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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

 

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October 28, 2015

Dear Fellow Stockholders:

              On behalf of our Board of Directors, I cordially invite you to attend the 2015 Annual Meeting of Stockholders of K12 Inc. to be held at the law firm of Latham & Watkins LLP, 555 Eleventh Street, N.W., Suite 1000, Washington, D.C. 20004-1304, on December 16, 2015, at 10:00 A.M., Eastern Time. The matters to be considered by the stockholders at the Annual Meeting are described in detail in the accompanying proxy materials.

              IT IS IMPORTANT THAT YOU BE REPRESENTED AT THE ANNUAL MEETING REGARDLESS OF THE NUMBER OF SHARES YOU OWN OR WHETHER OR NOT YOU ARE ABLE TO ATTEND THE ANNUAL MEETING IN PERSON. We urge you to vote promptly, even if you plan to attend the Annual Meeting. Please vote electronically via the Internet or by telephone, if permitted by the broker or other nominee that holds your shares. If you receive a paper copy of the proxy materials, please complete, sign, date and return the accompanying proxy card. Voting electronically, by telephone or by returning your proxy card in advance of the Annual Meeting does not deprive you of your right to attend the Annual Meeting. Thank you for your continued support of K12.

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K12 INC.

NOTICE OF 2015 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 16, 2015

The annual meeting of stockholders of K12 Inc., a Delaware corporation (the "Company"), will be held at the law firm of Latham & Watkins LLP, 555 Eleventh Street, N.W., Suite 1000, Washington, D.C. 20004-1304, on Wednesday, December 16, 2015, at 10:00 A.M., Eastern Time (the "Annual Meeting").

At the Annual Meeting, stockholders will be asked to:

1.

Elect nine directors to the Company's Board of Directors to serve for one-year terms;



2.

Consider and vote upon a non-binding advisory resolution approving the compensation of the named executive officers of the Company ("Say on Pay");



3.

Consider and vote upon an amendment to the Company's 2007 Equity Incentive Award Plan;



4.

Consider and vote upon the ratification of the appointment of BDO USA, LLP, as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2016; and



5.

Act upon such other matters as may properly come before the Annual Meeting or any adjournments or postponements of the Annual Meeting.

The foregoing matters are described in more detail in the accompanying Proxy Statement. In addition, financial and other information about the Company is contained in the accompanying Annual Report to Stockholders for the fiscal year ended June 30, 2015 (the "Annual Report"), which includes our Annual Report on Form 10-K for the fiscal year ended June 30, 2015 ("fiscal 2015"), as filed with the U.S. Securities and Exchange Commission (the "SEC") on August 4, 2015.

The Board of Directors has fixed the close of business on October 21, 2015, as the record date for determining the stockholders entitled to notice of and to vote at the Annual Meeting (the "Record Date"). Consequently, only stockholders of record at the close of business on October 21, 2015, will be entitled to notice of and to vote at the Annual Meeting. It is important that your shares be represented at the Annual Meeting regardless of the size of your holdings. A Proxy Statement, proxy card and self-addressed envelope are enclosed with these materials. Whether or not you plan to attend the Annual Meeting in person, please complete, date and sign the proxy card and return it promptly in the envelope provided, which requires no postage if mailed in the United States. Alternatively, you may vote by telephone or via the Internet as instructed in these materials. If you are the record holder of your shares and you attend the Annual Meeting, you may withdraw your proxy and vote in person, if you so choose.

For admission to the Annual Meeting, all stockholders should come to the stockholder check-in table. Those who own shares in their own names should provide identification and have their ownership verified against the list of registered stockholders as of the Record Date. Those who have beneficial ownership of stock through a bank or broker must bring account statements or letters from their banks or brokers indicating that they owned the Company's common stock as of the close of business on October 21, 2015. In order to vote at the meeting, beneficial owners of the Company's common stock must bring legal proxies, which can be obtained only from their brokers or banks.

Herndon, VA
October 28, 2015

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PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
DECEMBER 16, 2015

This Proxy Statement and the accompanying proxy card and notice of Annual Meeting are provided in connection with the solicitation of proxies by and on behalf of the Board of Directors of K12 Inc., a Delaware corporation, for use at the annual meeting of stockholders to be held at the law firm of Latham & Watkins LLP, 555 Eleventh Street, N.W., Suite 1000, Washington, D.C. 20004-1304, on Wednesday, December 16, 2015, at 10:00 A.M., Eastern Time, and any adjournments or postponements thereof, which we refer to as the Annual Meeting. "K12," "we," "our," "us" and the "Company" each refer to K12 Inc. The mailing address of our principal executive offices is 2300 Corporate Park Drive, Herndon, VA 20171. This Proxy Statement, the accompanying proxy card and the notice of Annual Meeting will be made available on or about October 27, 2015, to holders of record as of the close of business on October 21, 2015 of our common stock, par value $0.0001 per share, which we refer to as our Common Stock.

VOTING SECURITIES

Record Date; Outstanding Shares; Shares Entitled to Vote

Our Board of Directors has fixed the close of business on October 21, 2015, as the Record Date for determining the stockholders entitled to notice of, and to vote at, the Annual Meeting. On the Record Date, we had 38,939,704 shares of Common Stock issued and outstanding.

Holders of record of Common Stock on the Record Date will be entitled to one vote per share on any matter that may properly come before the Annual Meeting and any adjournments or postponements of the Annual Meeting.

Quorum and Vote Required

The presence, in person or by duly executed proxy, of stockholders representing a majority of all the votes entitled to be cast at the Annual Meeting will constitute a quorum. If a quorum is not present at the Annual Meeting, we expect that the Annual Meeting will be adjourned or postponed to solicit additional proxies.

If a quorum is present: (i) a plurality of votes present in person or represented by proxy at the Annual Meeting is required to elect the members of the Board of Directors; and an affirmative vote of a majority of the votes present in person or represented by proxy at the Annual Meeting must approve (ii) the non-binding advisory resolution on executive compensation, (iii) the amendment to our 2007 Equity Incentive Award Plan, (iv) the ratification of the appointment of BDO USA, LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2016, or fiscal 2016, and (v) such other matters as may properly come before the Annual Meeting or any adjournments or postponements of the Annual Meeting.

Voting; Proxies; Revocation

Shares of our Common Stock represented at the Annual Meeting by properly executed proxies received prior to or at the Annual Meeting, and not revoked prior to or at the Annual Meeting, will be voted at the Annual Meeting, and at any adjournments, continuations or postponements of the Annual Meeting, in accordance with the instructions on the proxies.

If a proxy is duly executed and submitted without instructions, the shares of Common Stock represented by that proxy will be voted:

•

FOR Proposal 1, the election of the Board of Director nominees named in this Proxy Statement;



•

FOR Proposal 2, the approval, on a non-binding advisory basis, of the compensation of the named executive officers of the Company;

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FOR Proposal 3, an amendment to the Company's 2007 Equity Incentive Award Plan;



•

FOR Proposal 4, the ratification of the appointment of BDO USA, LLP as the Company's independent registered public accounting firm for fiscal 2016; and



•

In the discretion of the proxy holders regarding any other matters properly presented for a vote at the Annual Meeting or any adjournments or postponements of the Annual Meeting.

A record holder who executes a proxy may revoke it before or at the Annual Meeting by: (i) delivering to our corporate secretary a written notice of revocation of a previously delivered proxy, with such notice dated after the previously delivered proxy; (ii) duly executing, dating and delivering to our corporate secretary a subsequent proxy; or (iii) attending the Annual Meeting and voting in person. Attendance at the Annual Meeting will not, in and of itself, constitute revocation of a proxy. Any written notice revoking a proxy should be delivered to K12 Inc., Attn: General Counsel and Secretary, 2300 Corporate Park Drive, Herndon, VA 20171. If your shares of Common Stock are held in a brokerage account, you must follow your broker's instructions to revoke a proxy.

Abstentions and Broker Non-Votes

Broker non-votes occur when a nominee holding shares of voting securities for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power on that item and has not received instructions from the beneficial owner. Abstentions, withheld votes, and broker non-votes are included in determining whether a quorum is present but are not deemed a vote cast "For" or "Against" a given proposal, and therefore, are not included in the tabulation of the voting results. As such, abstentions, withheld votes and broker non-votes do not affect the voting results with respect to the election of directors. Abstentions and broker non-votes will have the effect of a vote against the approval of any items requiring the affirmative vote of the holders of a majority or greater of the outstanding Common Stock who are entitled to vote and are present in person or represented by proxy at the Annual Meeting.

Proxy Solicitation

We are soliciting proxies for the Annual Meeting from our stockholders and we will bear the entire cost of soliciting proxies from our stockholders. Copies of solicitation materials will be furnished to brokerage houses, fiduciaries and custodians holding Common Stock for the benefit of others so that such brokerage houses, fiduciaries and custodians may forward the solicitation materials to such beneficial owners. We may reimburse persons representing beneficial owners of Common Stock for their expenses in forwarding solicitation materials to those beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone or personal solicitation by our directors, officers or other regular employees of the Company. No additional compensation will be paid to our directors, officers or other regular employees for these services.

The Company has retained MacKenzie Partners, Inc. to assist in obtaining proxies from shareholders for the Annual Meeting. The estimated cost of such services is $17,500, plus out-of-pocket expenses. MacKenzie Partners may be contacted at (800) 322-2885 or via email at proxy@mackenziepartners.com.

