EX-10.1






EMPLOYMENT AGREEMENT




THIS EMPLOYMENT AGREEMENT is made as of the 21st day of March, 2006, between Smart
Online, Inc. (the “Company”) and Nicholas A. Sinigaglia (the “Employee”).



W I T N E S S E T H:




WHEREAS, the Company is engaged in the business of providing web-hosted applications and
technology infrastructure syndication;



WHEREAS, the Company and the Employee wish to contract for the employment by the Company of
the Employee, and the Employee wishes to serve the Company, in the capacities and on the terms and
conditions set forth in this Agreement; and



WHEREAS, the Company is an enterprise whose success is attributable largely to the creation
and maintenance of certain Confidential Data (as defined below) and during the period of employment
Employee will be situated to have access to and be knowledgeable with respect to the Confidential
Data as well as the customers of the Company; and



WHEREAS, Company has a legitimate protectible business interest in the creation and
maintenance of its Confidential Data and the protection of the identity of, and related information
concerning, its customers and the Company’s customer lists; and



WHEREAS, the Company wishes to protect its Confidential Data from disclosure by Employee by
means of the restrictive covenants contained in this Agreement and Employee agrees to such
covenants in exchange for the Company’s commitment to continue to employ Employee and for other
additional consideration agreed to between the parties;



THEREFORE, it is hereby agreed as follows:



1. EMPLOYMENT PERIOD. The Company shall employ the Employee, and the Employee shall
serve the Company, on the terms and conditions set forth in this Agreement. Such employment
pursuant to the terms of this Agreement shall commence on March 21, 2006, and shall terminate on
the first to occur of (i) the termination of this Agreement as provided herein, or (ii) March 31,
2007; provided, however, that if neither party has given written notice to the other, at least
thirty (30) days prior to the expiration date then in effect, of the intention not to renew the
Agreement beyond such expiration date, then the term of this Agreement shall automatically extend
for an additional year at the conclusion of such expiration date. The term during which this
Agreement is in effect is referred to herein as the “Employment Period.”



2. POSITION AND DUTIES.



(a) During the Employment Period, the Employee shall serve as a full-time employee of the
Company as Chief Financial Officer with such duties and responsibilities as are customarily
assigned to such position and such other duties and responsibilities not inconsistent therewith as
may from time to time be assigned to her by the President, Chief Executive Officer or Board of
Directors.



(b) During the Employment Period, the Employee shall devote his loyalty, attention, and time
to the business and affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Employee under this Agreement, use the Employee’s best efforts to
carry out such responsibilities faithfully and efficiently.



(c) The Employee’s services shall be performed primarily at the Company’s headquarters in
Durham, North Carolina.



3. COMPENSATION.



(a) Salary. The Employee’s base salary, payable monthly shall be (i) $90,000 per annum for the
period commencing on the date hereof through March 31, 2006, (ii) $110,000 per annum for the period
commencing on April 1, 2006 through May 31, 2006, (iii) $120,000 for the period commencing on June
1, 2006 through August 31, 2006 and (iv) $135,000 per annum for the period commencing on September
1, 2006 and continuing for the Employment Period. The base salary shall be reevaluated from time
to time and is subject to such increases as the Board of Directors approves. The term “Annual Base
Salary” shall refer to the base salary prevailing during the applicable period until such time of
any increase in base salary whereupon it shall thereafter refer to such increased amount.



(b) Stock. Effective as of March 24, 2006, the Company shall grant options to purchase 50,000
shares of the Company’s Common Stock to Employee, contingent upon Employee and Company executing an
appropriate Stock Option Agreement in a form acceptable to the Company.



(c) Fringe Benefits. Employee shall be entitled to all of the non-wage benefits the Company
provides from time to time to all other full-time employees.



(d) Withholding. All compensation paid pursuant to this Section 3 shall be subject to
withholding of taxes and other amounts as shall be required by law.



