X0306 4 2012-10-15 0 0001113513 SMART ONLINE INC SOLN 0001315654 Atlas Capital SA 118 RUE DU RHONE GENEVA V8 CH-1204 SWITZERLAND 1 See Footnote 1.12 2012-10-15 4 A 0 200000 200000 A 2016-11-14 2016-11-14 Common Stock 178571 13975000 D Convertible Secured Subordinated Note due November 14, 2016 (the ?Note?). The Note is convertible into Smart Online, Inc. (the ?Issuer?) common stock at the lowest ?applicable conversion determined for each Note issued to any noteholder,? which shall be calculated by multiplying 120% by the lowest of (a) the average of the high and low prices of the Issuer?s common stock on the OTCBB averaged over the 5 trading days prior to the closing date of the Note?s issuance, (b) if the Issuer?s common stock is not traded on the Over-The-Counter market, the closing price of the common stock reported on the principal exchange on which the common stock is listed, averaged over the 5 trading days prior to the closing date of the Note?s issuance, or (c) the closing price of the Issuer?s common stock on the OTCBB or the principal exchange on which the common stock is listed, as applicable, on the trading day preceding the date such Note is converted, in each case as adjusted for stock splits, dividends or combinations, recapitalizations or similar events. /s/ Avy Lugassy, Member of Management 2012-10-17