equity incentive awards each year.personalized learning.



4.

Engagement ofEngage Independent Compensation Consultant.    We are committed to engagingengage an independent compensation consultant to inform the Compensation Committee and evaluate the alignment of pay, and performance relative to our peer group.group, and compensation risk.

PracticesPractices.

We employ certain executive compensation practices to align our executives' compensation with stockholder interests. Listed below are those compensation practices we employ and certain practices we do not employ because we believe they would not serve the long-term interests of our stockholders.

What We Do

Pay for Performance.    A significant portion of our NEOs' potential compensation is not guaranteed but is linked to our financial and operational performance, which directly correlates to stockholder returns. We seek to place appropriate emphasis on variable pay components relative toperformance. The target total direct compensation for our peer groupChairman and our compensation consultant evaluates the alignment of pay and performance relative to our peer group on an annual basis.CEO for fiscal 2018 was approximately 85% performance-based.

AlignmentAlign Compensation to Share Price.    A portion of potentialperformance-based compensation for our most senior executives is tied to growth in our sharestock price which directly aligns to shareholderstockholder interests.

Establish Performance Goals Aligned to Strategy.    Our Executive Bonus Plan, performance-based RSAs and LTIP utilize objective performance-based goals that we believethe Committee believes are rigorous and challenging, aligned to our strategic priorities and designed to increase stockholder value and motivate executive performance.challenging.

Target Pay Competitively.    We seek to target compensation within a competitive range of the median of the peer group and onlyseek to deliver greater compensation only when warranted by performancemarket conditions or unique skill set.superior performance.

Use Meaningful Vesting Conditions on Equity Awards.to Promote Retention.    In connectionPerformance-based RSAs begin to vest after attainment of performance criteria and most vest after two and three years depending upon the award. Time-based RSAs vest over three years.

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Carefully Consider Stockholder Input.    We regularly seek and engage in dialogues with the restructuring of our long-term incentive award program to emphasize the use of performance-based awards,stockholders on executive compensation matters. Recent enhancements in fiscal 2016 we granted PSUs that only vest to the extent rigorous student retention and academic performance metrics are attained. In addition, stock price RSAs granted to our Executive Chairman and Chief Executive Officer will only be awarded if we achieve certain stock price appreciation thresholds over a two or three year performance period.executive compensation programs have been influenced by these discussions.

Maintain a Clawback Policy.    We can recover incentive compensation wrongly awarded to an executive officer where fraud or intentional misconduct led to a restatement of our financial statements.

Require Mandatory Share Ownership.    We expanded our stock ownership policy in fiscal 2016, such that allAll of our executive officers, including our NEOs, and our non-employee directors are required to maintain a minimum ownership level of our common stock to ensure they hold a significant equity stake in our Company thereby aligning their interests with those of the stockholders.

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Perform Competitive Market Analysis.    The Committee reviews competitive market data provided by its independent compensation consultant for our executive officers prior to making annual executive compensation decisions.

Analyze Executive Compensation Risk.    We review the executive compensation program annually to ensure that it does not encourage excessive or unnecessary risk.

Provide an Incentive Oriented Pay Mix.    Pay for our NEOs is heavily performance based, which includes annual and long-term incentive awards. Our targeted total direct compensation for our Executive Chairman and our CEO is approximately 87% and 82% performance based, respectively. Actual awards vary based on performance and may be forfeited in the event threshold performance is not achieved.risk taking.

What We Do Not Do

Grant Multi-Year or Guaranteed Bonuses or Equity Awards.    We do not pay guaranteed bonuses and currently have no guaranteed commitments to grant any equity-based awards. This ensures that we are able to base all compensation awards on measurable performance factors, operational results and operational results.competitive market needs.

Provide Generous Executive Perquisites.    We do not provide significant perquisites to our NEOs,executive officers, such as club memberships, vehiclespersonal income tax advisory services and similar items.

Offer Income Tax Gross-ups.Gross-Ups.    We do not provide income tax gross-ups for personal or broad-based benefits and other broad-based benefits.

Permit Excise Tax Gross-ups.    We do not providenor excise tax gross-ups for change in control payments or benefits.

Offer Pension or Supplemental Retirement Plans.    We do not provide costly retirement benefits to our NEOsexecutive officers that reward longevity rather than contributions to Company performance.

Reprice Options.    Since our initial public offering in 2007, we have not repriced or otherwise reduced the per-share exercise price of any outstanding stock options and we have no present intention of implementing any such repricings or reductions. Our proposed 2016 Incentive Award Plan ("2016 Plan") specifically prohibits repricing of options without stockholder approval.

Increase Shares without Stockholder Approval.    Our 2016 Plan does not contain an "evergreen" provision to increase the number of shares available for grants each year. Any increase to the maximum number of shares available will require stockholder approval.

Provide Single Trigger Change in Control Payments.    We maintain a "double trigger" vesting policy with respect to our equity awards whereby accelerated vesting in connection with a change in control of the Company also requires a qualifying termination of employment. Only legacyLegacy "single-trigger" vesting stock option awards grantedfrom prior to November 20, 2013 contain single trigger accelerated vesting provisions.years have been completely eliminated from our compensation program.

Allow Hedging or Pledging.    Our insider trading policy specifically prohibits short sales, hedging and margin transactions. Our 2007 Equity Incentive Plan, or the 2007transactions and our 2016 Plan prohibits pledging of any award granted under the plan.

Executive Compensation Program Objectives and Process

Focus on Variable Pay