Business; Adjournments

We do not expect that any matter other than the proposals presented in this Proxy Statement will be brought before the Annual Meeting. However, if other matters are properly presented at the Annual Meeting or any adjournments or postponements of the Annual Meeting, then the proxy holders will vote in their discretion with respect to those matters.

If a quorum is not present at the Annual Meeting, the Annual Meeting may be adjourned from time to time upon the approval of the holders of shares representing a majority of the votes present in person, or by proxy at the Annual Meeting, until a quorum is present. Any business may be transacted at the adjourned meeting which might have been transacted at the meeting originally noticed. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. We do not currently intend to seek an adjournment of the Annual Meeting.

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QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND THESE PROXY MATERIALS

The following addresses some questions you may have regarding the matters to be voted upon at the Annual Meeting. These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the more detailed information contained elsewhere in this Proxy Statement and the documents referred to or incorporated by reference in this Proxy Statement for additional information.

Why am I receiving this Proxy Statement?

The Company is soliciting proxies for the Annual Meeting. You are receiving a Proxy Statement because you owned shares of Common Stock at the close of business on October 21, 2015, the Record Date for the Annual Meeting, which entitles you to vote at the Annual Meeting. By use of a proxy, you can vote whether or not you attend the Annual Meeting. This Proxy Statement describes the matters on which we would like you to vote and provides information on those matters so that you can make an informed decision.

Why is K12 calling the Annual Meeting?

We are calling the Annual Meeting and submitting proposals to stockholders of the Company to consider and vote upon Annual Meeting matters, including electing directors, a non-binding advisory vote on executive compensation, an amendment to our 2007 Equity Incentive Award Plan and ratifying the appointment of our independent registered public accounting firm.

How does the Board of Directors recommend that I vote?

Our Board of Directors recommends that you vote FOR the election of nine directors nominated by our Board of Directors, FOR the Company's executive compensation, FOR the amendment to our 2007 Equity Incentive Award Plan and FOR the ratification of the appointment of BDO USA, LLP as the Company's independent registered public accounting firm for fiscal 2016.

What do I need to do now?

After carefully reading and considering the information in this Proxy Statement, please complete, date, sign and promptly mail the proxy card in the envelope provided, which requires no postage if mailed in the United States, or vote electronically via the Internet or by telephone by following the instructions provided by your bank or broker.

May I vote in person?

Yes. If you were a stockholder of record as of the close of business on October 21, 2015, you may attend the Annual Meeting and vote your shares in person instead of returning your signed proxy card. However, we urge you to vote in advance even if you are planning to attend the Annual Meeting.

How do I vote if my shares are held in "street name" by my bank, broker or agent?

If you are a beneficial owner of shares registered in the name of your broker, bank, or other agent, you should have received voting instructions with these proxy materials from that organization rather than from us. Simply complete and mail your voting instructions as directed by your broker or bank to ensure that your vote is counted. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.

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If my shares are held in "street name" by a broker, will my broker vote my shares for me even if I do not give my broker voting instructions?

Under the rules that govern brokers who have record ownership of shares that are held in "street name" for their clients, brokers may vote such shares on behalf of their clients with respect to "routine" matters (such as the ratification of auditors), but not with respect to non-routine matters (such as the election of directors or a proposal submitted by a stockholder). If the proposals to be acted upon at the Annual Meeting include both routine and non-routine matters, the broker may turn in a proxy card for uninstructed shares that votes on the routine matters, but expressly states that the broker is not voting on non-routine matters. This is called a "broker non-vote" as to non-routine matters. Broker non-votes on non-routine matters will be counted for the purpose of determining the presence or absence of a quorum, but will not be counted for the purpose of determining the number of votes cast. We encourage you to provide specific instructions to your broker by returning your proxy card or by voting electronically via the Internet or by telephone, if permitted by the broker or other nominee that holds your shares. This ensures that your shares will be properly voted at the Annual Meeting.

Can I revoke my proxy and change my vote?

Yes. You have the right to revoke your proxy at any time prior to the time your shares are voted at the Annual Meeting. If you are a stockholder of record, your proxy can be revoked in several ways: by timely delivery of a written revocation to our corporate secretary, by submitting another valid proxy bearing a later date or by attending the Annual Meeting and voting your shares in person, even if you have previously returned your proxy card.

When and where is the Annual Meeting?

The Annual Meeting will be held on December 16, 2015 at 10:00 A.M., Eastern Time, at the law firm of Latham & Watkins LLP, 555 Eleventh Street, NW, Suite 1000, Washington, DC 20004-1304.

Who can help answer my questions regarding the Annual Meeting or the proposals?

You may contact K12 to assist you with your questions. You may reach K12 at:

K12 Inc.
Attention: Investor Relations
2300 Corporate Park Drive
Herndon, VA 20171
(703) 483-7000

MacKenzie Partners, Inc.
105 Madison Avenue
New York, NY 10016
(800) 322-2885

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CORPORATE GOVERNANCE AND BOARD MATTERS

Corporate Governance Guidelines and Code of Business Conduct and Ethics

Our Board of Directors oversees the management of the Company and its business for the benefit of our stockholders in order to enhance stockholder value over the long-term and to achieve its educational mission. The Board of Directors has adopted Corporate Governance Guidelines (the "Guidelines") to assist it in the exercise of its responsibilities. The Guidelines are reviewed annually and periodically amended as the Board of Directors enhances the Company's corporate governance practices. The Board of Directors has also adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees. The purpose of this code is to promote honest and ethical conduct for conducting the business of the Company consistent with the highest standards of business ethics. The Guidelines and Code of Business Conduct and Ethics are available on our website at www.K12.com under the Investor Relations-Governance section.

Our corporate governance and business conduct best practices include:

•

Regular executive sessions of non-management directors



•

All directors are independent except our Chairman and Chief Executive Officer



•

A lead independent director with delineated authority and responsibility



•

An over-boarding policy limiting other board service



•

Executive officer stock ownership guidelines



•

A policy prohibiting hedging, pledging and short sales of our stock by directors and employees

We intend to satisfy the disclosure requirements under the Exchange Act regarding any amendment to, or waiver from a material provision of our Code of Business Conduct and Ethics involving our principal executive, financial or accounting officer or controller by posting such information on our website.

Board of Directors

Term of Office.    All directors of the Company serve terms of one year and until the election and qualification of their respective successors.

Attendance at Board and Committee Meetings and the 2014 Annual Meeting.    Our Board of Directors met 13 times in person or telephonically during fiscal 2015. Each director attended at least 75% of the total Board and committee meetings to which they were assigned. Our policy with respect to director attendance at the annual meeting of stockholders is to encourage, but not require, director attendance. Two members of our Board of Directors attended our 2014 Annual Meeting of Stockholders: Mr. Davis and Dr. Futrell. Our director attendance policy is included in our Corporate Governance Guidelines, which is available on our website at www.K12.com.

Communication with Directors.    Stockholders and other interested parties may communicate directly with our Board of Directors, individually or as a group, by sending an email to our General Counsel at OGC@K12.com, or by mailing a letter to K12 Inc., 2300 Corporate Park Drive, Herndon, VA 20171, Attention: General Counsel and Secretary. Our General Counsel will monitor these communications and provide summaries of all received communications to our Board of Directors at its regularly scheduled meetings. Where the nature of a communication warrants, our General Counsel may decide to seek the more immediate attention of the appropriate committee of the Board of Directors, the Lead Independent Director or an individual director, or our management or independent advisors and will determine whether any response is necessary.

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Director Independence

Our Board of Directors has affirmatively determined that each of our non-employee directors is "independent" as defined in the currently applicable listing standards of the New York Stock Exchange ("NYSE") and the rules and regulations of the Securities and Exchange Commission ("SEC"). Mr. Davis is not independent under either NYSE or SEC rules because he is an executive officer of the Company. If the nominees for the Board of Directors are duly elected at the Annual Meeting, then each of our directors, other than Mr. Davis, will serve as an independent director on our Board of Directors as the term is defined in applicable rules of the NYSE and the SEC.

Board of Directors Leadership Structure

Our Board of Directors is comprised of independent, accomplished and experienced directors who provide advice and oversight of management to further the interests of the Company and its stockholders. Our governance framework provides the Board of Directors with the flexibility to determine an optimal organizational structure for leadership and engagement while ensuring appropriate insight into the operations and strategic issues of the Company. The Board of Directors has evaluated its leadership structure and determined that Mr. Davis should serve as Chairman of the Board and Chief Executive Officer ("CEO") and that Mr. Reynolds should serve as Lead Independent Director.

Chairman.    Our Board of Directors elects a chairman from among the directors and determines whether to separate or combine the roles of chairman and chief executive officer based on what it believes best serves the needs of the Company and its stockholders at any particular time. Both approaches have been taken depending on the circumstances. The determination to appoint Mr. Davis as Chairman and CEO was based on a number of factors that made him particularly well-suited for the role. These factors included his position as Chief Executive Officer and his prior position as Executive Chairman, his prior service on the Board of Directors and its Compensation Committee, and his understanding of the Company's business and day-to-day operations, growth opportunities, challenges and risk management practices. This combination of Company experience and expertise enables Mr. Davis to provide strong and effective leadership to the Board of Directors and to ensure that the Board of Directors is informed of important issues. The Chairman and CEO oversees all corporate and business functions of the Company, shapes the formulation and implementation of strategic and operational plans and acts as the Board of Directors' liaison to management. In consultation with our Lead Independent Director, the Chairman and CEO sets the agenda for the regular and special meetings of the Board of Directors, presides at the annual meeting of stockholders and performs such other functions and responsibilities as set forth in the Corporate Governance Guidelines, or as requested by the Board of Directors. The Board of Directors believes that having a unified role at this stage in our development promotes a cohesive, strong and consistent vision and strategy for the Company.

