**Exhibit
      10.6**





**SMART
      ONLINE, INC.**


**AMENDMENT** **NO.** **1 TO STOCK PURCHASE WARRANT AND AGREEMENT**




THIS
      AMENDMENT NO. 1 TO STOCK PURCHASE WARRANT AND AGREEMENT (this “ **Amendment** ”), effective
      as of February 20, 2008, is made and entered into by and between Smart Online,
      Inc., a Delaware corporation (the “ **Company** ”),
      and
      Atlas Capital SA, a Swiss business organization ****** (“ **Holder** ”).





W
      I T N E
      S S E T H:





**WHEREAS** , on
      November 13, 2006, the Holder issued an irrevocable standby letter of credit
      (the “ **Wachovia
      Letter of Credit** ”)
      to
      secure a revolving credit arrangement (the “ **Wachovia
      Line of Credit** ”)
      for
      the Company with Wachovia Bank, NA (“ **Wachovia** ”)
      in the
      amount of $1.3 million.




**WHEREAS** ,
      on
      January 24, 2007, the Company increased the amount of the Wachovia Line of
      Credit by $1.2 million and Wachovia required a corresponding $1.2 million
      increase in the Holder’s Wachovia Letter of Credit (the “ **Wachovia
      Letter of Credit Increase** ”).




**WHEREAS** ,
      as
      consideration for the Holder’s agreement to the Wachovia Letter of Credit
      Increase, the Holder and the Company agreed to enter into a Stock Purchase
      Warrant and Agreement dated January 15, 2007 (the “ **Warrant
      Agreement** ”),
      which
      represents the issuance of a stock purchase warrant (the “ **Warrant** ”)
      to the
      Holder convertible into common stock of the Company at a price of $2.70 (the
      “ **Exercise
      Price** ”).





**WHEREAS** , **** the
      Company has paid off the Wachovia Line of Credit and entered into a new
      revolving credit arrangement (the “ **Paragon
      Line of Credit** ”)
      with
      Paragon Commercial Bank on February 20, 2008.





**WHEREAS** ,
      the
      Wachovia Letter of Credit has been released from securing the Wachovia Line
      of
      Credit, and the Holder has issued a new irrevocable standby letter of credit
      to
      secure the Paragon Line of Credit (the “ **Paragon
      Letter of Credit** ”).





**WHEREAS** ,
      the
      Warrant Agreement currently provides that the Warrant shall be exercisable
      at
      the Holder’s option: (a) at any time the Company is in default under the
      Wachovia Line of Credit or (b) within thirty (30) business days of the
      termination of the Wachovia Line of Credit; and that if the Warrant is not
      exercised within thirty (30) business days of the termination of the Wachovia
      Line of Credit, all rights and obligations of the parties under the Warrant
      Agreement and the Warrant shall terminate.





**WHEREAS** ,
      in
      consideration of the Holder issuing the Paragon Letter of Credit, the Company
      has agreed to amend the Warrant Agreement to change the term of the Warrant
      such
      that it shall be exercisable (a) at any time the Company is in default under
      the
      Paragon Letter of Credit or (b) within thirty (30) business days of the
      termination of the Paragon Line of Credit.




**NOW,
      THEREFORE** ,
      in
      consideration of the mutual covenants and agreements set forth below, and other
      good and valuable consideration, the receipt and sufficiency of which are hereby
      acknowledged, the Company and the Holder agree that the Warrant Agreement shall
      be amended as follows:





1.
            All
                references in Section 1.2 of the Warrant Agreement to the “Line of Credit”
                shall mean the Paragon Line of
                Credit.





2.
            Except
                as specifically amended above, the Warrant Agreement shall continue
                to be
                in full force and effect and is hereby in all respects ratified and
                confirmed.





3.
            This
                Amendment has been executed, delivered and accepted at, and shall
                be
                deemed to have been made in, the State of Delaware and shall be
                interpreted in accordance with the internal laws (as opposed to conflicts
                of laws provisions) of the State of Delaware, without regard to principles
                of conflicts of laws.








4.
            This
                Amendment may be executed in several counterparts, each of which
                shall be
                an original and all of which together shall constitute but one and
                the
                same.





[Remainder
      of the page intentionally left blank.]


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*[Signature
      Page to Amendment No. 1 to*


*Stock
      Purchase Warrant Agreement]*




IN
      WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
      executed and delivered as of the date first above written.





**SMART
                ONLINE, INC.**By:
            /s/
                David E. ColburnName:
            David
                E. ColburnTitle:
            President
                and Chief Executive Officer**ATLAS
                CAPITAL, S.A.**By:
            /s/
                Avy LugassyName:
            Avy
                LugassyTitle:
            Member
                of the Management


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