**Exhibit
      4.1**





PARAGON
      COMMERCIAL BANK


3535
      Glenwood Avenue, Raleigh, North Carolina 27612





Loan
      #3866


**COMMERCIAL
      NOTE**


Loan
                  Officer
              JST
              /s/
                  John S. TowlesJohn
                  S. Towles, Senior Vice
                  President





Date:**February
                20, 2008**
            Borrower:**Smart
                Online, Inc.**Loan
                Amount:**$2,470,000.00**
            x
                Revolving Line of
                Credit




FOR
      VALUE
      RECEIVED, the undersigned, promise(s) to pay to PARAGON COMMERCIAL BANK
      (“Bank”), or order, the sum of **Two
      Million Four Hundred Seventy Thousand and 00/100 Dollars
      ($2,470,000.00)** or so
      much as shall have been disbursed from time to time and remains unpaid,
      including or together with interest at the rate and payable in the manner
      hereinafter stated. Principal and interest shall be payable at Bank at the
      address indicated above, or such other place as the holder of this Note may
      designate.





**INTEREST
      RATE**


All
      payments made on this Note will be applied first to accrued interest and then
      to
      principal. Interest will accrue on the unpaid principal balance at the rate
      set
      forth below until maturity and will accrue on any unpaid past due interest
      before maturity and on any unpaid balance after maturity as set forth on the
      reverse side of this Note.


Interest
      payable on this Note will be at the per annum rate of:





x **Wall
      Street Journal Prime minus one half percent variable.**





As
      used
      in this Note “Wall Street Journal Prime” shall mean the prime rate most recently
      published in the “Money Rates” section specified in the Eastern Edition of the *Wall
      Street Journal* ;
      provided that if more than one such “Prime Rate” is published, the higher of
      such rate shall be applicable. The term “One Year Treasury Bill” shall mean the
      annualized interest rate for treasury bills (one year), most recently reported
      by the Federal Reserve Board on a weekly-average basis, which yield is adjusted
      for a constant maturity. The term “Three Year Treasury Bill” shall mean the
      annualized interest rate for treasury notes (three year), most recently reported
      by the Federal Reserve Board on a weekly-average basis, which yield is adjusted
      for a constant maturity. The term “Five Year Treasury Bill” shall mean the
      annualized interest rate for treasury notes (five year), most recently reported
      by the Federal Reserve Board on a weekly-average basis, which yield is adjusted
      for a constant maturity. As used in this Note, the term “LIBOR (1 Month)” and/or
“LIBOR” shall mean the London Interbank Offered Rates for one month for U.S.
      Dollar deposits, as most recently published in the “Money Rates” section of the *Wall
      Street Journal* on the
      last Tuesday of each month. If the Bank should at any time determine that it
      is
      not possible to determine LIBOR or that LIBOR is no longer available, then
      the
      Note shall continue to bear interest at the rate in effect during at the last
      rate reset until the LIBOR is available or determinable. The term “Libor (3
      Months)” shall mean the London interbank offered rates (“LIBOR”) for three
      months as most recently published in the “Money Rates” section of the *Wall
      Street Journal* .





Interest
      will be calculated on the basis of: x **Actual
      days/360 day year**





All
      rates
      except the “Fixed” rate will be subject to change without prior notice at the
      sole option of Bank and will be effective:


x
      As of the date the base rate (Prime or
      Treasury Bill) changes





**Effect
      of Variable Rate** :
      A
      change in the interest rate will have the following effect on the payments:





x
      The amount of each scheduled payment and
      the final payment will change.










**PRINCIPAL
      PAYMENT TERMS**


Principal
      (and interest if indicated under Interest Payment Terms below) shall be payable
      as follows:





x
      Payable in one single payment on **February
      19, 2009** (herein
      referred to as “Maturity”).





**INTEREST
        PAYMENT TERMS**


Interest
      shall be payable in arrears, as follows:





x
      Payable monthly beginning March
      10, 2008 and
      consecutively on the same calendar day of each such calendar period
      thereafter.








**ADVANCES**


o
      See Advance Addendum
      (Exhibit A) attached hereto and made a part hereof for an explanation of the
      line of credit advance terms and conditions.





**LATE
      CHARGE**


**If
      any scheduled payment is in default 15 days or more (unless interest on this
      Note is payable in advance, in which case such period shall be 30 days or more),
      Obligors agree to pay a late charge equal to 4% of the amount of the payment
      that is in default, but not more than maximum amount allowed by applicable
      law.**


**PREPAYMENT**
 x
          This Note may be prepaid in whole or in
          part any time without premium.
 
 For
          partial prepayments, the Bank may, in its sole discretion, apply the prepayment
          to principal and recalculate the installment payment amount so that equal
          payments of principal and interest will cause this Promissory Note to be
          paid in
          full with the same Maturity date (set forth above). If the Bank decides
          not to
          recalculate the installment payment amount, then such prepayment will be
          applied
          to the most remote installment then unpaid and shall not otherwise reduce
          the
          installment payments coming due prior thereto.