4. EXPENSES.



Company agrees to reimburse Employee for reasonable and necessary expenses incurred by
Employee in the furtherance of the Company’s business in accordance with such procedures as the
Company may from time to time establish.



5. TERMINATION OF EMPLOYMENT.



(a) By the Company. The Company may terminate the Employee’s employment
at any time with immediate effect for Cause or without Cause.



(i) “For Cause,” means unacceptable conduct, including:




A. participation in a fraud or act of dishonesty against the Company;




B. any chemical dependence which affects the performance of her duties
and responsibilities to the Company;




C. breach of Employee’s fiduciary obligations to the Company;




D. Employee willfully fails to perform her duties;




E. breach of the Company’s policies or any material provision of this
Agreement;




F. misconduct resulting in loss to the Company or damage to the
reputation of the Company; or




G. conduct by the Employee which, in the determination of the Company’s
Board of Directors, demonstrates unfitness to serve.




(ii) “Without cause” means termination of Employee’s employment for some reason
other than that listed in Paragraph 4(b)(i) above. A termination of the Employee’s
employment Without Cause shall be effective when communicated to the Employee by
verbal or written notice.



(b) By the Employee. The Employee may signify her intention to terminate her employment at
any time upon the giving of thirty (30) days notice (“Notice Period”) to the Company of her intent
to do so. Upon expiration of the Notice Period the termination will be effective and the Date of
Termination will be effective as referred to below. The Company reserves the right to accelerate
the effective “Date of Termination” in its discretion after the inception of the Notice Period.



(c) Date of Termination. The “Date of Termination” means the date on which the termination of
the Employee’s employment by the Company for Cause or without Cause is effective, or the date on
which the termination of the Employee’s employment by the Employee is effective, as the case may
be.



6. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE.



Employee represents and warrants that:



(a) Employee is under no contractual or other restriction or obligation which is inconsistent
with the execution of this Agreement, the performance of duties hereunder or other rights of the
Company hereunder; and



(b) To the best of Employee’s knowledge, Employee is under no physical or mental disability
render her incapable of performing the essential functions involved in her anticipated duties or
that would otherwise hinder the performance of duties under this Agreement.



7. COVENANT NOT TO COMPETE.



Employee covenants that during the “Noncompetition Period,” as defined in paragraph 12, and
within the “Noncompetition Area,” as defined in paragraph 13, she shall not, directly or
indirectly, as principal, agent, consultant, trustee or through the agency of any corporation,
partnership, association, or agency engage in the “Business,” as defined in paragraph 14.
Specifically, but without limiting the foregoing, Employee agrees that during such period and
within such area, she shall not do any of the following: (a) be the owner of the outstanding
capital stock of any corporation which conducts a business of a like or similar nature to the
“Business” (other than stock of a corporation traded on a national securities exchange or automated
quotation service); (b) be an officer or director of any corporation which conducts a business of a
like or similar nature to the “Business”; (c) be a member of any partnership which conducts a
business of a like or similar nature to the “Business”; or (d) be a consultant to, an owner of or
an employee of any other business which conducts a business of a like or similar nature to the
Business.



8. NONDISCLOSURE COVENANT.



(a) The parties acknowledge that the Company is an enterprise whose success is attributable
largely to the ownership, use and development of certain valuable confidential and proprietary
information (the “Confidential Data”), and that Employee’s employment with the Company will involve
Employee’s access to and work with such information. Employee acknowledges that her relationship
with the Company is a confidential relationship. Employee covenants and agrees that (i) she shall
keep and maintain the Confidential Data in strictest confidence, and (ii) she shall not, either
directly or indirectly, use any Confidential Data for her own benefit, or divulge, disclose, or
communicate any Confidential Data in any manner whatsoever to any person or entity other than
employees or agents of the Company having a need to know such Confidential Data, and only to the
extent necessary to perform their responsibilities on behalf of the Company, and other than in the
performance of Employee’s duties in the employment by the Company. Employee’s agreement not to
disclose Confidential Data shall apply to all Confidential Data, whether or not Employee
participated in the development thereof. Upon termination of employment for any reason, Employee
will return to the Company all documents, notes, programs, data and any other materials (including
any copies thereof) in her possession.



