EMPLOYMENT
        AGREEMENT
 
 THIS
        EMPLOYMENT AGREEMENT is made as of the 1st day of April 2004, between Smart
        Online, Inc. (the “Company”) and Scott Whitaker (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. POSITION
        AND DUTIES .
 
 (a) Employee
        shall serve as a part-time employee of the Company in the role of Controller
        or
        in such other capacity as may be designated by the Company from time to time
        by
        the CFO, CEO, President or the Board of Directors or the officers of the
        Company.
 
 (b) Employee
        shall devote all of his loyalty, attention, time, skill and energies 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.
 
 2. COMPENSATION .
 
 (a) Salary.
        The Employee’s base salary shall be $45,000 per annum, which salary shall be
        reevaluated annually 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.
        Concurrently with the execution of this Agreement, the Company and Employee
        shall execute a Stock Option Agreement dated as of April 1, 2004 whereby
        the
        Company grants options to purchase 25,000 shares of the Company’s Common Stock
        to Employee.
 
 (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.
 
 3. 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.
 
 4. 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 his duties and
        responsibilities to the Company;
 
 C. breach
        of
        Employee’s fiduciary obligations to the Company;
 
 D. Employee
        willfully fails to perform his 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.
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 (b) By
        the
        Employee. The Employee may signify his intention to terminate his employment
        at
        any time upon the giving of two (2) weeks notice (“Notice Period”) to the
        Company of his 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.
 
 5. 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 him incapable of performing the essential functions involved in his
        anticipated duties or that would otherwise hinder the performance of duties
        under this Agreement.
  6. 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, he 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, he 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 system); (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.
 
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  7. 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 his relationship with
        the
        Company is a confidential relationship. Employee covenants and agrees that
        (i)
        he shall keep and maintain the Confidential Data in strictest confidence,
        and
        (ii) he shall not, either directly or indirectly, use any Confidential Data
        for
        his 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 his/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.
  8. NONSOLICITATION/INTERFERENCE.
 
 (a) The
        Employee covenants that during the Noncompetition Period and in the
        Noncompetition Area, he shall not directly or indirectly, on behalf of himself
        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.
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 (b) The
        Employee covenants that during the Noncompetition Period and in the
        Noncompetition Area, he shall not directly or indirectly, on behalf of himself
        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 his/her employment or relationship with the
        Company.
 
 9. INVENTIONS .
 
 All
        inventions, designs, improvements and developments made by Employee, either
        solely or in collaboration with others, during his 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.
 
 10. 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.
 
 
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 11. 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.
 
 12. 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).
 
 13. 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 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 Employee assists or performs services assisting Company.
 
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  14. 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.
  15. 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.
  16. This
        Agreement terminates the Employment Agreement dated May 31, 2001, as amended
        to
        date. Except for that agreement, all other agreements between the Company
        and
        Employee remain in full force and effect.
 
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  IN
        WITNESS WHEREOF, the parties executed this Agreement as of the day and year
        first above written.
 
 
 
 
 SMART
                  ONLINE, INC.By:
                  /s/ Michael NouriTitle:
                  CEOWITNESS:
                  /s/ Ronna Loprete
              EMPLOYEE:
                  /s/ Scott Whitaker
 
 
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