EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”), is made and entered into as of January 26,2004 by and between BLACKBOARD INC., a Delaware corporation (the “Company”), and Matthew H.Small (the “Employee”).
RECITALS
A.  The Company desires to retain Employee to provide the services hereinafter set forth. B.  Employee is willing to provide such services to the Company on the terms and conditionshereinafter set forth. The Company and the Employee shall enter into an additional EmployeeStock Option Contract (the “Option Agreement”) substantially in the form of the StockOption Contract dated November 20, 2002 by and between the Employee and the Company (the“First Option Agreement”) in conjunction with the granting of additional options topurchase stock of the Employer.
AGREEMENT
In consideration of the promises and the terms and conditions set forth in this Agreement, theparties agree as follows:
1.  Employment and Term.    The Company agrees to employ the Employee and the Employee agrees to work for the Company,subject to the terms and conditions below, for a term of two (2) years, from the datehereof, which shall automatically renew for additional annual terms unless either partynotifies the other at least ninety (90) days prior to the end of the term of the Agreementof a determination not to allow this Agreement to automatically renew. 2.  Compensation; Benefits.    Subject to the terms and conditions of this Agreement, the Company shall pay to theEmployee a base salary as set forth on Schedule A, attached hereto and made a part hereof,payable in accordance with the Company’s regular payroll policies. In addition to thisbase salary, the Employee shall be entitled to the benefits and bonuses described onSchedule A, subject to the terms and conditions described therein. In addition, theEmployee shall be entitled to receive such other benefits including, but not limited to,vacation, holidays and sick leave, as the Company generally provides to its seniorexecutives and employees holding similar positions as that of the Employee.Notwithstanding the foregoing, the Company reserves the right to adopt, amend ordiscontinue any employee benefit plan or policy in accordance with then-applicable law
 

 

3.  Business Expenses.    The Company shall reimburse the Employee during the term of this Agreement for travel,entertainment and other expenses reasonably incurred by the Employee on behalf of theCompany pursuant to the Company’s expense reimbursement policy for its senior executives. 4.  Title; Duties.    The Employee shall be employed as **General Counsel and Corporate Secretary, reportingdirectly to the Chief Executive Officer.**The Employee shall diligently and conscientiouslydevote his full time and attention and his best efforts to discharge the duties assigned tohim by the Company. The Employee shall perform such duties as may be assigned to him fromtime to time by the Board of Directors. 5.  Right to Contract; Conflict of Interest.    The Employee hereby represents and warrants to the Company that (i) he has full right andauthority to enter into this Agreement and to perform his obligations hereunder, and (ii)the execution and delivery of this Agreement by the Employee and the performance of theEmployee’s obligations hereunder will not conflict with or breach any agreement, order ordecree to which the Employee is a party or by which he is bound. 6.  Transfer by Company.    If at any time during the term of this Agreement, the Company transfers the Employee toanother location, the Company will reimburse the Employee for all reasonable relocationexpenses incurred as a result of such transfer. 7.  Termination by the Company.
 (a)  The Company shall have the right to terminate the Employee’s employment withor without Cause (as defined below) at any time during the term of this Agreement bygiving written notice to the Employee. It is specifically acknowledged and agreedthat a notification by the Company of a determination not to allow this Agreement toautomatically renew pursuant to Section 1 shall not be a termination by the Companyfor any purpose hereunder. The termination shall become effective on the datespecified in the notice, which termination date shall not be a date prior to the dateten (10) days following the date of the notice of termination itself. In the eventthat the Employee is terminated for Cause, the Company shall pay the Employee thesalary due him under this Agreement through the day on which such termination iseffective. In the event that the Employee
 

 

