Document:

Exhibit
      10.5

    

    AMENDMENT
      TO REIMBURSEMENT AGREEMENT

    

    THIS
      AMENDMENT TO REIMBURSEMENT 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 (“Atlas”).

     

    W
      I T N E
      S S E T H:

    

    WHEREAS,
      in connection with that certain Loan Agreement between the Company and Wachovia
      Bank, NA (“Wachovia”)
      dated
      as of November 10, 2006 (the “Wachovia
      Loan Agreement”),
      Atlas
      directed HSBC Private Bank (Suisse) SA, a Swiss business organization (the
      “Letter
      of Credit Provider”),
      to
      issue an irrevocable, direct-pay letter of credit to Wachovia (the “Wachovia
      Letter of Credit”)
      as
      security under the Wachovia Loan Agreement; and

     

    WHEREAS,
      the Company and Atlas entered into a Reimbursement Agreement dated as of
      November 10, 2006 (the “Reimbursement
      Agreement”),
      pursuant to which the Company agreed to reimburse Atlas in the event any amount
      was drawn and paid under the Wachovia Letter of Credit; and

     

    WHEREAS,
      the Company has terminated the Wachovia Loan Agreement and indefeasibly paid
      in
      full all obligations thereunder, and Wachovia has released the Wachovia Letter
      of Credit; and

     

    WHEREAS,
      pursuant to a Commercial Note dated as of the effective date hereof (as the
      same
      may be amended pursuant to its terms from time to time, the “Paragon
      Loan Agreement”)
      between the Company and Paragon Commercial Bank, a North Carolina bank
      (“Paragon”),
      Paragon will make available to the Company a revolving line of credit in a
      maximum principal amount of $2,470,000.00 (the “Paragon
      Revolving Line”);
      and

     

    WHEREAS,
      to induce Paragon to enter into the Paragon Loan Agreement and make the Paragon
      Revolving Line available to the Company, and to provide security under the
      Paragon Loan Agreement for the payment of the Paragon Revolving Line, the
      Company has requested that Atlas direct the Letter of Credit Provider to issue
      an irrevocable, direct-pay letter of credit to Paragon substantially in the
      form
      of Exhibit
      A
      attached
      hereto (as the same may be amended from time to time, the “Paragon
      Letter of Credit”);
      and

     

    WHEREAS,
      Atlas is willing to direct the Letter of Credit Provider to issue the Paragon
      Letter of Credit, subject to the Company and Atlas amending the Reimbursement
      Agreement to provide for reimbursement by the Company in the event any amount
      is
      drawn and paid under the Paragon Letter of Credit.

    

    NOW,
      THEREFORE, in
      consideration of the foregoing premises and for other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties hereto hereby agree as follows:

    

    Section
      1. Amendments
      to Reimbursement Agreement. 

    

    (a) The
      first
      Recital of the Reimbursement Agreement is amended and restated in its
      entirety
      to read
      as follows: 

    

    “WHEREAS,
      pursuant to a Commercial Note dated as of February 20, 2008 (as the same may
      be
      amended pursuant to its terms from time to time, the “Loan
      Agreement”)
      between the Company and Paragon Commercial Bank, a North Carolina bank (the
      “Bank”),
      the
      Bank will make available to the Company a revolving line of credit in a maximum
      principal amount of $2,470,000.00 (the “Revolving
      Line”);
      and”

     

    (b) Section
      2.1(a) of the Reimbursement Agreement is amended and restated in its
      entirety
      to read
      as follows: 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    “(a) Atlas
      shall direct the Letter of Credit Provider to issue the Letter of Credit on
      February 20, 2008. The Letter of Credit shall be issued in an amount equal
      to
      $2,470,000.00. The term of the Letter of Credit shall end on February 18, 2010.”

     

    (c) Section
      2.3 of the Reimbursement Agreement is deleted in its entirety.

    

    (d) Exhibit
      A
      to the
      Reimbursement Agreement is deleted in its entirety
      and
      replaced with Exhibit
      A to
      this
      Amendment.

    

    Section
      2. Reference
      to and Effect on the Reimbursement Agreement. 

    

    (a) Each
      reference in the Reimbursement Agreement to “this Agreement”, “hereunder”,
“hereof” or words of like import referring to the Reimbursement Agreement, and
      each reference to the “Reimbursement Agreement”, “thereunder”, “thereof” or
      words of like import referring to the Reimbursement Agreement as amended hereby,
      shall mean and be a reference to the Reimbursement Agreement as amended
      hereby.

    

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

    

    Section
      3. Controlling
      Law.
      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.

    

    Section
      4. Counterparts.
      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.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    [Signature
      Page to Amendment to Reimbursement 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. Colburn

            
	
              Name:

            	
              David
                E. Colburn

            
	
              Title:
                

            	
              President
                and Chief Executive Officer

            

    

    

    
      	
              ATLAS
                CAPITAL, S.A.

            
	 	 
	
              By:
                

            	
              /s/
                Avy Lugassy

            
	
              Name:
                

            	
              Avy
                Lugassy

            
	
              Title:
                

            	
              Member
                of the Management

            

    

    
      
         

      

      
        3Exhibit
      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.]

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    [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. Colburn

            
	
              Name:
                

            	
              David
                E. Colburn

            
	
              Title:
                

            	
              President
                and Chief Executive Officer

            
	 	 
	 	 
	
              ATLAS
                CAPITAL, S.A.

            
	 	 
	
              By:

            	
              /s/
                Avy Lugassy

            
	
              Name:
                

            	
              Avy
                Lugassy

            
	
              Title:
                

            	
              Member
                of the Management

            

    

    
      
         

      

      
        3

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