Lead Independent Director.    The role of the Lead Independent Director is to facilitate communications between the Chairman and the independent directors and the committees of the Board of Directors. In doing so, the Lead Independent Director, Mr. Reynolds, serves as the liaison between the Board of Directors and the Chairman, thereby giving guidance to management in meeting the objectives set by the Board of Directors and monitoring compliance with corporate governance policies. Additionally, the Lead Independent Director serves as a liaison between the Board of Directors and stockholders. The Lead Independent Director has the authority to call meetings of the independent directors and chairs executive sessions of the Board of Directors during which no members of management are present. These meetings are intended to provide the Lead Independent Director with information that he can use to assist the Chairman and CEO to function in the most effective manner. The Board of Directors believes the Lead Independent Director provides additional independent oversight of executive management and Board matters.

Executive Sessions of the Board.    Our Board of Directors holds executive sessions without management directors or management present at each regularly scheduled meeting of the Board of Directors. The independent directors may also meet without management present at other times as requested by any independent director. As Lead Independent Director, Mr. Reynolds chairs the executive sessions of the Board of Directors.

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Committees of the Board of Directors

As of the date of this Proxy Statement, membership on the Committees of the Board of Directors is as follows:

Chairperson               Member               Financial Expert

The standing committees of our Board of Directors are the Audit Committee, Compensation Committee, Nominating and Corporate Governance Committee and the Academic Committee.

Audit Committee.    The Audit Committee, which was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, consists of Mr. Fink, who serves as the Chairman, Mr. Bron and Ms. Cassell. Our Board of Directors has determined that each of Messrs. Fink and Bron and Ms. Cassell qualify as independent directors under the applicable NYSE listing requirements and SEC regulations.

The Audit Committee met nine times during fiscal 2015. The meetings to review the Company's quarterly and annual periodic filings with the SEC each include at least two separate sessions (which together count as only one meeting). Mr. Fink engaged in routine separate communications with the Company's external auditors and Chief Financial Officer, held the required executive sessions at each meeting, and requested participation by outside counsel, as needed. The Audit Committee has a charter, available on our website at www.K12.com, setting forth its structure, powers and responsibilities. Pursuant to the charter, the Audit Committee is comprised of at least three members appointed by our Board of Directors, each of whom satisfies the requirements of independence and financial literacy. In addition, our Board has determined that Messrs. Fink and Bron and Ms. Cassell are each an audit committee financial expert as that term is defined under the Exchange Act. Under its charter, the responsibilities of the Audit Committee include:

•

discussing with our independent registered public accounting firm the conduct of the annual audit, the adequacy and effectiveness of our accounting, the effectiveness of internal control over financial reporting, and applicable requirements regarding auditor independence;



•

approving the audited financial statements of the Company to be included in our Annual Report on Form 10-K;



•

reviewing and recommending annually to our Board of Directors the selection of an independent registered public accounting firm;

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pre-approving all audit and non-audit services and fees associated with our independent registered public accounting firm; and



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reviewing and discussing with management significant accounting matters and disclosures.

In addition, our Corporate Governance Guidelines provide that members of the Audit Committee may not serve on the audit committees of more than two other companies at the same time as they serve on our Audit Committee.

Compensation Committee.    The Compensation Committee consists of Mr. Tisch, who serves as the Chairman, Dr. Futrell and Mr. Reynolds. Our Board of Directors has determined that each of Messrs. Tisch and Reynolds and Dr. Futrell qualify as independent directors within the meaning of the applicable NYSE listing requirements and SEC regulations.

The Compensation Committee met five times during fiscal 2015. The Compensation Committee has a charter, available on our website at www.K12.com, setting forth its structure, powers and responsibilities. These include:

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reviewing the compensation philosophy of our Company;



•

reviewing, approving and recommending corporate goals and objectives relating to the compensation of our Chairman and CEO and, based upon an evaluation of the achievement of these goals, recommending to the Board of Directors our Chairman and CEO's total compensation;



•

reviewing and approving salaries, bonuses and other forms of compensation for our other executive officers, including without limitation stock options, restricted shares, and other forms of equity compensation;



•

considering and adopting changes to our compensation structure as applicable to all non-executive officer employees, including, but not limited to, salaries and benefits; and



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performing such duties and exercising such authority as may be assigned by the Board of Directors, including under the terms of our equity incentive and bonus plans.

Nominating and Corporate Governance Committee.    The Nominating and Corporate Governance Committee consists of Mr. Bron, who serves as the Chairman, and Messrs. Cohn, Engler, Fink, Reynolds and Tisch. Our Board of Directors has determined that each of Messrs. Bron, Cohn, Engler, Fink, Reynolds and Tisch qualify as independent directors within the meaning of the applicable NYSE listing requirements and SEC regulations. Our Board of Directors has adopted Corporate Governance Guidelines which are available on our website at www.K12.com.

The Nominating and Corporate Governance Committee met two times during fiscal 2015. The Nominating and Corporate Governance Committee has a charter, available on our website at www.K12.com, setting forth its structure, powers and responsibilities. Under its charter, the Nominating and Corporate Governance Committee has the authority to nominate persons to stand for election and to fill vacancies on our Board of Directors. The Nominating and Corporate Governance Committee may consider the following criteria, as well as any other factors it deems appropriate, in recommending candidates for election to our Board of Directors:

•

personal and professional integrity, ethics and values;



•

experience in corporate management, such as serving as an officer or former officer of a publicly-traded company, and a general understanding of marketing, finance, operations, governance and other elements relevant to the success of the Company in today's business and regulatory environment;



•

experience in the field of education policy and administration;



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service as a board member of another publicly-traded company; and

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practical and mature business judgment, including ability to make independent analytical inquiries.

Although the Nominating and Corporate Governance Committee does not have a formal policy with regard to the consideration of diversity in identifying director nominees, it strives to nominate directors with a variety of complementary skills so that, as a group, the Board of Directors will possess the appropriate backgrounds, talent, perspectives, skills and expertise to oversee the Company's business. The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders, provided such recommendations are submitted in writing not later than the close of business on the 90^th day, or earlier than the close of business on the 120^th day, prior to the anniversary of the preceding year's annual meeting of the stockholders. Such recommendations should include the name and address and other pertinent information about the candidate as is required to be included in the Company's proxy statement. Recommendations should be submitted to the corporate secretary of the Company at K12 Inc., 2300 Corporate Park Drive, Herndon, VA 20171, Attention: General Counsel and Secretary. The Nominating and Corporate Governance Committee will consider the criteria set forth above and other relevant information when evaluating director candidates recommended by stockholders.

Academic Committee.    The Academic Committee consists of Dr. Barrett, who serves as the Chairman, Mr. Davis and Dr. Futrell. The primary role of the Academic Committee is to make recommendations and assist management in discharging its responsibility to ensure continuous improvement in academic outcomes for the students and schools we serve. The Academic Committee, in conjunction with the Company's Educational Advisory Committee, met jointly four times in fiscal 2015.

The Academic Committee has a charter, available on our website at www.K12.com, setting forth the structure, powers and responsibilities of the Academic Committee. Under its charter, the responsibilities of the Academic Committee include:

•

monitoring the effectiveness of the Company's education products and services;



•

evaluating and implementing recommendations of the Company's Educational Advisory Committee; and



•

making recommendations to the Board of Directors and management to ensure continuous improvement in academic outcomes for the public and private schools served by the Company.

Risk Management

Our Board of Directors believes full and open communication with management is essential for effective enterprise risk management and oversight. Members discuss strategy and risks facing the Company with our Chairman and our senior management at meetings of our Board of Directors or when members of our Board of Directors seek to focus on a particular area of risk, such as meeting state academic accountability standards at the schools we manage, ensuring the privacy of student information, compliance with state regulatory and reporting requirements or information technology cyber-security protections and preparedness. Because the Chairman also sets the agenda for the Board of Directors meetings, each functional division of the Company can identify risk-related topics that may require added attention, such as evolving state curriculum standards, student engagement and retention, education technology, legal and policy matters, and information security. Each quarter, our Chairman also presents an assessment of the strategic, financial and operational issues facing the Company, which includes a review of associated risks and opportunities.

Management is responsible for identifying, prioritizing, remediating and monitoring the day-to-day management of risks that the Company faces, while our Board of Directors, as a whole and through its committees, is responsible for the oversight of enterprise risk management. In fiscal 2015, the Audit Committee continued to work directly with our Vice President of Internal Audit and a major independent accounting firm to support the Company's internal audit function in risk management. This combination provides us with the focus, scope, expertise and continuous attention necessary for effective risk management.

While our Board of Directors is ultimately responsible for risk oversight, three of its committees concentrate on specific risk areas.

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The Audit Committee oversees financial reporting and internal controls, and discusses with management the Company's policies with respect to those matters. This includes various risk management reports prepared by our internal audit department and provided to our Audit Committee on a quarterly basis. In addition, our Audit Committee assists the Board of Directors in the oversight of legal risk management. In June 2013, the Board of Directors approved the charter of a Legal Compliance and Ethics Committee (consisting of senior management members) to implement and maintain a Legal and Compliance Ethics Program, which includes a Chief School Compliance Officer within the Office of the General Counsel. The Legal Compliance and Ethics Committee is tasked with providing semi-annual reports to the Audit Committee on the Company's legal risks and compliance-related matters in the schools we serve.