    is terminated *without cause*, or on non-renewal of this Agreement by the Company,the Company shall, subject to the provisions of this Agreement:
 (i)  pay to the Employee within thirty (30) days of termination ofemployment a cash payment equal to his annual base salary based on his highestannual base salary for the three year period prior to the Termination date,earned bonus through the end of and including the then current quarter,expense reimbursements and fringe benefits other than any entitlement tobonus, set forth on Schedule A, in a lump sum or in accordance with normalpayroll practices, at the Company’s option;  (ii)  maintain and provide for a period of twelve (12) months fromthe date of termination, at no cost to the Employee, the Employee’s continuedparticipation in all group insurance, life insurance, health and accident,disability and other employee benefit plans, programs and arrangements inwhich the Employee was entitled to participate immediately prior to the dateof termination (other than any bonus plans or stock option plans of theEmployer), provided that in the event that the Employee’s participation in anyplan, program or arrangement as provided in this subparagraph (ii) is barredor during such period any such plan, program or arrangement is discontinued orthe benefits thereunder are materially reduced, the Employer shall arrange toprovide the Employee with benefits substantially similar to those which theEmployee was entitled to receive under such plans, programs and arrangementsimmediately prior to the Employee’s date of termination.
 (b)  The Company may terminate Employee’s employment hereunder at any time for“cause” upon written notice to Employee. For purposes of this Section 7,“cause” shall mean: (i) any willful gross misconduct by Employee whichmaterially injures the Company which breach is not cured within a reasonable periodfollowing not less than 30 days prior written notice thereof to Employee, (ii) acourse of conduct by Employee which involves material failures to perform his dutiessatisfactorily over a period of time, where there has been repeated counseling by theBoard or appropriate committee thereof, and following not less than thirty (30) days’prior written notice thereof to employee and a reasonable opportunity to cure, or(iii) conviction of a felony involving moral turpitude. No act or omission shall beconsidered “willful” if it is done by Employee in good faith and with reasonablebelief that it was in the best interest of the Company.  (c)  In the event the Employee disputes in writing any termination for Cause(after the Employee receives the grounds for termination, in writing, from
 

 

    the Company’s Board of Directors the Company shall continue to pay the Employeefull salary (including any earned bonuses or fringe benefits) for a period of nomore than three (3) months while the Company and the Employee attempt to resolvesuch dispute in good faith.
8.  Termination by Death or Disability of the Employee.
 (a)  In the event of the Employee’s death during the term of this Agreement, allobligations of the parties hereunder shall terminate immediately, and the Companyshall pay to the Employee’s legal representatives the salary (and any earned bonuses)due the Employee through the day on which his death shall have occurred.  (b)  If the Employee is unable to perform his duties hereunder due to mental,physical or other disability for a period of one hundred twenty (120) consecutivebusiness days, as determined by the Company, or for one hundred twenty (120) businessdays in any period of twelve (12) consecutive months, this Agreement may be terminatedby the Company, at its option, by written notice to the Employee, effective on thetermination date specified in such notice, provided such termination date shall not bea date prior to the date of the notice of termination itself. In this case, theCompany will pay the Employee the salary (and any earned bonuses) due him through theday on which such termination is effective.  (c)  The Company shall pay Employee the difference between the amount to be paidunder any disability insurance policy for the twelve (12) months following terminationand the amount of Employee’s salary due under the termination provision of Section 7(a) (i).
9.  Termination by the Employee.
 (a)  The Employee may terminate the Employee’s employment at any time, with orwithout cause, by giving written notice to the Company. It is specificallyacknowledged and agreed that a notification by the Employee of a determination not toallow this Agreement to automatically renew pursuant to Section 1 shall not be atermination by the Employee for any purpose hereunder. Any such termination, ifwithout cause, shall become effective on the date specified in such notice, providedthat the Company may elect to have such termination become effective on a date after,but not more than, fourteen (14) days after the date of the notice. If suchtermination is with Good Reason, (i) it shall become effective on the date thirty (30)days after the date of such notice, provided the Company has failed to cure the causespecified in the notice; and (ii) the Company shall subject to the provisions of thisAgreement:
 

 

 (i)  pay to the Employee within thirty (30) days of termination ofemployment a cash payment equal to his annual base salary based on hishighest annual base salary for the three year period prior to theTermination date, earned bonus through the end of and including the thencurrent quarter, expense reimbursements and fringe benefits other than anyentitlement to bonus, set forth on Schedule A, in a lump sum or inaccordance with normal payroll practices, at the Company’s option; and  (ii)  maintain and provide for a period of twelve (12) months fromthe date of termination, at no cost to the Employee, the Employee’s continuedparticipation in all group insurance, life insurance, health and accident,disability and other employee benefit plans, programs and arrangements inwhich the Employee was entitled to participate immediately prior to the dateof termination (other than any bonus plans or stock option plans of theEmployer), provided that in the event that the Employee’s participation in anyplan, program or arrangement as provided in this subparagraph (ii) is barredor during such period any such plan, program or arrangement is discontinued orthe benefits thereunder are materially reduced, the Employer shall arrange toprovide the Employee with benefits substantially similar to those which theEmployee was entitled to receive under such plans, programs and arrangementsimmediately prior to the Employee’s date of termination.
 (b)  In the event the Employee terminates this Agreement without Good Reason, theEmployee shall be entitled to the salary, bonus and other benefits due him through theday on which such termination becomes effective.  (c)  For purposes of this Section 9, “Good Reason” shall mean (i) amaterial failure by the Company to perform its obligations under this Agreement; (ii)a Constructive Termination (as defined below) of the Employee; (iii) non-renewal ofthis Agreement by the Company or (iv) if employee is not offered a position acceptableto the Employee or a Satisfactory Employment Agreement, substantially in the form ofthis Agreement, in connection with a “Transaction” prior to closing such Transactionor as otherwise mutually agreed to with the Employee.  (d)  For purposes of this Section 9 “Transaction” shall mean a“Transaction” as defined in the Employee’s Stock Option Contract Agreement.  (e)  For purposes of this Section 9, “Constructive Termination” shall meanany (i) diminution of the Employee’s total compensation, or (ii) material adversemodification of or diminution in the Employee’s duties or material diminution in theEmployee’s authority, title or office, or the assignment
 

