SMART
ONLINE, INC.

       

    

    
      REVISED
BOARD COMPENSATION POLICY

       

    

    
      (Effective  March
26, 2010)

       

    

    
      1.           Introduction.  Smart
Online,  Inc.  (the
"Company")  will  compensate non-management directors
through the payment of Board retainers based on election of the Board in
consideration of the services provided by such directors and in recognition of
their responsibilities to the company and potential liabilities associated
therewith. Management directors are not entitled to receive any directors'
compensation outlined in this policy.

       

    

    
      2.           Board Member
Fees.  Each non-management member of the Board of Directors not
serving as Chairman of the Board shall be entitled to monetary and equity
compensation in following amounts:

       

    

    
      A.          Monetary
Compensation.

       

    

    
       
(1)          Each such
director shall be paid a fee of $1,500 per month, due and payable by the
fifteenth (15th) day of
the same month in which services are rendered.

       

    

    
       
(2)          Additional   monetary  compensation  may  be   awarded  at  the
Chairman of the Board's discretion for any director incurring overnight travel
to attend Board meetings or other functions for the benefit of the
Company.

       

    

    
      B.           Equity
Compensation.  Each such director shall, at the sole discretion
of the director, be awarded pursuant to the Company's 2004 Equity Compensation
Plan either:

       

    

    
       
(1)          Upon such
director's appointment or election to the Board, a non-statutory stock option
grant representing  20,000 shares of the Company's common stock,
having an exercise price equal to the fair market value of the Company's common
stock on the date of grant. In addition, at the time of the annual meeting of
the Company's stockholders, each such non-management member of the Board who is
re-elected to the Board, and who has been serving on the Board for at least six
months prior to the date of the annual meeting, shall be granted an additional
non-statutory stock option grant representing 20,000 shares of the Company's
common stock, having an exercise price equal to the fair market value of the
Company's common stock on the date of grant. All options granted under this
Section 2.B.(1) shall vest quarterly over a year's time, subject to the
requirement that the grantee is a member of the Board of Directors on the
applicable vesting date; or

    


    
      
         


      

      
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(2)          Upon such
director's appointment or election to the Board, an award of  10,000
shares of restricted common stock of the Company, valued at the fair market
value of the Company's common stock on the date of the award. In addition, at
the time of the annual meeting of the Company's stockholders, each such
non-management member of the Board who is re-elected to the Board, and who has
been serving on the Board for at least six months prior to the date of the
annual meeting, shall be awarded an additional 10,000 shares of restricted
common stock of the Company, valued at the fair market value of the Company's
common stock on the date of the award. The contractual restrictions on all
restricted stock awards granted under this Section 2.B.(2) shall lapse quarterly
over a year's time, provided that the grantee is a member of the Board of
Directors on the applicable lapse date.

       

    

    
      3.           Chairman of the Board
Fees.  If a non-management member of the Board of Directors
serves as Chairman of the Board, he or she shall be entitled to monetary and
equity compensation in following amounts:

       

    

    
      A.          Monetary
Compensation. Such Chairman of the Board shall be paid a fee of $1,500
per month, due and payable by the fifteenth (15th) day of
the same month in which services are rendered.

       

    

    
      B.           Equity
Compensation.   Such Chairman of the Board shall, at the
sole discretion of the Chairman, be awarded pursuant to the Company's 2004
Equity Compensation Plan either:

       

    

    
       
(1)          Upon such
director's appointment or election to the post of Chairman of the Board, a
non-statutory stock option representing  30,000 shares of the
Company's common stock, having an exercise price equal to the fair market value
of the Company's common stock on the date of grant.   In
addition, at the time of the annual meeting of the Company's stockholders, each
non-management Chairman of the Board who is re-elected to the Chairman of the
Board post, and who has been serving on the Board as its Chairman for at least
six months prior to the date of the annual meeting, shall be granted an
additional non-statutory stock option grant representing  30,000
shares of the Company's common stock, having an exercise price equal to the fair
market value of the Company's common stock on the date of
grant.   All options granted under this Section 3.B.(1) shall
vest quarterly over a year's time, subject to the requirement that the grantee
is a member of the Board of Directors on the applicable vesting date;
or

       

    

    
       
(2)          Upon such
director's appointment or election to the post of Chairman of the Board, an
award of  15,000 shares of restricted common stock of the Company,
valued at the fair market value of the Company's common stock on the date of the
award. In addition, at the time of the annual meeting of the Company's
stockholders, each non-management Chairman of the Board who is re-elected to the
Chairman of the Board post, and who has been serving on the Board as its
Chairman for at least six months prior to the date of the annual meeting, shall
be awarded an additional  15,000 shares of restricted common stock of
the Company, valued at the fair market value of the Company's common stock on
the date of the award. The contractual restrictions on all restricted stock
awards granted under this Section 3.B.(2) shall lapse quarterly over a year's
time, provided that the grantee is a member of the Board of Directors on the
applicable lapse date.

    


    
      
         


      

      
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      Any
equity compensation grants to a Chairman of the Board under this Section 3(B)
shall be in lieu of, and not in addition to, any equity compensation grants
under Section 3(A).

       

    

    
      4.           Reimbursement for
Expenses.  Each non-management director is eligible for expense
reimbursement for reasonable travel and lodging expenses incurred in connection
with his or her attendance at Board and committee meetings, in accordance with
the same standards applicable to members of the Company's executive management.
The Company will ensure all such reasonable expenses are processed and paid
expeditiously upon submission to the company with the required forms and
receipts.

    


    
      
         


      

      
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