**COLLATERAL**


x
      SECURED. This Note is secured by
      collateral described in the following security instruments:





x
            Letter
                of Credit datedFebruary
                19, 2008securing Paragon Commercial Bank as beneficiary the sum of**Two
                Million****Five
                Hundred Thousand and 00/100 Dollars
                ($2,500,000.00)**





1)
            At
                maturity of this Note, or upon default, Bank is authorized and empowered
                to apply to the payment hereof, any and all money deposited in Bank
                in the
                name of or to the credit of each party, without advance notice, and
                is
                authorized to offset any obligation of Bank to any party to the payment
                hereof.





Collateral
      securing other loans of each party with Bank may also secure this loan and
      this
      loan.







**SIGNATURES**


The
      undersigned party is liable for the payment of this Note and has subscribed
      its
      name hereto. The provisions printed below are a part of this Note. The
      provisions of this Note are binding on the heirs, executors, administrators,
      successors and assigns of the party and shall inure to the benefit of the
      holder, its successors and assigns. This Note is executed under the seal of
      the
      party.





**Smart
                Online, Inc.**By:
            /s/
                David Colburn
            (SEAL)**David
                Colburn, President**By:
            /s/
                Nicholas Sinigaglia
            (SEAL)**Nicholas
                Sinigaglia, Chief Financial Officer**





**Additional
      Terms and Provisions of Note**





**DEFAULT** .
      Any of
      the following shall constitute an event of default: (1) the failure to make
      when
      due any payment described herein, whether of principal, interest, or otherwise;
      (2) the dissolution or termination of existence of the borrower, or any merger,
      consolidation or other transaction pursuant to which persons or entities owning
      on the date hereof, voting shares of the borrower, singly or in the aggregate,
      of 50% or more of the voting shares (3) the application for the appointment
      of a
      receiver for any party or the filing of a petition under any provisions of
      the
      Bankruptcy Code or Act by or against any party or any assignment for the benefit
      of creditors by or against any party; (4) the failure of the borrower to furnish
      from time to time, at Bank’s reasonable request, financial information requested
      with respect to such party without undue delay; (5) a determination by Bank
      that
      it deems itself insecure or that a material adverse change in the financial
      condition of the borrower has occurred since the date hereof; (6) the failure
      of
      the borrower to perform any other obligation to Bank; (7) the termination of
      the
      letter of credit referenced to above.


**LATE
      CHARGES, EXPENSES AND ACCELERATION** .
      The
      borrower agrees to pay any late charges permitted by applicable law that Bank
      may, in its discretion, charge for late payments. If this Note is not paid
      in
      full whenever it becomes due and payable, each party agrees to pay all costs
      and
      expenses of collection, including a reasonable attorney’s fee up to the amount
      of fifteen (15) percent of the then outstanding balance. Upon the occurrence
      of
      an event of default, the entire unpaid balance of this Note shall, at the option
      of Bank, become immediately due and payable, without notice or demand. Failure
      to exercise the option to accelerate shall not constitute a waiver of the right
      to exercise same in the event of any subsequent default.


**INTEREST** .
      Upon
      the nonpayment of any payment of interest described herein, the Bank, at its
      option and without accelerating this Note, may accrue interest on such unpaid
      interest at the rate(s) applicable hereunder from time to time until maturity
      of
      this Note. After maturity of this Note, whether by acceleration or otherwise,
      interest will accrue on the unpaid principal of this Note and any accrued but
      unpaid interest shall bear interest at the lesser of (i) the highest contract
      rate, if any, permitted by applicable law (ii) a rate per annum equal to 2%
      per
      annum above the contract interest rate payable immediately prior to maturity.
      Such interest rate shall apply both before and after any judgment
      hereon.


**WAIVER** .
      The
      borrower waives presentment, demand, protest and notice of dishonor, waives
      any
      rights which they may have to require Bank to proceed against any other person
      or property, agrees that without notice to any party and without affecting
      the
      borrower’s liability, Bank, at any time or times, may grant extensions of the
      time for payment or other indulgences to any party or permit the renewal,
      amendment or modification of this Note, the Loan Agreement or any security
      instrument(s), or permit the substitution, exchange or release of any security
      for this Note and may add or release any party primarily or secondarily liable,
      and agrees that Bank may apply all moneys made available to it from any part
      of
      the proceeds from the disposition of any security for this Note either to this
      Note or to any other obligation of any of the parties to Bank, as Bank may
      elect
      from time to time.


**PARTIES** .
      The
      signatory of this Note is herein sometimes referred to as “Party” or as
“Borrower” and agrees to be liable hereunder. This Note shall apply to and bind
      the borrower’s, successors and assigns. All references in this Note to Bank
      shall include the holder hereof and this Note shall inure to the benefit of
      any
      holder, its successors and assigns.


**PARTIES
      DUE DILIGENCE** .
      The
      undersigned acknowledges and represent that it has relied upon its own due
      diligence in making their own independent evaluations of the purposes for which
      the proceeds of this Note will be used and of the business affairs and financial
      condition of the borrower, and it will continue to be responsible for making
      its
      own appraisals of such matters. The undersigned has not relied upon and will
      not
      hereafter rely upon Bank for such information for such appraisal or other
      assessment or review and, further, will not rely upon any such information
      which
      may now or hereafter be prepared by Bank.


**CREDIT
      INVESTIGATION** .
      The
      Bank is authorized to investigate from time to time the credit of the borrower
      and to answer questions relating to the Bank’s credit experience with the
      borrower.


2