 

    of any duties to the Employee inconsistent with or demeaning of those set forth atthe effective date of this Agreement, or (iii) material reduction in the Employee’sbenefits under any employee benefit plan or program in which he participates as anemployee, other than any reduction which is a result of a reduction of benefitsapplicable to all employee participants; or (iv) relocation of the Employeeoutside of the Employee’s current residential area without the Employee’s consent;or (v) relocation of the Company’s principal executive offices outside of theWashington, DC area; or (vi) the requirement by the Company that the Employee bebased anywhere other than the Company’s principal executive offices or that theEmployee travel away from the Company’s principal executive offices substantiallymore than the Employee is required to travel at the effective date of thisAgreement.
10.  Suspension.    In the event the Company has reasonable cause to believe that there exists Cause fortermination of this Agreement as defined in Section 7, immediately upon written notice tothe Employee, the Company may, but shall not be obligated to, suspend the Employee, withpay, for a period not to exceed two (2) weeks, either as a disciplinary measure or in orderto investigate the Company’s belief that such cause exists. No such suspension shallprevent the Company from thereafter exercising its rights to terminate this Agreement inaccordance with its terms. 11.  Confidentiality and Non-Disclosure.
 (a)  The Employee shall hold in strict confidence and shall not, either during theterm of this Agreement or after the termination hereof, disclose, directly orindirectly, to any third party, person, firm, corporation or other entity,irrespective of whether such person or entity is a competitor of the Company or isengaged in a business similar to that of the Company, any trade secrets or otherproprietary or confidential information of the Company or any subsidiary or affiliateof the Company obtained by the Employee from or through his employment hereunder. TheEmployee hereby acknowledges and agrees that all proprietary information referred toin this Section 11 shall be deemed trade secrets of the Company and of itssubsidiaries and affiliates. Employee further acknowledges that the Company’s productsand titles consist of copyrighted material, and Employee shall exercise his bestefforts to prevent the use of such copyrighted material by any person or entity whichhas not prior thereto been authorized to use such information by the Company.  (b)  The Employee further hereby agrees and acknowledges that any disclosure ofany proprietary information prohibited herein, or any breach of the provisions ofSections 4 or 10 of this Agreement, may result in irreparable injury and damage to theCompany which will not be adequately
 

 

    compensable in monetary damages, that the Company will have no adequate remedy atlaw therefore, and that the Company may obtain such preliminary, temporary orpermanent mandatory or restraining injunctions, orders or decrees as may benecessary to protect the company against, or on account of, any breach by theEmployee of the provisions contained in Sections 5 or 11 . The Employee shallreimburse the reasonable legal fees and other costs incurred by the Company inenforcing the provisions of Sections 5 and 11 of this Agreement.  (c)  The Employee further agrees that, upon termination of this Agreement, whethervoluntary or involuntary or with or without cause, the Employee shall notify any newemployer, partner, associate or any other firm or corporation with whom the Employeeshall become associated in any capacity whatsoever of the provisions of this Section11, and that the Company may give such notice to such firm, corporation or otherperson.  (d)  Notwithstanding the foregoing limitations, the Employee shall not be requiredto keep confidential pursuant to this Section 12 any confidential or proprietaryinformation that: (i) is known or available through other lawful sources, not bound bya confidentiality agreement with the Employee, (ii) is or becomes publicly known orgenerally known in the industry through no fault of the Employee or his agents or(iii) is required to be disclosed pursuant to any statutes, laws, rules, regulations,ordinances, codes, directives, writs, injunctions, decrees, judgments, and orders ofany governmental body (provided the Company is given reasonable prior notice).
12.  Assignment and Disclosure of Inventions.
 (a)  From and after the date the Employee first became employed with the Company,the Employee hereby agrees to promptly disclose in confidence to the Company allinventions, improvements, designs, original works of authorship, formulas, processes,compositions of matter, computer software programs, databases, mask works, and tradesecrets (“inventions”), whether or not patentable, copyrightable orprotectible as trade secrets, that are made or conceived or first reduced to practiceor created by the Employee, either alone or jointly with others, during the period ofthe Employee’s employment, whether or not in the course of the Employee’s employment.  (b)  The Employee hereby acknowledges that copyrightable works prepared by theEmployee within the scope of the Employee’s employment are “works for hire” under theCopyright Act and that the Company will be considered the author thereof. The Employeehereby agrees that all Inventions that (i) are developed using equipment, supplies,facilities or trade secrets of the Company, (ii) result from work performed by the
 