•

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's Report which begins on page 20.



•

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 2015

In fiscal 2015, pursuant to our Amended Non-Employee Directors Compensation Plan ("Directors Compensation Plan") adopted in November 2013, our non-employee directors received annual cash retainers for service on the Board and assigned committees and annual restricted stock awards. Mr. Davis, our Chairman and CEO, received no additional compensation for his service on our Board of Directors.

Pursuant to the terms of the Directors Compensation Plan, each non-employee director received an annual cash retainer of $50,000. The Chairman of the Audit Committee received an additional annual cash retainer of $20,000; the Chairman of the Compensation Committee received an additional annual cash retainer of $15,000; and the Chairman of the Nominating and Corporate Governance Committee received an additional annual cash retainer of $10,000. Non-employee directors serving on Board committees received annual cash retainers of $5,000 for each committee on which he or she served. 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. In fiscal 2015 the Audit Committee met nine times. 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 based on their start date for a partial year of service), with the shares underlying such awards vesting in equal annual installments over a period of three years. The restricted stock awards were granted on January 2, 2015, pursuant to the Directors Compensation Plan.

Please see the Security Ownership of Certain Beneficial Owners and Management table starting on page 65 for additional information on the beneficial ownership of Common Stock by each of our directors.

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The following table sets forth the compensation paid to our non-employee directors for their services during fiscal 2015:

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PROPOSAL 1:
ELECTION OF DIRECTORS

Our Board of Directors currently has ten members: Messrs. Guillermo Bron, Adam L. Cohn, Nathaniel A. Davis, John M. Engler, Steven B. Fink, Jon Q. Reynolds, Jr., Andrew H. Tisch, Ms. Fredda J. Cassell, and Drs. Craig R. Barrett and Mary H. Futrell, although there are only nine director nominees standing for election. In October 2015, Dr. Futrell expressed her intention to retire from the Board of Directors and accordingly her term will end at the conclusion of the Annual Meeting. The Board of Directors determined that, effective at the conclusion of the Annual Meeting, the size of the Board of Directors will be decreased to nine directors.

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 nine directors, Messrs. Bron, Cohn, Davis, Engler, Fink, Reynolds, Tisch, Ms. Cassell, and Dr. Barrett, 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. THE 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.

Craig R. Barrett
Age 76

Dr. Barrett joined us as a director in September 2010 and currently serves as Chairman of the Academic Committee. He served as Chairman and Chief Executive Officer of Intel Corporation, which he joined in 1974, until his retirement in 2009. 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 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 63

Mr. Bron joined us as a director in July 2007, and currently serves as Chairman of the Nominating and Corporate Governance Committee and is a member of the Audit Committee. Mr. Bron is a Managing Director at Pine Brook

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Road Partners, LLC, an investment firm, 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- owned subsidiary of UPFC, from 1994 to 2005. Mr. Bron has served as Chairman of idX Corporation since 2008, and 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 60

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 44

Mr. Cohn joined us as a director in February 2013 and is a member of our Nominating and Corporate Governance 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 Stone Canyon Industries, 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 61

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. 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 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).

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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 Communications and Telica Switching. Mr. Davis also currently serves as a director of the non-profit Progressive Life Center. Mr. Davis received 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 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 67

Mr. Engler joined us as a director in October 2012 and is a member of the Nominating and Corporate Governance Committee. He has served as President of the Business Roundtable since January 2011. 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 a member of its Compensation Committee. He is also a director of Munder Capital Management. 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. 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 64

Mr. Fink joined us as a director in October 2003 and currently serves as Chairman of the Audit Committee and is a member of the Nominating and Corporate Governance Committee. Mr. Fink is the Chairman of the Board and Chairman of the Compensation Committee for Life Storage, LLC, the Deputy Chairman of Heron International and a Director of the Foundation of the University of California, Los Angeles. Mr. Fink served as a director of Nobel Learning Communities, Inc. from 2003 to 2011. In addition, Mr. Fink is a member of the Board of the Smithsonian National Museum of American History, the Board of the Herb Ritts Foundation, and is a member of The J. Paul Getty Photographs Counsel. From 1999 to 2009, Mr. Fink served as a director of Leapfrog, Inc. and 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, Jr.
Age 47

Mr. Reynolds joined us as a director in April 2011 and became the Lead Independent Director in January 2013. He also is a member of our Compensation Committee and Nominating and Corporate Governance Committee. In 1999, Mr. Reynolds became a General Partner at Technology Crossover Ventures, or TCV, a private equity and venture capital firm that 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 member 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

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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.

Andrew H. Tisch
Age 66

Mr. Tisch joined us as a director in August 2001 and served as Chairman of the Board of Directors from May 2007 to June 2012. He currently serves as Chairman of the Compensation Committee and is a member of our Nominating and Corporate Governance Committee. Since 1985, Mr. Tisch has been a director of Loews Corporation, and is Co-Chairman of its board, Chairman of its executive committee and, since 1999, has been a member of its Office of the President. Mr. Tisch has also 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 Corporation 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 Vice Chairman of Cornell University, 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 Cornell University and an M.B.A. from Harvard University. Mr. Tisch was selected as a director because of his extensive experience having served as president or chairman of various multinational companies over his career in addition 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.

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 Vice President of School Management and Services, Age 42

Ms. Cleveland joined us in October 2002 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 a Director for the Foundation for Blended and Online Learning.

Howard D. Polsky, Executive Vice President, General Counsel and Secretary, Age 64

Mr. Polsky joined us in June 2004, and serves as Executive Vice President, General Counsel and Secretary. Mr. Polsky previously held the position of Vice President and General Counsel 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 President and General Counsel of COMSAT's largest operating division, and subsequently serving on the executive management team as Vice President of Federal Policy 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. Polsky began his legal career at the Federal Communications Commission. He received a B.A. in Government from Lehigh 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.

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James J. Rhyu, Executive Vice President and Chief Financial Officer, Age 45

Mr. Rhyu joined us in June 2013 and serves as Executive Vice President and Chief Financial Officer. 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 56

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 2015 compensation for the following named executive officers (our "NEOs"):

Subsequent Management Change

In September 2015, Mr. Murray resigned as our President and Chief Operating Officer.

Executive Summary

Since it was founded in 1999, K12 has provided students in kindergarten through 12^th grade with access to engaging curriculum and learning systems which enable them to maximize their success in life, regardless of geographic, financial or demographic circumstances. Today, we continue to be an industry leader in technology-enabled individualized learning, adapting instruction to meet each student's unique capabilities, interests and needs.

For fiscal 2015, our key strategic accomplishments and executive compensation highlights included the following:

•

Commenced implementation of long-term investment goals.  To improve the academic performance of students, we made capital expenditures in fiscal 2015 to convert to a state-of-the-art high school learning management system provided by Desire2Learn, which is designed to help us improve student engagement, retention and outcomes for the managed schools we serve. Execution of the Desire2Learn pilot program, which was successfully completed during fiscal 2015, was a key performance measure for our NEOs annual bonus for the year. Significant investments in next-generation curriculum content, teacher support and data security were also made in fiscal 2015.



•

Sustained revenue growth.  Although we experienced a decrease in our operating income in fiscal 2015, we increased revenues to $948.3 million, representing a growth rate of 3.1%, and achieved above-threshold performance in our revenue and operating income, as adjusted, goals for the year. These results were reflected in our NEOs' annual bonus payouts. When determining the performance level targets, operating income was expected to be lower in fiscal 2015 than in fiscal 2014 due to planned investments in academics and instruction, including improving curriculum and learning systems and developing programs and initiatives to support and enhance the student online learning experience, and therefore, was reflected in the performance level targets for the fiscal 2015 Executive Bonus Plan.



•

Continued refinement of our executive compensation program to align with industry practices.  To be responsive to stockholder concerns, we continued to assess our executive compensation programs during fiscal 2015 and made adjustments to further align our compensation programs with our primary goal of increasing academic performance at the managed public schools we serve while increasing long-term stockholder value. These adjustments included expanding our stock ownership policy to include all our NEOs, continued use of performance-based equity incentives and restructuring

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of our Executive Bonus Program to ensure our accountability metrics permit an accurate pay-for-performance outcome.

•

Redesign of our Executive Bonus Plan.  In fiscal 2015, our executive management team made significant strides to further develop our infrastructure and business goals, allowing us to more accurately identify an appropriate student base, provide those students with the resources to help them succeed and attract and retain talented executives by providing meaningful incentives for them to continue to contribute to our ongoing development. These improvements represent a shift in our strategic focus toward sustained business development as our managed public school business continues to mature. This was reflected in the redesign of our Executive Bonus Plan during fiscal 2015 by targeting the focus of our executives on expanded corporate performance measures, including improving student retention and academic performance, and successfully implementing our new high school learning platform, in addition to key financial performance measures. In addition, individual performance measures for each NEO are specific, measurable, time bound and aligned to our strategic operational and financial priorities.



•

Strong cash flow performance.  While continuing to invest in products and programs we believe will deliver better academic gains for students, we recognized strong cash flow performance for fiscal 2015. We exceeded our "target" performance goal for the key cash flow measure of EBITDA, as adjusted, minus capital expenditures, which we refer to as "EBITDA minus CapEx". Our actual EBITDA minus CapEx for fiscal 2015 was $37.2 million, as compared to a target performance goal of $35 million. When determining our fiscal 2015 performance objectives, we anticipated lower results than fiscal 2014 because of our planned investments in academics and instruction, including improving curriculum and learning systems and developing programs and initiatives to support and enhance the student online learning experience. The lower target and achievement values reflect these capital expenditures as well as a shift in our enrollment growth strategy. (EBITDA is a non-GAAP financial measure. For additional information on this measure see "Determination of Long-Term Incentive Compensation—Chairman/Chief Executive Officer" below.)