(b) For purposes of this Agreement, the term “Confidential Data” shall include any and all
information related to the business of the Company, or to its products, sales or businesses which
is not general public knowledge, specifically including (but without limiting the generality of the
foregoing) all financial and accounting data; computer software; processes; formulae; inventions;
methods; trade secrets; computer programs; engineering or technical data, drawings, or designs;
manufacturing techniques; patents, patent applications, copyrights and copyright applications (in
any such case, whether registered or to be registered in the United States of America or elsewhere)
applied for, issued to or owned by the Company; information concerning pricing and pricing
policies; marketing techniques; suppliers; methods and manner of operations; and information
relating to the identity, needs and location of all past, present and prospective customers. The
parties stipulate that as between them the above-described matters are important and confidential
and gravely affect the successful conduct of the business of the Company and that any breach of the
terms of this paragraph shall be a material breach of this Agreement.



9. NONSOLICITATION/INTERFERENCE.



(a) The Employee covenants that during the Noncompetition Period and in the Noncompetition
Area, she shall not directly or indirectly, on behalf of herself or on behalf of any other person,
firm, partnership, corporation, association or other entity, call upon any of the customers or
clients of the Company for the purpose of soliciting or providing any product or service similar to
that provided by the Company nor will he, in any way, directly or indirectly, for himself, or on
behalf of any other person, firm, partnership, corporation, association, or other entity solicit,
divert or take away, or attempt to solicit, divert, or take away any of the customers, clients,
business, or patrons of the Company.



(b) The Employee covenants that during the Noncompetition Period and in the Noncompetition
Area, she shall not directly or indirectly, on behalf of herself or on behalf of any other person,
firm, partnership, corporation, association or entity, contract with, induce or attempt to
influence, any individual or entity who is an employee, contractor, agent or representative of the
Company to terminate or otherwise impair her employment or relationship with the Company.



10. INVENTIONS.



All inventions, designs, improvements and developments made by Employee, either solely or in
collaboration with others, during her employment with the Company, whether or not during working
hours, and relating to any methods, apparatus or products which are manufactured, sold, leased,
used or developed by the Company or which pertain to the Business (the “Developments”), shall
become and remain the property of the Company. Employee shall disclose promptly in writing to the
Company all such Developments. Employee acknowledges and agrees that all Developments shall be
deemed “works made for hire” within the meaning of the United States Copyright Act, as amended.
If, for any reason, such Developments are not deemed works made for hire, Employee shall assign,
and hereby assigns, to the Company, all of Employee’s right, title and interest (including, but not
limited to, copyright and all rights of inventorship) in and to such Developments. At the request
and expense of the Company, whether during or after employment hereunder, Employee shall make,
execute and deliver all application papers, assignments or instruments, and perform or cause to be
performed such other lawful acts as the Company may deem necessary or desirable in making or
prosecuting applications, domestic or foreign, for patents (including reissues, continuations and
extensions thereof) and copyrights related to such Developments or in vesting in the Company full
legal title to such Developments. Employee shall assist and cooperate with the Company or its
representatives in any controversy or legal proceeding relating to such Developments, or to any
patents, copyrights or trade secrets with respect thereto. If for any reason Employee refuses or
is unable to assist the Company in obtaining or enforcing its rights with respect to such
Developments, Employee hereby irrevocably designates and appoints the Company and its duly
authorized agents as Employee’s agents and attorneys-in-fact to execute and file any documents and
to do all other lawful acts necessary to protect the Company’s rights in the Developments.
Employee expressly acknowledges that the special foregoing power of attorney is coupled with an
interest and is therefore irrevocable and shall survive (i) Employee’s death or incompetency and
(ii) any termination of this Agreement.