 

    Employee for the Company, (iii) relate to the Company’s business or current oranticipated research and development, will be the sole and exclusive property ofthe Company and are hereby assigned by the Employee to the Company.
13.  Severability.    The Company and the Employee recognize that the laws and public policies of the state lawapplicable to this Agreement are subject to varying interpretations and change. It is theintention of the Company and of the Employee that the provisions of this Agreement shall beenforced to the fullest extent permissible under the laws and public policies of suchstate, but that the unenforceability (to the modification to conform to such laws or publicpolicies) of any provision or provisions hereof shall not render unenforceable, or impair,the remainder of this Agreement. Accordingly, if any provisions of this Agreement shall bedetermined to be invalid or unenforceable, either in whole or in part, this Agreement shallbe deemed amended to delete or modify, as necessary, the offending provision or provisionsand to alter the balance of this Agreement in order to render it valid and enforceable. 14.  Assignment.    Neither the rights nor obligations under this Agreement may be assigned by either party, inwhole or in part, by operation of law or otherwise, except that it shall be binding uponand inure to the benefit of any successor of the Company and its subsidiaries andaffiliates, whether by merger, reorganization or otherwise, or any purchaser of all orsubstantially all of the assets of the Company. 15.  Notices.    Any notice expressly provided for under this Agreement shall be in writing, shall be giveneither manually or by mail and shall be deemed sufficiently given when actually received bythe party to be notified or when mailed, if mailed by certified or registered mail, postageprepaid, addressed to such party at their addresses as set forth below. Either party may,by notice to the other party, given in the manner provided for herein, change their addressor receiving such notices.
 (a)  If to the Company, to:     Blackboard Inc.1899 L Street N.W., Fifth FloorWashington, D.C. 20036Attn: General Counsel
 

 

 (b)  If to the Employee, to:     Matthew H. Small2501 Porter St., N.W., Apt. 318Washington, DC 20008
16.  Governing Law.    This Agreement shall be executed, construed and performed in accordance with the laws ofthe State of Delaware without reference to conflict of laws principles. The parties agreethat the venue for any dispute hereunder will be the state or federal courts sitting in theDistrict of Columbia or the Commonwealth of Virginia and the parties hereby agree to theexclusive jurisdiction thereof. 17.  Headings.    The section headings contained in this Agreement are for reference purposes only and shallnot in any way affect the meaning or interpretation of this Agreement. 18.  Entire Agreement; Amendments.    This Agreement, together with any stock option contracts between the Company and Employee,constitutes and embodies the entire agreement between the parties in connection with thesubject matter hereof and supersedes all prior and contemporaneous agreements andunderstandings in connection with such subject matter. No covenant or condition notexpressed in this Agreement shall affect or be effective to interpret, change or restrictthis Agreement. In the event of a conflict or inconsistency between the terms of thisAgreement and the Company’s policies regarding employees, the terms of this Agreement shallsupersede the conflicting or inconsistent Company policies. No change, termination orattempted waiver of any of the provisions of this Agreement shall be binding unless inwriting signed by the Employee and on behalf of the Company by an officer thereunto dulyauthorized by the Company’s Board of Directors. No modification, waiver, termination,rescission, discharge or cancellation of this Agreement shall affect the right of any partyto enforce any other provision or to exercise any right or remedy in the event of any otherdefault.
[SIGNATURE PAGE FOLLOWS]
 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.       BLACKBOARD INC., a Delaware corporation    By:  /s/ Michael L. Chasen   Name:  Michael L. Chasen   Title:  CEO     **Matthew H. Small**