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Response to Fiscal 2014 Stockholder Advisory Vote on Executive Compensation

Last year, a majority of our stockholders who voted (69%) on the non-binding advisory vote on executive compensation at the 2014 Annual Meeting of Stockholders approved the compensation of our named executive officers, representing an increase in our approval rate over the previous year. Even so, in an ongoing effort to garner stronger support for our executive compensation programs, the Compensation Committee of the Board of Directors (the "Committee") continued to consider and make refinements to executive and employee compensation programs in fiscal 2015. Taking into account the unique challenges confronting a publicly-traded company serving public education in the state-regulated K-12 sector, the Committee sought an appropriate balance in our executive compensation policies and practices to best serve the long-term interests of our stockholders and public school customers, while attracting and retaining the talent necessary to achieve those interests. Specifically, the Committee took a number of actions to refine our executive compensation practices and continued to use and expand upon policies and practices that were previously implemented. These policies and practices are discussed in more detail throughout this Compensation Discussion and Analysis, but notable refinements and continued practices included:

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EXECUTIVE COMPENSATION PRACTICES

Below we highlight certain executive compensation practices we employ to align our executives' compensation with stockholder interests. Also listed below are certain compensation practices we do not employ because we believe they would not serve our stockholders' long term interests.

What We Do

Pay for Performance.    We tie annual incentive compensation to objective performance measures, including our fiscal 2015 revenue, operating income and cash flow (EBITDA minus CapEx). A significant portion of our NEO's potential compensation is not guaranteed but is linked to our financial and operational performance and stockholder return. We seek to place appropriate emphasis on variable pay components relative to our peer group and the

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Committee has its compensation consultant annually evaluate the alignment of pay and performance relative to our peer group.

Establish Performance Goals Aligned to Strategy.    We use objective performance-based goals in our annual incentive plan that we believe are challenging, aligned to our strategic priorities and designed to motivate executive performance, including minimum thresholds below which no incentive pay is awarded. We establish customized individual PMOs for each of our NEOs to set clear performance tasks so a meaningful portion of their annual incentives are tied directly to their individual achievements for the year.

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

Use Meaningful Vesting Conditions on Equity Awards.    To the extent that time-vested equity awards are granted to our NEOs, we use relatively long three-year or four-year vesting periods to incentivize performance. In addition, equity awards granted in fiscal 2015 in the form of restricted stock to our most senior NEOs, Messrs. Davis and Murray, were subject to the attainment of financial performance objectives.

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 require our NEOs 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. In fiscal 2015, we expanded our stock ownership policy to include, in addition to our Chairman/CEO and President/COO, our Chief Financial Officer, General Counsel and Executive Vice President, School Services. In fiscal 2016, we further expanded our stock ownership policy to include all our Executive Officers.

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 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 incentive awards and long-term incentives in the form of equity awards. Our targeted total direct compensation for our CEO is approximately 85% performance based. For our other NEOs, approximately 65% of their targeted total direct compensation is performance based. Actual awards vary based on performance.

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 and business results.

Provide Generous Executive Perquisites.    We do not provide significant perquisites to our NEOs, such as club memberships, vehicles and similar items.

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

Permit Excise Tax Gross-ups.    We do not provide 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 NEOs 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.

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Provide Single Trigger Change in Control Payments.    We maintain a "double trigger" vesting policy with respect to our restricted stock awards whereby accelerated vesting in connection with a change in control of the Company also requires a qualifying termination of employment. Beginning in November 2013, all new grants of stock options also contain double trigger accelerated vesting provisions.

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

EXECUTIVE COMPENSATION PROGRAM OBJECTIVES AND PROCESS

FOCUS ON RETENTION, MOTIVATION AND VARIABLE PAY

Our executive compensation programs are designed to attract, retain and reward the management talent that we need to maintain and strengthen our position in the education business, to improve academic performance at the public and private online schools we serve, and to achieve our other varied business objectives.

PAY FOR PERFORMANCE

Seeking to tightly link compensation to performance is a fundamental value underlying our NEO compensation practices. The annual incentives paid to each of our NEOs vary with performance based upon corporate PMOs, including our annual financial results, academic achievement at our managed schools and attainment of certain business objectives, and customized individual PMOs that are reviewed by the Committee at the beginning of each fiscal year. A significant portion of the total direct compensation delivered to all of our NEOs, but particularly our most senior NEOs, is variable, which directly ties their pay to corporate performance and their individual PMOs.

DETERMINING EXECUTIVE COMPENSATION

The Committee uses a performance-based framework as the basis for compensation decisions for our executives, including our NEOs. To maintain a disciplined approach to incentive compensation, the Committee applies a pre-defined process to calculate annual incentive payouts in relation to our level of achievement against corporate PMOs, which include objective financial performance criteria and measurable academic and business measures, and each NEO's achievement of their individual PMOs. The Committee may adjust final payout amounts to ensure that compensation decisions are fair and equitable, reflect all available information and serve our overall corporate objectives, including the retention of our NEOs, which we believe is critical to our ability to implement our strategic goals and continue to grow our business.

The Committee engages an independent compensation consultant to evaluate the relationship and alignment between executive compensation for our NEOs and our corporate performance. In late fiscal 2015, the Committee determined to transition compensation consultants from Towers Watson to Compensia. This transition is further discussed below under "Compensation Governance, Process and Incentive Decisions—Role of Committee's Independent Compensation Consultant."

In fiscal 2015, the compensation consultant's work for the Committee included our annual compensation benchmarking and pay-for-performance assessments, as described above. In determining overall compensation levels, the Committee generally seeks to set the target total direct compensation opportunity for most NEOs to approximate the market median, with the possibility to earn compensation above this level when warranted by actual performance or other commercial factors tied to attraction and retention of specific skill sets.

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ASSESSING COMPARATIVE MARKET DATA AND PRACTICES

Towers Watson assisted the Committee in early fiscal 2015 by reviewing competitive market data on the compensation practices and programs of publicly-traded peer group companies and published survey data. The peer group was selected based on a number of factors, including revenue, market capitalization, number of employees and industry. Towers Watson also considered companies that list us as a peer as well as our peers as identified by the major proxy advisory firms. The companies in the fiscal 2015 peer group were:

The Committee and compensation consultant used this peer group to compare the compensation levels of our NEOs to comparable executive positions for fiscal 2015. This peer group reflects an adjustment made in late fiscal 2014 to add Houghton Mifflin Harcourt Company, but the Committee did not otherwise adjust the peer group to ensure consistency in compensation benchmarking from year to year.

In late fiscal 2015, the Committee approved certain changes to the peer group to (i) adjust the balance between companies in the education services, subscription and software industry sectors, (ii) include only those companies that, at the time, continued to meet a majority of our screening criteria and (iii) remove those companies that no longer met such criteria. At that time, the companies removed from our peer group were Education Management Corp., LinkedIn Corp. and Universal Technical Institute and the companies added were Apollo Education Group, Inc., Career Education Corp., The Advisory Board Company and Tyler Technologies, Inc. The revised peer group will be used for fiscal 2016 compensation decisions.

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ELEMENTS OF COMPENSATION

The following table outlines the key components of our executive compensation program for our NEOs for fiscal 2015:

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FISCAL 2015 COMPENSATION DECISIONS

Determination of Base Salaries

Base salaries for our NEOs are initially determined by negotiation at the time of hire and take into consideration the scope of their responsibilities, as well as a competitive market analysis of the compensation paid by our peer group to similarly situated executives. In determining base salary adjustments for fiscal 2015, the Committee considered competitive market data provided by Towers Watson and the individual performance of our NEOs.

The base salaries for each of our NEOs in fiscal 2015 are set forth in the table below:

Annual Incentive Compensation

We maintain an annual cash bonus plan, or the Executive Bonus Plan, which is intended to reward our executive officers based on performance relative to corporate PMOs, which for fiscal 2015 included objective financial measures and measurable academic and business goals, and individual objective PMOs that are aligned with our strategic priorities. We believe that the Executive Bonus Plan provides incentives that are necessary to retain high performing executives and reward them for achieving our short-term goals in the pursuit of our larger business objectives. It is also designed to ensure that a meaningful portion of our NEOs' cash compensation is "at risk" based upon Company and individual performance.

In fiscal 2014, we adopted a performance-based "umbrella" bonus plan for certain of our key executives based upon objective performance measures and a pre-determined bonus pool, which is intended to qualify as "performance-based compensation" for purposes of Section 162(m) of the Internal Revenue Code. While all Executive Bonus Plan awards continue to be determined based on objective corporate-level financial, academic and business measures

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and a rigorous assessment of individual PMOs, the umbrella bonus plan also provided that for our most senior executives (which for fiscal 2015 included Messrs. Davis and Murray), their Executive Bonus Plan award would not exceed a pre-determined allocated percentage of our operating income for the year. For fiscal 2015, these percentages were 3.4% for Mr. Davis and 1.4% for Mr. Murray. The umbrella bonus plan also enables the Committee to exercise both positive and negative discretion below a maximum bonus pool in tying compensation to actual performance as events unfold during the performance period, and the annual cash bonuses for these executives were substantially below the allowable pre-determined bonus pool levels.