11. INDEPENDENT COVENANTS.



Each of the covenants on the part of Employee contained in paragraphs 6, 7, 8, and 9 of this
Agreement shall be construed as an agreement independent of each other such covenant. The
existence of any claim or cause of action of Employee against the Company, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of
any such covenant.



12. REASONABLENESS; INJUNCTION.



Employee acknowledges that the covenants contained in this agreement are reasonably necessary
and designed for the protection of the Company and its business, and that such covenants are
reasonably limited with respect to the activities prohibited, the duration thereof, the geographic
area thereof, the scope thereof and the effect thereof on Employee and the general public.
Employee further acknowledges that violation of the covenants would immeasurably and irreparably
damage the Company, and by reason thereof Employee agrees that for violation or threatened
violation of any of the provisions of this Agreement, the Company shall, in addition to any other
rights and remedies available to it, at law or otherwise, by entitled to any injunction to be
issued by any court of competent jurisdiction enjoining and restraining Employee from committing
any violation or threatened violation of this Agreement. Employee consents to the issuance of such
injunction.



13. NONCOMPETITION PERIOD.



This Agreement shall remain enforceable during Employee’s employment with the Company and for
a period of one year after termination of Employee’s employment for any reason (such period not to
include any period(s) of violation or period(s) of time required for litigation to enforce the
covenants set forth herein).



14. NONCOMPETITION AREA.



(a) Employee acknowledges and agrees that the Company does business on an international basis
and that Employee will assist Company in developing Company’s business in both the United States
and Europe, with customers throughout the United States and additionally existing in Europe,
particularly servicing France, Spain, United Kingdom and Germany, and that any breach of Employee’s
covenants contained herein would materially damage the Company, regardless of the area of the world
in which the activities constituting such breach were to occur. Accordingly, the terms and
provisions of this Agreement shall apply in the following Noncompetition Area:




(i) The State of North Carolina;




(ii) Any state other than North Carolina where Company conducts the “Business”
and in or for which the Employee assists or performs services assisting Company;




(iii) Any political subdivision of foreign countries where Company does
“Business” or will do “Business” during the period of employment; and




(iv) Any other state, country, or political subdivision where Company does
“Business” and in or for which the Employee assists or performs services assisting
Company.



15. BUSINESS.



For the purposes of this Agreement, the “Business” shall include any business, service, or
product engaged in, provided, or produced by the Company from the date of this Agreement to the
date of the termination of the employment, including, but not limited to: (i) the business of
development, production, marketing, design, manufacturing, leasing or selling software related to
business plans, legal services, whether for use by professionals or consumers; (ii) providing
web-hosted applications and technology infrastructure syndication and/or (iii) any other business
conducted by the Company immediately prior to the date of termination of Employee’s employment or
in which the Company shall at the time of termination of Employee’s employment with the Company be
actively preparing to enter.



16. MISCELLANEOUS.



(a) This Agreement shall be subject to and governed by the substantive laws of the State of
North Carolina, without giving effect to the conflicts of laws provisions thereof. The Employee
hereby submits to the jurisdiction and venue of the state and federal courts of North Carolina, and
Employee agrees that the Company may, at its option, enforce its rights hereunder in such courts.



(b) Company’s failure to insist upon strict compliance with any provision of this Agreement
shall not be deemed a waiver of such provision or any other provision.



(c) This Agreement may not be modified except by an agreement in writing executed by the
parties. The parties expressly waive their right to orally modify this provision.



(d) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision.



(e) This Agreement shall not be assignable without the written consent of the Company and
Employee.



(f) This Agreement expresses the whole and entire Employment Agreement between the parties and
supersedes and replaces any prior employment Agreement, understanding or arrangement between
Company and Employee.



IN WITNESS WHEREOF, the parties executed this Agreement as of the day and year first above
written.




SMART ONLINE, INC.




By:/s/ Michael Nouri

Name: Michael Nouri

Title: President and Chief Executive Officer




EMPLOYEE:



/s/ Nicholas A. Sinigaglia



WITNESS:



/s/ Joan Keston