In fiscal 2015, the Committee approved a redesign of our Executive Bonus Plan which reflected a shift in our overall strategic focus to sustained business development. The Executive Bonus Plan for our NEOs in fiscal 2015 consisted of two primary PMO categories: corporate PMOs based upon achievement of objective financial goals and measurable academic and business measures, and individual PMOs intended to motivate our executives to produce measurable corporate, academic and strategic achievements. When determining the corporate PMOs, the Committee added three goals focused directly on achievement of our business strategy of improving academic outcomes for students, improving student retention in the schools we manage and continuing to invest in our curriculum and learning systems, and retained two goals from fiscal 2014 for measuring financial performance. For Mr. Davis, the Committee assigned individual weightings to each PMO to reflect the total maximum bonus opportunity provided by his employment agreement, placing greater emphasis on the weightings of the corporate PMOs. Mr. Davis' total maximum bonus opportunity is achievable with over performance on the two corporate financial measures and his individual PMOs assigned by the Board. For the remaining NEOs, the Committee assigned equal weightings between the corporate and individual PMOs to align the total target bonus opportunity of our NEOs with the achievement of specific corporate and individual performance objectives that collectively are intended to promote the creation of long-term stockholder value.

The PMO categories provide our NEOs the opportunity to earn above target awards in the event they exceed pre-established performance levels, but also provide for no awards below minimum thresholds of performance. Pursuant to his employment agreement, Mr. Davis' total maximum bonus is 200% of his target level of 150% of base salary, which is a maximum of 300% of base salary. However, for fiscal 2015, based on our inability to meet the original budget for the year, the Committee determined that Mr. Davis would be eligible to receive only 80% of his bonus opportunity under each of the revenue and operating income metrics of the corporate PMOs in 2015. As a result the maximum opportunity for these components was reduced from 135% to 108% of base salary and his maximum bonus opportunity was reduced from 300% to 273% of base salary which is 182% of his target bonus. Threshold and target bonus payment opportunities related to revenue and operating income measures were similarly reduced.

Corporate PMOs

In 2015, payout under the corporate PMOs was based upon achievement in the following five categories: revenue, operating income, retention, implementation of the Desire2Learn learning management system and academic improvement. For Mr. Davis, revenue and operating income each comprised approximately 36% of his maximum bonus opportunity and the other corporate PMO categories comprised a combined 27% of his maximum bonus opportunity. For our NEOs other than Mr. Davis, each category comprised 10% of the NEOs' target bonus opportunity. In addition, in fiscal 2015 the Committee modified its financial performance matrix which determined the annual cash bonus that each NEO could receive with respect to our achievement of certain minimum, target or "stretch" revenue and operating income goals. The Committee adopted a simplified, laddered structure to determine the NEOs' performance under the revenue and operating income measures of the corporate PMO consisting of four performance levels (below threshold, threshold, target and outperform) as further described below.

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Revenue

For fiscal 2015, no bonus would be awarded to our NEOs for the revenue component of the corporate PMO unless we achieved a threshold revenue level of $915 million. Further, the NEO's were eligible to be awarded up to 135% of their target bonus opportunity for outperformance of the performance level established for this measure. The revenue measure of the corporate PMO was to be earned based upon the attainment of certain revenue performance levels for fiscal 2015 as set forth in the table below.

For financial achievement falling between the "threshold" and "outperform" levels, the percentage of the target bonus earned was extrapolated on a straight-line basis. We achieved revenue of $948.3 million in fiscal 2015, resulting in the NEOs receiving payout between the "threshold" and "target" levels and comprising 97.5% of their target bonus opportunity for this component of the Executive Bonus Plan.

Operating Income

Similar to the revenue measure, for fiscal 2015, no bonus would be awarded to our NEOs for the operating income component of the corporate PMO unless we achieved a threshold operating income level of $43 million, as adjusted. Further, the NEOs were eligible to be awarded up to 135% of their target bonus opportunity for outperformance of the performance level established for this measure. Due to our planned investments in academics and instruction, including improving curriculum and learning systems and developing programs and initiatives to support and enhance the student online learning experience, the operating income achievement levels were lowered for fiscal 2015 as compared to fiscal 2014. The operating income measure of the corporate PMO was to be earned based upon the attainment of certain operating income performance levels for fiscal 2015 as set forth in the table below.

For financial achievement falling between the "threshold" and "outperform" levels, the percentage of target bonus earned was extrapolated on a straight-line basis. We achieved operating income, as adjusted, of $43.7 million in fiscal 2015, resulting in the NEOs receiving payout between the "threshold" and "target" levels and comprising 55% of their target bonus opportunity for this component of the Executive Bonus Plan. (As adjusted operating income excludes the impact of write-offs, write downs and severance costs, which adjustments had a net positive impact of $25.2 million to operating income for fiscal 2015.)

Retention

Under the student retention improvement measure, a decrease in our student withdrawal rates equivalent to an improvement of 100 basis points would result in the NEOs earning credit for target performance of the NEO's bonus opportunity. Mr. Murray and Mr. Rhyu also had the opportunity to achieve additional credit for outperformance under this measure of 150% of their target bonus opportunity for this component if our student withdrawal rate decrease was equivalent to an improvement of 200 basis points under their individual PMOs. In fiscal 2015, our student withdrawal rate equaled an improvement of 200 basis points, representing outperformance of this measure and

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resulting in Mr. Murray and Mr. Rhyu earning 150% of their target bonus opportunity for this component and the other NEOs earning 100% of their target bonus opportunity for this component of the Executive Bonus Plan.

Desire2Learn Implementation

Company performance under this measure was based upon implementation of the Desire2Learn platform during fiscal 2015, including the launch of pilot programs, system enhancements and new user interfaces, such that it could be introduced at the high school level in our managed public schools by August 15, 2015. We successfully executed all planned pilot programs and technological developments during fiscal 2015, thereby achieving all of the performance objectives under this measure and resulting in the NEOs receiving payout equal to 100% of their bonus opportunity for this component of the Executive Bonus Plan.

Academic

In an ongoing effort to tie our NEOs' interests to academic achievement at our managed public schools, our Executive Bonus Plan in fiscal 2015 included an academic performance PMO measuring academic achievement by gains in reading and math at our managed schools, which was based upon an independent, nationally-normed computer adaptive testing program provided by Scantron that allowed us to measure the improvement in academic performance over the course of a school year. Under this measure, our NEOs would not receive a bonus with respect to this component unless 60% of our managed public schools showed improved Scantron gains in reading and 55% of our managed public schools showed improved Scantron gains in math.

Despite continued academic improvement and increases in Scantron gains at our managed schools, we did not attain the target performance levels under this corporate PMO measure, resulting in no payout for this component of our Executive Bonus Plan.

Individual PMOs

The individual PMOs accounted for 46% of Mr. Davis' maximum Executive Bonus Plan opportunity and 50% of the remaining NEO's target Executive Bonus Plan opportunity. Mr. Davis' PMOs included incremental bonus opportunities to provide a total aggregate maximum bonus level of 200% of his target bonus pursuant to the terms of his employment agreement, which was reduced to 182% for fiscal 2015 as described earlier. Messrs. Murray and Rhyu's PMOs also provided incremental bonus opportunities for outperformance to provide a total aggregate maximum bonus level of 177% of their target bonus. The Committee retained discretion to pay awards to our other NEOs at an above-target level for the individual performance component of our Executive Bonus Plan to reward exceptional individual performance for the year or otherwise where the Committee did not believe the NEO's total annual incentive award reflected his or her individual contributions for the year. The Committee also retained discretion to reduce an NEO's individual performance payouts in circumstances where it determined that the individual NEO's overall annual incentive award did not otherwise accurately reflect his or her individual performance or our overall corporate-level performance for the year.

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A general description of each NEO's primary individual PMOs for fiscal 2015 and his or her achievements are provided below:

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Determination of Fiscal 2015 Annual Incentive Compensation Paid

In July 2015, the Committee reviewed our financial results and achievement of business objectives for fiscal 2015 and evaluated each NEO's performance against his previously-established individual PMOs. Based on those criteria, the Committee approved annual incentive awards for each NEO as summarized in the table below:

Determination of Long-Term Incentive Compensation

We believe that providing long-term incentive compensation opportunities in the form of equity awards promotes our philosophy of aligning executive pay with the long-term interests of our stockholders while building the value of our Company. In deciding on long-term incentive award amounts for each of the NEOs, the Committee considered:

•

The responsibilities and position of each executive officer;



•

Our goals underlying the long-term incentive plan, including incentivizing performance and encouraging long-term retention; and



•

Data provided by its compensation consultant.

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During fiscal 2015, we granted restricted stock awards under our 2007 Equity Incentive Award Plan, as amended, or the 2007 Plan, to certain of our employees, including our NEOs, and stock options to Mr. Davis and Mr. Zarella, as described in more detail below. The Committee believes that the use of restricted stock (as opposed to stock options) as the primary form of equity compensation for most of our NEOs more closely aligns the interests of these executives with those of our stockholders, provides better retention incentives and results in less dilution to our stockholders. However, the Committee uses stock options as a form of long-term incentive compensation for our most senior NEOs and certain new hires to tie their realizable pay to the creation of long-term stockholder value. All stock option grants have an exercise price equal to the fair market value of our common stock on the date of grant. As a result, the NEOs will realize the value of the option grants only to the extent our share price appreciates and benefits our stockholders.

Chairman/Chief Executive Officer

In fiscal 2015, the Committee approved a long-term incentive award to Mr. Davis with a total target value of $3 million, which award value was allocated evenly between performance-based restricted stock and stock options. The number of shares in Mr. Davis' stock option grant was determined using the "Black-Scholes" value of the option. The option vests over a period of four years such that 25% of the shares subject to the option vest on the first anniversary of the date of grant and the remaining shares vest in equal quarterly installments thereafter, subject to his continued employment. The number of shares in Mr. Davis' performance-based restricted stock award was determined based upon the fair market value of our common stock on the date of grant, which resulted in a target award of 82,553 shares. The shares of our common stock subject to the performance-based restricted stock award were to be earned based upon the attainment of certain EBITDA less CapEx, as adjusted, performance levels for fiscal 2015 as set forth in the table below, with the earned shares subject to time-based vesting in equal annual installments over a period of three years.(1)

Financial achievement falling between the specified threshold levels was to result in a proportionate adjustment to the shares to be earned. In early fiscal 2016, the Committee determined that our fiscal 2015 EBITDA minus CapEx, as adjusted, was $37.2 million, which resulted in Mr. Davis earning an award between the target and outperformance levels (that is, 90,100 shares), one-third of which vested on July 27, 2015, the date of certification of achievement, and the remainder of which will vest on each of July 27, 2016 and 2017. When establishing this financial performance goal, the Committee considered anticipated lower financial results for fiscal 2015 compared to fiscal 2014 because of our planned investments in academics and instruction, including improving curriculum and learning systems and developing programs and initiatives to support and enhance the student online learning experience. The lower target and achievement values reflected these capital investments as well as a shift in our enrollment growth strategy.

In addition to Mr. Davis's annual long-term incentive award described above, in September 2014 the Board approved the grant of a restricted stock award to Mr. Davis with a value of $320,000 to further incentivize him to enhance stockholder value. This restricted stock award was granted in consideration of the Board's decision to approve a fiscal 2014 annual bonus award for Mr. Davis that was less than the assigned weightings of the relevant performance measures and thus, in applying its negative discretion, the Board reduced Mr. Davis' fiscal 2014 bonus payment by $400,000. The restricted stock award vested in full on September 4, 2015, the one-year anniversary of the date of grant.

   

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(1)

EBITDA is a non-GAAP financial measure that consists of net income, plus net interest expense, income tax expense, depreciation and amortization minus noncontrolling interest charges. A reconciliation of EBITDA to the U.S. GAAP financial measure of operating income is provided in Item 6 of our fiscal 2015 Annual Report on Form 10-K. EBITDA, as adjusted, further excludes the impact of write-offs, write downs and severance costs, which adjustments had a net positive impact of $11.4 million for fiscal 2015.

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President/Chief Operating Officer

Mr. Murray was granted 35,000 shares of performance-based restricted stock in August 2014, which shares were to be earned based upon the attainment of the EBITDA minus CapEx, as adjusted, performance levels for fiscal 2015 described above, with any earned shares subject to time-based vesting in equal annual installments over a period of three years. Based upon the Committee's determination in early fiscal 2016 that our fiscal 2015 EBITDA minus CapEx, as adjusted, was $37.2 million, Mr. Murray earned an award between the target and outperformance levels (that is 38,200 shares), one-third of which vested on July 27, 2015, the date of certification of achievement, and the remainder of which will vest on each of July 27, 2016 and 2017.

Other NEOs

In August 2014, we granted time-based restricted stock awards to each of Mr. Rhyu and Mr. Polsky equal to 35,000 shares and 22,000 shares, respectively, of our common stock. These awards vest pursuant to our standard vesting schedule which is semi-annually over a three-year period, with 20% of the shares subject to the awards vesting in the first year and 40% vesting in each of the next two years following the grant date. The Committee determined that the size of each restricted stock award was appropriate to encourage retention among our NEOs and to ensure the stability and consistency of our management team.

In addition, after considering the performance of Mr. Rhyu, including increasing the speed and quality of decision-making, improving the effectiveness of investor relations, integrating the finance department as a business partner and serving as head of the corporate development department, the Committee approved a special retention award for Mr. Rhyu in the form of a time-based restricted stock award for 100,000 shares of our common stock. The retention award vests over a period of four years such that, 60% of the shares subject to the award (60,000 shares) vest semi-annually pursuant to our standard three year vesting schedule described above and 40% of the award (40,000 shares) will vest in two increments of 20% of the total award (20,000 shares) on each of the third and fourth anniversary of the date of grant.

In November 2014, Mr. Zarella received a time-based restricted stock award of 25,000 shares of our common stock and an option to purchase 60,000 shares of our common stock in connection with his commencement of employment with us. The restricted stock award vests pursuant to our standard three year vesting schedule described above and the stock option vests at 25% of the shares subject to the award on the one year anniversary of the date of hire and in 12 equal quarterly installments thereafter.

Performance Share Award Program to be implemented for Fiscal 2016

In an ongoing effort to be responsive to our stockholders and garner stronger support for our executive compensation programs, the Committee considered and evaluated modifications to executive and employee compensation policies in fiscal 2015. Taking into account the unique challenges confronting a publicly-traded company serving public education in the K-12 sector, the Committee sought an appropriate balance in our executive compensation policies to best serve the long-term interests of our stockholders, while attracting and retaining the talent necessary to achieve those interests. As a result of this ongoing evaluation, the Committee adopted an equity-based long-term incentive plan ("LTIP") for our senior executives, including our NEOs, to be administered through the 2007 Plan beginning in fiscal 2016.

Under the LTIP, performance share units ("PSUs") tied to the achievement of specific performance goals will be awarded to our NEOs. For the fiscal 2016 grants, awards will be earned based on academic performance and student retention measures, with performance being measured over both a two and three year period. The Committee has approved threshold, target and stretch achievement levels and failure to achieve the threshold level will result in no payout of the award. The Committee believes the adoption of the LTIP will incentivize and closely connect our NEOs to our long-term performance objectives.

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Other Compensation

Deferred Compensation Plan

We maintain a non-qualified deferred compensation plan, or the Deferred Compensation Plan, for members of our management team, including our NEOs. Under the Deferred Compensation Plan, our NEOs are eligible to elect to defer the receipt of up to 50% of their annual salary and up to 100% of any annual incentive bonus until retirement. Earnings are credited on deferred amounts based upon a variety of investment options that may be elected by each participant. We do not make any contributions to the Deferred Compensation Plan. Certain information with respect to amounts deferred by our NEOs under this plan is set forth below in the "Fiscal 2015 Non-Qualified Deferred Compensation Table."

Defined Contribution Plan

We maintain a Section 401(k) Savings/Retirement Plan, or the 401(k) Plan, in which certain of our employees, including our NEOs, are eligible to participate. All employees, including our NEOs, are automatically enrolled in the 401(k) Plan at a 3% deferral rate with the ability to opt-out. The 401(k) Plan allows participants to defer a portion of their annual compensation, subject to certain limitations imposed by the Internal Revenue Code. We currently provide matching contributions equal to $0.25 for each dollar of a participant's contributions on the first 4% of eligible salary that they contribute each pay period, subject to certain statutory limits.

Employee Benefits and Perquisites

We provide our NEOs with certain personal benefits and perquisites, which we do not consider to be a significant component of executive compensation but recognize to be an important factor in attracting and retaining talented executives. Our NEOs participate in the same medical, dental, vision, disability and life insurance plans as our employees generally. We also pay for supplemental long-term disability and life insurance premiums for our executive officers and provide our executive officers with the opportunity to receive annual Company-paid executive physical examinations. We provide these supplemental benefits to our executive officers due to the relatively low cost of such benefits and the value they provide in assisting us in attracting and retaining talented executives. We reimburse certain executives for their relocation expenses from time to time and for temporary housing expenses they may incur in connection with their provision of services. We provide such reimbursements to our executives because such expenses are typically directly associated with and would not have been incurred but for their commencement or continued provision of services.

None of our executive officers receive tax gross-ups or other tax payments in connection with our provision of any perquisites or personal benefits. The value of personal benefits and perquisites we provided to each of our NEOs is set forth below in our "Summary Compensation Table for Fiscal 2015."

COMPENSATION GOVERNANCE, PROCESS AND
INCENTIVE DECISIONS

Role of Compensation Committee and Non-Employee Directors

The Committee is responsible for overseeing and implementing our executive compensation programs, as specified in its charter. The Committee's role includes:

•

Determining and recommending to our Board of Directors the incentive compensation and equity awards of our Chairman and CEO and approving such compensation for our other NEOs;



•

Establishing and approving compensation plans for our NEOs based on the recommendations of the Chairman and CEO and the Committee's compensation consultants;



•

Annually reviewing and, where appropriate, adjusting the base salaries of our NEOs; and

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Proposing revisions to the Committee's charter for our Board of Directors' approval to ensure compliance with new SEC regulations and NYSE listing standards as enacted.

In performing its responsibilities with respect to the compensation of our executive officers, the Committee uses information from a number of sources. The information utilized by the Committee includes advice from its independent compensation consultant, market data regarding the compensation practices of competitors, outside counsel specializing in executive compensation, tally sheets showing prior compensation awards, the recommendations of our Chairman and CEO and an assessment of the outstanding equity holdings of the NEOs.

Role of Management

Our management, under the leadership of our Chairman and CEO, plays an important role in establishing and maintaining our executive compensation programs. Management's role includes recommending plans and programs to the Committee, implementing the Committee's decisions regarding the plans and programs and assisting and administering plans in support of the Committee. Our Chairman and CEO also provides information on the individual performance of the other NEOs and makes annual recommendations to the Committee on compensation levels for our executive officers, including the other NEOs.

Role of Committee's Independent Compensation Consultant

The Committee's charter gives it the authority to retain and approve fees and other terms of engagement for compensation consultants and other advisors to assist it in performing its duties. In late fiscal 2015, the Committee determined to retain Compensia as its independent compensation consultant and to terminate its relationship with Towers Watson. The decision to effect this transition was based upon the Committee's evaluation of Compensia's services, including its expertise with the compensation practices of other technology companies and its ability to be responsive and offer creative solutions for a unique technology business, and the Committee's expectation that materials and advice delivered by Compensia will be better-suited to the Committee's needs. Compensia reports directly to the Committee, which will annually review its performance, independence and fees.

In fiscal 2015, prior to terminating its relationship with Towers Watson, the Committee received a report from Towers Watson reviewing its independence in light of SEC regulations and NYSE listing standards. The Committee discussed all relevant factors and concluded that the engagement of Towers Watson did not raise any conflicts of interest. Prior to engaging Compensia, the Committee received a report from Compensia reviewing its independence in light of SEC regulations and NYSE listing standards and the Committee concluded that the engagement of Compensia did not raise any conflicts of interest.

Risk Assessment in Compensation Programs

Consistent with SEC disclosure requirements, we periodically evaluate the risk profile associated with the Company's executive and other compensation programs. In early fiscal 2015, the Committee engaged Towers Watson to review the existing programs and analyze whether they create risks that are reasonably likely to have a material adverse effect on the Company. Among other factors, this analysis considered the program structure, design characteristics and performance-based measures associated with our executive compensation programs and concluded that our compensation programs contain a number of safeguards that are expected to minimize excessive risk taking, including capped incentive plan payouts, a compensation claw back policy, the use of multiple measures in our annual incentive plan, balanced bonus and equity variable pay structures, multi-year vesting of long-term incentive grants, modest perquisites and a stock ownership policy for the majority of our NEOs.

Based on the foregoing, we believe that our compensation policies and practices do not create inappropriate or unintended significant risk to the Company as a whole. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond the Company's ability to effectively identify and manage significant risks, are compatible with effective internal controls and the risk management practices of our Company, and are supported by the oversight and administration of the Committee with regard to our executive compensation programs.

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OTHER COMPENSATION POLICIES AND PRACTICES

Stock Ownership Policy

In fiscal 2014, the Committee adopted a mandatory stock ownership policy for certain of our key executive officers who have a broad scope of management authority over our entire business. The policy is designed to ensure that these executive officers hold a significant equity stake in our Company to align their interests with those of our stockholders. The policy requires each of our Chairman and CEO and President and COO to maintain ownership of our common stock having a value equal to three times their base salary. Messrs. Davis and Murray have five years from the policy's effective date of February 26, 2014 to accumulate the specified level of ownership. When initially adopted, the policy only applied to Messrs. Davis and Murray. Subsequently, the Committee expanded this policy to certain of our other NEOs and executives beginning in fiscal 2015. The policy now requires our Chief Financial Officer to maintain ownership of our common stock equal to two times his base salary and each of our General Counsel and Executive Vice President, School Services to maintain common stock ownership equal to one times their respective base salaries. The NEOs have five years from the effective date of this change in policy, or February 11, 2020, to accumulate the specified level of ownership. In fiscal 2016, the ownership policy was further expanded to include all executive officers appointed by the Board. The application of the ownership policy to other executives and directors will continue to be evaluated as circumstances change.

Compensation Clawback Policy

Our Board of Directors has adopted a clawback policy. If our Board of Directors determines that it is necessary, the Company may recover from current or former executive officers the amount of previously paid incentive compensation (including both cash bonuses and equity awards) that it determines to be appropriate if a material error or inaccuracy resulted in whole or in part from the fraud or intentional misconduct of an executive that leads to a financial restatement. This policy is intended to provide enhanced safeguards against certain types of employee misconduct, and allows for recovery of significant compensation paid to an executive.

Insider Trading Policy

We maintain a Policy Statement for the Prevention of Insider Trading that applies to all securities issued by the Company, including common stock, options to purchase shares of common stock, preferred stock, and any other type of security that the Company may issue or that relates to the Company's securities. Our Board of Directors has amended the policy to clarify that Company employees, directors and consultants are prohibited from engaging in hedging transactions, including purchasing Company stock on margin or engaging in transactions in puts, calls or other derivative securities designed to hedge or offset any decrease in the market value of the Company's equity securities. Additionally, our 2007 Equity Incentive Plan prohibits the pledging of awards granted under the plan.

Tax Deductibility of Annual Compensation

Section 162(m) of the Internal Revenue Code limits tax deductions for certain annual compensation in excess of $1 million paid to certain individuals named in the summary compensation tables of public company proxy statements. The Committee has generally sought to structure certain incentive compensation awards to satisfy the requirements for such awards to be treated as qualified performance-based compensation for purposes of Section 162(m) where necessary to preserve the tax deductibility of such payments. The Committee considers tax deductibility when structuring compensation programs and presently expects to continue to pursue compensation programs that are intended to be tax deductible. However, if circumstances warrant, the Committee retains the discretion to grant incentive awards to NEOs that are not fully deductible as a result of Section 162(m), as the Committee must balance the effectiveness and overall goals of our executive compensation programs with the materiality of reduced tax deductions.

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Accounting for Stock-Based Compensation

ASC Topic 718, Compensation—Stock Compensation, requires us to recognize an expense for the fair value of equity-based compensation awards. Grants of equity-based awards under our equity incentive award plans are accounted for under ASC Topic 718. The Committee considers the accounting implications of significant compensation decisions, especially in connection with decisions that relate to our equity incentive award plans and programs. As accounting standards change, the Committee may revise certain programs to appropriately align accounting expenses of our equity awards with our overall executive compensation philosophy and objectives.

Equity Award Grant Practices

We do not have any program, plan or practice to time equity awards to our employees in coordination with the release of material non-public information. We generally grant awards at the time employment commences and annually in connection with our annual compensation review process. We do not grant equity awards based on our stock price. If we are in possession of material non-public information, either favorable or unfavorable, when equity awards are made, the Committee will not take the information into consideration in determining award amounts. Our practice is to determine the stock price for annual NEO equity awards on the day that incentive awards are granted.

Severance and Change-in-Control Arrangements

We consider severance to be an integral part of the overall compensation package for our executives. We provide severance to attract and retain individuals with superior ability and managerial talent, provide our executives with appropriate protections due to their vulnerability to terminations of employment due to a change in control, merger or acquisition and to encourage our executives to focus their attention on their work duties and responsibilities in all situations.

Change in Control.    The NEOs are generally not entitled to receive cash payments solely as a result of a change in control of the Company. In addition, restricted stock awards for all of our current NEOs do not vest solely as a result of a change in control and, beginning in November 2013, all future stock option grants do not provide for vesting solely as a result of a change in control. We have adopted a policy pursuant to which all restricted stock awards held by our NEOs and all stock options granted after November 20, 2013 will be subject to "double trigger" acceleration upon a change in control of the Company. Under this policy, restricted stock awards and stock options will vest in full only if the NEO is terminated without cause in connection with the change in control. For this purpose, a termination without cause includes a "constructive termination," which generally involves any material diminution in the NEO's base salary, bonus potential, job title or responsibilities, as well as a relocation of the NEO's principal place of business outside of a 40-mile radius. For Mr. Davis, the vesting of all performance-based awards remains subject to the Company's attainment of the applicable performance goals.

Severance.    With regard to severance payments not made in connection with a termination of employment following a change in control of the Company, and if not otherwise provided for in the employment agreements of the NEOs, the Company's severance guidelines provide that solely for terminations without cause, and contingent upon signing a release of claims, the NEOs will be eligible to receive (i) accelerated vesting of outstanding and unvested stock options that otherwise would have vested in the one year period following the date of termination (all other options to be forfeited) and (ii) accelerated vesting of outstanding and unvested restricted stock awards, subject to the Committee's discretion. For Mr. Davis, the terms governing the accelerated vesting of his equity awards are contained in his employment agreement. This agreement provides that in the event of termination without cause or resignation for good reason after his first year of employment, Mr. Davis' unvested equity awards would be accelerated by two years. However, for Mr. Davis, the vesting of all performance-based awards remains subject to the Company's attainment of the applicable performance goals.

Pursuant to the terms of his employment agreement, as amended, in connection with his resignation in September 2015, Mr. Murray was entitled to receive one year of additional stock option vesting and 18 months of accelerated vesting of unvested shares of restricted stock. For additional information, see "Potential Payments Upon Termination or Change in Control—Timothy L. Murray's Resignation of Employment and Continued Consulting Service" below.

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We believe that providing the NEOs with the above-described severance payments and benefits upon certain terminations of employment are key retention tools that assist us with remaining competitive with the companies in our peer group, provide our executive officers with incentives to focus on the best interests of our stockholders in the context of a potential change in control, and appropriately protect our executive officers in the event of an involuntary termination of employment without creating a windfall due solely to a change in control.

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Compensation Tables

Summary Compensation Table for Fiscal 2015

The following table shows the compensation we paid to our NEOs for services rendered during fiscal 2015, 2014 and 2013, with the exception of Mr. Zarella who was not employed by us in fiscal 2014 or 2013.